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[2013] ZAGPPHC 202
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Morgan Abattoir (Pty) Ltd v Master of the High Court Pretoria NO and Others (72380/2012) [2013] ZAGPPHC 202 (3 July 2013)
REPORTABLE
IN
THE NORTH GAUTENG HIGH COURT,
PRETORIA
[REPUBLIC OF SOUTH AFRICA]
CASE
NUMBER: 72380/2012
DATE:03/07/2013
In
the matter between:
MORGAN
ABATTOIR (PTY)
LTD
....................................................................
APPLICANT
AND
THE
MASTER OF THE HIGH
COURT
...............................................
FIRST
RESPONDENT
PRETORIA
N.O.
MARI
HAYWOOD
N.O
...................................................................
SECOND
RESPONDENT
CONRAD
ALEXANDER STARBUCK N.O.
....................................
THIRD RESPONDENT
SAMUEL
MOTSHWANE NKOADI N.O.
........................................
FOURTH
RESPONDENT
FIRST
NATIONAL BANK
N.O.
..............................................................
FIFTH
RESPONDENT
JUDGMENT
MAVUNDLA
J;
[1]
The applicant approached this Court in terms of section 11 of the
Insolvency Act, Act 24 of 1936 (“the Act”) read
with
Section 339 of the Companies Act, Act 69 of 1973 for an order to set
aside the first Respondent’s decision to dismiss
an objection
filed by the applicant against the first Liquidation and Distribution
Account in the insolvent estate of Tshwane Meat
Traders (Pty) Ltd in
(liquidation).
[2]
Only the fifth respondent (First National Bank) opposed the
application and therefore costs are only sought against the fifth
Respondent.
[3]
The applicant was the creditor in the estate of Tshwane Meat Traders
(Pty) Ltd which was wound-up by this Court on 19 July 2011.
The basis
for the winding-up was the fact that it was unable pays its debt.
[4]
The applicant is a creditor in the estate of Tshwane Meat Traders
(Pty) Ltd in the amount of R1 683 160. 08. The debt arose
from meat
products sold and delivered to Tshwane Meat Traders (Pty) Ltd. The
applicant duly submitted its claim with the second
respondent after
liquidation of Tshwane Meat Traders (Pty) Ltd and the concurrent
claim was admitted by the first respondent in
the amount of R1 683
160. 08
[5]
Various other creditors also submitted claims, including the fifth
respondent who filed a claim as a secured creditor in the
amount of
R732 564. 89. The fifth respondent relied on a cession of debts to
establish a secured claim in the estate, as per annexure
“JM3”.
1
Before
liquidation, Tshwane Meat Traders (Pty) Ltd received various payments
from debtors in their bank account held at a branch
of the fifth
respondent. On 8 July 2011 Tshwane Meat Traders (Pty) Ltd paid an
amount of R1 062 132. 15 from their account into
the trust account of
Vorster Attorneys. A further amount of R700 000. 00 was paid to Blue
Sky Trust on the 8th of July 2011. Subsequent
to these payments and
on 19th of July 2011 Tshwane Meat Traders (Pty) Ltd was liquidated by
this Court.
At
the time of liquidation, Tshwane Meat Traders (Pty) Ltd was indebted
to the fifth respondent in the amount of R732 564.89 reason
being
that their bank account was overdrawn in such amount. Tshwane Meat
Traders (Pty) Ltd had no overdraft facility with the fifth
respondent
at the time. The liquidators of Tshwane Meat Traders (Pty) Ltd
(Second to fourth respondents) claimed back the money
from Vorster
Attorneys and reflected the amount obtained from the attorneys as
debt collected and further reflected such payment
in the first
Liquidation and Distribution Account as payment subject to the fifth
respondent’s security.
[8]
The applicant, in its papers, contended that it did not know what the
reason for the above mentioned payment into the trust
account of
Tshwane Meat Traders’ attorneys was. The liquidators claimed
the money back from the mentioned attorneys who in
fact transferred
it to the liquidators. The liquidators reflected the funds collected
from Vorster Attorneys’ trust account
as a collection of a debt
subject to the fifth respondent’s security, which the applicant
objected to.
[9]
The fifth respondent dismissed the applicant’s objection and
ruled as follows:
“
Cession
of debtors form part of the First National Bank’s security and
has been proved as such at a second meeting of creditors.
Vorster
Attorneys still owed the money in trust to the company in
liquidation.
Vorster
Attorneys repaid the company in liquidation, upon request, without
any objection.
It
is the conclusion of the Master that a valid cession of debtors
existed between First Rand Bank and the company in liquidation,
which
all recoveries of any amounts from such debtors, fell within this
cession agreement.
