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[2008] ZASCA 155
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Klopper NO v Master of the High Court (643/07) [2008] ZASCA 155; 2009 (3) SA 571 (SCA) ; [2009] 2 All SA 39 (SCA) (27 November 2008)
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THE
SUPREME COURT OF APPEAL
REPUBLIC
OF SOUTH AFRICA
JUDGMENT
Case no: 643/07
JOHANNES
FREDERICK KLOPPER N.O.
Appellant
and
THE
MASTER OF THE HIGH COURT
Respondent
___________________________________________________________
Neutral citation:
Klopper
v The Master of the High Court
(643/07)
[2008] ZASCA 155
(27 November 2008)
CORAM:
Cameron,
Mthiyane JJA and Mhlantla AJA
HEARD:
6 November 2008
DELIVERED:
27 November 2008
CORRECTED:
SUMMARY:
Insolvency Act 24 of
1936
─ Trustee’s remuneration ─
s 63(1)
─
court upheld Master’s refusal to allow an increase in
remuneration in respect of the administration of the insolvent’s
estate.
___________________________________________________________
___________________________________________________________
ORDER
___________________________________________________________
On appeal from:
High Court,
Pretoria (Bosielo J sitting as court of first instance).
The appeal is dismissed with costs, such costs to be
borne by the appellant in his personal capacity.
___________________________________________________________
JUDGMENT
___________________________________________________________
MHLANTLA AJA
(Cameron and
Mthiyane JJA concurring):
[1] This is an appeal with the leave of the court below
against an order of the Pretoria High Court (Bosielo J) dismissing an
application
for the review of the Master’s (the respondent’s)
decision refusing the trustee’s (the appellant’s) request
for an increased fee in terms of
s 63(1)
of the Insolvency Act 24 of
1936 (the Act).
[2] The issue in this appeal is whether the appellant is
entitled to increased remuneration in respect of the administration
of
an insolvent estate and whether the respondent’s refusal to
allow the appellant increased remuneration should have been reviewed
and set aside by the court below.
1
[3] The appellant is an insolvency practitioner and a
director of Independent Trustees (Pty) Ltd. According to the
appellant the
primary objective of the company is the administration
of insolvent estates. The respondent is the Master of the High Court,
who
amongst others, is responsible for the insolvent estates.
[4] The remuneration of a trustee or
curator
bonis
is governed by s 63 (1) of the Act
which reads as follows:
‘(1) Every trustee or
curator bonis
shall be entitled to
a reasonable remuneration for his services, to be taxed by the Master
according to tariff B in the Second
Schedule to this Act: Provided
that the Master may, for good cause, reduce or increase his
remuneration, or may disallow his remuneration
either wholly or in
part on account of any failure of or delay in the discharge of his
duties or on account of any improper performance
of his duties.’
[5] The Master is in terms of s 63(1) obliged to
determine ‘reasonable remuneration’ for the trustee or
liquidator against
the set tariff. Once the Master has determined
what constitutes a reasonable remuneration depending on the
circumstances of the
matter, he or she may exercise his or her
discretion either to increase or reduce the fee. The reasonable
remuneration marks a
point from which he or she departs. There must
of course, be good cause warranting the departure.
[6] The facts of this case are common cause. On 24
November 2003 the appellant was appointed as a trustee of the
insolvent estate
of Billy Oosthuizen. The administration of this
estate was fairly simple in that it consisted of only one major asset
being an
immovable property which was sold by way of public auction
for R180 000. ABSA Bank was the only secured creditor. It proved a
claim
in the estate which was admitted in the amount of R217 976.39.
The creditor was obliged to pay a contribution of more than R21 000.
[7] Pursuant to the performance of his duties as
trustee, the appellant prepared an amended First and Final
Liquidation, Distribution
and Contribution account, in which he made
provision for, inter alia, the trustee’s fees in the amount of
R6 752.51 calculated
in accordance with Tariff B of Schedule 2 to the
Act: 3 per cent of the gross sum realised (R5 000), 10 per cent
on occupational
rental (R389.68) and interest (R133.50) plus value
added tax (VAT). In addition the appellant applied to the respondent
for an
increased fee of R8 687.75 in terms of s 63(1) of the Act on
the basis that he and his staff had worked for approximately 29 hours
on the administration of the estate. He contended that although the
administration was not of a complex nature, the actual time
spent in
the administration of the estate should have been taken into account
in determining a reasonable remuneration. He accordingly
sought an
increase to a total sum of R15 440.26.
