Van Zyl N.O and Others v Master of the High Court of South Africa, Western Cape Division, Cape Town and Another (7892/2015) [2016] ZAWCHC 51 (11 May 2016)

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[2016] ZAWCHC 51
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Van Zyl N.O and Others v Master of the High Court of South Africa, Western Cape Division, Cape Town and Another (7892/2015) [2016] ZAWCHC 51 (11 May 2016)

IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
No: 7892/2015
DATE:
11 MAY 2016
In
the matter between:
CHRISTOPHER
PETER VAN ZYL
N.O
......................................................................
First
Applicant
PETER
CAROLUS
N.O
..............................................................................................
Second
Applicant
ABDURUMAN
MOOLLAJIE
N.O
..............................................................................
Third
Applicant
[in
their capacities as the duly appointed liquidators of
Chelsea
West (Pty) Ltd (in liquidation)]
And
THE
MASTER OF THE HIGH COURT OF SOUTH
AFRICA,
WESTERN CAPE DIVISION, CAPE
TOWN
.........................................
First
Respondent
CHESTER
FINANCE (PTY)
LTD
.........................................................................
Second
Respondent
(Registration
No:  1993/005402/07)
JUDGMENT
DELIVERED
ON 11TH MAY 2016
RILEY,
AJ
[1]
The applicants in their capacity as the
duly appointed liquidators of Chelsea West (Pty) Ltd (in liquidation)
seek an order in terms
of Sections 151 of the Insolvency Act No 24 of
1936 (‘the
Insolvency Act&rsquo
;), read with Section 339 of the
Companies Act No 61 of 1973 and read with item 9 of Schedule 5 of the
Companies Act No 71 of 2008
for a review of a decision by the Master
of the High Court, Cape Town, in terms of which the Master refused to
expunge a claim
of Chester Finance (Pty) Ltd, the second respondent,
in the winding-up of Chelsea West (Pty) Ltd (in liquidation).
[2]
The first respondent filed a notice to abide by the decision of this
court whilst the application is opposed by the second respondent.
The
striking out application
[3]
Before dealing with the background and
facts of the matter, I deem it necessary to deal with the submissions
made by Mr Peter on
behalf of the second respondent that the
application can be disposed of in short order by striking out the
founding and replying
affidavits of the applicants.  Mr Peter
submitted that for the most part the founding affidavit of the
applicants consists
of argument and inadmissible legal opinions.
He submitted in particular that there is not one single new fact
raised in response
to the answering affidavit that is alleged in the
replying affidavit and that argumentative matter is impermissible in
affidavits.
See
President of
the Republic of South Africa and Others v South Africa Rugby Football
Union and Others
2000 (1) SA 1
(CC)
at 19A.  He submitted further
that our courts have long since held the view that argumentative
matter should not be permitted
to clutter up affidavits and that in
the present matter applicants had included voluminous matter of an
argumentative and irrelevant
nature in both the founding and replying
affidavits.  See
Venmop 275
(Pty) Ltd and Another v Cleverland Projects (Pty) Ltd and Another
2016 (1) SA 78
GJ
at 86 para [12] to [13],
Reynolds
N.O. v Mecklenberg (Pty) Ltd
1996
(1) SA 75
(W)
at 78G – 80F.
[4]
It is now generally accepted that it is neither admissible nor
necessary for an applicant to include in his founding affidavit
legal
opinion on a matter of domestic law which a judge might have to
decide on. See
Prophet V National
Director of Public Prosecutions
2007 (6) SA 169
(CC)
at 189 C.
[5]
The law relating to the contents of
affidavits generally, is set out in
Swissborough
Diamond Mines (Pty) Ltd and Others v Government of the Republic of
South Africa
1999 (2) SA 279
(T)
at 323F – 325C and can be summarised
inter
alia
as follows:
(a)
In motion proceedings the affidavits serve
not only to place evidence before the court but also to define the
issues between the
parties.
(b)
By identifying the issues, the court is
assisted and at the same time the parties know the case that must be
met and in respect
of which they must adduce evidence in affidavits.
(c)
An applicant must raise the issues upon
which it would seek to rely in the founding affidavit and in doing so
by defining the relevant
issues and by setting out the evidence upon
which it relies to discharge the onus of proof resting on it in
respect thereof.
(d)
The more complex the dispute between the
parties the greater the precision that is required in the formulation
of the issues.
(e)
The facts set out in the founding,
answering and replying affidavits must be set out simply and clearly
and in chronological sequence
and without argumentative matter.
(f)
A party may advance legal argument in
support of the relief or defence claimed even where such arguments
are not specifically mentioned
in the papers provided they arise from
the facts alleged.
[6]
Mr Goodman who appeared on behalf of the
applicants submitted that there was no merit in Mr Peter’s
argument and that since
the review related to issues which contained
a mixture of fact and law, all that applicants had done was to refine
the issues.
[7]
On a consideration of the papers, I find that the founding affidavit
of the applicants is in fact relatively short. Pages 1-
4 contain the
notice of motion.   Pages 6 – 14 identify the parties
to the application; the relief sought and provides
a brief history of
the matter.  The further information provides an essential
narrative regarding the liquidation of Chelsea
West and the claim of
the second respondent. The reference to
Section 45
of the
Insolvency
Act provides
the basis upon which the applicants decided to proceed
with the examination of claims.  In pages 14 – 19 the
applicants
summarise the basis upon which they object to the first
respondent’s decision.  Pages 19 – 21 is a summary
of
the second respondent’s response to the objections, whilst
pages 21 – 24 contain a summary of the applicants response
and
reference is made to the first respondent’s ruling.  Page
25 deals with the view of creditors, whereas pages 26
– 27 is a
summary of the basis upon which first respondent’s ruling is to
be reviewed.  On a consideration of
the applicants’
replying affidavit all that applicant really seeks to do, is to rebut
the legal argument which is contained
in second respondent’s
answering affidavit.
[8]
I agree with Mr Goodman that whilst the legal contentions do not
constitute facts, they are of great importance in that they
form the
basis for why the first respondent’s decision requires to be
remedied. On the whole I am satisfied that applicants’
papers
“…
reveals that the factual
foundation for those legal contentions is raised in the founding
affidavit and the replying affidavit merely
advances in a crisp
fashion the legal contentions in question. The allegations in the
replying affidavit on behalf of the applicants
raising those legal
contentions are in the form of legal conclusions rather than
allegations of new factual matter
…”
See
Talacchi and Another v The Master
and Others
1997 (1) SA 702
(T)
at 707E–F. I am accordingly not
persuaded that the applicants’ papers are unnecessarily prolix
and/or that what is contained
therein is of such a nature that it
should be struck out or be disregarded in coming to a decision in
this application.
Background
[9]
The background facts are essentially common
cause and are set out concisely in the founding affidavit of the
applicants.  Since
there is no evidence that what is contained
in the founding affidavit of Christopher Peter van Zyl (“Van
Zyl”) is demonstrably
unworthy of credence or belief, I shall
for the purposes of the determination of this application accept the
factual account of
Van Zyl as correct.  I will accordingly
incorporate herein the chronology of the events as set out in his
affidavit and I
readily admit that the common cause and/or undisputed
facts was practically taken verbatim from the affidavit of Van Zyl.
[10]
On 17 December 2008 Chelsea West (Pty) Ltd
(“Chelsea West”) was placed in provisional liquidation by
this court.
The application was brought on the grounds that
Chelsea West was unable to pay its debts within the meaning of
Section 344(1)
as read with Section 345(1) (C) of the Old
Companies
Act.  On
6 January 2010 the applicants were appointed joint
provisional liquidators of Chelsea West by the first respondent.
On 3
February 2009 Chelsea West was placed in final liquidation and
on 21 April 2009 the applicants were appointed as final liquidators.
[11]
It is not in
dispute that no claims were lodged for proof at either the first or
second meetings of creditors and that three special
meetings were
thereafter convened for the admission to proof of claims.
[12]
On 15 July 2014 the applicants were
requested by the second respondent to convene a third special meeting
of creditors for the purpose
of submission to proof of claim to be
lodged by the second respondent.
[13]
As the applicants were of the view that the
claim by the second respondent was incorrect, the applicants
instructed their attorneys,
Edward Nathan Sonnenberg (“ENS”)
to oppose the admission of proof of the second respondent’s
claim.
[14]
At the third special meeting which was
presided over by Assistant Master, Mr Mabandla Dondolo (“Dondolo”)
of the first
respondent, both the applicants and the second
respondent were allowed to advance oral argument whereafter written
submissions
were provided to Dondolo, by both parties.  On 5
August 2014 Dondolo admitted second respondent’s claim to proof
in
the amount of R2 916 006-14.
[15]
The claim of the second respondent which is
set out in an affidavit deposed to by Lewis Freidus, a director of
second respondent,
can be summarised as follows:
15.1
The claim allegedly arises as a result of monies owed and advanced by
second respondent to Chelsea West prior to its liquidation
in terms
of a trade facility agreement (“TFA”) concluded on or
about 6 May 1997;
15.2
The claim was secured by virtue of three general notarial bonds and a
cession executed by Chelsea West in favour of the second
respondent;
15.3
The total amount lent and advanced by second respondent to Chelsea
West was in the amount of R13 205 610-18;
15.4
On 1 December 2008, second respondent obtained an order from this
court in terms whereof it perfected the security held by
it in terms
of the general notarial bonds;
15.5
On 3 December 2008 second respondent concluded an agreement with
Dreywin Finance CC (“Dreywin”) in terms whereof
all the
assets of Chelsea West which second respondent was authorised to take
possession of in terms of the perfection order were
sold to Dreywin
for amount of R13 200 000-00;
15.6
On the 11
th
and 12
th
December 2008 Reichmans
(Pty) Ltd (“Reichmans”) made payment to second respondent
of the amounts of R2 749 516-69
and R166 489-72
respectively (“the Reichmans payments”).  It is
necessary to point out in this regard that
the Reichmans payments
were purportedly made pursuant to the cession and were amounts that
were held by Reichmans to which Chelsea
West became entitled to on
the termination of the facility which it had with Reichmans.
15.7
On 25 June 2013 the applicants obtained an order in this court under
case number 25983/2010, (“the Binns-Ward judgments”),
in
terms whereof the Reichmans payments were determined not to form part
of the sale agreement and were set aside as dispositions
in terms of
Section 29
of the
Insolvency Act 24 of 1936
.
15.8
On 25 April 2014 second respondent paid to the applicants the amount
of R2 953 155-53 being the total amount paid
in terms of
the Reichmans payments.
15.9
It is common cause that the second respondents claim is based on the
repayment of such payments.
[16]
In accordance with their duties in terms of
Section 45
of the
Insolvency Act the
applicants examined the books
and documents relating to Chelsea West for the purpose of
ascertaining whether Chelsea West in fact
owes the second respondent
the amount claimed.  After studying the available books and
documents relating to Chelsea West
and after obtaining legal advice,
the applicants formed the view that the claim by the second
respondent that was admitted to proof,
is not a genuine or valid
claim and instructed their attorneys ENS to make application to the
first respondent to expunge the claim
of the second respondent.
[17]
The contents of the report by ENS which is
dated 7 October 2014 is succinctly summarised in the applicants
founding affidavit as
follows:
“
27.1
The documents lodged in support of the claim are at variance with
what is recorded in the affidavit lodged in support of the
claim and
such affidavit does not reconcile with the facts which appear ex
facie the documents lodged in support thereof;
27.2
Annexure M to the claim is a document setting out a schedule of
indebtedness which refers to, inter alia, three invoices allegedly

