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[2022] ZAFSHC 160
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Cloete Murray N.O and Others v Ntombela and Others In re Ntombela and Another v Cloete Murray N.O and Others (3807/2020) [2022] ZAFSHC 160; [2022] 3 All SA 689 (FB) (24 June 2022)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE PROVINCIAL DIVISION
Case
No.: 3807/2020
Reportable:
YES/NO
Of
interest to other Judges: YES/NO
Circulate
to Magistrates: YES/NO
In
the matter between:
CLOETE
MURRAY N.O.
First
Applicant
[1]
GERT
LOUWRENS STEYN DE WET
N.O.
Second
Applicant
MAGDA
WILMA KETS N.O.
Third
Applicant
[In
their capacity as joint liquidators of Phehla Umsebenzi
Trading
48 CC (in liquidation) with registration
number
[….]
and
MADALA
LOUIS DAVID NTOMBELA
First
Respondent
[2]
SEFORA
HIXSONIA NTOMBELA
Second
Respondent
HUGO
& TERBLANCHE AUCTIONEERS
Third
Respondent
In
re:
MADALA
LOUIS DAVID NTOMBELA
First
Applicant
SEFORA
HIXSONIA
NTOMBELA
Second
Applicant
and
CLOETE
MURRAY
N.O.
First
Respondent
GERT
LOUWRENS STEYN DE WET
N.O.
Second
Respondent
MAGDA
WILMA KETS N.O.
Third
Respondent
[In
their capacity as joint liquidators of Phehla Umsebenzi
Trading
48 CC (in liquidation) with registration
number
[….]
HUGO
& TERBLANCHE AUCTIONEERS
Fourth
Respondent
PHEHLA
UMSEBENZI TRADING 48
CC
[3]
Fifth
Respondent
PANGANATHANA
MARIMUTHU
Sixth
Respondent
NEERMALA
MOODLEY
Seventh
Respondent
WERNER
CAWOOD
N.O.
Eight
Respondent
JOHAN
CHRISTIAAN DE BEER
N.O.
Ninth
Respondent
VISHAL
JUNKEEPARSAD &
COMPANY
ATTORNEYS
Tenth
Respondent
MERLY
MOONSAMMY ATTORNEYS
Eleventh
Respondent
THE
MASTER OF THE HIGH COURT, PRETORIA
Twelfth
Respondent
Coram:
Opperman,
J
Date
of hearing:
13
April 2022
Delivered:
The judgment was handed down
electronically by circulation to the parties’ legal
representatives by email and release to SAFLII
on 24 June 2022. The
date and time for hand-down is deemed to be 24 June 2022 at 15h00
Summary:
Reviewability
of
a decision by liquidators not
to perform in terms of an unexecuted contract for the sale of
residential immovable property entered
into by the insolvent prior to
its liquidation – stay of Rule 6(5)(d)(iii) Notice to ensure
completion of Rule 53 –
process
JUDGMENT
INTRODUCTION
[1]
The deep core of the application for leave to appeal is the
submission that (the)
liquidators do not have to justify or validate
a decision not to perform in terms of an unexecuted contract for the
sale of an
immovable residential property to the Ntombela family;
entered into by the insolvent, Phehla Umsebenzi Trading 48 CC, prior
to
its liquidation.
[2]
It is the applicants’ case that the decision is not reviewable
and the court
had to adjudicate this point in the interlocutory
application; the finding of which is also a subject of the
application for leave
to appeal. I will depict a summary of the
comprehensive grounds for leave to appeal by the applicants later.
This was the order
a quo
:
ORDER
1.
The filing of the Notice in terms of Rule 6(5)(d)(iii) by the first
to third
and fifth respondents is provisionally set aside pending the
finalisation of the process prescribed in Rule 53 dealing with
reviews
in the Uniform Rules of Court;
2.
First to third and fifth respondents are ordered to make available to
the applicants
the record of the proceedings sought to be corrected
and set aside and in terms of Rule 53(1)(b) and within fifteen (15)
days of
the date of this order;
3.
The applicants may within ten (10) days after the record was made
available to
them deliver a notice and accompanying affidavit, amend,
add to or vary the terms of their notice of motion and supplement the
supporting affidavit in terms of Rule 53(4);
4.
The first to third and fifth respondents may reply in terms of Rule
53(5);
5.
The first to third and fifth respondents are afforded 10 (ten) days
from the
date of the filing of the papers and the conclusion of the
Rule 53 process above in which to amend and file their Notice in
terms
of Rule 6(5)(d)(iii), if necessary;
6.
The parties must each carry their own costs.
[3]
The common law authority of the liquidators to take the decision is
not in dispute.
There are two major issues in contention; the
reviewability of the decision of the liquidators in the circumstances
of this case
and the ruling on the Rule 6(5)(d)(iii) Notice.
[4]
The respondents,
via
Advocate Rautenbach SC, reacted with a
succinct reply in their heads of argument that reflects the second
issue of the Rule 6(5)(d)(iii)
Notice:
2.
The respondents rely on various grounds of appeal totalling sixteen
grounds.
[4]
3.
For purposes of this application for leave to appeal, it is submitted
that it
is not necessary to deal separately with each ground of
appeal. This is so as the Respondents’ approach towards any
relief
can be summarised by stating that the Applicants’
reliance on the Notice issued by them in terms of Rule 6(5)(d)(iii)
was
premature and could only be done once certain steps were taken by
the applicants in terms of Rule 53 of the Uniform Rules of Court.
[5]
After an effective and brief depiction of the law he stated further
that:
12.
Accordingly, this Honourable Court was one hundred present correct in
in (sic) “staying”
the Rule 6(5)(d)(iii) Notice as the
notice was premature in the circumstances. There is nothing to
prevent this Court from “staying”
or declaring a
provisional bar against the Rule 6(5)(d)(iii) Notice. The Court is
entitled to use inherent jurisdiction to make
such order.
13.
In terms of the Order, what the Court
did was to order that the provisions of Rule 53 should
be followed
before taking cognisance of a Notice in Terms (sic) of Rule
6(5)(d)(iii).
14.
In this specific matter, it seems that the only defence that the
Respondents had in the
interlocutory application is that they
submitted that there was no documentation in respect of a record.
This never constituted
compliance with Rule 53 in terms of which the
applicants are entitled to an answer as far as the record and the
deliberations are
concerned. It is in this regard quite clear from
the review application that there was correspondence between the
respective parties,
obviously required the Respondent to apply their
minds in taking a decision on the matter (sic).
15.
The decision-making process was not elaborated on in the
interlocutory application and nor
was anything provided as part of a
record of such decision-making process.
16.
As pointed out above, the Respondent
have not complied with the Rule and have not reached the
stage where
they could validly file a Rule 6(5)(d)(iii) notice in terms of which
a point of law could be adjudicated.
[6]
I will return to the detailed evolvement of the events in the case.
But, as introduction;
the Ntombela family purchased the property in
2014 and their son and his family have been residing there ever
since. The legal
sentiments in section 26 of the Constitution
[5]
and Rule 46A of the Uniform Rules of Court
[6]
should be regarded in the background.
[7]
The property was valued for the auction by the liquidators at R2 030
000.00 and the
market value to be R2 300 000.00.
[7]
The Ntombelas purchased the property for R2 500 000.00. They had
already paid the R2 500 000.00.
[8]
The property was not transferred to the Ntombelas before liquidation.
[8]
The liquidators bring the application for leave to appeal and drives
the litigation.
There was up until this moment, no input by the
Master of the High Court; the twelfth respondent. This matter has,
unacceptably
so, dragged on since 2020.
[9]
The liquidators maintain that they do not have a record of how the
decision was taken
and they also do not offer any reasons for their
decision.
[9]
They took the
decision and cannot; in terms of “trite law”,
[10]
be questioned. The law might not be so trite if one studies the ten
cases they base their submissions on; hence the referral of
this
matter to the Supreme Court of Appeal later.
[10]
The vulnerability of buyers that have paid the full price for
immovable property and, in the
instance, more than the price the
property was valued for to be sold at the auction by the liquidators,
is clear. The property
is a primary residence. For an entity as the
liquidator to claim absolute unaccountability and responsiveness is
curious in the
constitutional democratic epoch this country has
embraced since 1994.
[11]
The conundrum of the case is that the processes of the litigation
have not taken its course and
all the facts have apparently not been
ventilated.
[12]
The claim of the liquidators is based on the common law of insolvency
and their interpretation
of administrative law. Calitz
[11]
said it best in 2012 already on the phenomenon that the Law of
Insolvency is slow to catch up with the Constitution, 1996:
The
South African Constitution is different: it … represents a
decisive break from, and a ringing rejection of, that part
of the
past which is disgracefully racist, authoritarian, insular, and
repressive and a vigorous identification of and a commitment
to a
democratic, universalistic, caring and aspirationally egalitarian
ethos, expressly articulated in the Constitution.