All
moneys recovered from Vorster Attorneys will be deemed to fall so
forth within the ambit with this cession agreement.”
It is this
decision the applicant seeks that it be reviewed.
[10]
The applicant in its papers contended that the money obtained from
Vorster Attorneys should have been dealt with in the Liquidation
and
Distribution Account as an asset not subject to the security of the
fifth respondent and that this amount should have been
available for
distribution between concurrent creditors of the Tshwane Meat
Traders. It was further contended that the fifth respondent
was not
entitled to rely on its security for purposes of the money obtained
from Vorster Attorneys and should at most have shared
in the relevant
amount together with concurrent creditors of the estate.
[11]
The crisp question to be answered is whether money held by a person
or entity’s attorney on his or trusts account is
in fact a debt
owed by the attorney to the client. The further question is whether
the fifth respondent has a preferent claim regarding
such monies.
[12]
It was submitted on behalf of the applicant that when a client pays
money into the trust account of his/her attorney, ownership
of the
money does not pass to the attorney and the attorney does not become
a debtor of the client. The attorney is the agent and
controls the
money of and on behalf his client; relying on the decision of EDS
South Africa (Pty) Ltd v Nationwide (Pty) Ltd &
Others.
2
The money in the attorney’s trust account does not belong to
the attorney but to the client. The attorney has no other rights
to
the funds than to comply with the instructions given by his client,
vide LAWSA Volume 14(2), par 207. The money is held for
another
person and for a specific purpose and may be utilised for such
purpose; vide Incorporated Law Society, Tvl v. U
3
The interest earned by the attorney in respect of the money in his
trust account, does not accrue to the attorney but to the Law
Society. In this regard reliance is made on s78 (7).It was further
contended that the money received from Vorster Attorneys should
have
been reflected in the Liquidation & Distribution Account as an
asset rather than a debt.
[13]
It is indeed correct that the attorney is an agent of his client and
the moneys he holds in the trust account do not belong
to him but to
his client/s. The relationship between the attorney and client is sui
generis. However, with regard to the money
held in trust account by
the attorney, the position is regulated by statute. In this regard it
is apposite to cite in full from
the matter of Incorporated Law
Society, Transvaal v Visser & Others
4
where it was held that:
“
Under
common law money in the possession of an attorney enjoys no special
protection in the event of the death or insolvency of
the attorney,
because an obligation to pay money gives rise to a personal right and
not a real right and such personal right gives
no preference over
other creditors. During the depression it became necessary for the
benefit of trust creditors to protect trust
moneys in the hands of
attorneys, and sec 33 of the Act was enacted which provided, inter
alia, that the amount standing in the
credit of a trust account in a
bank (a) was not liable to attachment at the instance of the ordinary
creditors of the attorney,
that is to say, creditors other than the
persons on whose account the money is being held or has been received
by the attorney,
and (b) did not form part of the estate of the
attorneys to be administered in case of his death, insolvency, or the
assignment
of his estate. In 1956 this part of the section was
amended by sec 17 of Act 18 of 1956, but as it affects the wording of
the section
more than its content, I shall not refer to it.”
[14]
Act No. 18 of 1956, just like all previous Acts governing the
attorneys’ profession, has since evolved to the current
Attorneys Act No 53 of 1979. In this regard it is apposite to refer
to the matter of Ex Parte Law Society, Transvaal: In Re Hoppe
and
Visser
5
where Grosskopf J (as he then was) held that:
“
In
the case of Fuhri v Geyser
1979 (1) SA 747
(N) at 750D the court held
that
‘
the
effect of the exclusion from an attorney’s assets of the moneys
in his trust account in terms of s33(7) (s78(7) of the
present Act)
is that there is a fund which is available for distribution amongst
creditors but which does not form part of the
estate, which is beyond
the reach and control of trustee and which accordingly is not
available for distribution among the general
body of creditors’.
[15]
Section s78 (7) of the Attorneys Act, Act No 53 of 1979 (“the
Attorneys Act”) provides as follows:
“
7.
No amount standing to the credit of any practitioner’s trust
shall be regarded as forming part of the assets of the practitioner
or may be attached on behalf of any creditor of such practitioner:
provided that any access remaining after payment of all claims
of
person whose money has, or should have been deposited or invested in
such trust account, and / or claims in respect of interest
on money
so invested, shall be deemed to form part of the assets of such
practitioner.”
