Feldman v Migdin NO (194/05) [2006] ZASCA 63; 2006 (6) SA 12 (SCA) (26 May 2006)

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[2006] ZASCA 63
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Feldman v Migdin NO (194/05) [2006] ZASCA 63; 2006 (6) SA 12 (SCA) (26 May 2006)

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THE
SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
Reportable
CASE NO
: 194/05
In the matter between :
FELDMAN, DAVID CHARLES
Appellant
and
MIGDIN, JACK NO
Respondent
_________________________________________________________________________
Before: SCOTT, STREICHER, NAVSA, MTHIYANE & VAN
HEERDEN JJA
Heard: 16 MAY 2006
Delivered:
26 MAY 2006
Summary:
Administration of
Estates –
s 46
of the
Administration of Estates Act 66 of 1965
–
‘money’ does not include cheques –
s 28
only requires that
moneys received ‘for the estate’ be paid into estate’s bank
account.
Neutral citation: This judgment may be referred to as
Feldman v Migdin NO [2006] SCA 62 (RSA)
_________________________________________________________________________
J U D G M E N T
_________________________________________________________________________
STREICHER JA
STREICHER JA:
[1] Two issues have to be decided in this appeal.
The one is whether ‘money’, within the meaning of that word in
s 46
of the
Administration of Estates Act 66 of 1965
, includes
cheques and the other one is whether an amount of R150 000,
being the purchase price of immovable property, which
had been paid
to the appellant, at a time when he was the executor in the estate of
the late Siegfried Migdin, was received by him
‘for the estate’
within the meaning of that phrase in
s 28
of the Act.
[2]
The appellant is an attorney. During the life
of the late Siegfried Migdin he acted as Migdin’s attorney. In
Migdin’s will, which
was drafted by the appellant, Migdin not only
appointed the appellant as executor but also bequeathed a sum of
money to him. Unfortunately
Migdin’s faith in the appellant was
misplaced. After Migdin’s demise the appellant was, on 4 September
1992, appointed as executor
in his estate. However, in November 1997
the Master removed the appellant as executor for having failed to
perform his duties concerning
the administration of the estate. An
application by the appellant to the Transvaal Provincial Division to
have the removal set aside
was unsuccessful.
[3] After removal of the appellant as executor the
respondent was, on 26 February 1998, appointed as executor in the
estate. As executor
the respondent had to apply to court for an order
directing the appellant to hand over to him all the documents and
records pertaining
to the administration of the estate. Amongst the
documents contained in a file handed to the respondent pursuant to
the court order
were a number of cheques which had not been presented
for payment. The file also contained correspondence in regard to the
sale of
an immovable property by Hanfried Investments CC
(‘Hanfried’), a close corporation of which the deceased had been
the only member.
Further enquiries revealed that the immovable
property had been sold on 23 February 1993 for a purchase price of
R150 000 payable
upon registration of transfer into the name of
the purchaser. The deed of sale had been signed by the appellant on
behalf of Hanfried.
Transfer took place on 28 May 1993. In a first
liquidation and distribution account dated 20 February 1994, prepared
by the appellant
during his tenure as executor, the appellant stated
that the value of Migdin’s interest in Hanfried would be recorded
in the second
and final liquidation and distribution account. In a
subsequent amended ‘first liquidation and distribution account’
dated 3
December 1994 a ‘100% interest in Hanfried Investment CC’
valued at R120 000 is included in the liquidation account. In
yet a further amended ‘first liquidation and distribution account’
dated 17 January 1997 it is once again stated that the value
of
Migdin’s interest in Hanfried would be recorded in the second and
final liquidation and distribution account. No final liquidation
and
distribution account was prepared by the appellant.
[4] Letters written by the respondent’s attorney
to the appellant requesting that all documents relating to the sale
of the immovable
property be handed over to the respondent and
calling upon the appellant to account in respect of the purchase
price were not responded
to by the appellant. As a result the
respondent launched an application as first applicant together with
Hanfried as second applicant
against the respondent for payment of
the sum of R150 000. The respondent alleged in the founding
affidavit that the amount
was due to Hanfried and fell ‘to be
distributed to the heirs and beneficiaries in terms of the last will
and testament of (his)
late father’. The appellant responded to the
application by way of a letter dated 22 May 2000 addressed to the
respondent’s attorneys
in terms of which he stated that he had
investigated the matter and that Hanfried had indeed not been paid
the amount received for
the selling of the property. He attached a
cheque for the sum of R150 000 made out in favour of Hanfried
and tendered to pay
party and party costs and interest on the capital
amount from the date of demand, being 25 November 1999.
