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[2019] ZAWCHC 48
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Pio v Essel NO and Others (15353/18) [2019] ZAWCHC 48 (3 May 2019)
IN THE HIGH COURT OF
SOUTH AFRICA
WESTERN
CAPE DIVISION, CAPE TOWN
CASE:
15353/18
In
the matter between
DANIEL
PIO Applicant
And
GÖTZ ESSEL
N.O. First
Respondent
MADELE FERREIRA
MOOIHOEK BOERDERY
(PTY) LTD Second
Respondent
ABDURUMAN MOOLLAJIE
N.O. Third
Respondent
MOHAMED CASSIEM RAWOOT
N.O. Fourth
Respondent
MASTER
OF THE HIGH COURT, CAPE
TOWN Fifth
Respondent
JUDGMENT DELIVERED ON 3
MAY 2019
SIEVERS
AJ
[1]
The applicant is the sole member of George Refrigeration and
Airconditioning CC (in liquidation) (“the Close Corporation”).
The first respondent is a presiding Magistrate (“the
Chairman”), who is cited in his capacity as the chairman of a
special meeting of creditors of the Close Corporation held at the
George Magistrate’s Court on 6 April 2018. The second
respondent (“Mooihoek Boerdery”) is a company which
proved a claim at the said meeting. Third and Fourth Respondents
are
cited as being the joint liquidators of the Close Corporation. On 7
June 2018, the Master removed the fourth respondent as
a liquidator,
leaving the third respondent as the sole liquidator. The Master is
the fifth respondent.
[2]
The applicant seeks an order that the Chairman’s decision of 6
April 2018, to admit as proved, the claim of Mooihoek Boerdery
in the
insolvent estate of the Close Corporation be reviewed and set aside.
Applicant further asks that the costs of the application
be costs in
the liquidation, save that costs be awarded against any party
opposing the relief sought.
[3]
The application is opposed by Mooihoek Boerdery. The Chairman of the
meeting, as well as the remaining liquidator. The
Master filed
notices to the effect that they abide by the court’s decision.
[4]
The factual basis upon which the review of the Chairman’s
decision is sought, is that the claim of Mooihoek Boerdery is
unliquidated thereby rendering it outside of the provisions of
section 44 of the Insolvency Act, 24 of 1936. (“the
Insolvency
Act&rdquo
;).
[5]
In his founding affidavit, the applicant advanced three grounds for
the review of the Chairman’s decision admitting the
claim.
[6]
It was contended that the decision amounted to administrative action
as defined in the Promotion of Administrative Justice Act,
3 of 2002
(“PAJA”), and that it is liable to be reviewed in terms
of section 6(2)(b) – a mandatory or material
procedure was not
complied with, section 6(2)(d) – the action was materially
influenced by an error of law, and section 6(2)(e)(iii)
–
relevant considerations were not considered. Firstly, it was
submitted that as the Chairman had rejected Mooihoek Boerdery’s
claim at meetings prior to the special meeting of creditors, he was
functus officio
and not empowered to change the decision
arbitrarily. It was further contended that the provisions of
section
44
of the
Insolvency Act expressly
prohibit the proof of unliquidated
claims at meetings of creditors in the absence of a compromise being
reached in terms of
section 78(3)
of the
Insolvency Act.
>
[7]
The second ground was that Mooihoek Boerdery had instituted an action
against the Close Corporation prior to its winding up
in respect of
the same claim. This action was stayed in terms of section 359 of the
Companies Act of 1973. Mooihoek Boerdery thereafter,
allegedly failed
to give notice of its intention to proceed with the litigation as
required by section 359(2) of the Companies
Act, with the consequence
that the litigation was deemed to have been abandoned in terms of
section 359(2)(b).
[8]
Thirdly, it was alleged that the claim had become prescribed and
could thus not be admitted as proven.
[9]
Applicant has abandoned the second and third grounds as well as the
argument that the Chairman was
functus officio.
[10]
After the customary three sets of affidavits had been filed, the
applicant applied in terms of rule 6(5)(e) for leave to file
a
supplementary founding affidavit. In this affidavit, the applicant
does not seek to supplement the factual basis on which the
review is
sought, but rather, seeks to add the provisions of
section 151
of the
Insolvency Act as
an additional legal basis for the relief sought.
Applicant concedes in the application to supplement his papers, that
it must be
clear from the facts set out in the founding affidavit
that the statutory provision is applicable.