[16]
in the matter of Fuhri v Geyser
6
(confirmed by the Full Bench in Geyser v Fuhri
7
)
the court considered the question whether a trust creditor of an
attorney whose estate had been sequestrated and in whose trust
account there was a deficiency, was entitled to prove a claim against
the insolvent estate for the full amount owing to him. the
court held
that:
(a)
despite the separation of trust moneys from an attorney’s
assets thus effected by s78 (7), it was clear that trust creditors
have no control over the trust account: ownership in the money in the
account vests in the bank or other institution in which it
has been
deposited, and it is the attorney who is entitled to make withdrawals
from it.
(b)
the only right to payment by the attorney of whatever is due to them,
and it is to that extent that they are the attorney’s
creditors.
(c)
when an attorney receives an amount of money for the account of a
client, a debt immediately arises (subject to any agreement
that may
exist between the parties) for payment of that amount to the client,
or, viewed from client’s side, the latter becomes
entitled to
payment of the amount on demand.
[17]
The money in the trust account of an attorney is not an asset,
because the money vested with the bank or any institution it
was
deposited into. The attorney only has a right to operate the trust
account, to direct the bank what to do with the money; vide
Wypkema v
Lubbe;
8
vide also Ormerod v Deputy Sheriff, Durban
9
[18]
In casu, Tshwane Meat Traders (Pty) Ltd was wound-up on 19 July 2011
on which date “concursus creditorum was automatically
instituted”. In Mondi Limited v Rhodes
10
Meskin J held that:
“
It
has long been the law, and the Legislature must be taken to know,
that upon sequestration of a debtor’s estate a concursus
creditorum is automatically instituted (see Walker v Syfret NO
1911
AD 141
at 166 and numerous subsequent cases). The effect of this, in
the words of Goldstone AJA (as he then was) in Incledon (Welkom) Pty
Ltd v Qwa Qwa Development Corporation Ltd
[1990] ZASCA 85
;
1990 (4) SA 798
(A) at 803,
is that “As between the estate and the creditors and as between
the creditors enter se their relationship becomes
fixed and their
rights and obligations become vested and complete.”
Section
20(1) (a) of the Act provides:
“
The
effect of sequestration of the estate of an insolvent shall be—
To
divest the insolvent of his estate and to vest it in the Master until
a trustee has been appointed, and, upon the appointment
of a trustee,
to vest the estate in him.”
Meskin
J further referred to the definition of “sequestration order in
s2
of the
Insolvency Act 24 of 1936
and held that:
“
The
concursus creditorium cannot operate at all unless (i) the debtor is
divested of his estate, which, in terms of
section 20(1
)(a), is the
effect of the provisional order, and (ii) there is no alteration in
this situation except where the rule nisi is discharged;
for, if the
estate remains vested in the debtor, he may alter it by e.g. making
dispositions of his property, incurring further
liabilities, paying
certain creditors and not other.”
[19]
Tshwane Meat Traders (Pty) Ltd paid an amount of R1 062 132. 15 from
their account into the trust account of Vorster Attorneys
8th of July
2011. A further amount of R700 000. 00 was paid to Blue Sky Trust on
the 8th of July 2011. These payments from the
account of Tshwane Meat
Traders (Pty) Ltd were made: (i) not more than two years before
winding-up;
11
(ii) within two years of the winding-up;
12
was therefore a disposition without value and stood to be recovered
by the trustees. The money also stood to be recovered for being
a
voidable preference for having been paid out within six months of the
winding-up
13
There was no indication from the papers that Vorster Attorneys were
the creditors of Tshwane Meat Traders (Pty) Ltd. The trustees
could
also have recovered the payment from the former in terms of
s30
if
the payment was done with the intention of preferring them above
other creditors, or 31 if it were to be shown that the payment
was a
collusive disposition. In my view, the money was quite correctly
repaid to the trustees by the Vorster Attorneys.
[20]
It is common cause that Vorster Attorneys repaid this amount to the
trustees who in turn reflected it as a debt in the Liquidation
and
Distribution Account. In the matter of Ormerod v Deputy Sheriff,
Durban
14
it was held that: “The legal relationship between a banking
institution and its customer whose account with it is in credit
is
that of debtor and creditor; although the customer “deposits”
money to the credit of his account with the bank,
the transaction is
not one of depositum, but of loan without interest. White v Standard
Bank, (1883) 4 N..L.R 88 at pp. 91, 92.
The customer is a creditor
who has a claim against the bank in the sense that he has a right to
have it make payments to him, or
to his order, on cheques drawn by
him up to the amount by which his account is in credit. Duba and
Others v Ketsikili and Others,
1924 E.D. L. 332 at p.341; Estate
Ismail v Barclays Bank 9D.C.7 O.),
1957 (4) SA 17
(T) at p. 26.”