[5] The tender was not acceptable to the
respondent. He proceeded with the application in order to recover
interest on the sum of
R150 000 from 29 May 1993 until 22 May
2000 and costs of the application on the attorney and own client
scale. The appellant
did not file an answering affidavit but did
oppose the application. He submitted that the respondent had no
locus
standi in judicio
, being not himself entitled to payment of the
proceeds of the sale of Hanfried’s property and that Hanfried ‘was
not properly
before the court since the respondent had no right to
represent it’. Lewis J rejected these submissions and held: ‘It
is clear
from the application as a whole that the first applicant
claims only as the representative of the CC, on behalf of the CC,
which
he was entitled and indeed obliged to do.’
[6] Having alleged and having succeeded on the
basis that the sum of R150 000 was due to Hanfried and Hanfried
having been paid
the R150 000, the respondent, surprisingly,
instituted the action which is the subject matter of this appeal. In
his particulars
of claim he alleges that not only the cheques
referred to above but also the sum of R150 000 should have been
paid by the appellant
to the Master or should have been deposited
into a bank account opened in the name of the estate. Relying on the
provisions of
s 46
of the Act the respondent claims that the
appellant is liable to pay the estate an amount of R428 317,72
being an amount equal
to double the amount which the appellant
allegedly failed to pay into the estate’s bank account.
1
[7] The trial court found for the respondent and
ordered the appellant to pay an amount of R218 205,40 plus
interest and costs
on the scale as between attorney and client to the
respondent. The amount of R218 205,40 was arrived at on the
basis that the
Master, in terms of
s 46
had a discretion to
allow a discount on good cause shown. The trial court assumed that
discretion without stating on what basis it
was entitled to do so
and, in the light of the fact that the estate had received payment of
the amount of R150 000 as well as
the amount of R60 112,32
in respect of the cheques that had not been deposited, reduced the
claim of R428 317,72 by an
amount of R210 112,32. The
appeal is against the whole of this judgment.
[8]
Section 28(1)(a)
provides that an executor
‘shall, unless the Master otherwise directs, as soon as he or she
has in hand moneys in the estate in
excess of R1 000, open a
cheque account in the name of the estate with a bank in the Republic
and shall deposit therein the
moneys which he or she has in hand and
such other moneys as he or she may from time to time receive for the
estate’.
[9]
Section 46
provides:
‘
Any executor who fails to pay over any money to the
Master or to any other person or to deposit it in any banking account
under section
twenty-eight when required by or under this Act to do
so, or who uses or knowingly permits any co-executor to use any
property in
the estate except for the benefit of the estate, shall
pay into the estate an amount equal to double the amount which he has
so failed
to pay over or to deposit or to double the value of the
property so used: Provided that the Master may , on good cause shown,
exempt
any executor, in whole or in part, from any liability which he
may have incurred under this section.’
LIABILITY IN RESPECT OF THE R150 000
[10] In terms of the provisions of
s 28(1)(a)
the respondent, in order to succeed, had to prove not only that the
sum of R150 000 was received by the appellant but also that
it
was received ‘for the estate’. In my view he failed to do so. The
appellant, in his capacity as executor in the estate, acted
on behalf
of Hanfried in respect of the sale of the immovable property and the
purchase price was payable to Hanfried. There is,
therefore, no
reason to believe that the amount was paid to the respondent and
received by him in any capacity other than as representative
of
Hanfried. The respondent himself alleged in the application referred
to above that the appellant received the amount that was
due to
Hanfried and Hanfried recovered the amount from the appellant on that
basis.
[11] In terms of
s 51
of the
Close
Corporations Act 69 of 1984
payment could have been made by Hanfried
to the estate only –
‘
(a) if, after such payment [was]
made, the corporation’s assets, fairly valued, (exceeded) all its
liabilities;
(b) if the corporation [was] able to
pay its debts as they (became) due in the ordinary course of its
business; and
(c) if such payment [would] in the
particular circumstances not in fact [have rendered] the corporation
unable to pay its debts as
they [became] due in the ordinary course
of its business.’
Had such a payment been made to the appellant the
amount would have been received by the appellant ‘for the estate’
as required
by
s 28.
However, there is no evidence on the basis
of which it can be found that such a payment was made.
