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[2010] ZAGPPHC 254
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Stander v Erasmus and Others (70436/2010) [2010] ZAGPPHC 254; 2011 (2) SA 320 (GNP) (15 December 2010)
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Certain
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IN
THE HIGH COURT OF SOUTH AFRICA
(NORTH
GAUTENG, PRETORIA)
REPORTABLE
CASE
NO
:
70436/2010
JUDGMENT
HEARD: 30 /11/2010
JUDGMENT
DELIVERED:15/12/2010
In the matter between:
MARIA
MAGDALENA
STANDER
.......................................................
Applicant
And
DESIDERIUS
RASMUS ERASMUS
..........................................
1
st
Respondent
SEC
74 ADMINISTRATOR CC
….............................................
2
nd
Respondent
NEDBANK,
NELSPRUIT
............................................................
3
rd
Respondent
______________________________________________________________
J U D G M E N T
______________________________________________________________
LEDWABA
J:
[1]
This
is an opposed urgent application wherein the applicant seeks a an
order in the following terms:
“1. That
the applicant’s failure to comply with the Rules relating to
times and service be condoned in terms of rule
6(12) and that the
application be dealt with as one of urgency;
2. That,
pending the finalisation of the action instituted by the fisrt and
second respondents against the applicant under case
number
67755/2010,
(a)
the first respondent be ordered to forthwith take all steps
necessary to restore the applicant’s control over the trust
account of the second respondent conducted under account number at
the third respondent’s Nelspruit branch;
(b) the first
respondent be ordered to forthwith return to the applicant all
documents and statements relating the aforesaid trust
account;
3. That prayer 2
operate as an interim order with immediate effect;
4. the first
respondent be ordered to forthwith, and at least within 30 days of
the date of the order granted by this Court, to
render a full account
of the business of the second respondent and in particular of his
contribution of the funds received by him
since 11 March 2009.”
[2] It is only the first
and second respondents who filed opposing papers.
[
3] The
brief background of this matter set out below is important for the
proper understanding of the matter and for the conclusion
that I
would read herein. The undermentioned facts are common cause:
3.1
The
applicant was appointed as administrator in terms of section 74 of
the Magistrates Court Act 32 of 1944 (the act) for one thousand
one
hundred (1100) estates.
3.2
The applicant and one Mrs. Haarhoff had formed a close corporation,
the 2
nd
respondent, to be used as a juristic person for the management of the
debtors estates under administration in respect of which
the
applicant was personally appointed as administrator in March 2009.
3.3
Mrs.
Haarhoff and the applicant entered into an agreement of sale, (the
agreement), with the respondent in terms whereof they ceded
their
rights, title and interest in the administration applications as per
Annexure A attached to the agreement at a price of R500
000 to be
paid by the first respondent to the sellers (see annexure FA1).
Clause 1.1 of the agreement further states that the 1
st
respondent was appointed as administrator and/or was to be appointed
as administrator. Clause 1.2 to 1.4 thereof reads as follows:
“
1.2
THE Sellers confirms that with the respect to the Administration
Application
s
which have already been granted and where M. M. Stander was appointed
as Administrator, the Sellers confirms that in respect of
the
Applications as per ANNEXURE “A”, the required emolument
attachment orders have already been granted and have been
served or
are to be served at the relevant place of employment of the
Administration Applicant, and confirms that the current state
of the
necessary service of the emolument attachment order is per file as
per ANNEXURE “A”.
1.3 M. M. Stander
undertakes to sign all documentatition reasonably required and is
obliged to give full co-operation to effect
the necessary signing of
all the required documentation to be replaced as Administrator of the
Administration Applications.
1.4 THE
Sellers and the Purchaser agrees that the Purchaser will substitute
the current Administrator being M. M Stander by way
of an Affidavit,
as the Administrator.”
(I
will comment on the agreement latter).
3.4
There
was a trust shortfall of second respondent R511 589,60 in the trust
bank account of the 2
nd
respondent when the agreement was signed and Mrs. Hoorhof has been
the bookkeeper of the 2
nd
respondent books.
3.5
The
1
st
respondent was registered as the sole member of the 2
nd
respondent on 21 April 2009. The 1
st
respondent became the signatory of the trust and business account of
the 2
nd
respondent which account held with Nedbank, third respondent.
Initially the applicant had signing powers on the trust accounts
until July 2010 when her signing power were cancelled by the 1
st
respondent.
3.6
After
the signing of the agreement and/or the transfer of membership to the
1
st
respondent, the applicant continued being an employee of the 2
nd
respondent as an office manager. The accounting and distribution to
the creditors were done by one Kitty and first respondent was
overseeing the business and would approve the transfers to be made.