In
the case of Pharmaceutical Manufacturers Association of South Africa:
In re Ex Parte President of the Republic of South Africa
Chaskalson J
confirmed that there is only one system of law in South Africa and
that all law, including the common law, derives
its force from the
Constitution of the Republic of South Africa. As the supreme law of
the land the Constitution has changed the
face of our law
dramatically in that legislation may now be tested by the courts in
order to establish its constitutionality.
The
Constitution featuring a Bill of Rights was not in place when the
Insolvency Act came into force.
Consequently, the values and
principles entrenched in the Constitution in many instances differ
radically from the values, principles
and policies that formed the
foundation of the Insolvency Act.
(Accentuation added)
[13]
It is acknowledged that:
Courts
are often not best-placed, both prescriptively and descriptively, to
make decisions that require a choice among many legitimate
policy
options or the use of specialised knowledge and skills. At the same
time, administrators cannot have free reign in decision-making.
That
would be the rule of bureaucracy, not the rule of law
.
For the rule of law to mean anything, we must be governed by laws and
not by people.
(Accentuation added)
Constitutionalised
judicial review — especially of questions of law and fact —
necessarily requires substantive consideration
of the merits of the
decision, to determine whether it is lawful, reasonable and
procedurally fair.
Yet,
as eminent administrative lawyers have cautioned, in doing so judges
should take care not simply to replace the administrator’s
decision, with their own view of what is right
.
[12]
(Accentuation added)
[14]
Kroon
[13]
pronounced that:
Section
33 (of the Constitution) spawned the Promotion of Administrative
Justice Act 2 of 2000 (PAJA). This is not the occasion
to discuss
various shortcomings in the Act to which a number of commentators
have drawn attention. Suffice it to say that, albeit
imperfectly, the
legislation gives the courts the sinews of war,
via
judicial
review, against unconstitutional administrative excesses, and enables
them, by appropriate intervention, more positively
to develop an
ethos conducive to the advancement of our founding constitutional
values.
[15]
Due to the interlocutory nature of the proceedings that served before
me I decided that:
[17]
It is imperative to stress that this Court is not presently called
upon to adjudicate any of
the Rule 6(5)(d)(iii) objections; that is
the issues of law raised against the review application. It is the
view of the respondents
at page 35 of their heads of argument that
the Court is forced to; with regard to prayer 2 (that the applicants
be supplied with
the record of the proceedings sought to be corrected
and set aside) to take cognisance of the competency of the review
application.
I cannot do this and must work from the premise that
the applicants have a right to access the Court with a review
application and
it is for that Court to decide the viability of the
review.
In the meanwhile, the process must take its course as
will be shown hereunder.
THE
INTERLOCUTORY ISSUES
[16]
Courts must fathom the issue to be adjudicated and not be let astray
by the litigants. In
De Wet and another v Khammissa and others
(358/2020)
[2021] ZASCA 70
(4 June 2021) the Supreme Court of Appeal
remarked that:
[14]
This case demonstrates the importance of a
court’s central role in the identification of issues.
It is
only after careful thought has been given to a matter that the true
issue for determination can be properly identified. That
task should
never be left solely to the parties or their legal representatives.
Unfortunately, this is what happened in this case.
The court
a quo
was apparently led astray by the arguments contained in the
appellants’ notice in terms of rule 6(5)(d)(ii), which it
accepted
uncritically.
[17]
This is the relief wanted
a quo
:
[1]
This is an interlocutory application under the auspices of Rules
30/30A of the Uniform
Rules of the Court seeking:
1.
An
order to set aside the notice in terms of Uniform Rule
6(5)(d)(iii)
[14]
filed by the
first to third respondents in the main review application;
2.
The applicants, secondly, seek an order against the first to fourth
respondents
to comply with the provisions of Rule 53(1)(b) and that
is to supply to the applicants the record of the proceedings sought
to
be corrected and set aside; and
3.
The applicants want an order for costs if the application is opposed.
[2]
The case for the applicants now, in the main application and in the
urgent application,
is based on an unexecuted contract entered into
by the insolvent before insolvency. The applicants seek an order in
the main application
whereby the liquidators’ election not to
ratify an executory contract by a liquidated Close Corporation before
its liquidation
in relation to immovable property, is reviewed and
set aside.
[18]
The opposition to the application turned on four issues:
1.
Whether this interlocutory application can be validly brought
in
terms of Uniform Rule 30A in circumstances where the applicants’
notice is based on the provisions of Rule 30?
2.
Whether any of the relief claimed by the applicants in this
interlocutory application can be granted in circumstances where the
applicants failed to file their notice or the interlocutory
application within the applicable time periods stipulated by Rule 30?
3.
Whether it is competent to claim relief to set aside the first
to
third respondents’ Rule 6(5)(d)(iii) Notice in circumstances
where there is, among others, a discrepancy between the applicants’
grounds of complaints compared with the relief claimed in the
interlocutory application?
4.
Whether the interlocutory application is at all competent to
address
the failure, or rather inability, given the fact that no record
exists as set out in paragraph 15 of the liquidators answering
affidavit at page 31? The failure to file an application for the
record in terms of Rule 53 but under Rule 30 that governs the
setting
aside of irregular proceedings, is fatal.
[19]
The conclusion
a quo
on the above came to:
[53]
This matter is unique in that the applicants were not given the
opportunity to complete the litigatory
process launched in terms of
Rule 53. Whether the Rule 53 process is the correct one, is to be
decided in the main application.
[54]
The law in regard to Rule 53 must thus be adhered to and as read with
Rule 6. The litigation
to invoke Rule 6(5)(d)(iii) was not completed
because the record has not been supplied. The applicants are correct
in their submission
that they cannot continue with the Rule
53-process if the record is not supplied. The founding papers, unlike
in a pure Rule 6
application, only comes to finalization after the
record has been provided and the applicants had the opportunity to
file a supplementary
affidavit to vary, amend or add to their initial
founding affidavit. The Rule 6(5)(d)(iii) Notice was indeed
premature; it follows
with logic that the Rule
6(5)(d)(iii)-proceedings may only follow after the founding papers
have been concluded.
[55]
The respondents maintain there does not exist a record; the
applicants maintains that it does
exist albeit in the unusual form of
correspondence and other communications. A record will have to be
supplied by the respondents
and they must have due regard to the fact
that it may not be a conventional one. I reiterate: “It may be
a formal record
and dossier of what happened before the tribunal, but
it may also be a disjointed indication of the material that was at
the tribunal's
disposal. In the latter case it would, I venture to
think, include every scrap of paper throwing light, however
indirectly, on
what the proceedings were, both procedurally and
evidentially. It does include all the documents before the Executive
Committee
as well as all documents which are by reference
incorporated in the file before it.”
[56]
The respondents have a right to raise any question of law. They may
institute Rule 6(5)(d)(iii)
proceedings but not now.
To
dismiss the notice abruptly and wipe it of the table will not be
conducive to their right to access to Court
.
I will therefore grant them permission to access the Court on the
same papers duly supplemented after the Rule 53 process has
been
finalised.
[57]
All the parties contributed to the consternation and confusion in the
case and they will have
to carry their own costs.
[58]
ORDER
1.
The filing of the
Notice in terms of Rule 6(5)(d)(iii) by the first
to third and fifth respondents is provisionally set aside pending the
finalisation
of the process prescribed in Rule 53 dealing with
reviews in the Uniform Rules of Court;
2.
First to third and
fifth respondents are ordered to make available to
the applicants the record of the proceedings sought to be corrected
and set
aside and in terms of Rule 53(1)(b) and within fifteen (15)
days of the date of this order;
3.
The applicants may
within ten (10) days after the record was made
available to them deliver a notice and accompanying affidavit, amend,
add to or
vary the terms of their notice of motion and supplement the
supporting affidavit in terms of Rule 53(4);
4.
The first to third
and fifth respondents may reply in terms of Rule
53(5);
5.
The first to third
and fifth respondents are afforded 10 (ten) days
from the date of the filing of the papers and the conclusion of the
Rule 53 process
above in which to amend and file their Notice in
terms of Rule 6(5)(d)(iii), if necessary;
6.
The parties must each carry their own costs.
THE
DEVELOPMENT OF THE CASE
[20]
The Ntombelas brought an application against the then respondents in
case no. 3807/2020 on the
9
th
of October 2020 on an urgent
basis to suspend the sale of a property, Erf 3398 plus improvements
thereon. On 9 October 2020 I ordered
as follows:
1.
Non-compliance with the provisions of the Rules relating to
time
periods and the manner of service referred to hearing and dealing
with the matter as one of urgency in terms of the provisions
of Rule
6(12) of the Court is condoned;
2.
The auction and sale of the property ERF 3398 plus improvements
thereon are stayed and interdicted in the interim, pending the
finalisation of the review application to be instituted by the
applicants before 9 November 2020;
3.
The applicants to pay the wasted costs of the interdicted and
stayed
auction of 9 October 2020;
4.
The applicants to pay the wasted costs of the first, second,
third
and fifth respondents of the hearing on 8 October 2020.