issued by Chester Finance to Chelsea West (“the invoices”);
27.3
The invoices, which comprise part of annexure M, total the sum of R2
916 006,14, are all dated prior to the liquidation of
Chelsea West
and appear to have been issued pursuant to the TFA;
27.4
A self-styled “client exposure report” dated 21 November
2008 is attached to the claim marked annexure K.
In terms of
this document, the amount due by Chelsea West to Chester Finance as
at 21 November 2008, some three weeks before its
liquidation, was R13
205 610.18.  Included in the breakdown of how this total is
computed are the amounts contained in the
abovementioned invoices
totalling R2 916 006,41.  The amounts claimed in the invoices
therefore form part of the total amount
due by Chelsea West to
Chester Finance as at 21 November 2008;
27.5
On 3 December 2008, Chester Finance sold to Dreywin all of the assets
of Chelsea West of which it was entitled to take possession
of in
terms of the GNBs and subsequent perfection order.  As stated
above, the purchase price was R13 200 000;
27.6
On 8 December 2008, Dreywin paid to Chester Finance the purchase
price thereby reducing Chelsea West’s indebtedness from
R13 205
610.18 to R5 610.18, being the total amount owing of R13 205 610.18
less the purchase price of R13 200 000;
27.7
No further advances were made by Chester Finance to Chelsea West
prior to its liquidation.  Accordingly, Chester Finance’s

claim against Chelsea West has been substantially reduced.  The
only claim which is disclosed in the claim as read with the

supporting documents attached thereto is in the amount of R5 610.18
together with simple interest thereon according to the rate
recorded
in the TFA;
27.8
Chester Finance alleges that until the Binns-Ward, J. judgment, it
was “mistakenly under the impression” that the
sale
agreement included the sale of the monies that formed the basis of
the Reichmans payments.  Once it was determined that
these
monies did not form part of the assets attached when Chester
Finance’s bond was perfected, so the argument of Chester