[11]
This raises two issues. Firstly, is it clear from the founding papers
that
s151
of the
Insolvency Act is
applicable to the Close
Corporation in liquidation? In
Bato Star Fishing (Pty) Ltd v
Minister of Environmental Affairs
[2004] ZACC 15
;
2004 (4) SA 490
(CC)
in para
[27] O’Regan J stated as follows:
“
Where a litigant
relies upon a statutory provision, it is not necessary to specify it,
but it must be clear from the facts alleged
by the litigant that the
section is relevant and operative.”
[12]
Section 66(1)
of the
Close Corporations Act 69 of 1984
, provides that
the laws mentioned, or contemplated in item 9 of schedule 5 of the
Companies Act, 2008
apply to the liquidation of a corporation in
respect of any matter not provided for in the
Close Corporations Act.
[13
]
Chapter XIV of the Companies Act 1973, is of relevance with
regard to the proof of claims and the review of decisions made
in
respect thereof.
[14]
Regard must be had to section 339 of the Companies Act 1973, which
provides that:
“
the law of
Insolvency to be applied
mutatis mutandis
– In the
winding-up of a company unable to pay its debts the provisions of the
law relating to insolvency shall, in so far
as they are applicable,
be applied
mutatis mutandis
in respect of any matter not
specifically provided for by this Act.”
[15]
The Full Court of the Transvaal Provincial Division in
Taylor and
Steyn
NNO v Koekemoer
1982(1) SA 374 (T) held that the
time at which it must be determined whether the company is in fact
unable to pay its debts is the
time when it sought to invoke the
section, not the time of the commencement of the winding up.
[16]
The applicant’s affidavits do not establish that the Close
Corporation is unable to pay its debts as required by section
339.
Section 151
of the
Insolvency Act is
thus not rendered applicable in
terms of this section.
[17]
Section 366 of the Companies Act 1973 provides for the proof of
claims at a meeting of creditors. The section provides that:
“
366 Claims and
proof of claims. – (1) In the winding-up of a company by the
Court and by a creditors’ voluntary winding-up-
(a) the claims against
the company shall be proved at a meeting of creditors
mutatis
mutandis
in accordance with the provisions relating to the proof
of claims against an insolvent estate under the law relating to
insolvency;”
[18]
This section does not expressly make
section 151
of the
Insolvency
Act applicable
. It was contended on behalf of the applicant that
section 151
of the
Insolvency Act is
made applicable by section 366
of the Companies Act 1973 as section 151 refers expressly to “a
decision, ruling or, order
of an officer presiding at a meeting of
creditors”.
[19]
In
Swaanswyk Investments (Pty) Ltd v The Master and Another NO
1978 (2) SA 267
(C) Van Zijl JP held at 270 A-G that:
“
It was contended
that s 366 (1)(a) merely makes provision for the procedure that shall
be followed when claims are proved at a meeting
of creditors. The
section does more. It lays down the manner in which claims may be
proved against the company,
viz
in accordance with the
provisions relating to the proof of claims against an insolvent
estate under the laws of insolvency. That
this section intends to
deal with the substantive law and not merely with the procedure to be
followed when proving a claim before
a meeting of creditors can be
seen from the substitution of the phrase “the law relating to
insolvency” for the phrase
“the law relating to insolvent
estates”. The latter is directed to the procedure to be
followed. The former is directed,
in addition, to the substantive
law.
In the proof of claims
against a company in liquidation, the Master and his representatives
act in a
quasi
-judicial capacity in adjudicating upon the
validity of the claim. The Companies Act 46 of 1926 contained
provisions enabling a
creditor who was dissatisfied with the
rejection of his claim by the master or his deputies either, to
appeal to the Courts or
to take this decision on review to the
Courts. These provisions have been omitted from the present Act
because of the changes that
have been made to the
Insolvency Act 24
of 1936
and to the provisions of
s 366
(1) (a)
supra.
When the
1926 Companies Act was passed, it did not make the provisions of the
Insolvency Act 32 of 1916 applicable to the proof
of claims against a
company, and the 1916 Act gives no right of appeal against the
decision of the Master or his deputies. It conferred
only a right of
review. This latter right of review is retained in the 1936
Insolvency Act which also confers a right of appeal
on the
dissatisfied debtor. See
Bendeman v Bendeman’s Trustee
1939 CPD 377.
The right of review in terms of s 193 of the Companies
Act of 1926 and the right of appeal in terms of s 179 are not
repeated in
the present Act. These two provisions giving recourse to
the Courts became redundant when s 366 (1) (a) of the present Act was
recast so as to make the substantive law in relation to the proof of
claims against an insolvent estate applicable to the winding-up
of a
company by the Courts,
viz
they may where necessary be proved
in Court.”
