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[2006] ZASCA 152
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Allers and Others v Fourie No and Others (491/05) [2006] ZASCA 152 (21 September 2006)
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THE SUPREME COURT OF
APPEAL
OF SOUTH AFRICA
REPORTABLE
Case number : 491/2005
In the
matter between :
MARTHINUS
JOHANNES ALLERS
&
144 OTHERS APPELLANTS
and
PHILLIP FOURIE NO FIRST
RESPONDENT
HENRY JAMES VAN RENSBURG
NO SECOND RESPONDENT
REINETTE KARSTENS NO THIRD
RESPONDENT
MASTER OF THE HIGH
COURT FOURTH RESPONDENT
CORAM : ZULMAN, CAMERON, BRAND JJA, COMBRINCK
et
MALAN
AJJA
HEARD : 29 AUGUST 2006
DELIVERED : 21 SEPTEMBER 2006
Summary
: Previous court order consolidating
administration of separate insolvent estates effect on
proved creditors in one of constituent
estates interest of
applicant as requirement for declaratory order costs order
de bonis propriis
against trustees whether justified
by non-compliance with s 73 of
Insolvency Act 24 of 1936
and/or by
improper conduct on the part of trustees.
Neutral citation: This judgment may be referred to as
Allers v Fourie
[2006] SCA 106 (RSA)
_______________________________________________________
JUDGMENT
BRAND JA
/
BRAND JA
:
[1] The first three respondents are the trustees in the
insolvent estate of Mrs Brenda Jansen. The fourth respondent is the
Master
of the High Court, Pretoria. Since the Master does not oppose
the appeal, I refer to the trustees as the ‘respondents’.
The appellants’ case is that they should be regarded as proved
creditors in Brenda Jansen’s insolvent estate. This is
denied
by the respondents. Their position is that the appellants’
claims are still subject to proof under s 44 of the Insolvency
Act 24
of 1936 (‘the Act’). In the light of these opposing
contentions, the respondents sought and obtained a declaratory
order
in the Pretoria High Court (Fourie AJ), upholding their position that
the appellants still had to prove their claims. The appeal
against
that order is with the leave of this court. The full terms of the
declaratory order and the exact nature of the underlying
dispute will
best be understood in the light of the background facts.
[2] Brenda Jansen was the master mind behind a
fraudulent scheme which eventually drew investments from the public
in excess of R50m.
As a vehicle for her scheme, she utilised a
company, Chinza Holdings (Pty) Ltd. The representation to potential
investors was that
Chinza acted as agent for a company registered in
the Bahamas, specialising in investments all over the world, through
which overseas
investments could be made. Chinza also promised
guarantees by supposedly reputable independent third parties as
security that the
obligations by the Bahamian company towards
investors would be met. In truth, so it eventually turned out, the
affairs of the Bahamian
company were conducted by Brenda Jansen from
her office in Centurion and in the end both this company and Chinza
proved to be no
more than her alter egos that she used in furtherance
of her fraudulent scheme. The guarantees by so-called independent
third parties
proved to be worthless forgeries.
[3] The appellants numbered amongst the luckless members
of the public who were persuaded to invest in Brenda Jansen’s
scheme.
Though some of the funds invested initially went overseas, a
large portion were channelled back to Jansen in South Africa. What
she
did not squander on her extravagant lifestyle, she used to
acquire assets to the value of about R20m. These assets were mostly
held
in corporate entities and trusts under her control.
[4] On 19 May 2003 Brenda Jansen’s estate was
finally sequestrated and on the same day Chinza was finally wound up.
In the course
of time the other entities in which Jansen held her
assets met with the same fate. While the respondents were appointed
as trustees
of Jansen’s estate, two other individuals were
appointed as provisional liquidators of Chinza. In the same way as
many other
investors in Brenda Jansen’s scheme, the appellants
submitted their claims for proof under s 44 of the Act, both against
Chinza
and against Brenda Jansen’s personal estate. Their
claims against Chinza were not opposed. At the first meeting of
creditors
of the company, which was held on 19 August 2003, these
claims were therefore formally admitted by the presiding officer, in
terms
of s 44(3). (I shall, for the sake of convenience, henceforth
describe the officers chairing the various meetings of creditors of
Chinza and Brenda Jansen’s insolvent estates referred to as
‘the Master’, although she did not personally preside
at
all these meetings.)