Finance continues, Chelsea West became liable to Chester Finance for
such amounts as its indebtedness to Chester Finance has not
been
extinguished as initially believed;
27.9
The liquidators do not agree with this construction. The only effect
of the Binns-Ward, J. judgment insofar as the sale agreement
is
concerned, is that the retention monies held by Reichmans in terms of
a factoring agreement did not form part of the assets
sold by Chester
Finance to Dreywin i.e. it dealt with the subject matter as defined
in the sale agreement.  This in no way
impacts upon the purchase
price (which remained unaltered by the Binns-Ward, J. judgment) which
was as a matter of fact paid by
Dreywin to Chester Finance settling,
in the main, Chelsea West’s indebtedness to Chester Finance;
27.10
The extent of the assets sold in terms of the sale agreement is
irrelevant. The purchase price was fixed, being equal to the
extent
of the debt due to Chester Finance by Chelsea West (but for R5
610,18). Chester Finance received that purchase price;
27.11
In addition to the liquidators’ view that Chester Finance does
not assert a valid claim, or at the very least that such
claim falls
to be substantially reduced, the liquidators are further of the view
that the security relied on by Chester Finance
is bad in law;
27.12
Chester Finance alleges that the claim is secured by virtue of the
cession of book debts dated 15 May 1997;
27.13
However, the Reichmans factoring agreement in terms of which Chelsea
West ceded to it, in securitatem debiti, its right, title
and
interest in the retention fund was concluded on 28 June 1996;
27.14
Accordingly, at the time the cession between Chelsea West and Chester
Finance was concluded, Chelsea West had already ceded
the subject
matter thereof to Reichmans.  The only interest it retained in
its book debts was the reversionary interest which
would arise upon
the repayment of Reichmans.  Accordingly, the cession concluded
with Chester Finance could only have been
in respect of Chelsea
West’s reversionary interest;
27.15
Despite the aforegoing, the cession relied upon by Chester Finance
does not contemplate the cession of Chelsea West’s
reversionary
interest;
27.16
Therefore, for present purposes the cession does not afford Chester
Finance any security in the course of Chelsea West’s

winding-up; and
27.17
The case law in respect of
section 45(3)
of the
Insolvency Act
provides
that a liquidator is only required to establish that there
are reasonable grounds for suspicion that the claim of a creditor
that
the liquidator disputes is not genuine.  If there are
reasonable grounds for such suspicion, the Master ought to disallow
the claim and allow the creditor to establish its claim by way of
action.”
[18]
The ENS report concluded by stating that in
the circumstances, the applicants are of the view that the claim that
has been admitted
to proof by second respondent should be expunged
and that if the first respondent is unwilling to expunge the claim,
it should,
at the very least, be reduced to R5 610.18 for the reasons
that are set out in the report.
[19]
In a letter dated 21 October 2014 Fluxmans
Attorneys (“Fluxmans”), the attorneys of second
respondent, objected to the
applicants application for expungement of
the second respondent’s claim for the following reasons:
19.1
That at the time the sale agreement was concluded, second respondent
and Dreywin were under the impression that the claim against

Reichmans in regard to the retention monies was an asset secured by
the general notarial bonds and thus attached pursuant to the

perfection order;
19.2
On 8 December 2008, all debts owing to Reichmans were repaid and the
balance remaining in the retention fund was the amount
of R2 916
005.42;
19.3
That on 11 and 12 December 2008, and on the
instructions of Dreywin, Reichmans made two payments totalling R2 916
005.41 to second
respondent which received same in partial discharge
of
Dreywin’s obligation
to pay the R13,2 million purchase price payable in terms of the sale
agreement;
19.4
On the handing down of the Binns-Ward, J.
judgment, second respondent repaid to the liquidators the sum of R2
916 005.41, together
with interest thereon;
19.5
Second respondent alleges that the effect
of the Binns-Ward, J. judgment was that it had no obligation to
deliver the claim against
Reichmans to Dreywin.  In turn,
Dreywin had no obligation to pay second respondent therefor and,
accordingly, that aspect
of the sale agreement is void by reason of
common mistake. As a result, the Reichmans payments were set aside
and the purchase
price of R13 200 000 received by second respondent
was reduced by the concomitant amount leaving a balance of R2 916
005.41 owing
by Chelsea West to second respondent;
19.6
As regards the cession, second respondent alleges that the wording
thereof caters for the cession of all claims arising from
any cause
of indebtedness and furthermore specifically includes a cession of
any reversionary interest. Second respondent asserts
that in any
event, by 8 December 2008, all debts owing by Chelsea West to
Reichmans had been settled and, as such, the balance
in the retention
fund ceased to be the subject of the cession to Reichmans and Chelsea
West’s claim thereto became an ordinary
claim and not merely a
reversionary interest.
[20]
On 1 December 2014, ENS responded on behalf
of the applicants to the objections raised by Fluxmans to the
expungement of the second
respondent’s proof to claim.  It
is not necessary to repeat the response of ENS to the objections
raised by Fluxman’s.
[21]
On 19 March 2015,  the first
respondent wrote to ENS on the applicants’ expungement
application and advised that ‘…
due
to the fact that our Mr Dondolo presided at the meeting where Chelsea
Finance (Pty) Ltd’s claim was proven, this office
cannot review
the decision arrived at on 5
th
August 2014.  Mr Dondolo’s decision is the decision of
this office.  This office cannot review its own decision.

In the circumstances the correct form (sic) to undertake such a task
will be the High Court
”.
[22]
From the
contents of the letter it is clear that the first respondent had
taken the position that it could not review a decision
taken by its
office and should the applicants wish to review its decision, they
should approach the High Court.  The first
respondent’s
approach, however, also resulted in a situation where the decision
made by Dondolo on 5 August 2014, when he
admitted the second
respondents claim to proof in the amount of R2 916 006-14,
effectively remained in place since the
first respondent had decided
that he could not make a decision on the matter.
[23]
On 25 March 2015 the first respondent
formally informed the applicants of his decision.
[24]
It is common cause that the applicants,
after consultation with Credit Guarantee who appears to be the
largest creditor of Chelsea
West, decided to take the decision of the
first respondent on review.
The
Binns-Ward J Judgment
[25]
Since this application relates to the
interpretation of the Binns-Ward J judgment, it is necessary to have
regard to it so that
the submissions of the second respondent and the
applicants can be viewed in their proper perspective. A concise
summary of the
main features of the Binns-Ward J judgment is
contained in paragraphs 15-25 of applicant’s heads of argument
and for the
sake of convenience I shall repeat same below.
“
[
15]
Chelsea West carried on business as a garment manufacturer and had
only one customer, being Woolworths. It factored its claim
against
Woolworths to Reichmans.
[16]
In terms of the factoring agreement, a “retention fund”
was retained by Reichmans as security for the discharge
of Chelsea
West’s obligations to it. Further in terms of the agreement, on
its termination and immediately after all amounts
due by Chelsea West
to Reichmans had been duly paid, Chelsea West would be entitled to
repayment of the retention fund.
[17]
Chesterfin was a creditor of Chelsea West, allegedly its “principal
financier”.  It was owed as at 30 November
2008, R13
290 267-77. Resulting from communications by the managing
director of Chelsea West, one Dreyer, to one Freidus of
Chester
Finance relating to the inability of Chelsea West to reduce its
indebtedness to Chester Finance, the latter applied to
court to
perfect its security in terms of certain general notarial bonds which
it had over the assets of Chelsea West.
[18]
Chester Finance attached the movable assets of Chelsea West on 2
December 2008.  On the following day, Chester Finance,

