About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: North Gauteng High Court, Pretoria
SAFLII
>>
Databases
>>
South Africa: North Gauteng High Court, Pretoria
>>
2010
>>
[2010] ZAGPPHC 164
|
|
Strydom NO v Master of the High Court and Another (38006/2010) [2010] ZAGPPHC 164; 2010 (6) SA 630 (GNP) (15 October 2010)
REPORTABLE
IN
THE NORTH GAUTENG HIGH COURT
(REPUBLIC
OF SOUTH AFRICA)
CASE
NO: 38006/2010
DATE:15/10/2010
In
the matter between:
LEONARDUS
JOHANNES STRYDOM
NO
..........................................
Applicant
and
MASTER
OF THE HIGH
COURT
...........................................................
First
Respondent
DIMAKATSO
ARNOLD MICHAEL MOHOASOA NO
.......................
Second
Respondent
JUDGMENT
TUCHTEN
J
:
1.
This is a review application which came before me in the unopposed
motion court. There was no appearance for either of the respondents.
The applicant and a Mr Musenwa were appointed co-provisional
liquidators in the liquidation of Coal Experts (Pty) Limited
("Coa
l
Experts").
1
The applicant says he was, presumably by agreement with Musenwa,
charged with the day to day administration of Coal Experts.
2.
On
13 December 2009, Musenwa and the applicant decided to approach the
Master with what is described in the papers as an application
for the
payment of a provisional liquidators' fee in terms of reg 24 of the
Regulations for the Winding-Up and Judicial Management
of Companies
2
("the regulations") and annexure CM 101 thereto read with s
403 of the Companies Act, 61 of 1973.
3.
Section
403 of the Companies Act obliges every liquidator, a term that
includes a co-liquidator and a provisional liquidator unless
the
context otherwise indicates,
3
to frame and lodge accounts with the Master containing an account of
receipts and payments and a plan of distribution.
4.
Regulation
24 reads as follows:
Every
liquidator shall be entitled to the remuneration set out in Annexure
CM 104.
5.
Annexure
CM 104 to the regulations provides for a tariff of fees payable to
liquidators. Item l(b) of CM 104 specifically provides
that where a
winding-up order has been made but the provisional liquidator does
not continue as liquidator, the Master is empowered
to tax a fee with
due regard to the special circumstances of the case.
6.
Annexure
CM101 provides general directions on the form and contents of
liquidators' accounts. Item 5 of CM101 reads:
The
account of payments may provisionally be credited with the amount
claimed in respect of the liquidator's remuneration, but no
such
remuneration or part thereof shall, except by permission of the
Master... or the Court, be drawn until the account in which
it
appears has been confirmed.
7
.
The
applicant says he entrusted Musenwa with the duty of submitting the
application for payment of their provisional fee to the
Master. Why
he should have done so in this single instance is not explained in
the papers. The applicant is a professional liquidator,
as such is in
regular communication with the Master's office and must have office
staff or systems which deal with such routine
matters. Be that as it
may, the applicant says that Musenwa produced a document ostensibly
conveying the approval of the Master
to the immediate payment of a
provisional fee of R500 000. Although the allegations in this regard
are couched in circumlocutions,
the applicant's case is that this
document was forged by Musenwa and that the applicant was induced by
the forgery to hand over
R200 000 of Coal Experts' money to Musenwa.
8.
What
in fact happened is that by letter bearing the Master's (genuine)
date stamp of 18 December 2009, the Master responded to the
application for payment of the provisional fee through an Assistant
Master, Mr Cilliers. The letter communicated the Master's opinion
that we cannot approve your application and your fees will only be
taxed when a first account is submitted and a distribution is
made.
9.
The
applicant says that he then unsuccessfully tried to stop payment of
the estate cheque to Musenwa. There followed an interrogation
by Mr
Cilliers of the applicant and Musenwa and an undertaking by Musenwa
to repay the money taken by him. The money has not been
repaid and
the applicant has laid theft charges against Musenwa.
Musenwa
was removed as joint provisional liquidator by the Master on 28
January 2010.
10.
On
5 March 2010 the applicant and the second respondent were appointed
joint liquidators in the winding-up of Coal Experts. The
applicant
then had discussions with officials from the Master's office and, so
he says, was advised by Mr Cilliers to lodge a provisional
liquidator's account up to the date of the first meeting of
creditors.
