C of A (CIV) No.
21/2005

IN
THE COURT OF APPEAL OF LESOTHO

In
the matter between:

MOTAUNG
COLD STORAGE APPELLANT

and

LESOTHO
REVENUE AUTHORITY RESPONDENT

Held at Maseru

CORAM:

Steyn, P

Smalberger,
JA

Melunsky,
JA

JUDGMENT

SUMMARY

Appeal directed against the refusal
to grant a spoliation order. High Court dismissing application on the
ground that it had no jurisdiction.
– Merits of matter fully argued
before Court of Appeal. – Court accepting without deciding that
High Court had jurisdiction –
Appellant a partnership with two
partners – same partners own the debtor firm operating in the same
product market. – Seizure
effected by Respondent in terms of
Section 42 of the VAT Act 2001. – Respondent’s seizure in
circumstances lawful as vehicle
owned by the partners and not by the
firm. – Appeal dismissed.

STEYN,
P

This matter was enrolled
as a matter of urgency – due cause for such a set down having been
shown.

On the 19^th
of August 2005 the High Court dismissed an application brought by way
of Notice of Motion by the appellant. It did so on the sole
ground
that the spoliation order sought by the appellant in respect of a
refrigerated truck allegedly owned by the appellant, fell
within the
jurisdiction of the Magistrate’s Court. The High Court held that
the proceedings should, in terms of the Subordinate
Courts Order 1988
read with Section 6 of the High Court Act 1978, have been instituted
in the Magistrate’s Court, no leave having
been granted in terms of
Section 6 (b) of that Act. It was the correctness of this finding
and the consequent dismissal of the application
that appellant
challenged before us.

The appellant, however,
was not content for us to limit the appeal to the jurisdictional
question. What it sought on appeal was
the relief claimed in the
notice of motion, namely for the respondent to restore the
refrigerated truck into its possession. Although
the merits of the
spoliation application were not dealt with in the appellant’s heads
of argument, counsel for the appellant urged
us to decide whether the
respondent’s seizure of the truck was lawful. As counsel for the
respondent had no objection to this
course, we acceded to the
appellant’s request and heard argument on the merits. In the
event, and as appears hereunder, there
is no need for this Court to
deal with the question of jurisdiction.

The principal deponent
in these proceedings one Rego runs a business in partnership with one
Anthony Robert Stevenson, trading as
Motaung Cold Storage located at
No 6 Loop Street, Ladybrand in the Republic of South Africa. The
appellant was engaged in the business
of selling processed meats
delivered to Maseru every day of the week using inter alia an
Izusu 31/2 ton refrigerated truck. On the 24^th of
December 2004 officers of the respondent seized the truck whilst it
was in Maseru. It did so in respect of a claim of M123,201.60
allegedly due in respect of VAT for the period commencing 2001 by
Motaung Meat Wholesalers – a partnership which carried on a
butchery
business in Maseru and imported its meat into Lesotho from
South Africa. Although Rego stated in his replying affidavit that
Motaung
Meat Wholesalers was an “enterprise which he ran jointly”
with Stevenson, he nowhere denied the respondent’s averment that
the so-called enterprise was in fact a partnership and that the
parties at all relevant times were Rego and Stevenson. Appellant
contended that this disturbance of its possession of a vehicle owned
by it was unlawful and it sought the protection of an order
or writ
of mandament van spolie. It is common cause that Motaung Meat
Wholesalers was the debtor, not the appellant partnership. In fact
and in law, however, the
debt was owed by the parties of this
business.

The respondent raised
several defences to the granting of a spoliation order. Apart from
challenging the jurisdiction of the High
Court with reliance on the
statutory provisions referred to above, it also contested the right
of the appellant’s claim to ownership
or lawful possession of the
vehicle seized. Finally it averred that even if ownership had been
transferred to the appellant, in
law the truck was owned and in the
possession of the individual partners who were also partners in
the business of the debtor (while it) was trading as Motaung Meat
Wholesalers. It is not disputed for present purposes that the
debtor firm is indebted to the respondent in respect of unpaid VAT
tax in the
amount claimed. In these circumstances, - so the
respondent submitted – it was entitled in terms of Section 42 of
the Value Added
Tax Act 2001 (“the Act”) to recover VAT owed,
via distress proceedings, and to seize the vehicle in issue.

