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[2013] ZASCA 117
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Fourie N.O. And Another v Edkins (740/12) [2013] ZASCA 117; 2013 (6) SA 576 (SCA) (19 September 2013)
THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
REPORTABLE
Case no: 740/12
In
the matter between:
JACOBUS
PETRUS FOURIE N.O.
...........................................................
1
ST
Appellant
MARIAAN
BARNARDN.O.
.......................................................................
2
ND
Appellant
and
GRAHAM
VERNON EDKINS
......................................................................
Respondent
Neutral
citation:
Fourie N.O. v Edkins
(740/12)
[2013] ZASCA 117
(19 September 2013)
Coram:
MTHIYANE AP, MAYA, SHONGWE, TSHIQI JJA and ZONDI AJA
Heard:
19 August 2013
Delivered:
19 September 2013
Summary: Insolvency –
circumstances under which a court can exercise its discretion in
terms of
s 20
(1)
(c)
of the
Insolvency Act 24 of 1936
for or
against the stay of execution, where the sheriff sold immovable
property in execution of a judgment to a purchaser prior
to the
judgment debtor publishing a notice in terms of
s 4
(1) of the above
Act of his/herintentionto apply for the sequestration of his/her
estate and prior to the registration of the transfer
into the name of
the execution purchaser: Exceptional circumstances must be pleaded to
persuade the court to validate the deed
of sale and transfer of the
property.
ORDER
___________________________________________________________________
On appeal from:
South Gauteng
High Court, Johannesburg (Moshidi J sitting as court of first
instance):
The appeal is upheld with costs
including costs of two counsel where so employed
The order of the court a quo is set
aside and substituted with the following:
‘
The
application is dismissed with costs.’
JUDGMENT
___________________________________________________________________
SHONGWE JA (MTHIYANE AP, MAYA,
TSHIQI JJA and ZONDI AJA concurring)
[1] The central question in this
appeal concerns circumstances in which a court couldexercise its
discretion in terms of s 20(1)
(c)
of the Insolvency Act 24 of
1936 (the Act), to stay the execution where a sheriff sold immovable
property in execution of a judgment
to a purchaser, pursuant to a
sale concluded prior to the judgment debtor (Insolvent) applying for
the sequestration of his/her
estate and prior to the registration of
the transfer of the property into the name of the execution
purchaser.
[2] It would be expedient at this
stage to deal with the factual matrix, which isnot in dispute between
the parties.
[3] On 18 February 2010 ABSA bank (the
registered bond holder) obtained judgment against Mr Talent Mthethwa
(the judgment debtor
and registered mortgagor) and owner of Erf 64,
The Hill Township, situated at 50 Ben Adler Road, The Hill,
Johannesburg, held in
terms of deed of transfer T 3137/09 (the
property),in terms ofwhich, inter alia, the property was declared
specially executable.
[4] On 3 August 2010 the property was
sold in execution by the sheriff (as seller) to the respondent (who,
for convenience, I shall
refer to as Edkins) for the sum of R530 000
(five hundred and thirty thousand rand). The registered mortgage bond
over the
property was the sum of R1 100 000 (one million one
hundred thousand rand). After signing the conditions of sale, Edkins
complied
with all his obligations in terms of the conditions of sale
and, inter alia, guaranteed the full purchase price. Edkins
instructed
his attorneys, on the same day, to proceed with the
necessary registration of the transfer of the property into his name.
[5] On 6 August 2010 the judgment
debtor’s attorneys published a notice of the surrender of his
estate in terms of s 4(1)
of the Act in the Government Gazette and
the local newspaper. The notice indicated that the insolvent intended
applying to the
North Gauteng High Court on 3 September 2010 for the
acceptance of the voluntary surrender of his estate. Indeed on 3
September
2010, the court accepted the voluntary surrender and
placedhis estate under sequestration.
[6] On 2 August 2011 (and not 3
September 2011 as indicated in the founding affidavit), the
appellants (trustees) were appointed
as provisional trustees in the
insolvent estate.
[7] At all material times, Edkins and
the sheriff were completely unaware of the notice by the insolvent to
apply for the surrender
of his estate, nor were they aware of the
acceptance thereof. It is also common cause that when the sale was
concluded with the
sheriff, it was prior to the publication of the
notice in terms of s 4(1) of the Act.
[8] When Edkins’ attorneys
approached the Registrar of Deedswith the mandate to proceed with the
registration of the transfer,
they were informed that in terms of the
Registrar’s resolution 54/2009 if a debtor is sequestrated
afterthe sale in execution,
the sheriff is prevented from
transferring the property into the name of the purchaser. In light of
the Registrar’s resolution,
Edkins felt aggrieved and opined
that he had no option but to approach the court for an appropriate
relief.