[20]
In
The
Master v Stewart
1981 (2) SA 472
(E) at 474 B
Smalberger J (with Addleson J concurring) held that:
“
In terms of ss 339
and 336 of Act 61 of 1973, the provisions of the Insolvency Act in
relation to claims by creditors are made applicable
to companies”.
[21]
Insofar as the above authorities are construed to constitute
authority for the proposition that section 366 of the Companies
Act
1973 makes section 151 of the Insolvency Act applicable, regard must
be had to the content of the latter section.
[22]
Section 151 of the Insolvency Act reads as follows:
“
151 Review
Subject to the provisions
of section
fifty-seven
any person aggrieved by any decision,
ruling, order or taxation of the Master or by a decision, ruling or
order of an officer presiding
at a meeting of creditors may bring it
under review by the court and to that end may apply to the court by
motion, after notice
to the Master or to the presiding officer, as
the case may be, and to any person whose interests are affected:
Provided that if
all or most of the creditors are affected, notice to
the trustee shall be deemed to be notice to all such creditors; and
provided
further that the court shall not re-open any duly confirmed
trustee’s account otherwise than as is provided in section one
hundred and twelve
.”
[23]
The applicant, in order to have
locus standi
to bring a review
under this section, must therefore, establish that he is a
“person aggrieved” by the decision
in question. The
phrase “aggrieved person” is also found in section 371,
section 387(4) and section 407(4)(a) of the
Companies Act 1973.
[24]
In
Kaniah v WPC Logistics (Joburg) CC (in liquidation) &
Others
(5794/2016) [2017] ZAKZDHC 45 (13 December 2017) at para
[21] the Court quoted with approval
Attorney-General of Gambia v
N’Jie
(1961) 2 All ER 504
(PC) at 511:
“
The words ‘person
aggrieved’ are of wide import and should not be subjected to a
restrictive interpretation. They do
not include, of course, a mere
busybody who is interfering in things which do not concern him; but
they do include a person who
has a
genuine grievance because an
order has been made which prejudicially affects his interests
.”
(own emphasis)
[25]
The applicant in reply alleges that as he is the sole member of the
Close Corporation his
locus standi
is self-evident.
[26]
In
Muller N.O. v Trust Bank of Africa Ltd And Another
1981(2)
SA 117(N) a full bench of the Natal Provincial Division referred with
approval to the following:
“
In
Mears v
Pretoria Estate and Market Co Ltd
1906 TS 661
(a decision
referred to in
Reuvid’s
case) INNES CJ held that the
reversionary interest which an insolvent has in his insolvent estate
(ie the right to have paid over
to him any balance of assets over
liabilities which might remain after his estate has been liquidated)
is not legally executable
and cannot be attached and sold in
execution. INNES CJ held that the insolvent merely has an expectation
(
spes
) that there may be a residue left over after his estate
has been liquidated and such a
spes
, said INNES CJ, cannot be
sold in execution. The reasoning by which INNES CJ arrived at his
conclusion is instructive and appropriate
to the present enquiry. The
learned CHIEF JUSTICE said at 665:
“
The provisions of
that section merely constitute a
spes
, or expectation in
favour of the insolvent. There may be a residue. If and when there is
one, he becomes entitled to it. If there
is no residue he is entitled
to nothing. Nor does the fact that the statute makes a provision of
this kind in anticipation constitute
that a vested right which would
not be so otherwise.
Let me put a case.
Suppose that a public servant has a statutory right to a pension if
and when he attains the age of 60. How could
it be said that he had
any vested right in the pension fund before he attained that age? He
would be interested in its beneficial
administration; but the fact
that the statute provided that, if certain contingencies arose, he
should have a pension, would not
give him any present right
whatever.”
[27]
The papers do not reflect whether there will be surplus funds to pay
the Close Corporation’s member after the payment
of creditors’
claims.
[28]
For reliance upon section 151 to be permitted the applicant’s
founding papers had to allege facts that made the section
relevant
and operative. It was not alleged in the affidavit that applicant was
an “aggrieved person”.
