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[2011] ZAECPEHC 45
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Melville v Busane and Another (2067/2011) [2011] ZAECPEHC 45; 2012 (1) SA 233 (ECP); [2012] 1 All SA 675 (ECP) (18 August 2011)
Reportable
IN THE HIGH COURT OF SOUTH AFRICA
(EASTERN CAPE, PORT ELIZABETH)
Case No: 2067/2011
In the matter between:
ANNE ALETTA SUSANNA MELVILLE
….........................................
APPLICANT
And
MZUNGEZI NICHOLAS BUSANE
…...............................
FIRST
RESPONDENT
EDNER MFUTHI BUSANE
….......................................
SECOND
RESPONDENT
JUDGMENT
SCHOEMAN J.
This is an unopposed application for the winding up of
the BRI Construction Trust (IT 1579/98) (“the trust”) in
terms
of the Companies Act 71 of 2008 (the Act). The only issue is
whether it is competent in law to liquidate a trust in terms of the
Act.
Background
The trust performs telecommunication services for
Telkom. That is its main source of income.
The applicant and the two respondents are trustees of
the trust. The second respondent is the wife of the first
respondent. The
applicant holds 49% of the beneficial interest of
the trust, while the two respondents hold 25.5% beneficial interest
each. The
trust is the only source of income of the applicant.
The basis of the application for the liquidation of the
trust is that it is just and equitable to do so. The applicant does
not
know whether the trust is solvent or insolvent, but numerous
creditors of the trust have taken action against her as surety for
the debts of the trust. It has not been set out whether any of such
creditors have been paid and what the amounts of the debts
are.
However, the bank statements of the trust attached to the
application reflect a credit balance. Albeit, the last bank
statement attached is that of January 2011, the last time the
applicant had the opportunity to have access to the bank statements
of the trust.
The main allegations why it is just and equitable to
liquidate the trust are:
The applicant, a trustee and beneficiary under the
trust, has been excluded from all the dealings of the trust; she has
been prevented
from entering the property of the trust from 2009 to
the present; and she has no access to the books of account of the
trust
and since January 2011 has not had access to the bank
statements.
The first respondent utilises the trust property and
funds as if it is part of his personal estate in that he finances
his family’s
lifestyle from the trust.
The first respondent transfers money from the trust to
a close corporation known as Busane Medserve CC. The sole member of
this
close corporation is a certain Lindelani Busani, the son of the
two respondents. There exists no reason for the transfer of the
funds.
The respondents have in this way withdrawn an amount of
R6 580 442.31 from the trust for the period April 2009 to
January
2011.
During 2010 the respondents brought an application to
have the applicant removed as trustee. She opposed the application
and after
her answering affidavit was filed, the respondents did not
reply to the applicant’s affidavit, but sought to withdraw the
application. The respondents’ application was dismissed with
the respondents directed to pay the costs on the scale as
between
attorney and client.
The applicant’s case
Mr
Ronaasen
,
who appeared on behalf of the applicant, argued that a trust should
now be liquidated in terms of the Act. His argument is that:
(a) A
trust is defined as a juristic person in the Act; (b) In Chapter 14
of the previous Companies Act, 61 of 1973 (the previous
Act) the
definition of a company includes a body corporate
1
(which is a juristic
person); (c) Chapter 14 of the previous Act, dealing with winding-up
of companies, has now been incorporated
into the Act by way of
section 9 of Schedule 5. This has the effect that a trust can be
defined as a company in terms of the
Act and should therefore be
liquidated in terms of the new Act.
The position of the trust.
The common law does
not recognise a trust as a juristic person, except where a
particular statute so provides.
2
The previous Act did
not define “juristic person” or “body corporate”.
In the Act, “juristic person”
is defined to include a
trust, irrespective of whether or not it was established within or
outside the Republic.
3
There is no
definition of “body corporate”.
The trust deed in the instant matter provides that the
trust may be terminated if there is a resolution to that effect by
the
trustees. There was no such resolution.
