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[2009] ZAGPPHC 144
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Cook NO v S J Coetzee Inc (A1088/07) [2009] ZAGPPHC 144; 2012 (2) SA 616 (GNP) (20 November 2009)
IN THE HIGH COURT OF SOUTH
AFRICA
(NORTH
GAUTENG
HIGH COURT, PRETORIA)
Date: 2009-11-20
Case Number:
A1088/07
In the matter between:
AN
NETTE
COOK N.O.
Appellant
and
S.J. COETZEE
INC
Respondent
JUDGMENT
SOUTHWOOD J
[1]
On
23 April 2004, Bid Financial Services (Pty) Ltd (‘Bidfin’),
a creditor in the insolvent estate of Erf 824, Faerie
Glen Ext 2
Trust (‘the Trust’), in accordance with the provisions of
section 32(1)(b) of the Insolvency Act 24 of 1936
(‘the Act’)
instituted action in the name of the appellant, the trustee in the
insolvent estate of the Trust, against
the respondent, for payment of
R877 152,60 on the grounds that the payment by the Trust to the
respondent of this amount should
be set aside in terms of s29
alternatively s30 of the Act.
[2] The respondent
raised a special plea that the appellant is not competent to
institute the action and has no
locus
standi
.
This plea was based on the fact that on 23 August 2003 the appellant
had already prepared a first and final liquidation and distribution
account; the Master had confirmed the account on 30 September 2003;
in terms of section 112 of the Act confirmation of the account
is
final and it may not be reopened save with the permission of the
court; that the appellant had not been permitted to reopen
the
account and the appellant was therefore not authorised to act as
trustee. The thrust of the special plea seems to be that
as a result
of the confirmation of the account in terms of section 112 of the Act
the appellant ceased to be the trustee because
the insolvency had
come to an end.
[3] The parties agreed to deal with
the special plea in terms of Rule 33(4) and for that purpose agreed
on the relevant facts in
accordance with Rule 33(1).
[4] The court
a
quo
(Basson
J) upheld the special plea with costs. With the leave of the court
a
quo
the
appellant appeals against the judgment and order.
[5] The
agreed
facts may be summarised as follows (I shall refer to the litigating
parties as on appeal; to the other parties, where appropriate,
by
their abbreviated names and shall quote relevant passages from the
annexures in parenthesis):
(1) The appellant
is Annette Cook N.O., an insolvency practitioner who is the trustee
of the Trust. On 23 April 2004 Bidfin instituted
this action in the
name of the appellant in terms of section 32(1)(b) of the Act, after
Bidfin had indemnified the appellant against
the costs relating to
these proceedings.
(2
) The
respondent is SJ Coetzee Inc, an incorporated firm of attorneys
practising as such in Pretoria.
(3
) On
20 September 2002 the Trust was indebted to the respondent in the sum
of R877 152,60 in respect of legal fees and disbursements.
On the
same date the Trust paid that amount to the respondent.
(4
) On
3 December 2002 the Trust was sequestrated by order of this Court.
(5
) Bidfin
was at all relevant times the only proved creditor in the insolvent
estate of the Trust in an amount of R940 570,78.
(6
) The
appellant contends that the aforementioned payment by the Trust to
the respondent constitutes a disposition in terms of the
provisions
of sections 29 or 30 of the Act and falls to be set aside.
(7
) Prior
to the confirmation of the first and final liquidation and
distribution account the appellant did not take any steps to
recover
the alleged debt, neither was the appellant instructed by Bidfin
before the said date to do so.
(8
) On
20 August 2003, prior to the confirmation of the first and final
liquidation and distribution account, Bidfin’s attorney
Mr.
M.W. Nixon, in a letter, requested an enquiry in terms of section 152
of the Act for the reasons set out in the letter. (‘The
reason
for the application in terms of Section 152 of the
Insolvency Act for
the holding of an inquiry is that less than six (6) months before the
sequestration of the trust, attorney Coetzee appropriated
an amount
of R877 152,60 towards fees and disbursements. She appears to have
regarded herself as a creditor of the trust, having
rendered services
to the trust. The purpose of the inquiry will be to procure precise
details as to whether the appropriation
by her of the aforesaid
amount constitutes a voidable preference’.) The inquiry was
held in 2003 and 2004.