[29]
In
Frances George Hill Family Trust v SA Reserve Bank and others
1992(3) SA 91 (AD) the Reserve Bank attached money deposited by a
company in certain bank accounts. The court held that a trust,
which
owned shares in the company, did not qualify by virtue of such
shareholding to be a “person aggrieved” by the
attachment. Hoexter JA held (at 102C) as follows:
“
Leaving aside the
significance of statutory context in particular cases, the tenor of
decided cases in South Africa points, I think,
to the general
conclusion that the words ‘person aggrieved’ signify
someone whose legal rights have been infringed
– a person
harbouring a legal grievance.”
[30]
The applicant does not satisfy this test on the facts set out in his
founding affidavit. The mere fact that he is the sole
member of the
Close Corporation does not qualify him as such. There is no basis
established that he has a legal interest which
is prejudiced by the
decision.
[31]
Applicant further stated that he has been joined as a defendant in
Mooihoek Boerdery’s action for damages against the
Close
Corporation. Applicant does not in his founding affidavit set out on
which basis Mooihoek Boerdery has joined him as
defendant in
the action. It is thus not apparent, how he as defendant in the
action is prejudiced by the decision of the Chairman
to admit
Mooihoek Boerdery’s claim against the Close Corporation (in
liquidation).
[32]
In order to qualify as an “aggrieved person”, it must be
further established that the legal right which is alleged
to have
been infringed existed at the time when the decision in question was
made. A person cannot acquire this status as a result
of subsequent
events (
Jeeva and another v Tuck N.O. and others
1998 (1) SA
785
(SE) at 795 D-E). The applicant states that he was joined as
defendant subsequent to the winding up and does not state whether
this occurred prior to the special meeting of creditors. Applicant
has accordingly, not established a legal right in existence at
the
time of the decision which he now seeks to review and set aside.
[33]
I am accordingly of the view that the applicant has failed in his
founding affidavit to set out facts from which it is clear
that
section 151 of the Insolvency Act is relevant and operative as the
facts do not establish that he is an aggrieved person as
required by
the section.
[34]
The nature of a review in terms of section 151 of the Insolvency Act
(read with section 339 of the Companies Act 1973) was
considered in
Nel and another NNO v The Master (Absa Bank Ltd & others
intervening)
2005 (1) SA 276
(SCA) paragraphs [22] and [23]. When
engaged with this kind of review the court has powers of both appeal
and review, with the
additional power of receiving new evidence and
deciding the matter afresh.
[35]
The applicant’s founding papers expressly rely on PAJA. A
review under PAJA is a completely different type of review
to that
under section 151. The Respondent was not called upon to meet or,
oppose a section 151 review in respect of which completely
different
considerations are applicable. A section 151 review permits further
evidence. All three sets of affidavits deal with
and are focused on a
PAJA review. The belated reliance on section 151 was expressly stated
to be an afterthought by the applicant.
To allow its inclusion at
this stage of proceedings would be unfair to Mooihoek Boerdery as it
would then have to meet completely
different criteria.
[36]
In the
Master of the High Court, Western Cape Division, Cape Town
v C.P. Van Zyl, Case No A276/2018 (6 March 2019)
a full bench of
this division dealt with an appeal and cross-appeal in respect of a
review of the Master’s decision in terms
of section 379(1) of
the Companies Act 61 of 1973 to remove Van Zyl from the office of
liquidator of more than 100 companies. The
application for review was
brought on a dual basis under s151 of the Insolvency Act and under
PAJA.
[37]
Binns-Ward J held as follows:
“
[4]
The obvious question then was why the dual basis for the application
under both the Insolvency Act and PAJA if s 151 has
wider
breadth than s 6 of PAJA? Van Zyl’s counsel
(Mr
Muller
SC, assisted by Ms
Reynolds
)
explained that resort had been had to s 6 of PAJA in respect of
those matters, such as the winding up of Asch Professional
Services
(Pty) Ltd, in which the liquidation of the company concerned had
followed on grounds other than the company’s inability
to pay
its debts, and to which s 151 of the Insolvency Act therefore
did not apply. The difficulty is that in the respect
of the
vast majority of the affected liquidations the record gives no
particularity as to what the grounds for the winding-up orders
were,
or even of the names of the companies or close corporations
concerned. Experience suggests however, that most of the
liquidations are likely to have followed on the corporations’
inability to pay their debts. That, no doubt, explains
why
counsel gave so much prominence in their submissions to the reach of
s 151 in the current proceedings.