[9] Edkins decided to launch an
application against the Registrar of Deeds (Johannesburg), the Master
of High Court (Johannesburg),
the two appellants, ABSA bank and the
sheriff (Johannesburg) first asking for a declaratory order
validating the sale agreement
of 3 August 2010 between the sheriff
and himself, and secondly that the Registrar be directed to register
the transfer of the property
into his name. He did not ask for costs
against the respondents a quo, save only in the event that
theyopposed the relief sought.
[10] The court a quo granted the
relief as prayed for and found that the sale agreement was concluded
before the publication of
the notice of surrender, which finding
suggests that it was therefore a lawful sale which did not conflict
with the provisions
of s 5(1) of the Act. It reasoned that the
insolvent knew that ABSA had foreclosed on the loan and that there
was the pending sale
in execution, but deliberately waited until
after the sale to publish his intention to surrender his estate. It
foundfurther that
the insolvent had no authority over the property
and that the appellant had no right to prevent the transfer of the
propertyinto
the name of Edkins. This appeal is before us with leave
of the court a quo.
[11] It is clear from the papers that
the application in the court a quo waspremised on the provisions of s
5(1) of the Act, which
read as follows:
‘
After
the publication of a notice of surrender in the
Gazette
in
terms of section four, it shall not be lawful to sell any property of
the estate in question, which has been attached under writ
of
execution or other process, unless the person charged with the
execution of the writ or other process could not have known of
the
publication: Provided that the Master, if in his opinion the value of
any such property does not exceed R5 000, or the
Court, if it
exceeds that amount,
may
order the sale of the property attached and direct how the proceeds
of the sale shall be applied.’
[12] In my view the provisions of s
5(1) of the Act envisage a situation where the sheriff (who is the
one charged with the execution
of the writ) or the insolvent debtor,
or any person for that matter, is prohibited from selling any
property of the estate after
publication, unless he could not have
known of the publication. The purpose of the section is to protect
creditors against anyone,
including the insolvent debtor, from
dissipating the assets of the estate. Section 5(1) is irrelevant to
the facts of this case
as the sale, although the execution thereof
was incomplete, took place before the publication. One can safely
deduce from the founding
affidavit that Edkins had been advised that
the execution of the sale was finalized before the publication,
notwithstanding the
fact that transfer of the property had not taken
place. The signing of the deed of sale, per se, and the compliance
with the conditions
of sale are insufficient to complete the
execution of the sale.
[13] The nub of this appeal is, in my
view, that upon sequestration of a debtor’s estate, which
estateincludes all his/her
property, including property under
attachment or the proceeds thereof which are in the hands of the
sheriff, first vest in the
Master and thereafter in the trustees upon
their appointment. This includes immovable property sold in execution
but not yet transferred
at the date of sequestration. (See
Simpson
v Klein NO
1987 (1) SA 405
(W) at 408E-H;
Liquidators Union
and Rhodesia Wholesale Ltd v Brown & Co
1922 AD 549
at
558-559;
Syfrets Bank Ltd v Sheriff of the Supreme Court, Durban
Central; Schoerie NO v Syfrets Bank Ltd
1997 (1) SA 764
(D) at
772C-I; and
Shalala v Bowman NO
1989 (4) SA 900
(W) at
905E-G.)
[14] Of relevance in this regard is s
20(1)
(c)
and (2)
(a)
of the Actwhich reads as follows:
‘
20(1)The
effect of the sequestration of the estate of an insolvent shall be –
to
divest the insolvent of his estate and to vest it in the Master
until a trustee has been appointed, and, upon the appointment
of a
trustee, to vest the estate in him;
…
as
soon as any sheriff or messenger, whose duty it is to execute any
judgment given against an insolvent, becomes aware of the
sequestration of the insolvent's estate, to stay that execution,
unless the court otherwise directs;
…
(2)
For the purposes of subsection (1) the estate of an insolvent shall
include-
(a)
all
property of the insolvent at the date of the sequestration, including
property or the proceeds thereof which are in the hands
of a sheriff
or a messenger under writ of attachment;
(b)
….’
[15] The meaningand effect of
s20(1)
(c)
read with subsec (2)
(a)
is that as soon as
the sheriff becomes aware of the sequestration of the debtor’s
estate, he is duty bound or enjoined by
operation of law to stay the
execution, unless the court otherwise directs. Subsection 2
(a)
deals with what constitutes the property of the insolvent at the
date of the sequestration. The effect of subsec (1) is to confer
the
power or control(and not ownership) of the property on the Master and
subsequently the trustee and to dispossess or remove
control of the
property from the sheriff unless the court otherwise directs. This
simply means any interested party (including
the execution purchaser)
may approach the court to direct otherwise. Logically the interested
party must place facts before the
court to persuade it to direct
otherwise.