[21]
I refused prayer 3 of the urgent application that the then first,
second and third respondents
shall take steps necessary to transfer
the property into the name of the Ntombelas. Specific performance was
not ordered nor entertained.
[22]
The facts that lead to the urgent application are that the Ntombelas
had various discussions
with Mr. Marimuthu, the sixth respondent and
representative of the fifth respondent (Phehla), about the acquiring
of the property
with the improvements. The property is a house for
residential purposes.
[23]
The property in issue is ERF 3398 Bloemfontein Ext 3, Bloemfontein,
Mangaung Metropolitan, Free
State Province.
IN EXTENT: 2901 (Two
thousand nine hundred and one square metres)
Held by Deed of Transfer
No. T16518/2011.
[24]
The registered owner of the property is Phehla Umsebenzi Trading 48
CC, Registration Number:
2004/054809/23 (“Phehla”) duly
represented by Neermala Moodley (“the seller”).
[25]
Ms. Moodley and Mr. Marimuthu are married to each other in community
of property and are in business
together.
[26]
The Ntombelas paid various sums of money over to Mr. Marimuthu in
payment of the sale that took
place and they even took possession of
the property through their son and his family in the beginning of
2014. The property has
since been used and regarded by the son and
his family as their primary residence.
[27]
Well aware of the importance of the formalization of the transaction
in writing and after inquiries,
the Ntombelas were referred by Mr.
Marimuthu and Ms. Moodley to the tenth respondent as their attorneys,
to prepare an agreement
in respect of the sale and the transfer of
the property. The agreement was signed on 6 August 2015. Ms. Moodley
signed as seller
and Mr. Ntombela as the purchaser.
[28]
The purchase price was to the amount of R 2 500 000.00. The sum of R
2 300 000.00 had already
been paid by the purchaser as on 6 August
2015. The amount of R200 000.00 had to be paid on the signing of the
agreement.
[29]
From time to time the Ntombelas made inquiries as to when the
transfer process will be finalised.
It is their version that they
were assured that the process is ongoing. Later it transpired that
the seller was reluctant to sign
the agreement.
[30]
The Ntombelas had no knowledge whatsoever of the financial position
of Phehla, the fifth respondent.
The reason for the delay in the
transfer was alleged to have been the procurement of clearance
certificates due to accounts issues
experienced at the Mangaung
Metropolitan Municipality. The son, occupying the property as primary
residence, made inquiries in
2018 at the tenth respondent’s
offices and was assured that the seller signed the transfer
documents.
[31]
Around mid-2019 the Ntombelas instructed their attorneys of record to
assist and follow up with
the tenth respondent about the transfer.
The inquiries were to no avail and they wanted to turn to the Legal
Practise Council for
assistance.
[32]
On the 21
st
of November 2019 the tenth respondent informed
that their mandate has been terminated and the eleventh respondent
was appointed.
[33]
The business rescue practitioners were allegedly fully aware of the
fact that the property was
sold for its real value. The whole issue
of the property was apparently dealt with in the Court Order of Case
number 93289/2015
on 6 June 2018. The interpretation of the Court
Order by the Ntombelas is that the property was legally sold to them
and that it
was not subjected to business rescue.
[34]
The factual and legal conundrum that eventuated is that since the
property has not been registered
in the Ntombelas’ name and
Phehla having been liquidated, the property fell into the hands of
the liquidators.
[35]
On 18 September 2020 the liquidators wrote a letter requesting a copy
of the written sale agreement
and proof of payment. It was apparently
submitted.
[36]
In middle September 2020 the Ntombelas became aware of the fact that
the property was going to
be sold on auction on the 9
th
of
October 2020. Desperate notices and letters were written to the
liquidators just for them to be informed that they as the liquidators
are not bound to the sale agreement concluded prior to the
liquidation of Phehla and they have elected not to ratify the sale as
they are entitled to do. The liquidators informed that the auction
will go ahead.
[37]
There were apparently oral negotiations between the attorneys of the
applicants and the liquidators
that they undertook to ratify the sale
agreement on proof of payment of the purchase price. This was
conditional as long as the
sale was not below market value. The
property was valued as being R2 300 000.000. The applicants purchased
the property for R2
500 000.000. The conversation took place on 17
September 2020.
[38]
The Ntombelas now took the decision of the liquidators on review in
terms of Rule 53 of the Uniform
Rules. The Notice of Motion in terms
of Rule 53 dated 9 November 2020 was filed on 10 November 2020 at the
Free State Division
of the High Court.
[39]
The Ntombelas launched the review application against the liquidators
within the time limits
as were stipulated by the Court. They served
the application on 9 November 2020 on the liquidators and filed at
Court on 10 November
2020. They claimed for the following:
1.
That the decision taken by the first, second and third respondents
recorded in a letter of the respondents attached to the founding
papers to sell the said property known as Erf 3387, Bloemfontein
Ext
3 with the improvements thereon be reviewed and set aside;
2.
That the first, second and third respondents, as liquidators
of the
fifth respondent, be ordered to sign all transfer papers necessary to
enable the Deeds Offices to transfer the property
to the applicants;
3.
That in the event of this application being opposed, the first,
second and third respondents be ordered to pay the applicants’
costs, which costs shall be taxed on the scale as between
attorney
and client, including the costs of two Counsel, one which is Senior
Counsel.
[40]
On 30 November 2020 the first, second and third respondents (“the
liquidators”) delivered
a Notice in terms of Rule 6(5)(d)(iii).
The liquidators wanted for the following relief:
1.
Firstly, that the applicants are enjoined from making an application
to have the liquidators’ decision reviewed and set aside; and
2.
Secondly that the applicants are enjoined from claiming and
ordering
specific performance against the liquidators.
[41]
The review has not taken its course because the record remained
outstanding. The liquidators
wanted an application for condonation
for the late filing of the application for an order to compel them to
supply the record and
the dismissal of the Rule 6(5)(d)(iii)
objections.
THE
APPLICATION FOR LEAVE TO APPEAL
[42]
The application for leave to appeal is extensive in words and
objections. As I indicated; the
core issue is the fact that the
applicants do not want for the matter to be reviewed because they
submit for it to not be legally
reviewable. It is the golden threat
that runs through the application for leave to appeal.
[43]
The facts are
sui generis
and the parties have complicated the
matter with their conduct and manner of litigation. The case must be
dealt with and finalized
in the interest of justice. The rules are
for the Court and not the Court for the rules; any conduct that does
not comply with
the Constitution is illegal.
[44]
The Supreme Court of Appeal might view the issues differently than
the Court below and must the
issues be ventilated and decided upon
for once and for all. If the issues are not adjudicated here and now,
specifically the reviewability,
it will in any event conclude in an
appeal at the end of the case and the matter delayed to the detriment
of justice.
[45]
The grounds for appeal, summarized as best as possible and not
purported to be exhaustive, are:
1.
“The Court should have found that the claim for specific
performance against
the applicants in the main review application is
incompetent and bad in law, and will consequently render review
proceedings, even
if competent, nugatory.” (At page 4/20
paragraph 4 of the Bundle: “Index: Application for leave to
appeal” dated
29 March 2022 (“the Bundle”)). The
reviewability issue features in this ground.
2.
“The Courts summary recorded at paragraph [5] of the judgment
of the issues
to be decided, ignores and fails to meaningfully deal
with the second point
in limine
and particularly the third
point ignores the point
in limine
raised by the applicants
embodied in paragraphs 27 – 32 of the answering affidavit,
being to the effect (as summarised) that
the initial notice in terms
of Rule 30/Rule 30A did not raise an objection insofar as it relates
to the applicants’ notice
in terms of Rule 6(5)(d)(iii) and the
reliance thereon is improper. The extension of the ambit of the
complaint, by way of the
application at issue, is inappropriate and
ought not to have been countenanced by the Court.” The
reviewability issue features
here. (Page 6/22 at paragraphs 7 and 8
of the Bundle)
3.
“The Court erred to engage “unusual remedies” to
adjudicate
the merits of the interlocutory application and instead
ought to have merely applied Uniform Rules 53, 6 and 30A,
respectively”.
(Page 14/30 at paragraph 39 of the Bundle)
4.
“In reaching aforesaid conclusion, the Court erred by
conflating a party’s
entitlement to add to, supplement or vary
the terms of its notice of motion and supporting affidavit in a
review application upon
receipt of a record, with a party’s
ability to file a replying affidavit in review proceedings.”
(Page 16/32 at paragraph
46 of the Bundle)
5.
“The Court erred by making a finding of fact that a record
existed which
the applicants had to provide…” (Page
18/34 at paragraph 53 of the Bundle)
6.
“In analysing and relying on various authorities, the Court
erred by approaching
the enquiry to the entitlement to a record
without any heed to the question whether the proceedings sought to be
reviewed, are
in fact reviewable.” (At page 19/35 at paragraphs
58 & 60 of the Bundle)
7.
The seventh ground again goes to the reviewability of the conduct of
the liquidators.
(Page 23/39 at paragraph 68 of the Bundle)
8.