[20] On any approach,
however, and irrespective whether it acted in terms of s 151 of
the Insolvency Act or s 6 of PAJA,
the court would be justified
in interfering with the Master’s decision on review if she had
proceeded on a demonstrably incorrect
appreciation of the import of
the statutory provision under which she purported to act; in this
case by proceeding without due
regard to the constraints imposed on
the exercise of her power in terms of s 379(1).
[22] For all the
aforementioned reasons, I agree with the submission by Van Zyl’s
counsel that the court a quo could review
and set aside the Master’s
decision on any of the conventional review grounds now codified in
PAJA as well as on the wider
review basis applicable in the
circumstances in terms of s 151 of the Insolvency Act, which in
this case entitled it to set
aside the decision simply because it
considered it to be ‘wrong’, as distinct from ‘clearly
wrong’.”
[38]
Mooihoek Boerdery contends that the Chairman’s decision in the
present matter does not constitute administrative action
and that it
accordingly cannot be reviewed under PAJA. Section 1 (ee) of PAJA
provides that “administrative” action
does not include
“the judicial functions of a judicial officer of a court
referred to in section 166 of the Constitution
…”. The
Chairman is a Magistrate and is thus a judicial officer of a court
referred to in s166 (d) of the Constitution.
It was submitted that
the Chairman was exercising a “judicial function” in
admitting Mooihoek Boerdery’s claim
and thus his decision fell
within the exclusion set out in s 1(ee) of PAJA. The exception
is discussed in Hoexter Administrative
Law in South Africa 2
nd
ed page 240-241.
[39]
In
Aspeling and another v Hoffman’s Trustee
1917 TPD 305
Gregorowski J described the function of the presiding officer when
considering claims as follows:
“
With regard to the
proof of debt it is clear, under sec. 42, that the magistrate has
really to perform a judicial duty when he sits
at a meeting of
creditors and claims are produced before him. He must see that
prima
facie
proper proof is produced, and if proper proof is not
produced he ought to reject the claim.”
[40]
This authority was referred to in
Cachalia v De Klerk, NO and
Benjamin N.O.
1952 (4) SA 672
(T) where it was stated:
“
The admission of a
claim by the presiding officer is in a sense only provisional,
because under sec. 45(3) the trustee may dispute
the claim
notwithstanding its admission by the presiding officer. Furthermore,
the presiding officer does not adjudicate upon the
claim as if he
were a Court of Law; he is not required to examine the claim too
critically (
Hassim Moti & Co. v. Insolvent Estate M.Joosub &
Co.,
1927 T.P.D. 778
at p. 781), or to require more than
prima
facie
proof (Aspeling v. Hoffman’s Trustee,
1917 T.P.D. 305
at p. 307). It is by no means inconceivable that he might be
satisfied, on the evidence advanced by the creditor, that the latter
had a
prima facie
case, or even more than such a case,
notwithstanding the declared opposition of the trustee to the claim.”
[41]
In
Swaanswyk Investors
(supra) it was held that the Master and
his representatives act in a
quasi-judicial
capacity in
adjudicating upon the validity of the claim.
[42]
Similarly in
Aircondi Refrigeration (Pty) Ltd v Ruskin NO. and
Others
1981 (1) SA 799
(WLD), at 803 H, Nicholas J held:
“
From these
provisions it appears that there are two elements in the proof of a
claim:
(a)
The submission of an affidavit in the prescribed form; and
(b)
The satisfaction of the officer presiding at the meeting that it is
valid.
No objection was taken in
the present case to the form of the affidavit. In regard to (b) the
presiding officer performs a
quasi-judicial
function (cf
Aspeling and Another v Hoffman’sTrustee
1917 TPD 305
at 306-7).
As such he must exercise an independent judgment. Unless a claim is
on the face of it bad, he should not reject it without
hearing the
creditor’s
evidence under ss (7). (See Ilsely v De Klerk NO
and Another
1934 TPD 55
.)
It seems that a creditor is
entitled to have his claim considered without any evidence heard
except his own under s 44 (7). (See
Peach v Stewart NO and Another
1929 WLD 228
at 233.).”
[43]
In
Steelnet (Zimbabwe) Ltd v Master of the High Court, Jhb &
others
[2008] JOL 21948
(W) Jajbhay J was seized with an
application in terms of section 151 of the Insolvency Act (read with
section 339 of the Companies
Act, 1973) as well as PAJA for the
setting aside of a decision by the Master’s representative
admitting certain claims at
an adjourned first meeting of creditors.