[12] The trial court held:
‘
It is clear that the defendant acted on behalf of the
deceased in his representative capacity as executor when he sold the
property
and received the proceeds. He accordingly held the money as
executor and was obliged to deposit it into the estate account,
whether
directly or via the corporation’s account, and when he
failed to do so and pocketed the money instead he fell foul of
section 46.’
[13] However,
s 46
relates to a failure by an
executor to deposit money into a bank account under
s 28
when
required by or under the Act to do so.
Section 28
does not require
that an executor should deposit all moneys received by him into a
cheque account opened in the name of the estate.
The section only
requires an executor to do so in respect of moneys received ‘for
the estate’. The fact that the appellant represented
Hanfried in
his capacity as executor does not make the payment to him a payment
‘for the estate’, it remained a payment to Hanfried.
For these
reasons the appeal should succeed insofar as it relates to the
receipt by the appellant of the R150 000.
LIABILITY IN RESPECT OF THE CHEQUES
[14] The cheques which had not been deposited into
a bank account opened in the name of the estate, consisted of the
following:
A cheque dated 18 April 1997 in the amount of
R60 112,32 drawn by Sanlam in favour of the estate.The amount
represented an
amount payable in terms of an insurance policy plus
interest.
A cheque dated 9 January 1998 for the same amount
drawn by Sanlam in favour of the estate in respect of the same
policy. The cheque
was probably issued to replace the first cheque
which had become stale.
Ten cheques drawn by Sanlam and Trust Bank during
the period 26 October 1994 to 2 February 1998 in favour of the
estate for dividends
and interest in respect of investments by
Migdin. The total amount of these cheques is R4 046,54.
All these cheques became stale as a result of them
not having been collected. However, apart from interest on these
amounts the estate
did not suffer any loss as a result of the cheques
not having been deposited as the respondent was able to obtain
payment of the
amounts from the drawers of the cheques. (In the case
of the ten Sanlam and Trust Bank cheques payment was only obtained
after the
judgment by the trial court.)
[15] The trial court held that ‘money’ in
s 46
should be interpreted to include cheques, for the following reasons:
If the legislature intended to restrict the provisions of
s 46
to
cash as opposed to other forms of payment such as cheques it would
have used the word ‘cash’ as opposed to money.
There is no reason why the legislature would want
to penalise defaults in respect of cash received which is likely to
be a rare
occurrence but not penalise the non-payment over of
cheques received.
Section 28
clearly requires a banking account to be opened into
which all money received (in whatever form) is to be deposited.
[16] In
Stellenbosch Farmers’ Winery Ltd v
Distillers Corporation (SA) Ltd and Another
1962 (1) SA 458
(A)
at 476E-G Wessels AJA formulated the approach to be followed by a
court when interpreting a statutory provision as follows:
‘
In my opinion it is the duty of the Court to read the
section of the Act which requires interpretation sensibly, i.e. with
due regard,
on the one hand, to the meaning or meanings which
permitted grammatical usage assigns to the words used in the section
in question
and, on the other hand, to the contextual scene, which
involves consideration of the language of the rest of the statute as
well
as the
“matter of the statute, its apparent scope and
purpose, and, within limits, its background”.
In the ultimate result the Court strikes a proper
balance between these various considerations and thereby ascertains
the will of
the Legislature and states its legal effect with
reference to the facts of the particular case which is before it.’
[17] A cheque is not money. It is an order in
writing, signed by the person giving it, to a banker requiring the
banker to pay on
demand a sum of money to a specified person or his
order or to bearer.
2
The word ‘money’ may of course be used in a much wider sense so
as to include cheques. In order to determine whether that is
the case
it is necessary to determine whether there are indications to be
found in the Act that the word was intended to have such
wider
connotation. In this regard I shall deal with each of the reasons
advanced by the trial court in turn:
If money in its ordinary signification included
cheques one could of course have reasoned, as was done by the trial
court, that
if the intention was to exclude cheques the legislature
would have used another word such as ‘cash’ so as to exclude
cheques.
That not being the case there is no merit in the argument
that the fact that the legislature did not use the word ‘cash’
constitutes
an indication that the legislature intended to include
cheques.
I do not agree with the trial court that there is
no good reason to distinguish between money, in the sense of coins
and notes,
and cheques. Should coins and notes received by an
executor be mixed with the executor’s other coins and notes in a
manner that
renders it impossible to determine in whom the ownership
of the separate coins or notes vests, the executor becomes the owner
of
such coins and notes.
