L N Sackstein NO (in his capacity as liquidator of Tsumeb Corporation Limited (in liquidation)) v Proudfoot SA (Pty) Limited

Tsumeb Corporation Limited was incorporated in Namibia and registered as an external company in South Africa under section 323 of the Companies Act 61 of 1973. In October 1997, Tsumeb concluded a contract with Proudfoot SA (Pty) Ltd in Namibia for consultancy services, totalling R10 million in fixed weekly instalments. By 29 July 1998, Tsumeb had paid R5,708,957.00 to Proudfoot. Tsumeb was placed under provisional liquidation in Namibia on 29 April 1998, with a final winding up order granted on 12 March 1999. Tsumeb SA (the external company in South Africa) was placed under provisional liquidation on 29 July 1998, with a final winding up order on 16 March 1999. Leslie Neil Sackstein was appointed as liquidator of Tsumeb SA. The Namibian High Court sanctioned a scheme of arrangement on 10 March 2000 and discharged the Namibian liquidation order. The Namibian liquidators did not seek recognition in South Africa. Sackstein instituted action in South Africa against Proudfoot to recover the payments made, alleging they constituted voidable preferences under sections 29(1) and 30 of the Insolvency Act 24 of 1936 read with section 340 of the Companies Act. The payments were credit transfers from Tsumeb's bank account in Namibia to Proudfoot's account in South Africa.

• Whether a South African liquidator of an external company has the power to impeach dispositions of property that originated in a foreign country
• Whether the definition of 'property' in section 2 of the Insolvency Act 24 of 1936 ('wherever situate within the Republic') limits the liquidator's power to impeach dispositions to property situated within South Africa
• Whether the invalidation of a disposition and the recovery of property are two distinct processes
• The proper interpretation of sections 29 and 30 of the Insolvency Act read with section 340 and 391 of the Companies Act in the context of external companies

The appeal succeeded with costs. The judgment of the court a quo was set aside and paragraphs 4.4 and 4.5.2 of the Plea were struck out. The Defendant was ordered to pay the costs of the action in the court a quo and the costs of the appeal, including costs consequent upon the preparation of the stated case. In both courts, costs included those consequent upon the employment of two counsel.

A South African liquidator of an external company registered under section 323 of the Companies Act 61 of 1973 has the power to impeach dispositions of property under sections 29 and 30 of the Insolvency Act 24 of 1936 read with section 340 of the Companies Act, even where the disposition relates to property situated outside South Africa. The definition of 'property' in section 2 of the Insolvency Act ('wherever situate within the Republic') should be interpreted to extend rather than restrict the liquidator's powers, and does not limit impeachment proceedings to property situated within South Africa. The invalidation of a disposition and the recovery of property disposed of are two logically distinct processes. The impeachment process is governed by ordinary jurisdictional rules; where a South African court has issued the winding up order, appointed the liquidator, and the defendant is domiciled within its jurisdiction, that court has jurisdiction to entertain impeachment proceedings regardless of where the property was situated. Section 391 of the Companies Act imposes a duty on the liquidator to recover and reduce into possession all assets of the company, which includes taking steps to impeach voidable transactions in South Africa, even if subsequent recovery of property abroad may require recognition of the South African order in the foreign jurisdiction.

The Court observed that registration of an external company in South Africa does not create two separate legal personae but rather one legal persona registered in two countries. This can lead to conflicts between concurrent liquidators in different jurisdictions, and a principle of demarcation may need to be developed in cases of dispute between liquidators. The Court noted that if a foreign company is liquidated or dissolved in its country of incorporation, the external company in South Africa can continue its business and cannot be wound up unless grounds specified in section 344 of the Companies Act are proved. The Court clarified that its judgment should not be read to mean that the South African liquidator is obliged to institute impeachment procedures in a South African court where property is in a foreign country; rather, the liquidator has a choice to either proceed under section 391 or seek recognition in the foreign country and prosecute impeachment and recovery there. The Court emphasized that if a liquidator succeeds in impeaching a transaction involving property situated outside South Africa, the correct procedure for recovery is to seek recognition of the South African court order in the applicable foreign country, as the liquidator has no extra-territorial powers of recovery under common law.

This case is significant in South African law as it clarifies the powers of a liquidator of an external company registered in South Africa to impeach voidable dispositions that originated in a foreign jurisdiction. It establishes that the territorial limitation in the definition of 'property' in section 2 of the Insolvency Act does not restrict the liquidator's power to impeach transactions. The judgment recognizes the distinction between impeachment and recovery of property, affirming that South African courts have jurisdiction over the impeachment process where the respondent is within the court's jurisdiction, even if the property was situated abroad. The case provides important guidance on the operation of concurrent liquidations in different jurisdictions and the powers of liquidators of external companies under South African law. It balances territorial sovereignty with the practical needs of insolvency administration in cross-border contexts.