[8] The respondent refused to increase the appellant’s
remuneration contending that the time spent on the estate was not the
sole determining factor when deciding whether or not to allow an
increased fee and that there were several other factors that had
to
be considered. One such factor is the complexity of the matter. There
was nothing complicated about this estate and as pointed
out by the
respondent, it involved the sale of an immovable property for which
the appellant had already received a fee. No further
assets were
realised and a contribution was payable by ABSA Bank.
[9] As a result of the respondent’s refusal to
increase the remuneration, the appellant instituted a review
application under
s 151 of the Act, which gives the court the power
to review any ruling by the Master, invoking the provisions of the
Promotion of Administrative Justice Act 3 of 2000
. He contended that
the respondent had failed to take relevant factors into account and
that the decision was not rationally connected
to the information
before her.
[10] The court below dismissed the application with
costs on an attorney-client scale to be borne by the appellant in his
personal
capacity. The learned judge held that in determining whether
‘good cause’ existed justifying the increase of the
appellant’s
remuneration or not, the respondent had to consider
all the facts which had a bearing on the administration of the
estate; that
the time factor could not be considered in isolation nor
could it be regarded as the dominant or decisive factor. To do so
would
open the door for unscrupulous trustees to abuse s 63(1) of the
Act to the detriment of the insolvent estate and/or its creditors.
The learned judge held that the respondent had applied her mind
properly to all the relevant facts which had been put before her.
[11] In the appeal before us counsel for the appellant
argued that the minimum fee set in the tariff was insufficient when
regard
is had to the work performed by insolvency practitioners. He
set out a myriad of duties which according to him were not required
to be performed by insolvency practitioners in 1936 when the Act was
promulgated. These were inter alia:
(a) there were no financial leases in existence and the
insolvency practitioner was not obliged to take possession of all the
assets,
which would include leased assets;
(b) there were no VAT, pay as you earn (PAYE) or Capital
Gains Tax provisions;
(c) the insolvency practitioner was not a representative
taxpayer;
(d) there were no contracts of hire for equipment such
as office machines, cellular phones etc.
He furthermore contended that the overhead structure of
the appellant’s company consisted of salaries and various other
expenses
with the result that the overheads per month per estate were
in the amount of R25 000. Given present business and economic
realities, the appellant argued this was the minimum remuneration per
estate to which a liquidator should be entitled.
[12] The tariff is a statutory instrument set by the
Minister of Justice. It is admittedly an old tariff and was last
reviewed in
March 1995. The minimum fee is in the amount of R2 500.
It is indeed not generous. As already mentioned, the Master can only
exercise
his or her discretion once good cause has been shown. He or
she cannot use the discretionary power in order to address
limitations
in the tariff itself. The same applies to the function of
the courts reviewing the Master’s decisions: if the tariff is
not
realistic or just, given the economic and business conditions,
especially since it was last adjusted in 1995, that must be, in the
first instance, a matter for the executive to address.
[13] Accordingly, the strict question before us, is
whether the Master erred in refusing to conclude that ‘good
cause’
existed for increased remuneration on the facts of this
case. Counsel for the appellant contended that the appellant’s
remuneration
as taxed in accordance with Tariff B was not reasonable;
that it was grossly inadequate as it did not reflect the time spent
in
administering the estate and that the time and effort spent were
the overriding factors. In this regard he relied on the decision
of
Nel and another NNO v The Master (ABSA Bank
Ltd & others intervening)
,
2
and in particular the following remarks by Van Heerden AJA:
3
‘The fee prescribed by the tariff must be assessed for
reasonableness by way of a critical assessment of such prescribed
fee
in the light of the time and effort expended by a liquidator,
taking
into account (inter alia) the degree of complexity of his or her
duties in the winding-up
.’ [My emphasis].
[14] In
Nel
the appellants were joint liquidators of Intramed (Pty) Ltd. After
performing their duties as such they claimed liquidators’
remuneration in terms of s 384 of the Companies Act 61 of 1973.
4
The Master reduced the remuneration for their services. The
appellants sought an order declaring that they were entitled to
remuneration
in the higher amount. With regard to the concept of
‘good cause’ Van Heerden AJA held as follows:
5
‘The concept of “good cause” is very wide and there
is nothing in s 384 of the Act which indicates that it should
be
interpreted so as to exclude
any
factor which may be relevant
in determining what constitutes reasonable remuneration for a
liquidator’s services in the circumstances
of each case.
