THE HIGH COURT OF SWAZILAND
Case No. 1362/95
the matter between:
STATE MAIL ORDER (PTY) LIMITED Plaintiff
FAE (PTY) LIMITED Defendant
PLAINTIFF Mr. Dunseith
DEFENDANT Mr. Mlangeni
plaintiff seeks provisional sentence on three cheques each in an
amount of E5000.00
cheques are drawn by the defendant and the payee of each, is one
L.C.. Katzenellenbogen or bearer. As the words "or bearer"
appearing in the printed form of the cheque have not been deleted,
the plaintiff as bearer is by definition the holder. The cheques are
dated the 6th June, 6th July and 6th August 1994 respectively. It is
common cause that these cheques are part of the series issued by the
defendant in part payment of the purchase price of a business bought
by the defendant from the Man's Shop (Pty) Limited.
Dunseith who appeared for the plaintiff handed in the cheques on
behalf of the plaintiff and moved for provisional sentence.
the original cheques are each crossed, they do not appear to bear the
words "Not Negotiable" or any words restricting their
negotiability and their negotiability therefore is unaffected. It
follows that the plaintiff is the holder of the cheques as alleged
being the bearer thereof.
terms of Section 12 of the Bills of Exchange Act 1902 the antedating
or postdating of a cheque does not affect its validity.
terms of Section 29 (2) every holder of a bill is prima facie deemed
to be a holder in due course provided that if in an action on a bill
it is admitted or proved that the acceptance issue or subsequent
negotiation of the bill is affected with fraud or illegality, the
burden of proof is shifted unless and until the holder proves that
subsequent to the alleged fraud or illegality, the value has been
given in good faith for the bill.
defendant in opposing provisional sentence has admitted that the
cheques were drawn by the defendant. The defendant however denies
liability on the said cheques on the ground that the plaintiff is not
a holder in due course within the meaning of Section 28 of the Bill
and Exchange Act No. 11 of 1902 as amended, and that the plaintiff's
claim is subject to the defence the defendant alleges it has against
the original payee.
support of this allegation, the defendant asserts that the plaintiff
did not receive the cheques in good faith. To support this allegation
the defendant asserts that the present directors of the plaintiff who
were the directors at the time when the cheques were negotiated are
members of the payee's family. This allegation is supported by a
report prepared by John and Kernick which is Annexure A to the
affidavit and from which it would appear that it has been prepared by
a firm of Patent Attorneys and Trade Mark Agents with offices in
Pretoria. How the contents of the company search can be anything
other than a hearsay statement is not apparent. Although the
defendant has admitted that Maud Katzenellenbogen is the payee's
mother and Jeniffer Bernadette Knight is the payee's sister; the fact
if such it be that they are directors of the plaintiff's company is
proved by the report of John and Kernick. The plaintiff's denial that
Moosa Ahmed Denatt is not the father of the payee seems on the
probabilities to be correct.
defendant's argument is that because members of Katzenellenbogen's
family are directors of the plaintiff, the plaintiff must have known
of the alleged defect in title existing when the plaintiff took the
instruments. The defendant goes onto say that the payee L.G.
Katzenellenbogen was at all times material hereto a Director and a
controlling member of a company known as The Man's Shop (Pty) Limited
which was incorporated and does business in Swaziland. It is admitted
by the plaintiff that Katzenellenbogen was a director of the company
and he further admits that an agreement was entered into between the
Men's Shop (Pty) Limited and the defendant in terms of which the
Men's Shop sold a business to the defendant. It was also admitted
that the cheques which form the subject matter of the present
proceedings were issued as part payment of the purchase price as
reflected in the agreement of sale, a copy of which is attached to
the replying affidavit.
they were made payable to Katzenellenbogen or bearer and not to the
Man's Shop is not a circumstance affecting the issue of the cheques
with fraud or illegality for there is nothing wrong in making a
cheque payable to someone other than the seller. Certainly it is not
fraud or illegality as contemplated in Section 29 (2).
defendant then relates that subsequent to the conclusion of the sale
and the issue of the postdated cheques, it transpired that the Men's
Shop owed the Income Tax Department an amount of E66,846.48 in unpaid
tax. This the defendant says was a breach of a warranty given by the
Men's Shop in terms of clauses 7 and 10 of the sale agreement.