[5] As will presently appear, proof of the appellants’
claims against Brenda Jansen’s estate turned out to be
substantially
more complicated than the proof of their claims against
Chinza. The second meeting of creditors in the former started on 27
August
2003. When the appellants tried to prove their claims at that
meeting, the respondents asked for a postponement pending the outcome
of an application that had in the meantime been brought by the
liquidators of Chinza in the Pretoria High Court. The crux of the
relief sought in that application was for the corporate veil to be
lifted or pierced in respect of all the different
entities which were used by Brenda Jansen in the execution of her
fraudulent scheme, with the view that all the estates of these
entities under sequestration or liquidation could be administered as
one. Rather unsurprisingly, the liquidators proposed themselves
as
the most suitable candidates for appointment as administrators of the
new superordinate entity. In their capacities as trustees
of Brenda
Jansen, the present respondents were also joined by the liquidators
as respondents in that application. The respondents
opposed the
application by the liquidators. They also brought a
counter-application in which they essentially sought the same relief,
save for proposing that they were better qualified than the
liquidators to take control of the new umbrella entity. In the end
the
respondents won the battle for the lucrative position of control.
Apparently they did so by entering into a fee sharing agreement
with
the liquidators. The result was that, on 28 August 2003, Daniels J
was able to make an order by agreement between the opposing
parties.
[6] As will soon transpire, the present appeal turns
largely on the proper interpretation of the order by Daniels J (‘the
previous
court order’). A rather extensive quotation of its
terms therefore seems to be unavoidable. It reads as follows:
‘
1. That the first and second applicants [who were
the provisional liquidators of Chinza] and the first, second and
third respondents
[who were the present respondents] be granted leave
to institute the proceedings.
2. That a declarator be issued declaring that the
following entities, namely:
2.1 Chinza Holdings (Pty) Ltd (in liquidation);
[and the six other entities referred to in paras
2.2-2.7, in which Jansen held the assets gained from her fraudulent
scheme]
acquired all their assets with a title invalid to the
creditors of Brenda Jansen and are not to be regarded as separate
entities
or in any manner distinctive from Brenda Jansen;
3. That the first, second and third respondents, the
trustees of Brenda Jansen, be authorized to liquidate and/or
sequestrate the
entities referred to in paragraph 2 as one economical
entity;
4. That it be declared that the said trustees of Brenda
Jansen are entitled to take into their possession or under their
control all
property, books and documents to which the entities
listed in paragraph 2.1 to 2.7 would otherwise be entitled to, had it
not been
for the declarator issued in paragraph 2 above;
5. That it be declared that the trustees of Brenda
Jansen are entitled to administer and dispose of all the property,
books and documents
of the entities listed in paragraph 2.1 to 2.7
above as if it were the property, books and documents of Brenda
Jansen;
6. That Mrs Brenda Jansen is declared to be liable, in
her personal capacity, to the creditors of the entities listed in
paragraph
2 above;
7. That the declarators in paragraphs 2, 4 and 5 above
are subject to the right of any creditor of either Mrs Brenda Jansen
or any
of the entities listed in paragraph 2 above’.
. . .
12. It is recorded that the first and second appellants
and the first, second and third respondents made application to this
honourable
court in several matters with leave of the court, to take
reasonable steps to protect the assets of the economical entity
referred
to in paragraph 3. It is ordered that all authorized and/or
approved costs and expenses reasonably incurred by the liquidators of
Chinza Holdings and the trustees of Brenda Jansen to date hereof
and/or any of the entities referred to in paragraph 2 above, to
be
costs in the liquidation of the economical entity referred to in
paragraph 3 above, including any authorized and lawful special
arrangements concluded between the said trustees and the liquidators
and their attorneys.’
[7] As far as the Chinza estate is concerned, the Master
subsequently decided that, by virtue of the previous court order, the
liquidation
process of the company had been subsumed into the
sequestration of Brenda Jansen’s estate and that, consequently,
the winding-up
of the company had effectively been concluded. This
decision is reflected in the ruling that the Master gave at the
continuation
of the first meeting of creditors of Chinza on 9
September 2003. The pertinent part of that ruling reads as follows:
‘
Subsequent to the first meeting of creditors
[which occurred on 19 August 2003] the High Court . . . issued a
declarator on 28 August
2003 . . .