After April 2009 applicant was further appointed as administrator
by
the court in respect of other three hundred estates.
3.7 Between
1 March to 31
st
March 2010 an amount of about R9 781 207, 19 was paid into the second
respondent’s trust account by the debtors in the administration
files wherein the applicant was personally appointed as
administrator. The said monies were to be distributed to the
creditors.
[4
] Personal
problems between the applicant and the 1
st
respondent started in about September 2010.
[5]
In September 2010 and November 2010 the second respondent did not
make any distributions to the creditors as required by the Act.
[
6] In
April 2010 the 1
st
respondent requested that the applicant sign an affidavit for the
applicant to be substituted as administrator in the files under
administration wherein she was appointed as administrator as per
clause 1.3 and 1.4 of the agreement. Applicant refused to sign.
[
7]
The issue between the 1
st
respondent and the applicant culminated in the first respondent
issuing summons against the applicant in November 2010 in this
court
under case number 67755/2010 seeking an order to compel the applicant
to sign the required documents to effect the substitution
of the
first respondent as the administrator in the files under
administration where the applicant was appointed as administrator,
failing which the sheriff be authorised to sign the said document.
[8]
The
applicant is defending the action and the proceedings it has not been
finalised.
[9
] The
1
st
and 2
nd
respondents and the second respondent again on 1 November 2010 filed
an urgent application in this court under case number 67754/2010
seeking an order in that:
(i)
the applicant herein should have over all the keys for the business
of the 2
nd
respondent situated at 66 Ferreira street, Nelspruit, Mpumalanga;
(ii) Her
services with the 2
nd
respondent be immediately suspended pending the outcome of a
disciplinary hearing and; that
(iii)
She should be interdicted from:
a. entering the premises of the 2
nd
respondent;
b.
interfering in any way with any of the staff the 2
nd
respondent;
c.
removing
anything at all from the premises of the 2
nd
respondent.
[10] The
applicant opposed the urgent application and on 9
th
November 2010 Hiemstra AJ dismissed the application with costs.
[11] The
1
st
and 2
nd
respondents have filed a notice of application for leave to appeal
the judgment of Hiemstra AJ.
[12] I
did not see the judgment of Hiemstra AJ. However, in clause 2 and 4
of the notice opposing the first and second respondents
are also
appealing against the finding of Hiemstra AJ that the agreement
(Agreement of Sale) is not agreement at all and that it
was unlawful.
[1
3] The
1
st
and 2
nd
respondents’ counsel submitted that the finding of Judge
Hiemstra should be regarded as being suspended because the notice
application for leave to appeal has been filed. In my view, there is
no merit in the respondents submission furthermore, the respondents
did not make a counter-application for the enforcement of the
agreement. (See
Plettenberg
Bay Entertainment (Pty) ltd v Minister van Wet en ander
1993 (2) SA
323
(W)
.
[14] Against
the aforesaid background I must now determine if the applicant is
entitled to the relief sought. I pause to mention
that during the
proceeding, because my roll was heavy, I had about sixty-five matters
on the roll for that day, I instructed counsel
for the parties to
take further instruction from their instructing attorneys to see if
the matter could not be settled because
the interest of the debtors
and creditors had to be protected. Unfortunately the parties could
not reach an agreement.
[15] In
my view, the matter is urgent because there is an amount of about R5
million in the trust account of the second respondent
which is at
risk and the administrator appointed by the magistrate has no control
over the said monies.
[1
6] I
will start by quoting the provisions of
section
74 E (1)-(4) of the Magistrates Court Act 32 of 1944
which reads as follows:
“74
Appointment of Administrator-
(1)
When an administration order has been granted under section 74 (1),
the court
shall appoint a
person as administrator
,
which appointment shall become
effective
only after a copy of the
administration order has
been handed or sent to him
by
registered post and, in the event of his being required as
administrator to give security, after he has given such security.
(2)
An administrator may
on
good cause shown be relieved of his appointment by the court, and the
court may appoint any other person in his place
.
(3) An administrator
who is not an officer of the court or a practitioner shall, before a
copy of the administration order is handed
or sent to him by
registered post, give security to the satisfaction of the court and
thereafter as required by the moneys which
come into his possession
by virtue of his appointment as an administrator.
(4) An
administrator shall not be obliged to give security in respect of his
appointment as an administrator of the estate of any
particular
debtor if he has given or gives security to the satisfaction of the
court for the due and prompt payment by him to the
parties entitled
thereto of all moneys which may come into his possession by virtue of
his appointment as administrator of the
estate of any debtor,
irrespective of whether such appointment was made before or after the
date on which the said security was
given.”
(own
underlining).