represented by Freidus, concluded an agreement with Dreyer, this time
representing Dreywin Finance CC (“Dreywin”) in
terms of
which Chester Finance sold the assets of Chelsea West which it had
attached to Dreywin for R 13.2 million.  This
amount closely
approximated the total sum of Chelsea West’s indebtedness to
Chester Finance.  It was entered into without
any valuation of
the attached property or without any records having been drawn up as
required in terms of the court order authorising
the perfection.
[19]
The agreement of sale between Dreywin and Chester Finance requires
consideration.  It defined the “assets”
which were
the subject matter of the sale as “all the assets which the
seller (Chester Finance) was authorised to take possession
of in
terms of the court order and in terms of which it took possession”.
The sale had effect from the “Effective
Date”, being 3
December 2008.  The purchase price of the assets was
R13 200 000-00.  It was further provided
that in terms
of a separate agreement, Chester Finance would lend an advance to
Dreywin as a loan amount equal to the purchase
price.
[20]
It is accordingly clear that the assets sold to Dreywin were those
which Chester Finance had attached the previous day.
It had not
attached the retention funds.  These funds “did not fall
within the meaning of ‘assets’ defined
in clause 2.1.2 of
the agreement of sale between Dreywin and Chesterfin because it was
not a claim of which Chesterfin had taken
possession of by 3
December”, as the learned Judge held.
[21]
Sometime later on 17 December 2008 at the instance of Dreyer, Chelsea
West was placed in provisional liquidation.  Prior
thereto
Chester Finance’s attorneys contacted Reichmans attorneys to
advise that Chelsea West’s right to the balance
in the
retention fund had been included in the property attached by Chester
Finance and sold to Dreywin.  As the learned judge
held, “this
information was in fact incorrect. As at 2 and 3 December, Chelsea’s
right to any money in the retention
fund vested in Reichmans
consequent upon the cession thereof to it in securitatem debiti in
terms of the previously mentioned provision
in the factoring
agreement”. The learned judge also held that Chelsea West’s
claim against Reichmans did not fall within
the meaning of “assets”
as defined in the agreement of sale between Dreywin and Chester
Finance because the latter
had not taken possession of it by 3
December – the relevant date which fixed the assets which were
sold, namely those of
which Chester Finance had taken possession of
pursuant to the perfection order.”
[22]
The learned judged noted that it was the intention of Chester Finance
and Dreywin that the Reichmans retention monies due to
Chelsea West
should be paid by Reichmans to Chester Finance, and that the amount
would be appropriated to reduce Dreywin’s
indebtedness to
Chester Finance.
[23]
The learned judge ultimately found that the agreement involving
Chelsea West in terms of which it disposed of its right to
payment of
the Reichmans retention fund, constituted a voidable preference in
terms of
section 29
(1) of the
Insolvency Act, the
disposition
(effected in two tranches) was set aside and Chester Finance was
ordered to pay the Applicants as Plaintiffs the sum
of R
2 916 006-41, together with costs.
[24]
The court order entitling Chester Finance to attach Chelsea West’s
assets authorised it to perfect its security by taking
possession of
all of Chelsea West’s movable property.  As the judgment
makes clear, the monies in the retention fund
were not attached by
Chester Finance and did not constitute part of the assets which were
sold to Dreywin with effect from 3 December
2008.
[25]
The consequences of the transaction, however, was that Chester
Finance “transposed its creditor-debtor relationship with

Chelsea (West) to a virtually identical relationship with Dreywin.
The funds it received from Reichmans upon the early termination
of
Chelsea’s factoring agreement were credited in full in
reduction of Dreywin’s indebtedness in respect of the purchase