Having regard to the effect of the court order
aforementioned it is my opinion that:
it is unnecessary to continue with the first meeting of
creditors . . .
all the property of Chinza Holdings (Pty) Ltd (in
liquidation) now vests in the trustees of Brenda Jansen.
all that remains for the provisional liquidators of
Chinza Holdings (Pty) Ltd (in liquidation) is to submit an account to
this office
and to the trustees of Brenda Jansen reflecting all the
property that they administered, how they applied the funds under
their control
after making provision for their fees, after which they
will be entitled to apply for their release and the release of the
security
filed herein.
The first meeting of creditors is hereby closed.’
[8] I revert to what happened in Brenda Jansen’s
estate. After the previous court order was granted, the second
meeting of creditors,
which had been postponed in anticipation of
that order, was resumed. At the meeting, the Master made a ruling, at
the behest of the
respondents, that all creditors who wanted to prove
their claims against the estate would have to submit to interrogation
under the
provisions of s 44(7) of the Act with regard to those
claims. Creditors, including the appellants, who had previously
proved claims
against Chinza then took up the position that the
Master’s ruling did not apply to them. In support of this
contention they
argued that pursuant to the previous court order they
automatically became proved creditors in the estate of Brenda Jansen
by virtue
of the fact that they were proved creditors in the estate
of Chinza. The respondents did not agree. Their argument was that,
although,
as a matter of substantive law, the previous court order
effectively declared all creditors of Chinza to be creditors of
Brenda Jansen,
those creditors still had to prove their claims
against the latter estate in accordance with the provisions of the
Act. It followed,
so the respondents’ argument went, that the
appellants were also subject to the Master’s ruling.
Consequently that they
also had to submit to interrogation under s
44(7).
[9] The Master found himself unable to resolve this
dispute. He therefore recommended that the respondents should seek a
solution
by way of a declaratory order from the High Court. The
Master also proposed that, while the respondents were approaching the
court,
they might as well, at the same time, seek a declaratory order
on another issue he found himself unable to resolve. This issue arose
from another request it is not exactly clear by whom
that, in view of the previous court order, the Master should
issue
certificates contemplated in terms of s 419 of the Companies Act 62
of 1973 read with
s 66
of the
Close Corporations Act 69 of
1984
in respect of Chinza and all the other corporate bodies
referred to in paras 2.2 to 2.7 of the previous court order.
[10]
Section 419
of the former Companies Act deals with
the dissolution of companies and other bodies corporate that have
been wound up while
s 66
of the
Close Corporations Act makes
these
provisions applicable to close corporations. The nature of the
certificate appears from the provisions of
s 419:
‘
(1) In any winding-up, when the affairs of a
company have been completely wound up, the Master shall transmit to
the Registrar [of
companies] a certificate to that effect and send a
copy thereof to the liquidator.
(2) The Registrar shall record the dissolution of the
company and shall publish notice thereof in the
Gazette
.
(3) The date of dissolution of the company shall be the
date of recording referred to in subsection (2).
(4) In the case of any other body corporate the
certificate of the Master under subsection (1) shall constitute its
dissolution.’
[11] These were the circumstances in which the
respondents then brought their application for the declaratory order
that eventually
gave rise to the present appeal. Despite vigorous
opposition by the appellants, raising various defences, the court
a
quo
eventually granted the order sought.
Translated from the original Afrikaans, it reads as follows:
‘
1. It is declared that:
1.1 claims previously proved against Chinza Holdings
(Pty) Ltd (in liquidation) will be struck out and will have no legal
effect in
the administration of the insolvent estate of Brenda
Jansen;
1.2 creditors who have proved their claims against
Chinza Holdings (Pty) Ltd (in liquidation) as well as all creditors
who intend
to do so, if any, are ordered to prove their claims
against the insolvent estate of Brenda Jansen in accordance with the
provisions
of
s 44
of the
Insolvency Act;
1.3 the
Master is authorised to implement the provisions
of s 419 of the Companies Act . . . , read with
s 66
of the
Close
Corporations Act
. . . , with reference to the
following corporate bodies:
1.3.1 Chinza Holdings (Pty) Ltd; [and the other
companies and close corporations set out in para 2 of the previous
court order].
2. That the costs of this application, excluding the
cost of oppositions, be costs in Brenda Jansen’s insolvent
estate.’