11.
The
applicant framed such an account and submitted it to the Master under
cover of a letter dated 5 March 2010. The account makes
provision for
liquidators' fees excluding VAT of R1 134 869,91. In the letter the
applicant recorded that Mr Cilliers and the applicant
were busy
conducting certain investigations into the irregularities committed
by Musenwa but that at that date, the enquiries had
not been
finalised. No indication is given about what these enquiries might
be. As it seems that Musenwa's participation in the
administration of
Coal Experts was limited to carrying the application for provisional
payment of the fees to the Master and forging
the document of
approval of this payment, it is not clear why the enquiries have not
been completed.
12.
The
letter goes on to convey the applicant's contentions as to why he
(and Musenwa) should receive a provisional payment. The grounds
advanced appear to be that the provisional liquidators have done a
substantial amount of work and have recovered assets of value
in and
associated with the estate and that the work still to be done by the
liquidators in winding up the estate is of limited
extent.
13.
The
task of scrutinising the provisional account was allocated to Mrs
Jordaan, an official in the Master's office who had not been
associated with the discussions held between the applicant and other
officials. Mrs Jordaan refused to approve the provisional
account and
refused to tax the provisional liquidators' fees. Her reasons for the
refusal were conveyed in a letter bearing the
date stamp 12 March
2010 and are that there would be no benefit to creditors from an
early payment, that there was no reason why
a first liquidation and
distribution account as such could not be lodged and that the
application for payment of the provisional
liquidators' fees was just
another form of the application in terms of CM101 which had been
rejected on 18 December 2009.
14.
This
prompted the applicant to write a letter dated 17 March 2010 to the
Master. In it he submitted that the reasons given in the
Master's
letter date stamped 12 March 2010 were not rationally connected to
the information placed before the Master. He urged
the Master to have
regard to the fact that by agreement with the officials with whom
discussions had been held, the account would
have a twofold purpose,
namely:
14.1
to
give an analysis of the applicant's administration of the estate
which, if found to be in order,
would
absolve the [applicant] of any liability in respect of the
irregularities occasioned by [Musenwa];
4
and
14.2
to
enable the final liquidators to finalise the remaining matters in the
estate.
15.
The
payment of the provisional liquidator's fees, the applicant suggested
in the letter, was not the primary purpose of the application.
This
is curious, to say the least, because the admitted purpose of the
approach to the Master in the first place had been to get
authority
for payment of these very fees.
16
.
Further
discussions followed on 15 April 2010 between a director of the
company for which the applicant worked (Mr van Rensburg),
the
applicant and a number of officials of the Master's office. The
discussions
did not produce results to the satisfaction of the applicant and his
co-director. Mr van Rensburg wrote an ill-tempered
letter dated 3 May
2010 claiming that the provisional account had been submitted
pursuant to a suggestion from an official in the
Master's office, a
suggestion with which another official had concurred, and asserting,
in effect, that Mrs Jordaan did not know
what she was talking about.
This letter elicited a response from the Master himself in a letter
dated 11 May 2010 in which he conveyed
the denial of the officials
that they had asked the applicant to submit a provisional account and
recording that the officials
[sic] stood by their decision. The
applicant launched the present application by notice of motion dated
30 June 2010.
17.
The principal prayer in the notice of motion seeks the review and
setting aside of the Master's decision not to "accept,
consider
and/or approve" the provisional account and to tax the fee of
the provisional liquidators in accordance with s 384
of the Companies
Act and reg 24. The review is brought in terms of rule 53 and ss
6(2)(a), (d) and (e) read with s 8(1 )(c) of
the
Promotion of
Administrative Justice Act, 3 of 2000
,
18.
The
application elicited a Master's Report, date stamped 30 June 2010,
from the Master, Mr BC Nell. The report says:
1
A
copy of the Notice of Motion, the Applicant's founding affidavit and
the annexures thereto have been served on me.
2
I
confirm that it is not my intention to oppose the application.
3
I
confirm the contents of the Applicant's affidavit in so far as it
relates to me and the actions of my sub-ordinates relative to
my
decision not to accept the provisional account as framed in the
estate of Coal Experts (Pty) Ltd (In Liquidation).