[16] I now turn to the facts of this
case. When Edkins approached the court a quoseeking registration and
transfer of property into
his name he relied on s 5(1) of the Act,
which in my view is irrelevant as I indicated earlier. In my view
Edkins should have approached
the court in terms of s 20(1)
(c)
and seek an order moving the court to direct that the transfer into
his name should be proceeded with, notwithstanding the supervening
voluntary surrender of the insolvent estate.
[17] Edkins’ counsel argued that
s 20(1)
(c)
does not assist the appellant, but conceded that it
was for Edkins to move the court to direct that the execution,
culminating in
the property being transferred into his name be
proceeded with. He further argued that Edkins had succeeded on a
balance of probabilities
to persuade the court to direct otherwise.
In my view Edkins failed to place facts before the court a quo to
persuade it to direct
otherwise than stay the sale in execution. In
Master of the Supreme Court v Nevsky
1907 TS 268
Innes CJ
concluded that:
‘
The
determining considerations are that the proceeds are not likely to be
sufficient to satisfy the two bonds, and that there is
nobody likely
to be benefited by holding over the sale.’
My considered view is that any
interested party must show that it would be in the interests of the
body of creditors
(concursuscreditorum)
to direct otherwise
than staying the execution sale. For example in this case ABSA bank
has a bond over the property of R1 100 000
(one million one
hundred thousand rand) and Edkins bought the property for only
R530 000 (five hundred and thirty thousand
rand) which is almost
half of the bond held by ABSA bank. Edkins failed to place before the
court a quo any valuation of the property,
and also failed to mention
if there were any other creditors of the insolvent estate. Failure to
place all these facts before court
was detrimental tohis case bearing
in mind that the onus rested on him. However, in exceptional
circumstances and only if the interest
of the other creditors of the
estate will not be adversely affected, the court has the authority to
order the sheriff to proceed
with the sale and registration of the
property into the name of the execution purchaser.
(see
UnieSpoorwegOnderlingeBegrafnisgenootskap v Druker,
NO
1961 (1) SA 266
(W) at 268C-D.
[18] It is important to emphasize that
ownership of attached immovable property does not pass during the
sale in execution, but
upon formal registration of transfer to a
purchaser (see
Simpson’s
case (supra)). The effect of
the sequestration in terms of s 20(1)
(a)
is to divest the
insolvent of his estate not his/her ownership, ownership remains with
the insolvent debtor but the control vests
in the Master. The court a
quo mentioned s 20(1)
(c)
but did not deal with the effects of
the supervening sequestration. It may probably be because the
application in the court a quo
was couched on the basis of s 5(1),it
unfortunately created the erroneous impression on the court a quo
that the application turned
solely on the provisions of s 5(1).
[19] The appellant argued that the
court a quo misdirected itself because it did not deal with the
substitution of a
pignusjudiciale
by a
concursuscreditorum
and
consequently the effect of s 20(1)
(c)
of the Act thereon. The
appellant further contended that the court a quo relied heavilyon the
unreported judgment of
De Jager NO v Balju van die Hooggeregshof,
Bloemfontein - Wes
(407/2010)
[2010] ZAFSHC 90
(4 June 2010) which
judgment does not concern a supervening sequestration and is
therefore distinguishable and in factirrelevant
to the facts of this
case.I agree with this submission.
[20] I therefore conclude that upon
publication of a notice in terms of s 4(1) of the Act, the provisions
of s 20(1)
(c)
and (2)
(a)
immediately come into
operation. The effect thereof is that control of the insolvent estate
vests in the Master until a trustee
has been appointed and thereafter
the estate will vest in the trustee. Ownership,however remains with
the insolvent debtor. (See
Liquidators Union, Simpson, Shalala
etc. supra.) Once a
concursuscreditorum
has been established
nothing may be done by any creditor to alter the rights of the other
creditors. (See
Walker v Syfrets NO
1911 AD 141
at 160;
Taylor
& Steyn NNO v Koekemoer
1982 (1) SA 374
(T).) At once the
rights of the general body of creditors have to be taken into
consideration. In other words, no transaction can
then be entered
into with regard to estate mattersby a single creditor to the
prejudice of the general body of creditors. The
bona fides
of
the creditors or execution purchaser is irrelevant, so is the
mala
fides
of the insolvent debtor.
[21] For the reasons given above the
appeal stands to be upheld.
[22] In the result the following order
is made:The appeal is upheld with costs including costs of two
counsel where so employed.
The order of the court a quo is set aside
andsubstituted with the following:
‘
The
application is dismissed with costs.’
________________________
J B Z SHONGWE
JUDGE OF APPEAL
APPEARANCES
FOR APPELLANT: D A Preis SC
Instructed by:
JacoRoos Inc., Pretoria;
Lovius Block, Bloemfontein
FOR RESPONDENT: F W Botes and M Van
Eyk
Instructed by:
Bruno Simão Attorneys,
Pretoria;
McIntyre & Van Der Post,
Bloemfontein