[12] Against this background I turn to the issues
between the parties. Their outcome does not depend so much on the
application of
general legal principles, but on a proper construction
of the previous court order. In construing a court order, the
approach is
no different from interpreting any other document. The
interpreter is initially confined to the order read as a whole. If on
such
reading the intention of the court which granted the
order is clear, that is the end of the matter. It is only
when
uncertainty remains that regard may be had to extrinsic
circumstances, which would include the issues giving rise to the
order as
well as the facts upon which it relied (see eg
Firestone
South Africa (Pty) Ltd v Gentiruco AG
1977
(4) SA 298
(A) at 304D-H;
Frankel Max Pollak
Vinderine Inc v Menell Jack Hyman Rosenberg & Co Inc
[1996] ZASCA 21
;
1996
(3) SA 355
(A) at 362I-363D).
[13]
With reference to the previous court order, the
question that underlies the key issue between the parties is thus
does the
order, on a proper interpretation, reflect an intention by
the court that creditors who had previously proved their claims
against
Chinza, were to be absolved from proving their claims against
Brenda Jansen’s insolvent estate in accordance with s 44 of the
Act? The respondents’ contention is that it does not. Their
argument in support of this, which found favour with the court
a
quo,
started out from the premise that the
previous court order did not interfere with the separate existence of
the entities involved.
Though the order provided that the assets of
these entities were to be transferred to Brenda Jansen’s estate
and that the creditors
of these entities also became creditors of
Brenda Jansen, they argued, the entities retained their separate
legal existence. Chinza,
for example, was not somehow absorbed into
Brenda Jansen’s estate. It remained in existence as a company,
albeit with no assets
of its own, until a certificate in terms of s
419 of the Companies Act had been issued by the Master.
[14] From this it follows, the respondents argued, that
proof against Chinza could not possibly be regarded as automatically
constituting
proof against Brenda Jansen’s estate. A legal
mechanism whereby proof against one insolvent estate can without more
be regarded
as proof against another, they said, simply does not
exist. The mere fact that, as a matter of substantive law, Brenda
Jansen had
been declared personally liable to the creditors of Chinza
(and the other entities), they argued, did not justify the inference
that
proof against Brenda Jansen’s estate was intended to be
dispensed with because these claims had been proved in the estates
of
other entities. What is more, respondents argued, the interpretation
of the previous court order contended for by the appellants
would
mean that they, as trustees of Brenda Jansen, were bound to accept
the consequences of any lackadaisical failure by the liquidators
to
investigate claims submitted against the company. This result, they
said, could not have been intended by the court. In consequence,
the
respondents contended, the preservation of creditors’ rights in
para 7 of the previous order must be understood to refer
to
substantive rights and not to procedural rights such as those
resulting from formal proof of claims in terms of s 44 of the Act.
[15] In considering these arguments, it is apparent, in
my view, that on the respondents’reasoning, para 1.1 of the
order appealed
against can hardly be justified on any legal basis.
Once it is accepted that Chinza remained a separate legal entity, how
could proved
claims against that entity simply be struck out? What in
the previous order, would justify that procedure? The fact that, as a
result
of the previous order these claims became valueless because
the company was deprived of all its assets, might have been regarded
as a pragmatic reason for granting the order, but it could not
constitute any legal basis for doing so. However, para 1.1 of the
order appears to be of little practical consequence. The appeal is
primarily aimed at the relief granted in para 1.2.
[16] Turning to para 1.2, I am, unlike the court
a
quo,
not persuaded by the respondents’
argument in support of that relief. It departs from the wrong premise
and therefore inevitably
arrives at the wrong conclusion. The
question is not so much whether the previous court order interfered
with the separate existence
of legal entities. That it obviously did
not, as is illustrated by the fact that s 419 certificates were
sought in respect of these
entities. The further proposition that
there is no legal mechanism whereby proof against one insolvent
estate can be regarded as
proof against another, amounts to
petitio
principii
in the present context. The very
issue is whether the previous order should be construed to constitute
such mechanism. Thus understood,
the real question relates to the
effect of the order on the administration of the separate insolvent
estates. The answer to this
question is in the first place that they
were to be administered as one. For purposes of administration a new
entity was created
and administrators for this new entity were
appointed. This new entity was to take over all the assets of the
separate entities.
