A Falcon 900B executive jet (registration ZC-DAV) had been stranded at Le Bourget Airport in France since 3 April 2003. The aircraft was registered in South Africa in the name of Hawker Air Services (Pty) Ltd (HAS), which was liquidated on 31 March 2006. HAS was a partner in Hawker Aviation Services Partnership, the beneficial owner of the Falcon. The Commissioner for SARS had tax claims exceeding R900 million against David Cunningham King and R1.4 billion against Ben Nevis Holdings Ltd. On 3 September 2002, Hartzenberg J issued a preservation and anti-dissipation order regarding the Falcon. Despite this order, on 5 September 2002, Carmel Trading Company Limited (controlled by King) "took over" the interests in the Falcon. Previous court findings established that this transaction was contrived in fraudem legis to bypass the preservation order. The Falcon, originally valued at R200 million, was deteriorating rapidly in France and would soon become worthless. The Commissioner sought an order to sell the Falcon and hold the proceeds in trust pending finalization of the main tax action. Carmel opposed the sale.
The appeal was dismissed with costs, including costs of two counsel. The order of Preller J authorizing the sheriff to sell the Falcon and hold the proceeds in an interest-bearing trust account pending the outcome of the main action was upheld.
A court has the power to vary a preservation order to authorize the sale of deteriorating assets and the retention of proceeds in trust, even where those assets have not been attached and are located in a foreign jurisdiction. Such an order does not constitute arbitrary deprivation of property under section 25(1) of the Constitution where it is procedurally fair and has sufficient reason (preventing dissipation of value). The conversion of a deteriorating asset into its cash equivalent does not amount to a deprivation beyond the original preservation order. A party who fraudulently acquired an interest in property cannot rely on that fraudulent transaction to establish proprietary rights. Upon dissolution of a partnership, former partners have no proprietary claim to specific partnership property, only a claim to a proportionate share of proceeds after liquidation.
Harms ADP made several notable observations: (1) He characterized Carmel's opposition as conduct animo vicino nocendi (with intention to harm a neighbor) or "Schadenfreude," and invoked the Roman maxim "Malitiis non indulgendum esse" (there must be no indulgence to malice). (2) He quoted Lord Donaldson regarding the need for courts to adapt their practices to meet the "wiles" of defendants who devote energy to making themselves immune to court orders. (3) He noted that King's apparent attitude was to prevent the Falcon from coming under court control at all costs, even if it meant the total loss of its value rather than it being used to pay creditors. (4) He observed that Carmel's objection "lacks reality" and reminded of the farmer who destroyed his whole crop to avoid paying tithe. (5) The court did not address issues regarding the role of the English Crown Court preservation order as counsel did not press this "non sequitur" argument.
This case is significant for establishing the court's power to adapt preservation orders to changing circumstances, particularly where assets are deteriorating. It confirms that courts may order the sale of property subject to preservation orders even where not attached and located outside South Africa. The judgment affirms that section 25(1) of the Bill of Rights does not prevent courts from making effective preservation orders to prevent dissipation of assets. It demonstrates judicial willingness to prevent abuse of process by parties using procedural objections and geographical location of assets to frustrate legitimate creditor claims. The case also illustrates the application of the doctrine that courts will not indulge malicious conduct designed to defeat the administration of justice.
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