The eighth ground is again aimed against the reviewability of the
conduct of
the liquidators. (Page 25/41 at paragraph 78 of the
Bundle)
9.
“In its analysis of the case and pertinent issues, the Court
erred by failing
to give an accurate account of all of the issues
that are germane to the main review application and specifically
failed to deal
with any of the issues and factual disputes raised by
the applicants in opposition to the main review application.”
(Page
26/42 at paragraph 80 of the Bundle)
10.
“In paragraphs [46] to [50] of the judgment, the Court erred by
conflating and confusing
the various points
in limine
raised
by the applicants with other points
in limine
, and also with
the issue of the production of the record.” Again,
reviewability is the underlying issue. (At Page 28/44 paragraph
86 of
the Bundle)
11.
“The Court erred by failing, entirely, to adjudicate the second
point
in limine
raised by the applicants.” The issue is
about the record and reviewability. (Page 33/49 at paragraph 96 of
the Bundle)
12.
“The Court erred by failing and/or refusing to deal with the
third point
in limine.
” “The Court erred by
failing to appreciate and find that a record in terms of Rule
53(1)(b) can and should only be
provided once a party has established
as a jurisdictional fact, that the proceedings are in fact
reviewable.” (Page 35/51
at paragraphs 103 and 105)
13.
“The Court erred by failing and/or refusing, entirely, to deal
with the fourth point
in limine
,
alternatively
, by
implicitly finding against the applicants in respect of the fourth
point
in limine
in that the Court ordered the production of a
record under Rule 53(1)(b) whilst declining to expressly deal with
the pertinent
issue of reviewability.” Again, reviewability is
the issue. (Page 36/52 at paragraph 111)
14.
“The Court erred by disregarding the evidence of the applicants
set out in the answering
affidavit to the main review application and
the answering affidavit to the interlocutory application, without any
basis or justification
for doing so.” (Page 40/56 at paragraph
121)
15.
“In paragraph [56] of the judgment the Court correctly finds
that the applicants have
a right to raise any question of law, but
incorrectly concludes that such points in law may only be raised
after the Rule 53 process
has been finalised.” (Page 41/57 at
paragraph 126)
16.
“The costs of the interlocutory application should have been
borne by the first and
second respondent on a punitive scale.”
(Page 43/59 at paragraph 135)
PRECEDENT
QUOTED BY THE APPLICANTS ON THE NON-REVIEWABILITY OF THEIR DECISION
[46]
The discussion of Plasket, JA in December 2021 on “
The
Understated Revolution: The Development of Administrative Law in the
Appellate Division of the Supreme Court of South Africa
in the 1980s
and 1990s
”
[15]
gives insight into the principles to be applied when the
reviewability of the actions of entities such as liquidators are
adjudicated.
Some of the cases quoted by the applicants, similarly,
show the development of this task. None of the cases relied upon by
the
applicants causes an inference or carries a statement that the
conduct of liquidators in instances as in this case, are not
reviewable.
[47]
The cases quoted by the applicants were consulted when the matter was
adjudicated
a
quo
;
I did however rule that the reviewability is not relevant in the
interim and should be decided by the court that will deal with
the
review itself. This is because all the facts were not on the table as
yet. If I erred in the decision, the cases quoted by
the applicants,
did not rule against the reviewability of the decisions of
liquidators. The facts of this case demonstrate a glaring
need for
judicial overview of the autocratic conduct of liquidators. I
could not find precedent on the issue at the time
of writing this
judgment and before.
[16]
[48]
Mars
[17]
gave some guidance
with reference to the Sarrahwitz – case from the Constitutional
Court:
(i)
The
writers resolved that
indeed and
in terms of the common law, on sequestration of an immovable property
sold by the insolvent but not transferred, ownership
passes to his
trustee.
(ii)
The contract of sale is not terminated, modified or in any way
affected by the sequestration of the estate of one of the parties.
(iii)
The exception is that the trustee cannot be compelled by the other
party
to perform the contract.
(iv)
The trustee may therefore either enforce or repudiate the contract.
(v)
If he decides to enforce the contract, he must fulfil all the
insolvent’s
outstanding obligations under it.
(vi)
Should
he decide not to perform in terms of the contract, the purchaser
cannot claim transfer of the land even if he has paid the
full
purchase price unless it falls within the exception created by the
Constitutional Court in
Sarrahwitz
v Maritz NO
2015
(4) SA 492 (CC)
[18]
and he
only has a concurrent claim for damages for non-performance of the
insolvent’s contractual obligations.
(vii)
The protection
afforded to instalment-sale buyers under section 21 and
section 22
of
the
Alienation of Land Act 68 of 1981
is an option but problematic.
[49]
I am with Cameron, J and Froneman, J in their concurring minority
judgment that the vulnerable
consumer in these scenarios needs
protection; and equity in protection. The effect of the conduct of
Cloete Murray and his colleagues
might cause eviction and grave loss
to a sincere buyer. The Constitution do not protect against
homelessness and loss in absolute
terms. Rather, it provides that no
one could be evicted from his or her home without an order of court
made in consideration of
all relevant circumstances. This will demand
judicial oversight of the decisions of the liquidator.
[50]
The cases that the applicants rely on do not tackle the reviewability
of the decisions of the
liquidator nor does it order for it to be
adjudicated at a stage where all the facts are not on the table and
on the specific facts
of this case.
[51]
The applicants conflate the authority to elect not to ratify the
terms of an unexecuted contract,
entered into by an insolvent prior
to insolvency, with the reviewability of the decision of the
liquidators.
[52]
I must unfortunately burden the judgment with a summary of the core
issue(s) and findings in
the cases the applicants rely on because of
the allegation that it was not considered. I will quote directly from
the cases to
avoid contentions of erroneous interpretation.
I
Grey's Marine Hout Bay (Pty) Ltd and others v Minister of Public
Works and others
[2005] ZASCA 43
;
2005 (6) SA 313
(SCA).
This
case does not deal with the reviewability of the liquidator’s
decisions and the facts and litigants are not comparable
to the
matter
in casu
. The discussion on administrative action and
access to courts in terms of section 33 of the Constitution is of
value.
Flynote:
Administrative
law - Decision of functionary - Validity of - Administrative decision
to lease property to a tenant - Legislative
prohibitions against and
requirements for use of property - Such immaterial to validity of
decision to lease property - Functionary
not thereby purporting to
permit tenant to use property unlawfully or relieve it of any
obligations it might have under any law.
Administrative
law - Administrative action - What constitutes - At core of
definition of 'administrative action' in s 1 of
Promotion of
Administrative Justice Act 3 of 2000
is idea of decision
of administrative nature taken by public body or
functionary - Definition to be construed consistently,
whenever
possible, within meaning attributed to administrative action as used
in
s 33
of Constitution - Although definition purporting to restrict
administrative action to decisions that as a fact 'adversely affect
the rights of any person', such literal meaning could not have
been intended, but rather that it has capacity to affect legal
rights
- Thus administrative action is conduct of bureaucracy in carrying
out daily functions of State that necessarily involves
application of
policy with direct and immediate consequences to persons - Decision
by Minister of Public Works to lease State land
in harbour to tenant
made in exercise of public power conferred by legislation in ordinary
course of administering property
of State and with
immediate and direct legal consequences to others, thus constituting
administrative action.
Administrative
law - Administrative action - Validity of - Decision by Minister of
Public Works to lease State land in harbour to
tenant -
Procedural fairness of - Right to procedural fairness conferred
by s 3(1) of
Promotion of Administrative Justice Act 3 of 2000
only
in respect of administrative action that 'materially and adversely
affects the rights or legitimate expectations of any person'
- Not
shown by other tenants in harbour that their rights, or prospective
rights, or even interest falling short of prospective
right,
adversely affected by decision - Also not shown that other tenants
had legitimate expectation that property would be left
vacant or that
they would be consulted or invited to comment before decision made -
Furthermore, no grounds shown for finding the
Minister's decision
arbitrary or irrational under
s 6
of Act - Decision valid.
II
Motala v Master, North Gauteng High Court
2019 (6) SA 68
(SCA).
The
case concerns the appointment of liquidators and the reviewability of
the decision of the Master of the High Court on such appointments.
It
does not compare to the matter
in casu
; again, but for the
discussion on an administrative action that is valuable. This case
concerns the following:
Administrative
law
—
Administrative action
— What constitutes — Compilation by High Court Master of
panel of persons suitable for appointment
as liquidator or trustee —
Constituting administrative action.
Insolvency
—
Trustee
—
Master's panel of
persons suitable for appointment as liquidator or trustee —
Removal from panel — Grounds for.
Insolvency
—
Trustee —
Rights and duties — Duty to be scrupulously honest.
Company
—
Winding-up —
Liquidator — Master's panel of persons suitable for appointment
as liquidator or trustee — Removal
from panel — Grounds
for.
Company
—
Winding-up —
Liquidator — Duties — Duty to be scrupulously honest.
Costs
—
Constitutional
litigation — Proper approach — Unsuccessful party in
constitutional litigation against state —
Relevant
considerations in deciding whether unsuccessful party should not
be mulcted in costs.