[1
7] On
the facts of this case, it is common cause that the applicant is the
appointed administrator in respect of about one thousand
four hundred
(1400) files. The management of the said files is operated through a
close corporation (second respondent) which
initially had two members
(Applicant and Mrs. Haarhoff) who transferred their membership to the
second respondent.
[1
8] In
terms of the act, a person who has been appointed administrator has a
duty to render services set out in the act, if he fails
to perform
accordingly, the court may order the administrator to pay the costs
of the creditor(s)
de bonis
propriis.
[19]
I
know that there is a practice of establishing juristic person through
which files under administration are administered. The
legitimacy of
such practice, in my view, it raises serious concerns because the
said juristic persons have not been appointed by
the court.
[20
] In
terms of the provisions of
section
74 (4)
of
the Act
the
appointment of an administrator is done by the court. If such a
person is to be relieved of his/her appointment it is the court
that
must sanction same and the new appointment or substitution should be
done by the court.
[21] I
have serious doubts about the legitimacy of the practice of appointed
administrators in using close corporations and companies
to do
administration without the approval of the court.
[22] The
interests of debtors and creditors are of paramount importance hence
in
section
74 J (1) of the act
the debtors and creditors have the right to inspect the list of all
payments and other funds received by the administrator. Now
if the
payments are going to be received by a person not appointed by the
court, the rights and interests of debtors and creditors
are going to
be compromised.
[2
3] The
need for the protection of the payments of the monies paid by the
debtors is shown by the requirement that an administrator
must
deposit all monies received in a separate trust account with a bank
in the Republic and such monies, including the interests
thereon,
shall not form part of the assets of the administrator.
[24] On
the facts of this case, the applicant and the first respondent dealt
with the files of the debtors under administration
matter as if they
are their personal assets without the approval of the court. Their
personal interest and the interest of the
second respondent are given
preference over that the interest of the debtors and the creditors.
[
25] It
is also clear that there was misappropriation of monies in trust
hence a shortfall of R511 589, 60 before membership in the
2
nd
respondent was transferred to the 1
st
respondent.
[2
6] There
is now a credit balance about five million in the trust account and
distribution to the creditors has not taken place since
September
2010. This matter needs urgent attention.
[2
7] What
is intriguing in the matter is that the relationship between
appointed administrator, applicant, and the 1
st
respondent who is in control of the trust account has broken down to
the extent that the respondents further wanted the applicant
to be
out of the premises where they manage the debtors file.
[2
8] It
is the applicant who has been appointed as administrator and who
bears the responsibility of complying with the act. One of
the duties
of an administration is to take expeditious steps to distribute the
monies. The applicant as an administrator has no
control of the trust
monies.
[
29] The
money in trust is mainly for the benefit of the creditors of the
debtors.
[30] The
applicant in allowing the trust account to be conducted and
controlled by another person acted contrary to her duties and
responsibilities as administrator.
[31] The
respondent’s counsel argued that the applicant’s
application should be dismissed because the respondent paid
the
applicant an amount of R1174 563, 18 which is more than what she was
entitled to in terms of the agreement. In other words
he paid her an
extra R207 444, 67.
[32] She
further submitted that this court should consider appointing the
respondent as the administrator to substitute the appointment
of the
applicant since a similar order was granted in other cases. I cannot
do that because there is no proper application by the
respondents.
Furthermore, the respondents have issued summons to protect his right
regarding him being appointed as an administrator.
[33] It
is abundantly clear that the 1
st
respondent has not been appointed as an administrator and he is the
one who has the signing powers to the trust account held at
the bank
of the 3
rd
respondent. The applicant contributed and caused this unhealthy
situation. The trust monies need protection. The order to be made
herein is done with the purpose of protecting the monies in the trust
and the interest of the debtors and the creditors.
[34
] The
applicant and respondent were the authors of the situation they
presently find themselves in and in exercising my discretion
on the
costs, I think the costs should be reserved.
[35
]
I
therefore, make the following order:
(i)
Applicant’s appointment as administrator in respect of the
estates referred to in the agreement is set aside.
(ii)
The monies in the trust banked with the third respondent is freezed
pending the appointment of an independent and competent
administrator
by a competent court.
(iii)
The Trust account held by
the 3
rd
respondent should be administered by a new administrator to be
appointed by the court who shall urgently make a report to the court
regarding the status of the trust account and effect a distribution
to the creditors.
(iv)
The creditors should not take any steps against the debtors pending
the directions of the court.
(v)
The administrators remuneration in the account to be kept in trust
pending the finalisation of the action proceedings between
the
applicant and the respondent.
(vi) Costs reserved.
__________________________
A. P. LEDWABA
JUDGE OF THE HIGH COURT