In the event of a
trust’s insolvency, while the previous Act was in operation,
the appropriate remedy was to sequestrate
a trust. The reason for
this is apparent in the judgment of
Magnum
Financial Holdings v Summerly NO
4
where it was found
that a trust fell within the definition of a “debtor” as
set out in
Section 2
of the
Insolvency Act, 24 of 1936
. In the
Insolvency Act “debtor
” is defined as follows:
"'debtor', in connection
with the sequestration of the debtor's estate, means a person or a
partnership or the estate of a
person or a partnership which is a
debtor in the usual sense of the word, except a body corporate or a
company or other association
of persons which may be placed in
liquidation under the law relating to companies".
It was found that a trust was "a debtor in the
usual sense of the word". Furthermore, it was not a body
corporate or a
company or other association of persons which may be
placed in liquidation under the law relating to companies. Therefore
it was
found that sequestration is the appropriate remedy.
The relevant legislative provisions.
A company is defined
5
as:
“
a
juristic person incorporated in terms of this Act, a domesticated
company, or a juristic person that, immediately before the effective
date—
(a) was registered in terms of
the –
Companies Act, 1973 (Act No. 61
of 1973), other than as an external company as defined in that Act;
or
Close Corporations Act, 1984
,
if it has subsequently been converted in terms of Schedule 2;
(b) was in existence and
recognised as an “existing company” in terms of the
Companies Act, 1973 (Act No. 61 of 1973);
or
(c) was deregistered in terms of
the Companies Act, 1973 (Act No. 61 of 1973), and has subsequently
been re-registered in terms
of this Act;”
It is clear that a trust cannot be defined as a
company, although it is a juristic person in terms of the Act.
Section 9 of Schedule 5 of the Act determines as
follows:
“
Continued
application of previous Act to winding-up and liquidation. ---
Despite the repeal of the
previous Act, until the date determined in terms of subitem (4),
Chapter 14 of that Act continues to
apply with respect to the
winding-up and liquidation of companies under this Act, as if that
Act had not been repealed subject
to subitems (2) and (3).
Despite subitem (1), sections
343, 344, 346 and 348 to 353 do not apply to the winding-up of a
solvent company, except to the
extent necessary to give full effect
to the provisions of Part G of Chapter 2.
If there is a conflict between
a provision of the previous Act that continues to apply in terms of
subitem (1), and a provision
of Part G of Chapter 2 of this Act with
respect to a solvent company, the provisions of this Act prevails.
In Chapter 14 of the
previous Act a company is defined to include “
a
company, external company and any other body corporate.”
6
Because a debtor is defined in
s 2
of the
Insolvency
Act, 24 of 1936
to exclude
“
a
body corporate or a company or other association of persons which
may be placed in liquidation under the law relating to companies”
the argument is that as a trust is now defined
as a juristic person, which is a body corporate, it may be placed in
liquidation.
Therefore, a trust may not be sequestrated, and the
liquidation of the trust is the correct procedure.
This argument loses
sight of the fact that
s 9
of Schedule 5 determines that Chapter 14
of the previous Act “continues to apply with respect to the
winding-up of and
liquidation
of
companies under this Act
…
.”
(
my
emphasis).
As
is evident from the definition of “company” as set out
supra, a trust is not covered by the definition of a company
under
the Act for it is not a juristic person incorporated in terms of the
Act. Therefore the Act cannot be applied to wind-up
or liquidate the
trust.
I am of the view that
if the trust has committed a deed of insolvency, or is insolvent,
the appropriate remedy remains the sequestration
of the trust. If
the trust is not insolvent, a trustee could be removed if the court
is satisfied that such removal will be in
the interest of the trust
and its beneficiaries.
7
The application is dismissed.
___________________________
Irma Schoeman.
(Judge of the High Court)
Counsel
for Applicant: Adv OH Ronaasen
Counsel
for Respondents: None
Heard
on 26 July 2011
Delivered
on 18 August 2011.
1
S
337 of the previous Act.
2
Honoré’s
South African Law of Trusts 5
th
Ed page 9-11.
3
S
1 of the Act.
4
1984(1)
SA 160 (W)
5
S
1 of the Act.
6
S
337 of the previous Act.
7
Ss
20 (1) and 9 of the Trust Property Control Act, 57 of 1988
;
Tijmstra NO v Blunt-Mackenzie NO and
Others
2002 (1) SA 459
(T).