III
State
Information Technology Agency Soc Ltd v Gijima Holdings (Pty) Ltd
2018 (2) SA 23
(CC)
concerns
the issue of self-review by Organs of State. It is not helpful
in
casu
:
Administrative
law
—
Administrative action
— Review — Organs of state may not use PAJA to review
their own decisions —
Promotion of Administrative Justice Act 3
of 2000
.
Review
—
Grounds —
Legality — Organs of state may bring legality reviews of their
own decisions.
IV
Ellerine Brothers (Pty)
Ltd v McCarthy Ltd
2014 (4)
SA 22
(SCA)
confirmed
the
effect of the
concursus
on a lease,
specifically on the right to cancel it. This case did not deal with
the reviewability of the decision of the liquidators.
Flynote:
Sleutelwoorde
Insolvency
—
Effect — On
uncompleted contracts — Lease — Impact of
concursus
creditorum
on
right to cancel lease.
Headnote:
Kopnota
In
this case E leased premises to company T. Ultimately T failed to pay
the rent and E gave it notice to pay within seven days,
failing which
E would have the right to cancel the agreement. Five days later a
third party lodged an application with the registrar
of the high
court for the liquidation of T, so establishing a
concursus
creditorum
. Six days afterwards E gave T a letter cancelling the
lease. In issue was the effect of the concursus on the lease,
specifically
on the right to cancel it.
Held
,
that the
concursus
creditorum
neither
altered nor suspended the rights of the parties under the contract,
and that the right to cancel, which arose after the
creation of the
concursus, had been validly exercised by E. (Paragraphs [1], [10],
[12] – [13] and [15] at 23C – E,
26D – G, 27E –
G, 28A – C, 28H and 29A.)
V
Minister of Defence and
Military Veterans v Motau and others
2014 (5) SA 69
(CC).
The
value in this case is again the determination of administrative
action that is reviewable.
Headnote:
Kopnota
In
this case the Minister of Defence and Military Veterans terminated
Maomela Motau and Refiloe Mokoena's membership of Armscor's
board of
directors in terms of s 8
(c)
of the Armscor Act. (Armscor
is the Armaments Corporation of South Africa (SOC) Ltd and the
Armscor Act is the Armaments Corporation
of South Africa Ltd Act 51
of 2003.) The section provides that 'a member of the Board must
vacate office if his or her services
are terminated by the minister
on good cause shown'.
In
response the pair applied to a high court to set aside the decision
on grounds in the Promotion of Administrative Justice Act
3 of 2000
(PAJA) (error of law, procedural unfairness, ulterior motive and
irrationality); and by reason of the minister's
failure to show
'good cause' as required by s 8
(c)
. This caused the minister
to appeal directly to the Constitutional Court. (Paragraphs [17] –
[20] at 78A – 79B.)
There
the first issue was whether the dismissal decision was executive or
administrative action. PAJA excludes from the definition
of
administrative action, and from its review ambit, the exercise of
executive powers and functions (s 1). Such powers include
developing and implementing national policy and performing executive
functions provided in national legislation (ss 85(2)(b) and
(e) of
the Constitution). However, PAJA's definition of administrative
action includes the executive power of implementing national
legislation (s 85(2)(a) of the Constitution), which has been held
ordinarily to constitute administrative action. Thus,
determining
the nature of the dismissal power was necessary to
deciding whether it was administrative action. (Paragraphs [27], [30]
–
[31] and [33] at 80F – 81B, 82B – D and 82F –
83C.)
In
this regard a power most closely related to formulating policy was
likely to be executive, while a power most closely related
to
applying policy was likely to be administrative. Pointers in making
this determination were the source of the power; constraints
imposed
on its exercise; and whether it was appropriate to subject its
exercise to the more rigorous standard of administrative
law review.
(Paragraphs [38] – [39], [41] and [43] – [44] at 84F –
85C, 85E – G and 86B – E.)
Here
the dismissal power was more executive than administrative in nature.
This because it was an adjunct of the power to make defence
policy;
it was a high-level power; and the minister was afforded a broad
discretion in exercising it. It constituted performance
of an
executive function (s 85(2)
(e)
of the Constitution),
rather than implementation of national legislation (s 85(2)
(a)
),
and was thus not administrative action, and not subject to review
under PAJA. (Paragraphs [47] and [49] – [51] at 87E –
F.)
The
second issue was whether the minister had good cause to terminate
the services of Motau and Mokoena (s 8
(c)
of the
Armscor Act). The court held that she had and that it was constituted
of the Armscor board's delays in entering into
service-level
agreements with the Department of Defence, and by the board's failure
to complete procurement projects timeously.
The minister had also had
justification to single out Motau and Mokoena for dismissal.
(Paragraphs [25], [57] – [58] and
[62] – [63] at 80B –
C, 91B – F and 92E – 93A.)
The
third issue was whether the minister's decision was rational: whether
her exercise of the dismissal power related rationally
to the purpose
of that power. The court held that her decision was rational because
there was a rational link between dismissing
Motau and Mokoena and
addressing the failures of Armscor. (Paragraphs [69] and [71] at 94C
– E and 95A – B.)
The
fourth issue was whether there were any procedural constraints on the
minister's exercise of the s 8
(c)
power. The court held
that there were — the minister had to comply with the procedure
for removal of directors in
ss 71(1)
and (2) of the
Companies Act 71
of 2008
: that Act provided the process and the Armscor Act the
substantive criterion for removal of members of the Armscor board.
Here,
though, the minister had failed to comply with the
Companies
Act and
so had acted unlawfully. (Paragraphs [25], [72], [76] and
[80] at 80B – C, 95C – D, 97C – E and 98D.)
But
in the exceptional circumstances of the case, it would not be just
and equitable to set aside the minister's decision and to
reinstate
Motau and Mokoena. It would be sufficient to declare that the
minister's conduct was unlawful and to draw her attention
to the
proper procedure to be followed in making such dismissal decisions.
(Paragraphs [86] and [94] at 100C – 101B and 102D
– G.)
By
contrast, the minority would have upheld the decision of the high
court and dismissed the appeal. In its view the minister's
decision
was administrative action; the minister ought to have heard Motau and
Mokoena before making it; and her failure to do
so rendered the
decision procedurally unfair and required it to be set aside.
(Paragraphs [95], [100] – [101], [127] and
[129] at 103A –
B, 104A – C, 111C and 111E.)
VI
Affordable Medicines Trust and others v Minister of Health and
others
[2005] ZACC 3
;
2006
(3) SA 247
(CC).
The
case provides a good exposition of the supremacy of the Rule of Law
as decreed in the Constitution when the legality of conduct
of an
entity that has consequences in the public sphere, must be
adjudicated. It does not deal with the reviewability of a
liquidators’
conduct.
Flynote:
Sleutelwoorde
Practice
- Applications and motions - Notice of motion - Amendment of - When
granted - Amendments will always be granted unless
made in bad faith,
or will cause injustice to other parties which cannot be cured by
costs order or parties cannot be put back
for purposes of justice in
same position as they were when pleading, etc. sought to be amended
was filed - Question in each case
is what interests of justice
demand.
Constitutional
law - Public power - Exercise of - Control of - Sections 1
(c)
,
2 and 172(1)
(a)
of Constitution establishing commitment
to supremacy of Constitution and rule of law - This meaning that
exercise of all public
power subject to constitutional control -
Exercise of public power must comply with Constitution as supreme law
and doctrine of
legality as part of that law - Both Legislature and
Executive constrained by principle that they may exercise no power
and perform
no function beyond that conferred on them - In this sense
Constitution entrenches principle of legality and provides foundation
for control of public power.
Constitutional
law - Human rights - Right to choose trade, occupation or profession
freely - Meaning of such right as entrenched
in s 22 of Constitution
- More at stake than one's right to earn a living - Freedom to choose
vocation intrinsic to nature of society
based on human dignity -
One's work part of one's identity and constitutive of one's dignity -
Legal impediments to choice of profession
not to be countenanced
unless clearly justified in terms of broad public interest - But in
modern world of human interdependence
and mutual responsibility
regulation of vocational activity for protection of both the persons
involved and of community at large
affected by it to be expected and
welcomed - But such regulation not to be arbitrary or capricious.
Constitutional
law - Human rights - Right to choose trade, occupation or profession
freely - Meaning of such right as entrenched
in s 22 of Constitution
- Two sentences of s 22 to be read together as defining content of
right - Implicit, if not explicit, from
text of s 22 that right
having two components: right to choose a profession, and right to
practise chosen profession - Section
22 contemplating that chosen
profession would be practised and protects both right to choose a
profession and right to practise
it.
VII
Bryant & Flanagan (Pty) Ltd v Muller and another NNO
1978
(2) 807 (A).
This
case is pre-constitution and deals with the undisputed right of the
liquidator to ratify or “continue with the executory
contract”.
It has no value in the adjudication of the reviewability of the
conduct of liquidators.