3
The result is that the money received by an executor may not
subsequently be recoverable from him. The same does not apply to

cheques handed to an executor. There is also a much greater risk
that money belonging to the estate would be used for ulterior

purposes than that cheques would be so used for the simple reason
that it would generally be much more difficult to establish the
misappropriation of coins and notes than of cheques. Furthermore, to
interpret ‘money’ so as not to include cheques does not
result
in the misappropriation of cheques not being penalised.
Section 46
provides that an executor who uses property in the estate other than
for the benefit of the estate shall pay into the estate double
the
value of the property so used. The legislature may well have
considered that this provision provided adequate protection for
the
estate in respect of cheques.
The third ‘reason’ advanced by the trial
court is not a reason at all. The trial court in effect states that
‘moneys’ in
terms of
s 28
clearly includes cheques without
giving any reason for the statement.
[18] The respondent submitted that the purpose of
the Act is to provide for the proper administration of estates and
that it would
be absurd to interpret ‘money’ so as not to include
cheques. It would indeed have been strange if the effect of not
interpreting
‘money’ so as to include cheques was that an
executor was free to do with cheques whatever he wanted to do. That
is however not
the case. The purpose of the Act is in my view
adequately served by the provision providing for the penalisation of
an executor who
uses cheques belonging to the estate for purposes
other than the benefit of the estate.
[19] For these reasons I am not persuaded that
there are indications to be found in the Act that the legislature
intended ‘money’
in the context of
s 46
to have the wider
meaning contended for by the respondent. On the other hand, there
are, in my view, indications to the contrary.
[20] Should ‘money’ be interpreted to include
cheques an executor who fails to deposit the cheque into the
estate’s bank account
would be liable for double the amount of the
cheque subject to the discretion of the Master, on good cause shown,
to exempt him from
such liability. Should the failure have related to
coins and notes in the very same amount the executor would also have
been liable
for double the amount but having retained the amount the
penalty would, unlike in the case of the cheque, only be equal to the
amount
received and not double the amount. It is unlikely that the
legislature intended such an anomalous result.
[21] The mere failure to deposit a cheque would, apart from interest,
generally not cause any loss to an estate, provided of course
that
the delay is not so long that the underlying debt has become
prescribed and cannot be recovered. To impose a penalty equal
to
twice the amount of the cheque in these circumstances seems to me to
be unduly harsh. I do not think that that was the intention
of the
legislature.
[22]
Section 46
is punitive in nature and in the
absence of indications to the contrary a more lenient interpretation
should be favoured (see
R v Milne and Erleigh (7)
1951 (1) SA
791
(A) at 823A-F). Being aware that that is the case the legislature
would in my view have made it clear that it intended ‘money’
to
include cheques, if that was its intention.
[23] It follows that by failing to deposit the
cheques into the banking account of the estate the appellant did not
in terms of
s 46
fail to deposit ‘money’ into the banking
account of the estate. It follows that the appeal should succeed also
in respect of
the respondent’s claim relating to the cheques.
[24] Apart from the inference to be drawn from the
facts in respect of the R150 000 paid to the appellant, there is
no real factual
dispute in this matter. The appeal record
nevertheless consists of some 857 pages. Many of the documents could
and should have been
omitted.
Rule 8
of the rules of this court
require the parties to attempt to confine the record to only such
documents as are required to decide
the appeal. It is the duty of the
appellant as well as the respondent to ensure that costs and this
court’s time are not wasted
by the inclusion of unnecessary
documents. In this case the parties did agree on the documents that
should form part of the record
on appeal but it is clear that no real
attempt was made to confine the record to only those documents that
were required for a proper
determination of the appeal. Had it not
been for the agreement between the parties I would have been inclined
to deprive the appellant
of a substantial part of the costs relating
to the preparation and perusal of the record. In the light of the
agreement the respondent
has only himself to blame for having to pay
costs unnecessarily incurred.
[25] In the result the following order is made:
The appeal is upheld with costs.
The order of the trial court is set aside and replaced with the
following order:
‘The plaintiff’s action is dismissed with costs.’
_________________
P E STREICHER
JUDGE OF APPEL
SCOTT JA)
NAVSA JA)
MTHIYANE
JA)
VAN
HEERDEN JA)
1
The amount is made up as follows: 2 x (R150 000
+ R60 112,32 + R4 046,54).
2
19
Lawsa
(first reissue) para 5; see also
Tjollo Ateljees (Eins) Bpk v Small
1949 (1) SA 856
(A) at
876.
3
Van der Merwe
Sakereg
2 ed p263-265.