I
am prepared for present purposes to assume – without so deciding –
that the High Court had jurisdiction to adjudicate the application.

The issue to be decided was whether the respondent seized the vehicle
lawfully in terms of Section 42 of the Act.

The facts relevant for
the determination of this issue are the following. As outlined
above, the two partners in the partnership
trading as Motaung Cold
Storage (the appellant), are also the two partners in the firm
Motaung Meat Wholesalers (the debtor). One
of the two partners -
the said Stevenson – alleges that he “personally purchased”
the vehicle and paid for it by means of
3 post-dated cheques drawn by
“a company” – T. Stevenson Marketing and Warehousing. It is
clear however that the vehicle in
question is still registered in the
name of the seller, one Dr. Musoke. She avers that she sold the
vehicle to Motaung Meat Wholesalers
(the debtor) and she confirmed
that no formal change of ownership occurred and that she was still
the registered owner.

Stevenson
says that when Dr. Musoke alleges that she sold the vehicle to
Motaung Wholesalers for M27,000 (and not for M58,000 as
averred by
him), she is not correct and he attached cheques totaling R58,000 to
prove this fact. He does not however state on whose
behalf he bought
the vehicle or how it is alleged to have been “acquired” or
possessed by the appellant firm or transferred to
it. The only
evidence tendered by the appellant is Stevenson’s allegation that
“I personally
(my emphasis) purchased this vehicle from Dr. Musoke …”. (It
must be borne in mind that Rego admitted in his replying affidavit
that Motaung Meat Wholesalers (the debtor company) “was ….. an
enterprise run jointly by the said Stevenson and I and I consequently
accept liability for its act.”

However that may be, and
on the assumption that Stevenson bought the truck for the purposes of
the business conducted by the appellant,
it is clear that it was
never registered in its name and inasmuch as it was a partnership
asset it was at the time of its seizure
the property of the partners.
The respondent contended that the fact that the vehicle may not have
been used in pursuance of the
business needs of the debtor at the
time of its seizure was irrelevant if indeed it was owned in law by
the individual partners of
both partnerships – one of whom was the
debtor in the amount claimed.

Support for this
contention is to be found in Gibson SA Mercantile and Company Law
7^th ed, pp248-249 and Wille’s
Principles of South African Law 8^th ed, p.612. In
Strydom v Protea Eiendomsagente 1979 (2) SA 206 (T) at p.209
C-D Nestadt J (as he then was) summarizes the law concerning the
legal personality of a partnership as follows: “There
is now no
doubt, if there ever was, that the basic common law principle is that
a partnership is not a legal entity or persona separate from
its members. This means that the rights of a partnership are vested
in, and the liabilities are binding on, the individual
partners.”
See also Ex Parte Cohen and Another 1974 (4) SA 674 (W) at 675
and Muller and Another v Pienaar 1968 (3) SA (A) 195 at 202 F-H
where the Court states “The assets of a partnership is the
property of the partners in joint undivided shares”. (Own
translation)

The respondent contended
that the use of different names for the business conducted by the
respondent was merely a facade to facilitate
the evasion of VAT.
There is certainly a well-founded suspicion that what the two
partners did by conducting business under a variety
of aliases was a
charade intended to confuse and obfuscate the true identity of those
involved for whatever purpose – tax evasion
or otherwise. In this
regard there is the unexplained peculiarity that a vehicle, allegedly
purchased for use by the appellant,
was bought by Stevenson and paid
for by cheques issued by a company under the name T. Stevenson
Marketing and Warehousing. Then
there is the fact that the deponent
of the founding affidavit failed to disclose therein that he was
himself a partner of the debtor
business. Indeed he was at pains at
that point to distance himself from any association with this
enterprise. His allegation in
the founding affidavit was that
Motaung Wholesalers – the debtor company - “is the butchery
business which the said Stevenson attempted to run in Maseru
but could not obtain a licence to operate in Maseru …”. As
pointed out above it was only in reply
that he admitted that he was
indeed a partner in the debtor business.