The court relied upon both
Hoffman’s Trustee
and
Aircondi Refrigeration
with regard to the nature of the
function performed by the presiding officer. The creditor’s
meeting in Steelnet was held
at the Master’s offices and
presided over by an assistant Master. It was thus not conducted by a
judicial officer and the
provisions of s 1 (ee) of PAJA were not
applicable.
[44]
Mooihoek Boerdery‘s counsel referred to
National Credit
Regulator v Nedbank Ltd and others
2009(6) SA 295 (GNP) at 306F
where it is stated.
“
Each of the
findings mentioned involves a consideration of the relevant evidence,
the making of factual findings, a consideration
of the relevant
statutory and other legal provisions, rules and principles, and,
finally an application of the law to the facts.
The findings will in
most cases be aimed at resolving one or more disputes between two or
more parties. To resolve disputes and
generally to make findings,
based on the application of law to the facts, are essential elements
of a judicial function.”
[45]
In
NCR v Nedbank
the court held that a Magistrate discharging
his or her duties under
section 87
of the
National Credit Act 34 of
2005
fulfils a judicial role. It is to be noted that this section
requires a Magistrates’ Court to make the orders provided for
in the section.
[46]
The functions of a presiding officer with regard to the proof of
claims was considered in
Breda NO . v The Master of the High
Court, Kimberley
(20537/2014)
[2015] ZASCA 166
(26 November 2015)
at paragraph [23] the SCA concluded that:
“
the presiding
officer does not adjudicate on the claim as a court of law, is not
required to examine the claim too critically and
only has to be
satisfied that the claim is
prima facie
proved.”
[47]
The presiding officer’s decision to admit a claim is thus based
upon him being
prima facie
satisfied that the claim is good.
[48]
It thus appears that the presiding officer performs a quasi-judicial
function and not a judicial function, and the exclusion
clause in
s1
(ee) of PAJA is thus not applicable. The decision accordingly
would fall to be reviewed under PAJA.
[49]
It is however, not necessary to finally determine this issue as the
review would still fall to be considered on the basis of
legality.
[50]
In
State Information Technology Agency Soc Ltd v Gijima Holdings
(Pty)
2018 (2) SA 23
(CC) Madlanga J and Pretorius AJ stated as
follows:
“
[39]
Pharmaceutical Manufacturers
tells us that the principle of
legality is ‘an incident of the rule of law’, a founding
value of our Constitution. In
Affordable Medicines Trust
the
principle of legality was referred to as a constitutional control of
the exercise of public power. Ngcobo J put it thus:
‘
The
exercise of public power must therefore comply with the Constitution,
which is the supreme law, and the doctrine of legality,
which is part
of that law. The doctrine of legality, which is an incident of the
rule of law, is one of the constitutional controls
through which the
exercise of public power is regulated by the Constitution.’
[40] What we glean from
this is that the exercise of public power which is at variance with
the principle of legality is inconsistent
with the Constitution
itself. In short, it is invalid. That is a consequence of what s 2 of
the Constitution stipulates.”
[51]
In
Airports Company South Africa v Tswelokgotso Trading
Enterprises CC
2019 (1) SA 204
(GJ)
Unterhalter J held:
“
[5] Judicial
review under the principle of legality has come to assume an ever
greater significance in our public law. Originally
conceived as a
residual and limited form of scrutiny, of application to the exercise
of powers that do not constitute administrative
action, the principle
of legality has been recognised in two ways that have greatly
enhanced its centrality.
[6] First, the principle
of legality is of application to the exercise of all public power.
The exercise of a power that is not
administrative action falls under
the discipline of the principle of legality. Less clear is whether,
recourse to the principle
of legality applies only residually, where
an applicant seeks to review administrative action. This position is
based on the constitutional
primacy that PAJA enjoys and
considerations of subsidiarity. The other stance is that, the review
of administrative action may
rely upon the principle of legality,
whether or not the PAJA offers a basis for determining the matter.
The Constitutional Court
has given different guidance on these
issues. But if the principle of legality is of application to the
exercise of all public
power, without regard to subsidiarity
considerations, its reach is cast wide.