Flynote:
Sleutelwoorde
Company
- Winding up - The liquidator - Executory contract not specifically
provided for in Insolvency Act entered into by company
prior to
liquidation - Liquidator vested with a discretion either to abide by
or terminate contract - intention must be clear -
Act 61 of 1973 s
339 - Liquidators choosing to continue with an executory contract -
Liquidators thereby binding themselves to
pay in full for
pre-liquidation work, no fresh contract having been entered into in
lieu thereof.
Headnote:
Kopnota
A
trustee in insolvency, and thus a liquidator of a company in
liquidation (see s 339 of Act 61 of 1973), is invested with a
discretion
to abide by or terminate an executory agreement not
specifically provided for in the Insolvency Act which was concluded
by the
company in liquidation before its liquidation. Such agreement
does not terminate automatically on the company being placed in
liquidation.
The liquidator must make his election within what,
regard being had to the circumstances of the cases, is a reasonable
time. Should
he elect to abide by the agreement the liquidator steps
into the shoes of the company in liquidation and is obliged to the
other
party to the agreement to whatever counter prestation is
required of the company in terms of the agreement. No right in law
resides
in the liquidator to abide by the contract and at the same
time unilaterally make a stipulation derogating from the other
party's
rights under the contract.
The
respondent had entered into a building contract with the T company.
While building was in progress T was placed under liquidation
and the
appellants were appointed liquidators. At the time of liquidation T
owed the respondent an amount for work already performed.
The
appellants took up the attitude that respondent only had a concurrent
claim for such work. Appellants obtained an order declaring
that they
were not obliged to pay as a preferent claim any amounts owing to the
respondent save and except an amount for repairing
a beam. On an
appeal this order was reversed: the Court holding that, if the
appellants chose to continue with such an executory
contract, they
thereby bound themselves to remunerate the other party in full for
the pre-liquidation work. In a further appeal
the Court had regard to
a letter written by the appellants, from the terms of which the Court
found that the appellants had elected
to abide by the contract, and
had not entered into any fresh contract.
Held
,
that by so doing the appellants bound themselves to fulfil the
obligation undertaken by T under the contract and therefore no
ground
existed for interfering with the order of the Court
a
quo
. The
decision in the Natal Provincial Division in
Bryant
& Flanagan (Pty) Ltd v Muller and Another NNO
1977
(1) SA 800
confirmed.
VIII
Du Plessis and another NNO v Rolfes Ltd
[1996] ZASCA 45
;
1997 (2) SA 354
(A).
The
judgment, just as the above, rules on the manner in which the
selection of the liquidators to ratify or not ratify the contract
after liquidation of the contractor must be dealt with. It has
nothing whatsoever to do with the reviewability of the election
of
the liquidators and their duty towards constitutional conduct.
Company
- Winding-up - The liquidator - Contracts - Election whether to
continue with contract after liquidation of contractor -
Continuation
an act of administration and payments made under contract are
expenses of administration - Such expenses, together
with value of
performance by other party, may swell or diminish free residue
available to general body of creditors - Prudent liquidator
taking
such factor into account in making election.
Company
- Winding-up - The liquidator - Executory contracts - Election
whether to continue with contract after liquidation of contractor
-
No general principle that exercise of election to abide by executory
main contract necessarily carrying with it election to abide
by
executory subcontracts, whether nominated or not - Notwithstanding
that subcontract referred to in main contract and that main
contract
referred to in subcontracts, main and subcontracts separate and
independent.
Company
- Winding-up - The liquidator - Executory contracts – Election
whether to continue with contract after liquidation
of contractor -
Whether or not liquidator electing to abide by contract a question of
fact, not of law - If question to be decided
by process of inference,
conclusion drawn to be consistent with all proved facts - Where
contractor relying upon conduct by liquidator
as constituting
election to abide by contract, such conduct to be unequivocal.
Headnote:
Kopnota
The
Insolvency Act 24 of 1936
is not a codification of the common law of
insolvency, although it is based on the common law with certain
modifications. It follows
that the common law of insolvency, save
only to the extent that it may have been changed by the
Insolvency
Act or
is inconsistent with it, is still of application. At common
law a liquidator or trustee is not bound to perform unexecuted
contracts
entered into by an insolvent before insolvency unless he,
in conjunction with the general body of creditors, considers that
such
performance will be in their interests. If a trustee elects to
abide by an executory contract he must perform all the obligations
of
the insolvent. He must also give reasonable notice of his intention
to continue with the contract, otherwise the other party
to the
contract may treat the contract as being at an end and hold the
insolvent estate liable for any damages that it might have
suffered
as a consequence thereof. The claim for such damages is a concurrent
one and does not form part of the costs of administration.
(At
363C/D--H.)
If,
however, the trustee elects to continue with the contract after
liquidation, this is an act of administration and the payments
which
he has to make under the contract are the expenses of administration.
Such expenses, taken in conjunction with the value
of the performance
of the other party, may swell or diminish the free residue available
to the general body of creditors. This
is, of course, a factor to
which a prudent trustee or liquidator would have regard in arriving
at a decision whether or not to
terminate an executory contract or to
abide by it. (At 364A--B.)
The
decision in the Witwatersrand Local Division in
Rolfes Ltd v
Du Plessis and Another NNO
reversed.
IX
Nedcor
Investment Bank v Pretoria Belgrave Hotel (Pty) Ltd
2003 (5) SA
189
(SCA)
deals
with whether the seller's claim for the balance of the purchase price
is against the liquidator as expense incurred in the
estate's
administration or whether the seller to be regarded as secured
creditor after the first mortgage bond holder? It does
not deal with
reviewability as an issue but the court did apply its inherent
jurisdiction to judicial oversight of the conduct
and decisions of
the liquidators.
Flynote:
Sleutelwoorde
Company
- Winding-up - The liquidator - Executory contracts - Contract for
sale of business, inclusive of immovable property, movables
and
liquor licence - Transfer of immovable and movable property having
taken place before liquidation - Part of purchase price
outstanding -
Whether seller's claim for balance of purchase price lying against
liquidator as expense incurred in estate's administration
or whether
seller to be regarded as secured creditor after first mortgage bond
holder – Liquidator having no right to cancel
contract -
Liquidator's duty to realise assets in estate for benefit of
creditors - Liquidator must admit seller as creditor -
In realising
assets, liquidator not making election to abide by contract - Claim
by seller for balance of purchase price not expense
in
administration.
Headnote:
Kopnota
The
respondent had entered into a written agreement with the W company
(W) in terms of which the respondent sold to W its hotel
business,
inclusive of its immovable property, all movables and the hotel
liquor licence as a going concern for R1 450 000. The
purchase price
was payable by a deposit secured by a first mortgage bond on the
immovable property in favour of the bank and the
balance of R400 000
payable on 31 December 1999 secured by a second bond in favour of the
respondent. The deposit was paid, the
movables were delivered and the
immovable property registered in the name of W 6 July 1998. The two
bonds were duly registered.
On 2 February 1999 the appellant lodged
an application for the liquidation of W. On 1 March 2000 W was placed
under final liquidation.
The respondent brought an application for an
order that its claim for the balance of the purchase price be paid as
part of costs
of administration. The application was granted. In the
present appeal the issue was whether respondent's claim for the
balance
of the purchase price lay against the liquidator as an
expense incurred in the estate's administration or whether the
respondent
was to be regarded as a secured creditor ranking after the
appellant's first mortgage bond.
Held
,
that in the present case the immovable property had been registered
in W's name and the movables delivered to W prior to the
concursus
creditorum
.
The property had vested in W before the
concursus
.
It had become part of the insolvent estate and had to be dealt with
accordingly. There was no further obligation on the part of
respondent that had to be performed. (Paragraph [7] at 192H/I - J.)
Held
,
further, that it was not necessary for the liquidator to pay the
outstanding balance of the purchase price before selling the
property. The balance of the purchase price was not yet due at the
time of the
concursus
and
no right to cancel had accrued at
concursus
.
The liquidator could not cancel the sale and insist on returning
the
merx
and
refuse to admit the respondent as creditor. It was the duty of the
liquidator to realise the assets in the estate for the benefit
of
creditors. In so doing she was not making an election to abide by the
contract. (Paragraph [7] at 193A/B - C.)
Held
,
accordingly, that the claim in respect of the purchase price was not
an expense in the administration. (Paragraph [8] at 193C/D.)
Appeal
allowed.
X
Walker
v Syfret
1911
AD 141
does
not assist the court to decide the reviewability of the liquidators’
decision to ratify pre-liquidation contracts.
Flynote:
Sleutelwoorde
Company
- Liquidation - Debentures - Cession of Action - Negotiable
Instrument - Set-off or Compensation - Insolvency - Concursus
Creditorum.