At the same time, creditors of the separate
entities automatically became creditors of the new entity. It is true
that the new entity
was given the name of one of its constituent
elements, ie insolvent estate Brenda Jansen. That, however, is purely
fortuitous. Equally
fortuitous is the fact that the trustees of one
of the constituent entities were appointed to administer the newly
created entity.
The new entity might as well have been called XYZ.
[17] On the respondents’ argument, creditors who
proved their claims against one of the constituent elements, estate
Brenda
Jansen, would remain proved creditors against the new entity
while those who proved their claims against other constituent
entities
would have to start all over again. I can see no reason for
such discrimination and if it was really intended, I would have
expected
an express provision in the order to that effect. What is
more, I do not agree with the respondents’ argument that the
resulting
discrimination against the creditors of other entities
would only be a matter of procedure. It may well involve substantive
prejudice.
Take the example of creditors who had unliquidated or
disputed claims against Chinza which had been settled with the
liquidators
and then proved against the company. Such creditors will
undoubtedly be prejudiced if they are required to start all over
against
the new entity. Causing prejudice of this kind would be in
direct conflict with the intention that, in my view, appears clearly
from
the order, namely, that it should not cause prejudice to any
creditor of any of the constituent entities.
[18] Thus far I have referred only to the wording of the
previous order itself. But, if any uncertainty remains as to what
effect
the order was intended to have on proved claims, it is, in my
view, eliminated by reference to the issues giving rise to the order
and the facts upon which it relied. What gave rise to the order were
the problems encountered in the winding-up process by everybody
concerned, including both administrators and creditors, as a result
of the different entities that were put up by Brenda Jansen as
part
of the smoke and mirrors of her fraudulent scheme. The overall
purpose of the order was to avoid these problems and to streamline
the winding-up process. It was obviously not to make the process more
costly and more complicated. Its purpose was to alleviate the
plight
of Jansen’s victims, not to put new obstacles in their way, for
example, by requiring (some of them) to start all over
again. The
mechanism created by the order to achieve its overall purpose was
essentially to consolidate the separate winding-up processes
already
in progress together with those that were about to follow
under one umbrella.
[19] The intention to be inferred from all this is, in
my view, that the winding-up processes already in progress were to
continue
under the new umbrella as if no change had occurred.
Otherwise stated, that a snapshot be taken as at the moment of
consolidation
and the picture transposed onto the new entity. This is
borne out, not only by para 7 of the order with its express
preservation
of existing rights, but also by para 12 which provides
that costs incurred in the winding-up of the separate estates will
become
costs of sequestration in the new entity ‘referred to in
paragraph 3’. The conclusion that inevitably follows, I think,
is that creditors who had proved their claims against any one of the
separate entities were intended to be regarded as proved creditors
of
the new entity. It is true that on this construction, the
administrators of the new entity were bound by the order to bear the
consequences of failures by liquidators or trustees in the estates of
the separate entities to properly scrutinise claims submitted
in
those estates. That negative impact can, however, largely be
eliminated, I think, by application of the procedure in s 45 of the
Act. In consequence, I hold the view that paras 1.1 and 1.2 of the
court
a quo
’s
order fall to be set aside.
[20] This brings me to para 1.3 of that order, which
authorised the Master to issue certificates contemplated in s 419 of
the Companies
Act with reference to Chinza and the other corporate
entities involved. The reasoning behind this order, as it appears
from the judgment
was that, as a result of the previous court order
the winding-up process in the corporate entities concerned had in
effect been finalised
and that there was therefore no reason why s
419 certificates should not be issued at this stage. On appeal, the
respondents supported
this reasoning. It is borne out, they
contended, by the Master’s ruling at the continued first
meeting of creditors in Chinza
on 9 September 2003 (referred to in
para [7] above). According to this ruling, the respondents said, the
Master decided that, by
virtue of the previous court order, the
winding-up of Chinza had effectively been finalised and that the
liquidators could apply
for the release of their security once they
had provided him with an account ‘reflecting the property they
administered [and]
how they applied the funds under their control’.