It is also to be noted
that the allegation made by the respondent that the partners kept on
changing their trade name and had also
operated a butchery in the
trade name Lefikeng Butchery is not explicitly denied by the
appellant. Indeed the response is the following:

“As
will be apparent to this Honourable Court I have attempted not to
answer the gratuitous insults and accusations of dishonesty hurled
at
me by the deponent simply because they are irrelevant to the question
of the ownership of the vehicle in issue and also because
they do not
show the required decorum to this Honourable Court.”

This is an evasive and
unconvincing response to specific and detailed allegations that
required a reasoned rebuttal.

Even if it were to be
assumed for present purposes that Stevenson bought the vehicle
exclusively for the purposes of the appellant’s
business, (which he
does not allege) this does not in any way affect the principle that
its ownership vested in the partners in
the business – Rego and
Stevenson. This principle is defined as follows in Wille’s
Principles of South African Law (8^th ed.)
op.cit:

“Although the assets or
property mentioned above are invariably referred to as ‘partnership
property’, they do not actually belong
to the firm, since the firm
is not a persona and cannot therefore own property. The property is
owned jointly by the partners in
undivided shares, i.e. they are
co-owners, in such proportions as have been stipulated.”

See also the authorities
cited by the authors and cf. the Strydom decision cited above.

It follows therefore
that the respondent was entitled to attach the asset (the truck) as
it was owned and in the possession of the
partners who represented
both the appellant and the debtor [company].

It is my view that the
truck was owned by the partners in related enterprises operating
formally under different names. The failure
of both Rego and
Stevenson to deal appropriately with the respondent’s allegations
of the use of different names for tax evasion
purposes and that they
also at one point changed their trade name to Lefikeng Butchery
strengthens the suspicion that these various
businesses were
essentially one business operating under different names. If these
were two distinct businesses, one would have
expected the partners to
have responded and to have demonstrated their bona fides by
setting out why these businesses had different names; that they
operated from different premises; had separate books of account
and
were genuinely distinct enterprises. It is also puzzling why the
appellant never registered the vehicle in its name. No explanation
was tendered for its failure to do so.

Whilst it is clear that a
male fide exercise of statutory powers of seizure is
spoliation – see Van Eck N.O. v Etna Stores 1947 (2) SA 984
(A) – the respondent in my view acted both bona fide and
intra vires when it seized the vehicle – the property of the
partners, Rego and Stevenson.

I summarize our findings
thus.

1. It is common cause:

1.1 The debtor company
owes the Respondent M123,201-60 due for VAT purposes.

1.2 The partners in the
Appellant and in the debtor businesses are the same persons.

2. It is our view that
the respondent acted lawfully when it seized the vehicle in question
in terms of Section 42 of the Act because
-

1. 
   The vehicle was in law
   the property of its two partners.

   
   

2. 
   The two partners being
   partners in both businesses, ran them not as distinct and separate
   businesses but they were essentially
   the same business but with
   different names.

   
   

3. 
   It follows that the
   basic common law rule applies that the assets of both businesses
   belonged to the two partners who were common
   to both these
   enterprises.

   
   

4. 
   In these circumstances
   the respondent acted lawfully when it availed itself of the powers
   conferred on it by Section 42 of the
   Act when it seized the vehicle
   in question.

   
   

For these reasons the
appeal is dismissed with costs

______________

J.H.
STEYN

PRESIDENT
OF THE COURT OF APEAL

I
agree: _________________

J.W. SMALBERGER

JUDGE
OF APPEAL

I
agree: __________________

L. MELUNSKY

JUDGE
OF APPEAL

Delivered on this 20^th
day of October 2005.

For Appellant : Mr. K.
Sello, KC

For
Respondent : Mr. R. Mathaba