[7] Second, the range and
intensity of review permitted by the principle of legality has
enjoyed some expansion by way of judicial
interpretation. Central to
the principle of legality, are the requirements that for a public
power to be exercised lawfully it
may not be exercised
ultra
vires
; the holder of the power must act in good faith, and must
not have misconstrued the power conferred; nor may the power be
exercised
arbitrarily or irrationally. It is the requirement of
rationality, as an incident of legality, that has given rise to some
significant
expansion of judicial review under the principle of
legality. Rationality has been found to encompass considerations of
procedural
fairness, the duty to give reasons and to take into
account relevant material in reaching a final decision. This broad
conception
of rationality has meant that the principle of legality
covers much territory that is also to be found in the grounds of
review
specified in PAJA. Whether this concurrence is warranted under
the separation of powers is a matter of on-going consideration.”
[52]
In the present matter, the applicant in his founding affidavit
contended that as Mooihoek Boerdery’s claim was for damages,
it
was an unliquidated amount, and thus could not be admitted as proved
in the absence of the claim being compromised by the Liquidators
in
terms of section 78 (3) of the Insolvency Act.
[53]
The issue to be determined is accordingly whether, the Chairman was
empowered by section 44 of the Insolvency Act to admit
Mooihoek
Boerdery’s claim to proof. If not, his decision is to be set
aside on the basis of legality in that he misconstrued
the power
conferred by the said section.
[54]
Section 44 provides that:
“
(1) Any person or
the representatives of any person who has a liquidated claim against
an insolvent estate, the cause of which arose
before the
sequestration of that estate, may, at any time before the final
distribution of that estate in terms of section one
hundred and
thirteen, but subject to the provisions of section one hundred and
four, prove that claim in the manner hereinafter
provided …
(3) A claim made against
an insolvent estate shall be proved at a meeting of the creditors of
that estate to the satisfaction of
the officer presiding at that
meeting, who shall admit or reject the claim: provided that the
rejection of a claim shall not debar
the claimant from proving that
claim at a subsequent meeting of creditors or from establishing his
claim by an action at law, but
subject to the provisions of section
seventy five: and provided further that if a creditor has twenty four
or more hours before
the time advertised for the commencement of a
meeting of creditors submitted to the officer who is to preside at
that meeting the
affidavit and other documents mentioned in
sub-section (4), he shall be deemed to have tendered proof of his
claim at that meeting.”
[55]
Section 78 (3) provides that:
“
If authorised
thereto by the creditors or if no creditor has proved a claim against
the estate, by the Master, the trustee may compromise
or admit any
claim against the estate, whether liquidated or unliquidated if proof
thereof has been duly tendered at a meeting
of creditors. When a
claim has been so compromised or admitted, or when it has been
settled by a judgement of a court, it shall
be deemed to have been
proved and admitted against the estate in the manner set forth in
section 44, unless the creditor informs
the trustee in writing within
7 days of the compromise or admission or judgment that he abandons
his claim: provided that the preceding
provisions of this sub-section
shall not debar the trustee from appealing against such judgment, if
authorized thereto by the creditors.”
[56]
The claim tendered for proof before the Chairman by Mooihoek Boerdery
was for the fair reasonable and market related repair
costs in
respect of Mooihoek Boerdery’s cold store and packing
shed as determined by a registered professional engineer
and a
registered quantity surveyor appointed by Mooihoek Boerdery. This is
clearly an unliquidated claim for damages based upon
expert opinion.
The quantum of the claim has not been determined by agreement or by
an order of court.
[57]
In Cachalia (supra) at 678 A-C, Dowling J held as follows:
“
While sub-sec. (1)
of sec. 44 deals exclusively with liquidated claims, the remaining
sub-sections bear no such limitation. It is
true that sec. 44 (1)
refers to proof of liquidated claims “in the manner hereinafter
provided”, which carries the
suggestion that the machinery for
proof of claims is provided exclusively for liquidated claims. But
the provisions of sec. 78
(3) must I think lead to a broader
construction, for sec. 78 (3) indubitably contemplates that proof of
claims whether liquidated
or unliquidated should be tendered at a
meeting of creditors.”
[58]
This was confined in Proksch v Die Meester en Andere.
1969 (4) SA 567
(AD) at 589 A-D where Rumpff, A.R. stated:
“
Uit laasgenoemde
sub-artikel blyk dit m.i. duidelikd at dit die bedoeling was dat ‘n
skuldeiser wat ‘n ongelikwideerde
vordering het, bewys van
hierdie vordering kon aanbied. Indien die skuldeisers nie die curator
tot vergelyk of erkenning magtig
nie, meot die skuldeiser, indien hy
wil voortgaan, sy ongelikwideerde vordering deur ‘n hof laat
besleg. Dieselfde bedoeling
word m.i. weerspieël in art. 78 (3)
VAN DIE Wet van 1936 en dié sub-artikel sal van toepassing
wees op ‘n ongelikwideerde
vordering wat voorwaardelik is of
onvoorwaardelik. Die verwysing na ‘n vonnis van ‘n hof in
art. 78 (3) het nie betrekking
op ‘n vordering wat afgewys word
luidens art. 44 (3) nie. In art. 44 (3) word uitdruklik bepaal dat
die afwysing van ‘n
vordering die skuldeiser nie belet nie om
sy vordering in ‘n regsgeding te bewys. Die vonnis van ‘n
Hof waarna in art.