In my view, this legal position similarly applies where a client who
pays money into the trust account of
an attorney. Axiomatically the
same position applies between the attorney and the bank in regard
with the amounts held in the trust
account of the attorney. In my
view, the trustees of the wound-up estate of Tshwane Meat Traders
(Pty) Ltd, were correct in reflecting
the amount received from
Vorster Attorneys in the Liquidation and Distribution Account as a
debt. Besides, this issue stands so
decided and approved by Full
Bench in Geyser v Fuhri
15
and recognised by the Supreme Court of Appeal in the matter of
Wypkema v Lubbe.
16
It stands to reason that the decision of the Master in confirming the
classification of the relevant amount as a debt cannot be
faulted nor
disturbed. The applicant stated that he did not know why the money
was paid to Vorster Attorneys. There is no room
to find that an
agreement between Tshwane Meat Traders (Pty) Ltd and Vorster
Attorneys resulted in the form of attorney stakeholder
or agent in
relation to the funds held by the said attorneys, as envisaged in the
EDS SA v Nationwide Airlines (supra). In the
latter matter it was
held that a stakeholder agreement is based on a contract to which the
attorney stakeholder must be a party
in addition to the other parties
to the stakeholding. A stakeholder is not the agent of any of the
other parties to the stakeholding.
Absent an agreement of
stakeholding, the attorney holds the funds as agent, so that they
remain under control of the party which
transferred the funds.
[21]
With regard to the second issue to be decided, whether the fifth
respondent has a preferent claim regarding such monies. It
is common
cause that the fifth respondent submitted his claim based on the
relevant cession. It would seem that the fifth respondent
proved its
claim during the first meeting of creditors and the Master confirmed
it.
[22]
In Field NO v Standard Bank Ltd
17
it was held that book debts are those debts connected with the
business of the insolvent, which would normally be included in the
books of account of the estate of the insolvent and acquired in the
course of the running of the Insolvent’s business.
[23]
The trustees were obliged to recover the insolvent’s debts and
pay the entire secured creditor’s proven claim.
In my view, the
fifth respondent was a secured creditor who looked upon, for its
payment of the insolvent’s debt, on the
cession of its debts
and therefore had a preferential claim over concurrent creditors
18
;
I have not been persuaded that the Master was incorrect in his
conclusion “that a valid cession of debtors existed between
First Rand
Bank
and the company in liquidation, which all recoveries of any amounts
from such debtors, fell within this cession agreement.”
[25]
In my view the application stands to be dismissed with costs
including costs of senior counsel. The employment of senior counsel
was justified in casu.
[26]
In the result the application is dismissed with costs such costs to
include the costs of employing the services of senior counsel.
N.M MAVUNDLA
3U0GE
OF THE HIGH COURT
DATE
OF HEARING : 06 JUNE 2013
DATE
OF JUDGMENT : 03 JULY 2013
APPLICANT'S
ATT : HOTANE SNYMAN & TALJAARD INC.
APPLICANT
S ADV: ADV. J. CILLIERS S.C.
1st
RESPONDENTS' ATT : RORICH, WOLMARANS 7 LUDERITZ INC.
1st
RESPONDENTS' ADV : D.M. LEATHERN S.C.
1
This
annexure at paginated page 49 and signed on 11 August 2008 provided,
inter
alia,
that the applicant as cedent pledged and ceded its debts in favour
of the fifth respondent with effect from date of signature
of the
Deed as security for the due and proper performance and discharged
of the Secured Obligations.
2
2011 (5) SA 158
(SCA),
par [14] and [15].
3
1964
(2) SA 243(T)
247C-D.
4
1958
(4) SA 115
(TPD) at 131H-132A.
5
1987 (2) SA 773
(TPD) at
780B-F.
6
1979
(1)SA 747 (N).
7
1980
(1) SA 598
(N).
8
2007
(5) SA 138
(SCA) at 141C-142C (paras [4] -[6],
9
1965
(4) SA 670
(D & CLD) at 673D-E.
10
1997
(3) ALL SA 291
(D) at 298f-g.
11
S26(l)(a)
of the
Insolvency Act.
12
S26(l)(b
)
of the
Insolvency Act.
13
Section
29 of the Insolvency Act.
14
1965 (4) SA 670
(d & C.L.D.) at 673D-F.
15
Supra.
16
Supra.
17
1979
(4) SA 451
(ZR) at 544F
18
Vide
National Bank v Cohen’s Trustee
1911 AD at 248,
Trust
Bank of South Africa Ltd v Standard Bank of SA
1968 (3) SA 166
at 189A-C;
vide
Bank of Lisbon and South Africa Ltd v Master and Others
1987 (1) SA 276
at 294H-I.