of Chelsea’s business”.  The consequence of this, as
is apparent from the finding, is that Dreywin became the
debtor of
Chester Finance, and Chelsea West was no longer indebted to it (but
for R 5 610-18)
.”
[26]
I do not propose to repeat the whole of the
arguments and submissions made on behalf of the applicants and the
second respondent
before me as they are dealt with fully hereinbefore
in the reports made on behalf of the respective parties by their
attorneys
to the first respondent.  Accordingly, I shall
highlight only the main submissions made on behalf of the respective
parties.
Second
respondent’s main submission
[27]
Mr Peter
submitted that on an analysis of the Binns-Ward J judgment, as
between second respondent and Dreywin, the claim against
Reichmans
was part of the assets sold, therefore the value of such claim had
been taken into account in the sale and it was intended
that when the
claim was paid, notwithstanding that it had been sold to Dreywin, it
would be paid directly to second respondent
which would and did give
Dreywin a credit for the purchase price.  He submitted that the
sale transaction between second respondent
and Dreywin included the
Reichmans claim. In his view, second respondent had disposed of the
Reichmans claim to Dreywin in satisfaction
of the indebtedness owed
by Chelsea West to second respondent.  He submitted that both
second respondent and Dreywin mistakenly
believed that it was
entitled to do so in terms of the court order. According to Mr Peter,
second respondent was not so entitled
and the disposition was thus
impeachable.
[28]
He submitted
further that the effect of the court order setting aside the payment
as a voidable disposition has the effect of undoing
part of the
transaction in the sense that not only did second respondent not get
part of the payment in the sum of R2 916 006-41,
but Dreywin did
not receive one of the assets i.e. the claim against Reichmans in the
sum of R2 916 006-41. He submitted
that under the
circumstances second respondent has no claim against Dreywin for part
of the R13.2 million in an amount in the sum
of R 2 916 006-41.
Accordingly, he submitted that Chelsea West’s indebtedness to
second respondent was not discharged
by the transaction to the extent
that it was set aside as a voidable disposition. In his view, the
court was simply dealing with
a disposition of an insolvent’s
assets in partial consideration of that insolvent’s liability
to the creditor and the
fact that the court has subsequently set
aside such disposition does not absolve the insolvent from liability.
The
essence of the  submissions made on behalf of the liquidators
[29]
The essence of Mr Goodman’s argument
against the claim by the second respondent is that the payment by
Dreywin to second respondent
in the amount of R13 200 000-00
in terms of the agreement of sale, had the effect of extinguishing
the indebtedness of
Chelsea West to second respondent.  He
submitted that second respondent no longer had a claim against
Chelsea West, but for
the sum of R 5610-18.
[30]
In his view, second respondent now had a
new debtor, namely Dreywin, which owed it R13 200 000-00 on
the basis that second
respondent sought to reduce Dreywin’s
indebtedness by obtaining payment of the Reichmans retention fund and
crediting Dreywin
with the equivalent amount.  He submitted
further that the effect of the Binns-Ward J judgment was that second
respondent
was not entitled to the Reichmans monies which had to be
repaid to the liquidators of Chelsea West.  Accordingly, Dreywin
continued to owe the second respondent the equivalent sum.  He
submitted further that second respondent was not entitled on
some
“fanciful basis”, to resurrect part of the indebtedness
formerly owed by Chelsea West and to prove a claim in
the winding
up.  According to Mr Goodman the claim by second respondent
against Chelsea West had thus been extinguished.
The
legal framework
[31]
In the present matter the liquidators seek
to have the claim of the second respondent expunged in terms of
section 45.
Section 45
(1) provides for the delivery by the officer
presiding at a meeting of creditors to the trustee or a meeting of
creditors to the
trustees or liquidator of every claim proved against
the estate. Sub-section (2) provides that the trustee shall examine
the available
books and documents relating to the insolvent estate
for the purpose of determining whether the estate owes the claimant
the amount
claimed.
[32]
Section 44(3)
of
the
Insolvency Act provides
that ‘
a
claim made against an insolvent estate shall be proved at a meeting
of the creditors of that estate to the satisfaction of the
officer
presiding at that meeting, who shall admit or reject the claim:
Provided that the rejection of a claim shall not debar
the claimant
from proving that claim at a subsequent meeting of creditors or from
establishing his claim by an action at law…’
[33]
According to
Meskin,
Insolvency Law
para 9.2.5 the function of the officer presiding at the meeting of
creditors where a claim has been lodged to be proved is a
quasi
-judicial
one.  It therefore follows that the presiding officer has the
duty to examine the proof of claim documents for the
purpose of
deciding whether or not they disclose
prima
facie
the existence of an enforceable
claim.  If,
ex facie
the proof of claim documents, the claim is in fact invalid, the
presiding officer is duty bound to reject such claim.  The
fact
that a claim is rejected, which is on the face of it invalid, does
not in my view cause prejudice to the party which has lodged
the
claim of proof as the rejection thereof by the presiding officer does
not debar the claimant from amending his claim to be
proved at a
subsequent meeting. Such a party may also establish his claim at law
in terms of
section 44(3)
of the
Insolvency Act.
[34
]
It seems to me
that in allowing the proof of claim at a subsequent meeting or by way
of action, the legislature intended to allow
for the proof of a claim
at a subsequent meeting or by way of action, to protect the watering
down of the dividends of genuine
creditors by way of incurring costs
in relation to the expungement proceedings provided for in
section
45(3)
of the
Insolvency Act in
the event of the proof of an invalid
claim.
[35]
Section 45
(3)
of the
Insolvency Act provides
that:
“
If
the trustee disputes a claim after it has been proved against the
estate at a meeting of creditors, he shall report the fact
in writing
to the Master and shall state in his report his reasons for disputing
the claim.  Thereupon the Master may confirm
the claim, or he
may, after having afforded the claimant an opportunity to
substantiate his claim, reduce or disallow the claim,
and if he has
done so, he shall forthwith notify the claimant in writing:
Provided that such reduction or disallowance shall
not debar the
claimant from establishing his claim by an action at law, but subject
to the provisions of section seventy-five.
”
[36]
Regulation 18
of the Regulations for the
Winding Up and Judicial Management of Companies provides that a
liquidator who disputes a claim “
shall
furnish to the Master in duplicate the reasons for disputing the
claim and shall at the same time –
(a)
forward a copy of the said reasons
to the creditor and request him to furnish his reasons to the Master
within 14 days or such longer
period as the Master may on application
allow, why his claim should not be expunged or reduced; and
(b)
report to the master in writing the
steps taken by him in this regard.”
[37]
The case law in respect of
section 45(3)
of
the
Insolvency Act provides
that all that a liquidator is required to
establish in a
section 45(3)
report is that there are reasonable
grounds for suspicion that the claim of the creditor that the
liquidator disputes, is not genuine.
[38]
The learned authors, Blackman
et
al
(vol 3 at 14-378), in
Commentary
on the
Companies
Act and
the SCA in
Standard
Bank
of South Africa v The Master of the High Court and Others
2010 (4) SA 405
(SCA)
at 427A-B,
described the test as follows:
“
The
test as to what is or is not reasonable in any given circumstances is
not whether the conclusion arrived at is reasonable, but
is that of a
reasonable man applying his mind to the conditions of affairs, which
means considering the matter as a reasonable
man normally would and
then deciding as a reasonable man normally would decide.”
[39]
Accordingly, the
Master ought to disallow the claim and require the creditor to
establish its claim by way of action if there are
reasonable grounds
for suspicion. It is for the alleged creditor in due course, and by
way of separate proceedings, to satisfy
the Court on the propriety of
the claim.  No hardship is done to the alleged creditor.
He is given every opportunity
to establish his claim at law.
[40]
Watermeyer J
stated the principle  as follows in
Chappell
v The Master & Others
1928
CPD 289
at 291:
“…
my
view is that when claims are submitted for proof to the Master and
there are reasonable grounds for suspicion that the claims
are not
genuine claims, the Master ought to disallow them and leave the
parties who are putting forward these claims to apply to
Court to
establish their claims by way of action. If this is not the principle
followed, then once claims are admitted, the onus
of disproving their
existence, which may amount to proving a negative, is thrown upon a
trustee, or some creditor who may object
to these claims, and I do
not think that that is fair.”
[41]
Section 151
of
the
Insolvency Act provides
that:
“…
any
person aggrieved by any decision, ruling, order or taxation of the
Master or by a decision, ruling or order of an officer presiding
at a
meeting of creditors may bring it under review by the court and to
that end may apply to the court by motion, after notice
to the Master
or to the presiding officer, as the case may be, and to any person
whose interests are affected…”
[42]
In this regard
section 151
must be read with section 339 of the Companies Act no 61
of 1973 and item 9 of schedule 5 of the Companies Act, Act No 71 of
2008.
It is generally accepted that section 339 renders the law
of insolvency applicable to companies unable to pay their debts;
while
the 2008 Act renders the Chapter on winding up in the 1973 Act
of continued application.
[43]
In
Nel &
another NNO v The Master (ABSA Bank Limited and Others intervening)
2005 (1) SA 276
(SCA)
at 286 C-G the
SCA held as follows with regard to section 151:
“
South
African courts have long accepted that the review envisaged by
s 151
of the
Insolvency Act is
the ‘third type of review’
identified more than a hundred years ago in Johannesburg Consolidated
Investment Co v Johannesburg
Town Council … i.e. where
Parliament confers a statutory power of review upon the Court.
In the Johannesburg Consolidated
Investment Co case, Innes CJ stated,
with reference to this kind of review that a Court could
:
‘…
enter
upon and decide the matter de novo.  It possesses not only the
powers of a Court or review in the legal sense, but it
has the
functions of a Court of Appeal with additional privileges of being
able, after setting aside the decision arrived at …
to deal
with the matter upon fresh evidence
…’
Thus,
when engaged in this third kind of review, the Court has powers of
both appeal and review with the additional power, if required,
of
receiving new evidence and of entering into and deciding the whole
matter afresh.  It is not restricted in exercising its
powers to
cases where some irregularity or illegality has occurred.
However, while it is sometimes stated that the Court’s
powers
under this kind of review are ‘unlimited’ or
‘unrestricted’, this is not entirely correct.
The
precise extent of any ‘statutory review type power’ must
always depend on the particular statutory provision concerned
and the
nature and extent of the functions entrusted to the person or body
making the decision under review
.”
[44]
Accordingly, it is accepted that a court is
entitled to have regard to,
inter alia,
the nature of the evidence placed before the Master, and if it is
satisfied that the Master’s decision is wrong, it may correct