Headnote:
Kopnota
W
and two others undertook for valuable consideration to pay the
liabilities of the G. Company, including certain 1,700 debentures
of
£100 each previously issued by the Company and payable to
bearer. Thereafter the Company was ordered to be wound up, and
the
plaintiff with knowledge that the Company was in liquidation,
obtained cession for value of 280 debentures from his brother
W.,
whose claim for £28,000, if proved by him in the liquidation,
would have been extinguished, inasmuch as his share of
the
liabilities which he and two others had undertaken to pay was in
excess of £28,000: -
Held
, that under the
circumstances the plaintiff had no greater rights in respect of the
debentures, even regarded as negotiable instruments,
than W himself
would have had it he had proved thereon instead of selling them to
the plaintiff.
The
decision of the Cape Provincial Division
(1910, C.P.D., 520)
upheld.
THE
PRINCIPLES
WHEN ADJUDICATING AN APPLICATION FOR LEAVE TO APPEAL
[53]
The atmosphere of this case reminds of the words of the
Constitutional Court in
Shinga v The State and another (Society of
Advocates (Pietermaritzburg Bar) intervening as Amicus Curiae); S v
O'Connell and others
2007 (2) SACR 28
(CC) that defined the
judicial character of the task conferred upon a presiding officer in
determining whether to grant leave to
appeal. Although having heard
the evidence and having made a ruling; the judge is called upon to
consider whether another Court
may reach a different conclusion. This
requires a careful analysis of both the facts and the law that have
supported the judgement
a quo
and a consideration of the
possibility that another Court may differ either in relation to the
facts or the law or both. This is
a task that has been carried out by
High Court Judges for many years and it is a judicial task of some
delicacy and expertise.
It should be approached on the footing of
intellectual humility and integrity, neither over-zealously endorsing
the ineluctable
correctness of the decision that has been reached,
nor over-anxiously referring decisions that are indubitably correct
to an appellate
Court.
[54]
The right to appeal is, among others, managed by the application for
leave to appeal. It may
not be abused but the hurdle of an
application for leave to appeal may never become an obstacle to
justice in the post-constitutional
era.
Section 17
of the
Superior
Courts Act 10 of 2013
is the law:
17.
Leave to appeal. —
(1)
Leave to appeal may only be given where the judge or judges concerned
are of the opinion
that—
(a)
(i) the appeal would have a reasonable prospect of success; or
(ii)
there is some other compelling reason why the appeal should be heard,
including conflicting
judgments on the matter under consideration;
(b)
the decision sought on appeal does not
fall within the ambit of
section 16
(2) (a); and
(c)
where the decision sought to be
appealed does not dispose of all the issues in the case,
the appeal
would lead to a just and prompt resolution of the real issues between
the parties.
[55]
The interpretation of the Rules and the law has evolved in case law
since 2013.
1.
In
numerous cases
[19]
the
view is held that the threshold for the granting of leave to appeal
was raised with the induction of the 2013 legislation. The
former
assessment that authorization for appeal should be granted if “there
is a reasonable prospect that another Court might
come to a different
conclusion” is no longer applicable.
2.
The words in
section 17(1)
that: “Leave to appeal
may
only
be given…” and
section 17(1)(a)(i)
that: “The appeal
would
have
a reasonable prospect of
success” are peremptory. “
If
there is a reasonable prospect of success” is now that: “
May
only
be given if there
would
be
a reasonable prospect of
success.” A possibility and discretion were therefore, in the
words of the legislation and consciously
so, amended to a mandatory
obligatory requirement that leave may not be granted if there is not
a reasonable prospect that the
appeal will succeed.
3.
It must be a reasonable prospect of success; not that another
Court
may hold another view. The Court
a
quo
may not allow for one party to
be unnecessarily put through the trauma and costs and delay of an
appeal. In
Four Wheel Drive v Rattan
N.O.
2019 (3) SA 451
(SCA) at
paragraph [34] the following was ruled by Schippers JA (Lewis JA,
Zondi JA, Molemela JA and Mokgohloa AJA concurring):
[34]
There is a further principle that the Court
a quo
seems to
have overlooked — leave to appeal should be granted only when
there is 'a sound, rational basis for the conclusion
that there are
prospects of success on appeal'. In the light of its findings that
the Plaintiff failed to prove
locus standi
or the conclusion
of the agreement, I do not think that there was a reasonable prospect
of an appeal to this Court succeeding that
there was a compelling
reason to hear an appeal. In the result, the parties were put through
the inconvenience and expense of an
appeal without any merit.
4.
It is trite that the views of Courts may differ but that there
will
not be, automatically, interference with the judgment of the Court
a
quo
. The vital way of thinking of
the Courts of Appeal is that the trial Court experienced the hearing,
the conduct of the parties
and their Counsel and the evidence in all
its forms; and that interference will not be a given just for a
difference in opinion
by the Court sitting on appeal. The Supreme
Court of Appeal reiterated this stance in its judgment on 31 July
2020 in
AM and another v MEC Health,
Western Cape
(1258/2018)
[2020]
ZASCA 89
; Such findings are only overturned if there is a clear
misdirection or the trial Court’s findings are clearly
erroneous.
[56]
The final word was spoken recently in the Supreme Court of Appeal in
Ramakatsa and others v African National Congress and another
[2021] JOL 49993
(SCA) in March 2021:
[10]
Turning the focus to the relevant provisions of the
Superior Courts
Act (the
SC Act), leave to appeal may only be granted where the
judges concerned are of the opinion that the appeal would have a
reasonable
prospect of success or there are compelling reasons which
exist why the appeal should be heard such as the interests of
justice.
This Court in Caratco, concerning the provisions of section
17(1)(a)(ii) of the SC Act pointed out that if the Court is
unpersuaded
that there are prospects of success, it must still
enquire into whether there is a compelling reason to entertain the
appeal. Compelling
reason would of course include an important
question of law or a discreet issue of public importance that will
have an effect on
future disputes. However, this Court correctly
added that "but here too the merits remain vitally important and
are often
decisive". I am mindful of the decisions at High Court
level debating whether the use of the word "would" as
oppose
to "could" possibly means that the threshold for
granting the appeal has been raised.
If a reasonable prospect of
success is established, leave to appeal should be granted. Similarly,
if there are some other compelling
reasons why the appeal should be
heard, leave to appeal should be granted. The test of reasonable
prospects of success postulates
a dispassionate decision based on the
facts and the law that a court of appeal could reasonably arrive at a
conclusion different
to that of the trial court. In other words, the
appellants in this matter need to convince this Court on proper
grounds that they
have prospects of success on appeal. Those
prospects of success must not be remote, but there must exist a
reasonable chance of
succeeding. A sound rational basis for the
conclusion that there are prospects of success must be shown to
exist.
(Accentuation added)
CONCLUSION
[57]
I might have been mistaken in my ruling that the issue of
reviewability of the liquidator’s
decision is not one to be
ruled upon here and now. If that is so, it would be in the interest
of justice to allow the appeal.
[58]
If I was not mistaken to not rule on the issue; then the time might
have come for the reviewability
of liquidators’ decisions on
the subject
in casu
to be vented and ruled upon in the Supreme
Court of Appeal; that is if the Supreme Court of Appeal is willing to
entertain the
subject on the peculiar facts and timing in the case.
[59]
The issue of reviewability will affect the order
a quo
that:
ORDER
1.
The filing of the Notice in terms of Rule 6(5)(d)(iii) by the first
to third
and fifth respondents is provisionally set aside pending the
finalisation of the process prescribed in Rule 53 dealing with
reviews
in the Uniform Rules of Court;
2.
First to third and fifth respondents are ordered to make available to
the applicants
the record of the proceedings sought to be corrected
and set aside and in terms of Rule 53(1)(b) and within fifteen (15)
days of
the date of this order;
3.
The applicants may within ten (10) days after the record was made
available to
them deliver a notice and accompanying affidavit, amend,
add to or vary the terms of their notice of motion and supplement the
supporting affidavit in terms of Rule 53(4);
4.
The first to third and fifth respondents may reply in terms of Rule
53(5);
5.
The first to third and fifth respondents are afforded 10 (ten) days
from the
date of the filing of the papers and the conclusion of the
Rule 53 process above in which to amend and file their Notice in
terms
of Rule 6(5)(d)(iii), if necessary;
6.
The parties must each carry their own costs.
[60]
ORDER
1.
The applicants are granted leave to appeal to the Supreme Court
of
Appeal;
2.
Costs to be costs in the appeal.
M
OPPERMAN, J
APPEARANCES
FOR
THE APPLICANTS
ADVOCATE S
TSANGARAKIS
Chambers,
Bloemfontein
ADVOCATE
U VAN NIEKERK
Chambers,
Pretoria
MACROBERT
ATTORNEYS
MacRobert
Building
1062
Jan Shoba Street
Brooklyn
Pretoria
Ref:
CA Wessels/rc/00045863
rchinner@macrobert.co.za
C/O
SYMINGTON DE KOK
ATTORNEYS
169
B Nelson Mandela Drive
Westdene
Bloemfontein
051
505 6692
dmoller@symok.co.za
REF:
D MOLLER
FOR
FIRST & SECOND RESPONDENTS ADVOCATE
J G RAUTENBACH SC
MOTLATSI
SELEKE ATTORNEYS
C/O
HUTCHINSON ATTORNEYS
40
Kellner Street
Westdene
BLOEMFONTEIN
O11
660-4300/083 750 0679
rasmotlatsi@motlatsiseleke.com
amina@motlatsiseleke.com
moses@motlatsiseleke.com
Ref:
MS/MAM/S23/19
[1]
First to
third applicants will be referred to as the “
applicants”
or “liquidators”.