[21] The cornerstone of the appellants’ objection
to the order in terms of para 1.3 was that a s 419 certificate in
respect
of Chinza would deprive them of whatever remedies they may
otherwise have had against the liquidators of the company. In
developing
this objection, they recounted that, pursuant to the
Master’s ruling of 9 September 2003, the liquidators had filed
their administration
account. What appeared from this account, the
appellants said, was that, while the liquidators started their
administration of Chinza
with assets to the value of about R1,5m,
they ended up with a nett loss of R1,59m. Resulting from the account,
objections against
the liquidators’ administration were raised
by creditors of Chinza which caused the Master to appoint an
inspector in terms
of s 381 of the Companies Act. The inspector’s
report, which the appellants annexed to their papers, prima facie
concluded,
firstly, that the liquidators did not act in the best
interest of creditors and, secondly, that estate funds had been
misapplied
on a substantial scale.
[22] For these and other possible transgressions, the
appellants said, they intended to hold the liquidators liable and
their expressed
concern was that a s 419 certificate in Chinza will
prevent them from doing so. In answer, the respondents denied that a
s 419 certificate
would deprive the appellants of any remedy they may
have against the liquidators. Since the liquidation process in Chinza
had now
been transferred to the estate of Brenda Jansen, the
respondents contended, the appellants could now exercise whatever
remedies they
may have in the course of the administration of that
estate. In any event, they argued, the result of the Master’s
ruling of
9 September 2003 which had not been taken on
review was that, as a fact, nothing more could happen in the
winding-up
of Chinza.
[23] Though I appreciate the force in the respondents’
arguments, I do not share their confidence that a s 419 certificate
in
respect of Chinza could have no negative impact on the rights of
creditors against the liquidators. For reasons I regard as
self-evident,
I would in all the circumstances be extremely reluctant
to endorse any order which might provide the liquidators with an
additional
shield against the legitimate claim of creditors. However,
be that as it may, I find it inappropriate to enter any deeper into
this
debate. There is another reason why, in my view, the declarator
concerning s 419 should not have been granted. This reason has
its origin in the jurisdictional fact for the granting of a
declaratory
order stipulated in s 19(1)(a)(iii) of the Supreme Court
Act 59 of 1959 whence the High Court derives its power to
grant
these orders namely, that such an order can only be
granted at the instance of an ‘interested person’.
[24] Whether the ‘interest’ required by s
19(1)(a)(iii) should be described as ‘a direct and substantial
legal interest’
(see
Milani v SA Medical and Dental Council
1990 (1) SA 899
(T) 902F-903G) or as a ‘real and sufficient
interest’ (see eg
Tsosane v Minister of Prisons
1982 (2)
SA 55
(C) 63D) makes no difference in this case. The
incontrovertible fact is that the respondents had no interest
whatsoever in the order
that they sought. When asked during argument
what possible difference it could make to respondents if the s 419
certificate were
only to be issued at the end of the sequestration
process in Brenda Jansen’s estate, the respondents’
counsel conceded
that this would not alter his clients’
position at all. His response was, in reality, that the declarator
had been sought at
the behest of the Master. In my view this response
does not make the grade. An intent to assist the Master in making a
ruling may
be laudable, but it does not satisfy the requirement of
‘an interest’ on the part of the applicant in the
declaratory
order. For this reason, para 1.3 of the court
a quo
’s
order should also not have been granted and likewise falls to be set
aside.
[25] There remains to be considered the appellants’
contention that the costs order, both in the court
a quo
and
on appeal, should not be against the insolvent estate of Brenda
Jansen, but against the respondents
de bonis propriis
. Though
I found the argument in support of this contention rather confused,
it seemingly rested on two legs. First, on the proposition
that s
73(1) of the Act had not been complied with and, secondly, on the
basis of alleged misconduct on the part of the respondents.
I propose
to deal with these two bases in turn.
[26] In so far as it is relevant for present purposes, s
73(1) of the Act provides:
‘
. . . [T]he trustees of an insolvent estate may
with the prior written authorization of the creditors engage the
services of any attorney
or counsel to perform the legal work
specified in the authorization on behalf of the estate: Provided
that the trustee -
(a) if he or she is unable to obtain the prior written
authorization of the creditors due to the urgency of the matter or
the number
of creditors involved, may with the prior written
authorization of the Master engage the services of any attorney or
counsel to perform
the legal work specified in the authorization on
behalf of the estate; or
(b) . . .
and all costs incurred by the trustee, including any
costs awarded against the estate in legal proceedings instituted on
behalf of
or against the estate, in so far as such costs result from
any steps taken by the trustee under this subsection, shall be
included
in the cost of the sequestration of the estate.’