clause 7 of the agreement the seller warranted that no person or
company has any claim legal, equitable or otherwise over the
boutique's business or whatsoever. It is difficult to see how the
claim of the Revenue Department even if the same were to be
substantiated would constitute any claim over the boutique's business
Clause 10 the seller, it was recorded was to remain responsible and
shall pay, satisfy and discharge all the debts and liabilities in
respect of the said boutique business subsisting on and prior to the
date of the sale. The seller undertook to fully indemnify the
purchaser from all demands, claims and actions thereof. It does not
appear that this fact alone would give rise to a claim by the
defendant against the Man's Shop without there being some allegation
that the defendant was somehow advised to pay the amount of
only allegation in this connection is that the Commissioner of Taxes
in exercise of authority in terms of Section 49 of the Income Tax
Order 1975 as amended declared that the defendant was its agent for
the purpose of collecting the outstanding tax. The defendant has
annexed a copy of a letter addressed by the Commissioner of Taxes to
the public officer of the defendant in terms of which the defendant
is appointed agent for the collection of income tax. The notice
itself would appear to be bad as it does not state the grounds or
circumstances mentioned in section 48 a, b and c of the Order which
are applicable in the present case. Moreover the defendant is
required to make payment of the alleged outstanding taxes within
fifteen days of receipt of the notice or within fifteen days of the
date on which such money becomes due to, or available for or on
account of such person, what these words mean in the present case, is
not apparent. There is also a third alternative demand on the
defendant in rather obscure terms in which he is required to "deduct
once" whatever that may be. One does not know from what it is
supposed to be deducted. Obviously the notice can only require the
addressee thereof to pay to the receiver, from the taxpayer's monies
or other assets in the addressee's possession. In this way it
resembles a gamishee, and was intended to refer to the balance of the
purchase price of the business.
the absence of an affidavit from the receiver revenue to establish
the amount allegedly owing by the Man's Shop in respect of taxes, the
letter itself is hearsay. Furthermore the defendant by issuing the
cheques has already made payment of any amounts owing by it in
respect of the purchase and does not appear to be in any position to
outstanding taxes allegedly owing by the Man's Shop on behalf of the
receiver. As far as the plaintiff is concerned there is nothing to
show that the plaintiff received the cheques subsequent to the
alleged claim arising and with knowledge thereof. There is
accordingly no evidence to show that the subsequent negotiation of
the cheque from the payee to the plaintiff was in any way affected
with fraud or illegality.
the foregoing circumstance the presumption in Section 29(2) of the
Bills of Exchange Act remains undisturbed. The onus is on the
defendant to show that the plaintiff is not a holder and that its
alleged claim which the defendant describes as having arisen from a
breach of a contract is available against the plaintiff as a holder
in due course.
28 of the South African Bills of Exchange Act with which Section 29
of the Swaziland legislation corresponds has been authoritatively
interpreted in a number of cases see: Rutenberg vs Issroff 1938 EDL
275 at 283: Joffe vs Goldstein 1942 WLD 183 at 187: Geysdorp Trading
Company vs Nathaym (Pty) Ltd 1954 (2) SA 575 T. at 577 and Jaffer vs
Neil 1958 (3) SA 497 (C).
effect of the section is as follows:
is presumption that every holder is a holder in due course, but the
presumption does not come into operation until the plaintiff has
established that he is a holder. In this case we have seen that the
plaintiff is a holder.
the presumption may be rebutted by proof on a balance of probability
that anyone requirement for holding in due course is absent. In the
present case there is no evidence whatsoever to show that any of
these requirements are absent.
the Act specifically provides that the presumption may be rebutted by
an admission or proof that fraud or illegality affected the issue,
acceptance, making, or subsequent negotiation of the instrument. One
would look for proof of fraud or illegality. In this case we have
seen that there is no fraud or
affecting the issue or negotiation of the instrument.
there is evidence as to how the cheque came to be issued, there is
nothing to point to the circumstances in which it was negotiated to
the plaintiff more especially there is no evidence to show that the
issue or negotiation took place after the receiver's claim became
known and that negotiation took place in order to defeat this claim.
are two other considerations arising out of the section which I need
not deal with here.
considering the validity of the offender's alleged claim against the
seller of the business, I find that as the plaintiff is a holder in
due course such a claim would not constitute a defence against the
plaintiff's claim on the cheques. I accordingly grant provisional
sentence with costs as prayed.