[2]
First
and second respondent will be referred to as the Ntombela family.
They are married and their son has apparently been residing
on the
property with his family. The third respondent did not partake in
the litigation.
[3]
“
Phehla”.
[4]
The
grounds are actually referred to as “Sets of Grounds” in
the Notice and not “a Ground of Appeal”.
There are 16
sets. The “Sets of Grounds for Appeal” contain numerous
aspects within each set and also overlap on
the issue of review.
[5]
26.
Housing. — (1) Everyone has the right to have access
to
adequate housing.
(2) The state must
take reasonable legislative and other measures, within its available
resources, to achieve the progressive
realisation of this right.
(3) No one may be
evicted from their home, or have their home demolished, without an
order of court made after considering
all the relevant
circumstances. No legislation may permit arbitrary evictions.
[6]
Rule 46A
(1) This
rule applies whenever an execution creditor seeks to execute against
the residential immovable property of
a judgment debtor.
(2) (a) A
court considering an application under this rule must—
(i)
establish whether the immovable property which the execution
creditor intends to execute against is the primary residence of the
judgment debtor; and
(ii)
consider alternative means by the judgment debtor of satisfying
the
judgment debt,
other than execution
against the judgment debtor’s primary residence.
(b) A court shall not
authorise execution against immovable property which is the primary
residence of a judgment debtor unless
the court, having considered
all relevant factors, considers that execution against such property
is warranted.
(c) The registrar shall
not issue a writ of execution against the residential immovable
property of any judgment debtor unless
a court has ordered execution
against such property.
[7]
Review
Application (Index dated 31 May 2021) at page 23 paragraph 45.
[8]
Review
Application (Index dated 31 May 2021) at pages 17 and 18.
[9]
There is an
allegation by the Ntombelas that some correspondence by the
liquidators might explain the decision.
[10]
Bundle dated 29
March 2022: “Index: Application for leave to appeal”
at
Pages 20/36 to 21/37 at paragraphs 60 and 61. I will return to the
ten cases cited later.
[11]
OBITER (Volume 33),
Issue 2,
State
Regulation of South African Insolvency Law – An Administrative
Law Approach
,
pages 457 to 481 at Introduction on pages 457 to 458, online ISSN
2709-555X | Print ISSN 1682-5853 published on 1 January 2012.
[12]
M.N. De Beer,
Reviewable
Mistakes of Law and Fact,
The
South African Judicial Education Journal, Volume 4, Issue 1,
December 2021, JUTA, ISSN: 2616-7999 pages 65 to 87 at 87.
[13]
Frank Kroon,
Retired Judge of the Eastern Cape Division of the High Court,
The
Rule of Law: The Role of The Judiciary and Legal Practitioners,
The South African
Judicial Education Journal, Volume 1, Issue 1, April 2018, JUTA,
ISSN: 2616-7999, pages 81 to 88 at 84.
[14]
Rule 6(5)(d)(iii):
Any person opposing the
grant of an order sought in the notice of motion must—
(i)
within the time stated in the said notice, give applicant
notice, in
writing, that he or she intends to oppose the application, and in
such notice appoint an address within 15 kilometres
of the office of
the registrar, at which such person will accept notice and service
of all documents, as well as such person’s
postal, facsimile
or electronic mail addresses where available;
(ii)
within fifteen days of notifying the applicant of his or her
intention to oppose the application, deliver his or her answering
affidavit, if any, together with any relevant documents; and
(iii)
if he or she intends to raise any question of law only he or she
must deliver notice of his or her intention to do so, within the
time stated in the preceding sub-paragraph, setting forth such
question.
[Substituted by GG 39715
of 19 February 2016 – Regulation Gazette 10566, Vol 608.]
[15]
The
South African Judicial Education Journal, Volume 4, Issue 1,
December 2021, JUTA, ISSN: 2616-7999 at pages 1 to 18.
[16]
See
De
Wet and another v Khammissa and others
(358/2020)
[2021] ZASCA 70
(4 June 2021) that deals with the reviewability of a
decision of the Master of the High Court.
[17]
A
Bertelsman
et
al, Mars: The Law of Insolvency in South Africa
(10
th
Edition),
JUTASTAT e-publications, Internet: ISSN 2224-4743, at 12.2 Effect on
contracts for the acquisition of immovable property,
12.2.2
Sequestration of seller’s estate
,
pages 249 to 253.
[18]
The case first and
foremost turns on the right to housing and the protection
of
vulnerable purchasers. The
Alienation of Land Act 68 of 1981
per
sections 21
and
22
apparently fail to give cash purchasers same
protection (right to transfer) as instalment purchasers and the
Constitutional Court
amended the provisions to provide equal
protection to all vulnerable purchasers in event of the insolvency
of a seller.
The facts are that in
September 2002, Mr Posthumus entered into a contract for the sale of
a house to Ms Sarrahwitz. She paid
cash and took occupation in
October 2002. But Mr Posthumus did not transfer the house into her
name and in April 2006 his estate
was sequestrated. The first
respondent, who was appointed trustee of Posthumus' insolvent
estate, refused to transfer the house
to Ms Sarrahwitz on the ground
that it formed part of the insolvent estate.
Ms Sarrahwitz approached
the High Court for an order for transfer but her application was
refused on the ground that the common
law and not the Act regulated
the transfer of the house and that the common law supported the
trustee's position. Her subsequent
approaches to the full bench of
the High Court and the Supreme Court of Appeal failed for the same
reason.
Ms Sarrahwitz's problem
was that, as a cash buyer, she did not enjoy the protection afforded
to instalment-sale buyers under section
21 and
section 22
of the
Alienation of Land Act 68 of 1981
. The Act provides that a buyer of
residential property who pays the purchase price in two or more
instalments over a period of
one year or longer is entitled to
demand transfer if the seller becomes insolvent. In an application
for leave to appeal to the
Constitutional Court, Ms Sarrahwitz for
the first time raised constitutional principles, arguing that the
common law and the
Act unconstitutionally failed to protect
vulnerable cash buyers like her.
The majority judgment
(per Mogoeng CJ) ruled that this case was about the protection of
the poor and vulnerable from homelessness.
Given the absence of the
exceptional circumstances required for the development of the common
law, the court would instead approach
the matter through a proper
interpretation — premised on the constitutional rights to
housing, dignity and equality —
of section 21 and
section 22
of the
Alienation of Land Act. The
purpose of the Act is to protect
vulnerable buyers of residential property was beneficial, yet its
failure to extend its protection
to buyers other than instalment
buyers impaired the abovementioned constitutional rights in an
unjustified and irrational manner.
Cash buyers and those who paid
within a year should also be protected. Hence the appropriate remedy
would be to read into the
Act words that conferred a right on
vulnerable buyers who paid cash or who paid in less than one year to
take transfer of the
property in the event of the seller's
intervening insolvency, which right would only arise if the buyer
were likely to become
homeless if transfer did not take place. In
the event the first respondent would be ordered to transfer the
house to Ms Sarrahwitz.
(Paragraphs [16] – [17], [21], [27] –
[29], [35], [57], [68] and [74] – [78] at 499B – E,
500D, 502E
– 503F, 505E – H, 513A – B, 515I –
516B and 517E – 519D.)
In a concurring minority
judgment (per Cameron J and Froneman J) found the order in the main
judgment would be concurred in with
the reservation that it might
lead to the striking-down of beneficial consumer-protection
legislation because it failed to protect
everyone equally. This
would intrude too far into legislative territory. It was also
difficult to assess the limits of vulnerability
that would entitle
buyers who paid the full purchase price to the same protection as
instalment buyers. The Constitution, moreover,
did not protect
against homelessness in absolute terms. Rather, it provided that no
one could be evicted from his or her home
without an order of court
made in consideration of all relevant circumstances. Hence the less
intrusive and more appropriate
remedy in the present case would have
been to protect Ms Sarrahwitz's possessory rights by refusing an
eviction order. (Paragraphs
[84] – [86], [90] – [91] and
[97] – [100] at 520F – 521B, 522A – E and 523G –
524C.).
[19]
Mont
Chevaux Trust v Goosen and others
(LCC14R/2014)
3 November 2014;
South
African Breweries (Pty) Ltd (“SAB”) v Commissioner of
the South African Revenue Services (“SARS”)
[2017] ZAGPPHC 340 (28
March 2017);
ABSA
Bank Ltd v Transcon Plant and Civil CC and another
[2020] ZAKZPHC 19 (23
June 2020) and
Adonisi
and others v Minister for Transport and Public Works: Western Cape
and others and a related matters
[2021]
4 All SA 69
(WCC).