[27] It appears that the respondents did in fact obtain
the prior written authorisation of the Master to bring the present
application.
Against that authorisation, the appellants, however,
launched a two pronged attack. In the first place, they said, it was
obtained
by the respondents in breach of their earlier undertaking
that they would not approach the court without the creditors’
consent.
In the second place they contended that neither of the two
preconditions for obtaining the Master’s consent in
lieu
of creditors’ consent that are stipulated for in
s 73(1)(a), ie urgency or the number of creditors involved, had been
established. The respondents’ answer to this attack, gave rise
to a rather involved dispute of fact.
[28] I find it unnecessary to decide these issues of
fact. In my view, the appellants’ argument based on s 73 is
misconceived.
Non-compliance with s 73(1) does not in itself justify
a
de bonis propriis
cost
award. It deals with the question whether costs previously
awarded by the court against the estate should
eventually
be considered as part of the sequestration costs. This interpretation
is, I think, borne out by the wording of
the section itself. It also
conforms, in my view, with the decision of this court in
Patel
v Paruk’s Trustee
1944 AD 469
at
474-475. According to this decision, absence of authority under s 73
is a matter which concerns the relationship between the trustee
and
the insolvent estate. It is not something that can be raised by
litigants against the estate. In the court proceedings at issue,
the
appellants were acting in their capacities as litigants against the
estate and their position is no different from that of other
litigants. Their protestations,
qua
creditors, against the inclusion of costs awarded against the estate
as part of the sequestration costs, can be raised at the appropriate
time by way of a objection to the trustees’ account under s 111
of the Act.
[29] As to the appellants’ argument based on
respondents’ alleged misconduct, it is a well established
principle that
a trustee should not be ordered to pay the costs of
unsuccessful litigation on behalf of the estate,
de
bonis propriis,
unless he or she had been
guilty of improper conduct; for example, that he or she acted in bad
faith, or negligently or unreasonably.
Mere unacceptable or ill
considered conduct is not enough to justify such an order (see eg
Grobbelaar v Grobbelaar
1959 (4) SA 719
(A) at 725;
Cooper NO v First
National Bank of SA Ltd
2001 (3) SA 705
(SCA)
at 717D-E). In support of their argument that the respondents’
conduct can indeed be described as ‘improper’,
the
appellants referred to the history of the administration of the
insolvent estate; how the respondents on numerous occasions allegedly
squandered the money of the estate, for instance on needless court
applications and on postponements of creditors’ meetings.
[30] It seems, however, that this is very much a case of
the pot calling the kettle black. From the minutes of the creditors’
meetings annexed to the papers, it is clear that there are various
factions of creditors and that those representing the different
factions are all jockeying for positions of control. They are clearly
acting, at least prima facie, in their own interest and not
in the
interest of those they represent. It appears that at these meetings,
time had been wasted on endless squabbles and ding-dong
battles of
futile point-taking by all concerned. For the most insignificant
reasons postponements were sought. As a result, the second
meeting of
creditors in Brenda Jansen’s estate had been postponed on no
fewer than twelve occasions; with the end not nearly
in sight. What
is even more disturbing is the sense of unease that the courts too
are being used by those responsible in this self-serving,
wasteful
process. Some costs order to mark the court’s displeasure would
clearly be appropriate. The problem is, however, that
not only the
respondents are to blame. What is more, it so happens that, in the
application under consideration the respondents did
not, in my view,
act improperly. In this instance, they seem to have been motivated by
an overall intent to save costs. The fact
that this court does not
agree with the declarator that they sought self-evidently does not,
in itself, render their conduct improper,
particularly where it found
favour with the court
a quo.
It would therefore, in my view, be inappropriate to grant the
de
bonis propriis
costs order sought.
[31] For these reasons, it is ordered that:
(a) The appeal is upheld with costs against the
insolvent estate of Brenda Jansen, such costs to include the costs of
two counsel.
(b) The order of the court
a quo
is set aside
and for it is substituted the following:
‘The application is dismissed with costs against
the insolvent estate of Brenda Jansen.’
......................
F D J BRAND
JUDGE OF APPEAL
CONCUR
:
ZULMAN JA
CAMERON JA
COMBRINCK AJA
MALAN AJA