78 (3) verwys word, het betrekking op ‘n
ongelikwideerde vordering wat nie deur die curator erken of geskik
word nie. Word
die ongelikwideerde vordering besleg, word dit geag
onder art. 44 bewys en toegelaat te wees, maar indien dit ‘n
voorwaardelike
vordering is, sal die waarde van die vordering nog
kragtens art. 48 bepaal moet word.”
[59]
Margo J in
Taylor and Steyn NNO v Koekemoer
1982(1) SA374 (T)
stated the position to be as follows:
“
Section 366 (1)
provides for claims to be proved
mutatis mutandis
as under the
law relating to insolvency. Under the Insolvency Act, an unliquidated
claim, such as one for damages, may be tendered
for proof, but cannot
be proved until the amount thereof has been fixed by a judgment, or
the trustee, acting under a resolution
of creditors, has compromised
it and agreed to the amount thereof. See Mars on
The Law of
Insolvency in SA
7
th
ed para 17.4 at 327. Once it has
become liquidated by a judgment or a compromise, the claim, if it was
tendered for proof, is deemed
by s 78 (3) of the Insolvency Act to
have been proved and admitted against the estate. See, for example
Cachalia v De Klerk NO and Benjamin
NO
1952 (4) SA 672
(T);
Wynne and Godlonton NNO v Mitchell and Another NNO
1973 (1) SA
283
(E).”
[60]
Similarly Van Der Walt J, held in
Rabinowitz v De Beer NO
and
Another (at 412 H- 413 B) that:
“
It would follow
therefore that at the first meeting of creditors proof of
unliquidated claims may be tendered and noted but the
claim only
becomes a proven and admitted liquidated claim against the estate if
it has been compromised or admitted by the trustee,
or when it has
been settled by a judgment of a court. Again reference is made to the
Cachalia
case at 678 A-B. I advisedly use the word “noted”
and not “admitted” because if proof of an unliquidated
claim is tendered no value can be placed upon it, the amount not
being fixed and determined until the procedure in s 78 (3) has
been
put into effect. Should a creditor tender proof of an unliquidated
claim at the first meeting of creditors the claim might
be noted and
recorded by the presiding officer, but, lacking proof and admission
of the claim in a fixed and determined amount,
the creditor will have
no voting rights until his claim has been duly admitted in an amount
determined in terms of s 78 (3).”
[61]
In
Klein NO v Kolosus Holdings Ltd and Another
2003 (6) SA
198
(T) Bertelsmann J, set out and considered the authorities
(including
Ilic v Parginos
1985 (1) SA 795
(AD) and noted as
follows:
“
[87] The decision
of
Rabinowitz v De Beer and Another
1983 (4) SA 410
(T) does
not take the argument any further, other than to underline that an
unliquidated claim must be rendered for proof at a
meeting of
creditors, where it is to be noted if not immediately compromised,
admitted or determined by a judgment.”
[62]
The line of decisions above establish that, while proof of a
liquidated claim is to be tendered at a meeting of creditors it
will
then be delivered by the presiding officer to the trustee to be
compromised, or admitted which will thereby render it liquidated.
Where it is not compromised or admitted the creditor must establish
its claim by way of legal proceedings.
[63]
The Chairman in the present matter was thus not empowered by section
44 of the Insolvency Act to admit Mooihoek Boerdery’s
unliquidated claim. His decision accordingly is to be reviewed and
set aside on the basis of legality.
[64]
It is therefore ordered that:
(a) The First
Respondent’s decision of 6 April 2018 to admit, as proved, the
claim of the Second Respondent in the Insolvent
estate of George
Refrigeration CC (in liquidation) is reviewed and set aside;
(b) The Second Respondent
shall pay the Applicant’s costs.
________________
SIEVERS,
AJ
Acting
Judge of the High Court
I
agree. It is so ordered.
________________________
DOLAMO, J
Judge of the High Court