such decision and substitute the decision with its own decision.
The
principles of interpretation
[45]
Since I will be required to interpret the
judgment of Binns-Ward J and also have regard to what the intention
of the parties were
when they entered into the agreement which
precede and form the subject matter of the Binns-Ward judgment, I
deem it necessary
to deal briefly with the  general principles
relating to interpretation.  The basic rules for interpreting a
judgment
or order of court are no different from those applicable to
the construction of documents. See
Herbstein
& Van Winsen Civil Procedure of the High Courts of South Africa
,
5
th
edition, 936.  In
Jaga v Donges,
NO and Another; Bhana v Donges, NO and Another
1950 (4) SA 653
(A)
at 662 G-H,
Schreiner JA in interpreting a statute was of the view that:
“
The
first is that ‘the context’, as here used, is not limited
to the language of the rest of the statute regarded as
throwing light
of a dictionary kind on the part to be interpreted.  Often of
more importance is the matter of statute, its
apparent scope and
purpose, and, within limits, its background. …”
[46]
In
Van
Rensburg v Taute
1975 (1) SA 279
(A)
at 303 B-D, Wessels JA expressed
the view that:
“’
n
Geskrewe stuk word natuurlik na gelang van sy aard en opset vertolk,
bv. in die onderhawige geval gaan dit oor ‘n ooreenkoms
wat die
daarstelling van ‘n serwituut beoog.   Ook moet die
woord of woorde wat vertolk moet word nie in isolasie
nie, maar in
samehang van die stuk as geheel, gelees word. Die hof kan blykbaar
ook ingelig word oor die agtergrondsomstandighede
waaronder
kontraksluiting plaasgevind het, maar slegs om die breë konteks,
waarin die woorde wat vertolk staan te word, gebesig
word, beter te
kan begryp.’
[47]
In
Engelbrecht
and Another NNO v Senwes Ltd
2007 (3) SA 29
at 33, Malan AJA held
that:   “
The intention
of the parties is ascertained from the language used read in its
contextual setting and in the light of admissible
evidence
.”
The learned judge, further at 33, distinguished three classes of
admissible evidence namely,
“
Evidence
of background facts is always admissible.  These facts, matters
probably present in the minds of the parties when
they contracted,
are part of the context and explain the ‘genesis of the
transaction’ or its ‘factual matrix’.
Its aim is to
put the Court ‘in the armchair of the author(s)’ of the
document. Evidence of ‘surrounding circumstances’
is
admissible only if a contextual interpretation fails to clear up an
ambiguity or uncertainty.  Evidence of what passed
between the
parties during the negotiations that preceded the conclusion of the
agreement is admissible only in the case where
evidence of the
surrounding circumstances does not provide ‘sufficient
certainty
’.”
[48]
In
Bothma–Batho
Transport (Edms) BPK v S Bothma & Seun Transport (Edms) Bpk
2014 (2) SA 494
(SCA)
at 498E–499E
,
Wallis JA referring to the case of
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012 (4) SA 593
(SCA)
at para 18,
stated that:
“ ‘…
Interpretation
is the process of attributing meaning to the words used in a
document, be it legislation, some other statutory instrument,
or
contract, having regard to the context provided by reading the
particular provision or provisions in the light of the document
as a
whole and the circumstances attendant upon its coming into existence.
Whatever the nature of the document, consideration must
be given to
the language used in the light of the ordinary rules of grammar and
syntax; the context in which the provision appears;
the apparent
purpose to which it is directed and the material known to those
responsible for its production. Where more than one
meaning is
possible each possibility must be weighed in the light of all these
factors. The process is objective, not subjective.
A sensible
meaning is to be preferred to one that leads to insensible or
unbusinesslike results or undermines the apparent purpose
of the
document. Judges must be alert to, and guard against, the temptation
to substitute what they regard as reasonable, sensible
or
businesslike for the words actually used.  To do so in regard to
a statue or statutory instrument is to cross the divide
between
interpretation and legislation; in a contractual context it is to
make a contract for the parties other than the one they
in fact
made.  The inevitable point of departure is the language of the
provision itself, read in context and having regard
to the purpose of
the provision and the background to the preparation and production of
the document.’
That
statement reflected developments in regard to contractual
interpretation in
Masstores (Pty)Ltd v Murray & Roberts
Construction (Pty) Ltd
and Another
;
KPMG Chartered
Accountants (SA) v Securefin Ltd and Another
; and
Ekurhuleni
Metropolitan Municipality v Germinston Municipal Retirement Fund
.
I return to it and to those cases only because we had cited to us the
well-known and much-cited summary of the earlier approach
to the
interpretation of contracts by Joubert JA in Coopers & Lybrand
and Others v Bryant, that:
‘
The
correct approach to the application of the golden rule of
interpretation after having ascertained the literal meaning of the

word or phrase in question is, broadly speaking, to have regard:
(1)
to the context in which the word or phrase is used with its
interpretation to the contract as a whole, including the nature
and
purpose of the contract…
(2)
to the background circumstances which explain the genesis and purpose
of the contract, i.e. to matters probably present to the
minds of the
parties when they contracted…
(3)
to apply extrinsic evidence regarding the surrounding circumstances
when the language of the document is on the face of it ambiguous,
by
considering previous negotiations and correspondence between the
parties, subsequent conduct of the parties showing the sense
in which
they acted on the document, save direct evidence of their own
intentions.’ ”
[49]
According to the learned judge of appeal,
the above summary is no longer consistent with the approach to
interpretation now adopted
by South African courts in relation to
contracts or other documents, such as statutory instruments or
patents. In his view, whilst,
the starting point remains the words of
the document which are the only relevant medium through which the
parties have expressed
their contractual intentions, the process of
interpretation does not stop at a perceived literal meaning of those
words, but considers
them in the light of all relevant and admissible
context, including the circumstances in which the document came into
being. The
former distinction between permissible background and
surrounding circumstances, never very clear, has fallen away.
Interpretation
is no longer a process that occurs in stages but is
‘
essentially one unitary
exercise’
. See
Bothma-Batho
Transport (EDMS) Bpk v S Bothma & Seun Transport (EDMS) Bpk
(supra)
at
para [12].
[50]
Considering the arguments raised on behalf
of the parties, I deem it necessary to have a closer look at the
claim lodged for proof
by the second respondent.
[51]
In the claim
lodged with the Master, Lewis Freidus affirms and states
inter
alia
that:
“…
(3)
That Chelsea West (Pty) Ltd (in liquidation) (hereinafter referred to
as the said Estate) which Estate has been liquidated was
at the date
of liquidation (15 December 2008) and still is indebted to Chester
Finance Proprietary Limited, the said Creditor in
the sum of R
2.916.006-14 …
for
the balance of monies loaned and advance [sic] by the Creditor to the
Estate prior to its winding up and pursuant to a trade
facility
agreement concluded on or about 6 May 1997… as read with the
General Notarial bond numbers 86238/2004, 1372/08
and 27621/96 (“the
GNBs”) and Cession date 15 May 1997 (“the Cession”)
as security…
Monies
were lent and advanced by the said Creditor to Chelsea West (Pty) Ltd
pursuant to the Trade Finance Agreement in the sum
of R
13 205 610-18…
On
or about 01 December 2008 the Creditor obtained an order in the High
Court of South Africa, Western Cape Division, under case
number
19747/08 for the perfection of the security held by it under the
GNBs…
On
or about 3 December 2008 the Creditor and Dreywin Finance CC
(“Dreywin”) concluded an agreement in terms of the
Creditor [sic] sold to Dreywin all of the assets of Chelsea West
(Pty) Ltd which the Creditor was authorised to take possession
in
terms of the December 2008 order [the perfection order] for an amount
of R13 200 000.00…
Reichmans
(Pty) Ltd made payment of the amounts of R2 749 516.69 and
R166 489.72 to the Creditor on 11 December 2008
and 12 December
2008 respectively in accordance with the Sale Agreement (“the
Reichmans payments”)…
On
or about 17 December 2008 the Estate was placed into provisional
liquidation.
The
Estate was deregistered on 19 October 2009 alternatively 24 February
2011…
On
or about 25 June 2013 the liquidators of the Estate obtained an order
in the High Court of South Africa, Western Cape Division,
under case
number 25983(10), in terms of which the Reichmans payments were
determined not to form part of the assets sold in terms
of the Sale
Agreement and were set aside as dispositions in terms of
section
29(1)
of the
Insolvency Act…
On
or about 27 March 2014 an order was granted by the High Court of
South Africa Western Cape Division, under case number 21141/2013
in
terms of which, inter alia, the deregistration of the Estate was
declared to have been void…
On
or about 25 April 2014, the Creditor refunded the sum of
R2 953 155.53 to the Estate…
In
all of the above mentioned circumstances, the Estate is indebted to
the Creditor in the sum of R2 916 006.41 as at
15 December
2008 being the date of liquidation of the Estate…”
(4)
The said debt arose in the manner and at the time set forth in the
documents schedule annexed hereto marked “A”
to “N”…”
[52]
It is important
to note that second respondent relies upon a ‘schedule of
indebtedness at the date of liquidation in support
of the claim.
In Annexure “M” at 148 of the record, reference is made
to the following invoices:
INV
7737L dated 20 November 2008 for R 1 515 832.27
INV
7736L dated 20 November 2008 for R 1 098,121.04
INV
7696L dated 10 October 2008 for R 988 387.56
[53]
What is clear is that the invoices referred
to hereinbefore are all dated prior to the liquidation of Chelsea
West which occurred
on 17 December 2008.   Also attached to
the claim is a client exposure report dated 21 November 2008 in terms
of which
the amount is due to second respondent by Chelsea West as at
21 November 2008 (i.e. about 3 weeks prior to liquidation)was the
globular amount of R 13 215 610.18.  The amounts
contained in the invoices mentioned hereinbefore is included in
the
breakdown of the globular amount under the heading “Bills
Outstanding Local”.  These amounts were due to second