4
I
have not further information which may be of assistance to the
Honourable Court in the adjudication of this matter and abide the
decision of the Honourable Court.
19
.
The
Master records in the report his decision not to oppose the
application but he does not say whether he supports or does not
support his own decision (made on his behalf by Mrs Jordaan) which is
the subject of the review application.
20.
This
is not good enough. The court is entitled to know what the Master's
views are on the merits of the review application, particularly
because the issues in this case relate to decisions made by or on
behalf of the Master himself and because the competence of Mrs
Jordaan, one of the Master's officials, is under attack. I regret
that the Master did not cause counsel to be briefed to be of
help to
the court in this regard.
21.
The
primary attack on Mrs Jordaan's decision is that she failed to
appreciate that item l(b) of CM104 conferred on the Master a
discretion to tax a fee where the provisional liquidator does not
continue as liquidator. The applicant submits that joint liquidators
are in law one person and that because Musenwa was dismissed as
provisional liquidator, the situation contemplated in item l(b)
of
CM104 has arisen. The applicant submits that because Mrs Jordaan did
not appreciate that this was so, her decision was accordingly
materially influenced by errors of law as envisaged by s 6(2)(d) of
the Promotion of Administrative Justice Act, 3 of 2000 ("PAJA").
22.
I
was at first inclined to think that there was substance in this
submission but on further reflection and a more careful analysis
of
the facts I am satisfied that the argument is unsound and that Mrs
Jordaan got it right. I am prepared to accept for the sake
of
argument that the applicant is correct when he says that the
situation contemplated in item l(b) of CM104 has arisen because
one
of the provisional liquidators did not continue as liquidator. But
that is beside the point: Mrs Jordaan did not decide that
the Master
had no discretion to tax the provisional liquidators' fees, ie that
as a matter of law the Master
could
not
do
so: she decided that the Master
should
not
do
so.
23
.
Item
l(b) of CM104 is silent as to the time when the Master should tax the
provisional liquidators' fees. In the circumstances of
this case,
there is good reason to defer such taxation. This is in essence what
Mrs Jordaan decided and in this regard, in my view,
she was correct.
For example, when all the facts are known, the Master may decide that
the provisional liquidators' fees should
properly be reduced, having
regard to the amount that was misappropriated.
24.
The
applicant submits further that Mrs Jordaan was mistaken in her
conclusion that the provisional account lodged was
just
another form of the application in terms of CM101.
Far
from employing flawed reasoning and displaying a lack of rationality,
Mrs Jordaan in my view saw through the stratagem employed
by the
applicant. The confessed purpose of the submission of the account
under cover of the applicant's letter dated 5 March 2010
was to
obtain payment of the provisional liquidators' fees before
confirmation of any liquidation and distribution account submitted
under s 403 of the Companies Act. Mrs Jordaan saw that this was so
and concluded that there would be no benefit to creditors if
the
erstwhile provisional liquidators received an early payment of their
fees.
25.
When
Mrs Jordaan made her decision, she was not to know, as I however do,
that there was another reason for the submission of the
account: that
as disclosed in the applicant's letter dated 17 March 2010, the
approval of the provisional account was also designed
to
absolve
the writer from any liability in respect of the irregularities
occasioned by the erstwhile provisional liquidator.
I
am not sure how the approval of a provisional account could achieve
this result and have not had the benefit of argument in this
regard.
But it seems to me manifestly undesirable that creditors and other
interested parties should be deprived of the opportunity
of
establishing, if they so wish and the facts bear them out, that the
conduct of the applicant in regard to the theft by Musenwa
of Coal
Experts' money
should
attract
liability.
26
The
other expressed purpose of the submission of the provisional account,
according to the applicant's letter dated 17 March 2010,
was to
enable the liquidators to finalise the remaining matters in the
winding-up of Coal Experts. I cannot see how the approval
of the
provisional account would advance the finalisation of the winding-up.
27.
There
is another, more fundamental, reason why Mrs Jordaan's decision was
correct. There is no express provision in either the
Insolvency Act,
24 of 1936
, or the Companies Act providing for the time when a
trustee or liquidator may pay himself his fees. But under the common
law, a
trustee cannot claim or draw his remuneration until the
account in the estate showing the amount thereof has been confirmed.