Obviously, what factors
are
relevant will vary from case to
case, but may certainly include aspects such as the complexity of the
estate in question, the degree
of difficulty encountered by the
liquidator in the administration thereof, the amount of work done by
the liquidator and the time
spent by him or her in the discharge of
the duties involved. If, in the winding-up of a company, particular
difficulties are experienced
by the liquidator because of the nature
of the assets or some other similar feature connected with the
winding-up, this would undoubtedly
constitute “good cause”
entitling the Master to
increase
the tariff remuneration.’
[15] The nub of the appellant’s argument is that,
even though this was an avowedly simple and straight-forward
liquidation,
to mount a liquidation operation at all, requires a
complex business infrastructure which should automatically qualify
for increased
remuneration. The overriding factor, even in such
‘simple’ matters, counsel urged us to find, was the time
and effort
required, against the background of the necessary office
infrastructure: The relative simplicity of the estate and the ease of
liquidating the assets, he contended, were of lesser importance.
[16] The argument on behalf of the appellant cannot be
sustained. In my view the learned judge clearly stated that time and
effort
together with the degree of complexity of one’s duties
have to be taken into account. It is accordingly clear that the time
factor cannot be considered in isolation nor can it be an overriding
factor. The other factors must be taken into account as well.
It is
evident in this matter that the respondent provided reasons for
refusing to increase the fee: that the estate was fairly
simple,
there being one immovable property which was sold at an auction and
there was one secured creditor who had to pay a contribution.
The
appellant had already received a fee for the sale of the immovable
property. It is clear that the respondent did not act contrary
to the
principles enunciated in the
Nel
case.
The respondent further stated in her response that to allow the issue
of time-based remuneration seen on its own would negate
the intention
of s 63 of the Act.
[17] Counsel for the appellant also relied on the
unreported judgment of
Johannes Klopper v The
Master of the High Court
6
where it was held that an estimate of time spent would be acceptable.
The facts of that case are however distinguishable from the
facts of
this matter. In that case there were about 13 points which warranted
an increased fee. I set them out briefly:
The administration of the estate spanned a period of
more than five years; the winding up process was multifaceted,
complex and
difficult; there was a dispute with the South African
Revenue Service (SARS) about custom duties relating to company
stock; there
were cross-border matters in respect of Australian
suppliers; there were objections by creditors; legal proceedings were
instituted
against the liquidator; there were negotiations in regard
to the sale of stock and the company trademark in South Africa and
Australia
as well as negotiations in respect of the release of lien
over stock; the company’s book debts had been factored to
Nedbank
Ltd; VAT claims by SARS required extensive investigation etc.
None of these points are present in this matter.
[18] As already indicated the respondent in the exercise
of her discretion did not reject the time factor out of hand. She
considered
all the relevant factors and concluded that good cause for
the increase of the appellant’s remuneration had not been
shown.
In my view, the respondent did not exercise her discretion
improperly and there is thus no basis for the setting aside of her
decision.
It follows therefore that the appeal must fail.
[19] I turn to the question of costs. The appellant
pursued the matter in his personal capacity and for his own benefit.
The costs
are to be borne by him in his personal capacity. As to the
costs order issued by the court a quo, there is in my view, no basis
to interfere with the exercise of its discretion.
[20] In the result the appeal is dismissed with costs,
such costs to be borne by the appellant in his personal capacity.
________________________
N Z MHLANTLA
ACTING JUDGE OF APPEAL
APPEARANCES:
For
Appellant: F H Terblanche SC
Instructed
by
Strydom
& Bredenkamp Inc Pretoria
E
G Cooper Attorneys Bloemfontein
For
Respondent: B Neukircher SC
Instructed
by
State
Attorney Pretoria
State
Attorney Bloemfontein
1
Accessible as
Klopper
NO v Master of the High Court
(13493/06)
[2007] ZAGPHC 139
(3 August 2007).
2
2005 (1) SA 276 (SCA).
3
At 293I-J.
4
Section 384(1) and (2) provide:
‘(1) In any
winding-up a liquidator shall be entitled to a reasonable
remuneration for his services to be taxed by the Master
in
accordance with the prescribed tariff of remuneration: Provided
that, in the case of a members’ voluntary winding-up,
the
liquidator’s remuneration may be determined by the company in
general meeting.
(2) The Master may reduce
or increase such remuneration if in his opinion there is good cause
for doing so, and may disallow such
remuneration either wholly or in
part on account of any failure or delay by the liquidator in the
discharge of his duties.’
5
At 285C-F.
6
Unreported judgment of Thring J, case no
2475/2008 (CPD) delivered on 13 June 2008.