respondent by Chelsea West on 21 November 2008.
[54]
On a consideration of the documents lodged
in support of the claim I find that they are at variance with each
other.  In short,
the allegations made in the proof of claim
affidavit do not reconcile with the facts which appear
ex
facie
the documents lodged in support
thereof.
[55]
I have already referred to the agreement
entered into between second respondent and Dreywin on 3 December 2008
hereinbefore.
Having considered the arguments advanced on
behalf of the parties and considering the facts of the matter, I make
the following
findings:
1.
In terms of clause 5.1 the purchase price for the assets which were
the subject matter of the agreement was the amount of R
13.2 million;
2.
In terms of clause 5.4 the purchase price was to be paid in full by
Dreywin to second respondent on the advance date, which
is defined in
the agreement as the date on which the general notarial bond in
favour of second respondent was registered over the
assets of Dreywin
(Clause 5.3.2 of the agreement)
3.
On 8 December 2008 Dreywin paid the purchase price as set out in the
agreement to second respondent.
4.
Based on the schedule attached to the claim submitted by second
respondent the second respondent’s claim against Chelsea
West
was reduced to an amount of R5610-18 (i.e. R13 205 610-18
less R13 200 00.00).
[56]
Second respondent made no further advances
to Chelsea West after 8 December 2008 and it is common cause that
Chelsea West was liquidated
on 17 December 2008.
[57]
What is significant is that second
respondent did not claim to be a creditor of Chelsea West until such
time as Binns-Ward J made
the order that the payment of the R2.9
million received from Reichmans was impeached.  It is not
unreasonable to conclude
that the claim arose due to the fact that
second respondent was dissatisfied as it had to repay to Chelsea West
the undue preference
it had received prior to the liquidation of
Chelsea West.
[58]
I am satisfied that Binns-Ward J was alive
to the fact that the indebtedness of second respondent had been
settled by second respondent,
but for the R5610-18 referred to
hereinbefore.  In his judgment, at para 27, the learned judge
deals with this issue as follows
where he states that “
It
(Chesterfin) did so, (disposed of Chelsea West’s assets to
Dreywin) without having undertaken any valuation of the attached

property and at a price that very closely approximated the extent of
Chelsea West’s indebtedness to it.  Chesterfin’s

confessed intention in disposing of the attached property in the way
which it did was to, in effect; dispose of Chelsea’s
business
as a going concern.  It did so on terms of credit that, to the
extent that they are discernable, would appear essentially
to have
transposed its creditor – debtor relationships with Chelsea to
a virtually identical relationship with Dreywin
”.
[59]
Put simply the learned judge found that
Dreywin replaced Chelsea West as second respondent’s debtor,
but for the amount of
R5610-18.
[60]
Having regard to what I have stated
hereinbefore, I am accordingly not persuaded that the documents
lodged in support of the proof
of claim affidavit provides a basis
for the claim of R2 916 006-41.  In the result, the
only claim made out by second
respondent on the supporting documents
by it, is a claim for the amount of R5610-18 plus interest in
accordance with the rate stipulated
in the agreement.
The
issue of prescription of second respondent’s claim
[61]
A further important matter which requires
to be highlighted is the impact of the issue of prescription on the
second respondent’s
claim.  The second respondent’s
claim arose in or around November / December 2008.  In the
ordinary course, that
claim would have prescribed at the end of
2011.  It is accepted law that it is competent for a presiding
officer to admit
a claim as to a portion thereof only, i.e. that
portion which has been proved to his satisfaction.  See
Garlicks
Wholesale & Others v Magistrate of Sutherland & Others
1926 CPD 267
.  A presiding officer
can, however, not admit as proof to claim, a claim which on the face
of it appears to have prescribed,
which appears to have happened in
the present case.  Second respondent, is in my view, confronted
with a situation where it
bears the onus to prove that prescription
of its claim has been interrupted if it wishes to revive any claim
which it believes
it may have.
Can
second respondent place any reliance on para 31 of the judgment of
Binns-Ward J for its contention that the portion of the sale