5
This common law principle is by no means repugnant with the
provisions of the Insolvency Act, 24 of 1936, and is thus an
applicable
principle of our insolvency law today.
6
28
The
authorities to which I have referred deal with the position of the
trustee in insolvency. In my view, the principle is equally
applicable to liquidators.
7
I have referred to the liquidator's obligation to account under s 403
of the Companies Act. Under s 406 the account must lie for
inspection
for a period of at least 14 days at the office of the Master and,
where the registered office of the company is not
situated in the
same district as the office of the Master, the office of the
magistrate
of that district and, if the company carried on business at any other
place, at the office of the magistrate in the district
into which
that other place falls as well. Notice that the account is lying for
inspection must be given in the Government Gazette.
29.
It was submitted on behalf of the applicant that these sections
cannot apply to provisional liquidators because a provisional
liquidator is not called upon to liquidate or distribute the assets
of a company in liquidation. This is no doubt the general position
but it is not always so. In this very case, the provisional
liquidators disposed of assets by public auction and got in proceeds
of at least R10 million. Furthermore, the submission does not seem to
me to explain why the provisional liquidator's account, whatever
it
contains, should not lie for inspection and be open to objection
under the Companies Act. The applicant submits that his provisional
account will lie for inspection as an attachment to the liquidator's
account. But by then, if the applicant gets his way, the fees
dealt
with in the provisional account will have been paid out, to the
potentially irreversible prejudice of creditors. To use the
language
of the definition of liquidator in s 1 of the Companies Act, I do not
see that the context of these sections indicates
that provisional
liquidators are to be excluded from their reach.
30.
The
wide publicity given to the account is obviously intended to achieve
a wide degree of publicity about how the liquidator has
carried out
the duties of his office. Under s 407, there is provision for
objections to the account and for how any such objection
is to be
adjudicated. Ultimately, an aggrieved objector can approach the court
for relief.
31.
After
the account has duly lain for inspection and the period for
objections has passed without objections having been lodged or,
if
lodged, dealt with according to law or withdrawn, the Master must,
under s 408, confirm the account. Such confirmation has the
effect of
a final judgment save in limited specified circumstances.
32
.
The
scheme of the sections I have discussed would be significantly
retarded if the applicant were permitted in respect of his fees,
an
important component of any account in a liquidation, to go behind the
backs of creditors and obtain provisional payment by an
unpublicised
administrative process. It follows from this conclusion, in my view,
that item 5 of CM101, to the extent that it purports
to empower the
Master to authorise payment of a liquidator's fees
before
an
account specifying the fee the liquidator intends charging has duly
lain for inspection and been confirmed, may be
ultra
w'resthe
Companies Act. This is because there is no indication in the
Companies Act itself that the legislature intended to depart
from the
common law in this regard. It is unnecessary to reach a final
conclusion on this question in the present case but manifestly
if
such a power exists, it should be exercised very sparingly and with
exceptional caution.
33.
It follows that the review cannot succeed. The application is
dismissed.
NB
Tuchten
Judge
of the High Court
12
October 2010
For
the applicant:
Adv
PA
Venter
instructed
by William Tintinger Attorney
1
According
to the court file in
Edey
v Coal Experts (Pty) Limited,
case
no. 6790/09 in this court, of which I take judicial notice, the
winding-up order was made final on 9 November 2009.
2
Promulgated
under GN R2490 of 28 December 1973 and amended from time to time.
3
Definition
of liquidator in s 1.
4
My
emphasis
5
Mars,
Law
of Insolvency in South Africa, 9
th
ed 310;
Meskin,
Insolvency
Law looseleaf ed, para 4.21;
Abbott
v Bryant
20
CTR 943;
R
v Macleod
1935
EDL284;
Elliot
Brothers (East London) (Pty) Ltd v The Master and Another N0
1988
4 SA183 E 192 letter I; Compare
Ex
parte Thomas; Ex parte Thomas
[2002]
4 All SA 227
T 229g.
6
Mars,
op cit,
13
7
Henochsberg
on the Companies Act
5
,h
ed, general note to s 384;
Blackman
et
a/,
Commentary on the Companies Act, looseleaf ed, note to s 384. If
Coal Experts is being wound up for inability to pay its debts,
s 339
of the Companies Act will apply to support this proposition; but I
reach my conclusion independently of s 339.