agreement relating to the Reichmans claim is “
void
by reason of common mistake
”?
[62]
It is trite law that in order to render a
contract void, a common mistake must be material.  It is also
accepted law that a
common error as to the extent or substance of the
subject matter of a sale agreement (i.e. an error in
substantia
/
qualitate
)
or an error in law, is not considered to be a material error that
vitiates actual consensus between the parties to a contract,
i.e. it
does not render the contract void.
[63]
Second respondent appears to rely on para
31 of the Binns-Ward J judgment for the contention that part of the
sale agreement which
related to the Reichmans claim, i.e. the
obligation to deliver same under the sale and the obligation of
Dreywin to pay for same
was thus void by reason of common mistake.
[64]
In para 31 of his judgment, Binns-Ward J
finds in relation to the refusal of the liquidators claim in terms of
section 31
of the
Insolvency Act that
:
“
[31]
The correct approach entails taking appropriate account of the
indications in the evidence that Freidus and Dreyer (and
indeed also
Chesterfin’s attorney) believed, albeit mistakenly, that
Chelsea’s claim against Reichmans in respect of
the retention
fund was subject to the notarial bond and the court order made on 1
December 2008
”.
[65]
In my view, para 31 does not declare the
portion of the sale agreement relating to the Reichmans claim to be
“
void by reason of mistake
”.
On an ordinary reading of the paragraph, all that the learned judge
finds is that Freidus and Dreyer were mistaken
as to the extent of
the assets sold in terms of the sale agreement i.e. that the
Reichmans payment did not form part of the definition
of the assets
sold in terms of the sale agreement, which would be “
all
the assets which the seller was authorised to take possession of in
terms of the court order, and in terms of which it took
possession
”.
I am satisfied that the Reichmans payment could not form part and
does not form part of this definition as it was
not capable in law of
being attached in terms of the notarial bonds, nor was it in fact so
attached.
[66]
I agree with Mr Goodman that the error
between Freidus (on behalf of second respondent) and Dreyer (on
behalf of Dreywin) at the
time of the conclusion of the sale
agreements related to the extent of the assets sold.  Put
differently, the error related
to the quantity and the quality of the
subject matter sold.  In interpreting the Binns-Ward J judgment,
second respondent
effectively seeks to divide and void only a portion
of the sale agreement whilst the rest of the agreement remains in
place.
[67]
On a consideration of the sale agreement, I
cannot find that it contains a “
division
clause
” in terms of which the
parties expressly agree that each provision of a contract is
divisible from the others with the effect
that should one of the
provisions be attacked on the basis of being void or unenforceable,
that it will not taint the balance of
the agreement.  On the
contrary, paragraph 9.2 of the agreement between the parties contain
what is commonly referred to as
a non-variation clause.  I am
accordingly satisfied that it was never the intention of the parties
that each provision of
the agreement is divisible from the others.
Should the argument advanced on behalf of second respondent on the
interpretation
of para 31 of the Binns-Ward judgment be correct, then
the effect thereof would be that the entire sale agreement and not
just
a portion thereof would have to be declared void.  This
would effectively mean that second respondent would be obliged to
refund the entire purchase price to the liquidators of Chelsea West.
This could never have been the intention of the parties.
[68]
The submissions
made on behalf of the second respondent in this regard, accordingly,
falls to be dismissed.
Second
respondent’s attempt to import onto the Binns-Ward J judgment a
rectification of the quantum of the purchase price
agreed upon
between Freidus and Dreyer at the time that the sale agreement was
concluded.
[69]
In his argument, Mr Peter attempted to
persuade me that the price of R13.2 million which mistakenly included
the value of the claim,
had to be reduced accordingly and that the
correct position was that second respondent did not in fact receive
the sum of R13.2
million from the realisation of its security but
rather the sum of R10 283 993-59.
[70]
It is accepted law that rectification of
agreement can only be achieved where the agreement which contains the
understanding between
contracting parties, unintentionally fails to
reflect the common intention of the parties at the time when the
agreement is entered
into.  It is further accepted that the
effect of a rectification is not to rectify the underlying agreement
between the parties
to the agreement, but merely to rectify the
document in question because such document does not reflect what the
parties thereto,
intended to be the content of their agreement at the
time.
[71]
On a
consideration of the Binns-Ward J judgment, the learned judge makes
no reference whatsoever to the alteration of and/or reduction
of the
purchase price in terms of the agreement.  I agree with Mr
Goodman that there is no factual basis for the submissions
made by Mr
Peter in this regard.  I further agree that the fact that the
Reichmans payment did not form part of the assets
sold in terms of
the agreement, did not alter the purchase price of R13.2 million as
the assets defined in the sale agreement are
not separately
identified or valued.
[72]
What is clear is that at the time that the
sale agreement was entered into, both Freidus and Dreyer believed
that the Reichmans
payment was capable of being attached and sold
pursuant to the perfection of the general notarial bonds.  It
appears that
after the institution of the
concursus
and in particular after the judgment of Binns-Ward J, that second
respondent realised its dilemma and that this was not possible
in
law.  A further problem that confronted the second respondent
was that Dreyer, who had represented Dreywin at the time
that the
agreement was entered into, had died and could therefore not have
appreciated his error prior to his death.
[73]
Second respondent did not raise the issue
of rectification at the time that Binns-Ward J decided the
disposition claim and when
it was proved.  I am satisfied that
if the learned judge had intended to rectify the provisions of the
sale agreement in his
judgment, he would have made an express finding
in this regard.  He did not do so.
[74]
Accordingly, it must be so that the sale
agreement concluded between the parties reflects the common intention
of the parties thereto
at the time and it cannot now be rectified.
[75]
Should rectification be allowed to take
place, the effect would be to disturb the rights of the remaining
creditors of Chelsea West,
resulting in what has been described by
applicants as a watering down of the concurrent dividends and which
is not permissible.
Considering what I have said hereinbefore,
it follows that the first respondent is not empowered to rectify a
contract which is
the subject of a disputed claim during the course
of the expungement procedure.  The second respondent’s
attempt to
import onto the Binns-Ward J judgment a rectification of
the purchase price agreed upon between Friedus and Dreyer at the time
that the sale agreement was concluded, accordingly has no merit and
must therefore also be dismissed.
[76]
In my view, it
is unnecessary for the purposes of this judgment to deal with the
issue of the purported security relied on by the
second respondent.
The issue of security is irrelevant for the determination I am
required to make at this stage. The applicants
will have to evaluate
the merits of the alleged security if and when it is necessary to do
so.
Conclusion
[77]
In conclusion I
find that the correct approach, as was set out in the submissions
made by applicants to the presiding officer, is
that the presiding
officer should have decided to either:
“
26.1
Admit the claim of Chesterfin against Chelsea in the reduced amount
of R5610-18 as this is the extent of the claim disclosed
on the
papers before the presiding officer (provided that Chesterfin is in a
position to persuade the presiding officer that the
claim has not
prescribed); or
26.2
To reject the claim of Chesterfin in order to allow it to redraw such
claim in the lesser amount to be proved at a subsequent
meeting of
creditors, alternatively to allow Chesterfin the opportunity to
establish its claims against Chelsea West at law
”
.
[78]
I am satisfied that for the reasons hereinbefore set out, that the
liquidators have established reasonable grounds of suspicion
relating
to the validity of the second respondent’s claim and that for
these reasons, the claim should be disallowed.
I am however
satisfied that second respondent has proved a claim in the amount of
R5610-18.
[79]
For the reasons as set out hereinbefore, I
am satisfied that the ruling of Dondolo of the first respondent falls
to be reviewed
and set aside. Consequently the claim of the second
respondent falls to be expunged and is hereby reduced to R5610-18.
[80]
Accordingly, I
make the following order:
1.
That in terms of
Section 151
of the
Insolvency Act No 24 of 1936
read with item 9 of Schedule 5 of the
Companies Act 71 of 2008
, the decision of the Master of the High
Court in terms of which the Master refused to expunge, alternatively
reduce the claim of
the second respondent against Chelsea West (Pty)
Ltd (in liquidation) is hereby reviewed and set aside.
2.
The claim of the second respondent is
hereby expunged and reduced to the amount of R5610-18.
3.
The second respondent is ordered to pay the
applicant’s costs of this application including the costs of
two counsel.
RILEY,
AJ