(9
) On
30 September 2003 the Master confirmed the first and final
liquidation account of the insolvent estate of the Trust. A copy
of
the account is attached to the statement of facts as annexure E.
(This two page document contains a list of receipts and expenses
and
a bank reconciliation statement.) Pursuant to the confirmation of
the account the appellant paid two dividends to Bidfin,
i.e. R300 000
on the 8
th
of August 2003 and R61 290,88 (as a final dividend) on 1 October
2003. These were the only dividends paid to proved creditors
in
accordance with the account.
(10
) The
s 152
inquiry commenced on 1 October 2003 and continued on 14
February 2004. Pursuant to the inquiry Bidfin’s attorney, Mr.
Nixon,
on 11 March 2004 in a letter requested the appellant’s
permission to institute this action. (‘An enquiry in terms of
section 152
of the
Insolvency Act is
currently in progress and was
postponed until 15 April 2004. We confirm that our client is funding
the enquiry in terms of
Section 104
of the
Insolvency Act. We
have
been instructed by our client to institute action against the
recipients of the funds which had been received on behalf of
the
Trust by attorney SJ Coetzee, approximately two (2) months prior to
the sequestration of the Trust. Our client will fund the
actions as
envisaged in terms of
section 104
of the
Insolvency Act. Please
urgently furnish us with your consent to institute action in the name
of the trustee against the recipient of the funds’.)
The
appellant consented in a letter dated 12 March 2004. (‘We have
no objection to you instituting action against the recipients
of all
the funds under discussion in the name of the Trustee. In doing so
the following must be taken into consideration. (1)
The Trustee has
distributed all funds available in the sequestration. (2) The
sequestrated estate is not vested with any funds
and therefore no
attorneys fees and/or cost orders which may be granted, can be
accommodated. In proceeding with this matter we
will need a written
indemnification to file with the Master of the High Court for proof
that the estate will not be liable for
any costs. If you are
successful, it is trite law that the proceeds will fall within the
estate and the sequestrated estate will
then accommodate all costs
and your client will then reap the benefits of
section 104(3)
, which
clearly makes your client preferential to any monies recovered. On
receipt of such indemnification, you may consider this
letter as
consent to institute action in the name of the Trustee’.)
Bidfin instituted the action on 23 April 2004.
(11
) The
appellant did not apply for, nor was granted permission to reopen the
said account as provided in section 112 of the Act.
Bidfin did not
object to the final account, nor did it take any steps contemplated
in
section 111
of the
Insolvency Act.
(12
) On
19 November 2005 the Master wrote a letter to the appellant to inform
her that as all his requirements had been met and the
final
liquidation and distribution account had been filed the security bond
may be reduced to nil.
[6] As already
mentioned t
he
respondent contends that the appellant is no longer competent to act
as a trustee and has no
locus
standi
to
sue because of the Master’s confirmation of the first and final
liquidation and distribution account in terms of s 112
of the Act.
The appellant’s contention is that confirmation of the account
in terms of s 112 of the Act has no bearing on
her authority to act
as trustee or her right to sue.
[7] In upholding
the special plea the court
a
quo
found
that –
(1) Before the
appellant submitted her first and final liquidation and distribution
account to the Master the appellant knew that
Bidfin intended to
recover the debt (i.e. the amount of R877 152,60 now claimed from the
respondent), payment of which was made
prior to the sequestration of
the Trust;
(2) The account
should have dealt with that debt;
(3) No objections
to the account were filed in terms of s 111 of the Act;
(4) On 30
September 2003 the Master confirmed the account in terms of s 112
of the Act;
(5) The debt was finally disposed of
as a result of the Master’s confirmation of the account; and
(6) Because Bidfin
did not object to the account and did not seek to reopen the account
Bidfin is now non-suited.
[8]
The
court
a
quo
clearly
erred in finding that before the appellant submitted the account to
the Master the appellant knew that Bidfin intended to
recover the
debt and that the debt should have been dealt with in the account.
Mr Nixon’s letter dated 20 August 2003 makes
it clear that
Bidfin wished to conduct an inquiry to establish whether the payment
of R877 152,60 to the respondent could be set
aside in terms of the
relevant provisions of the Act and his letter dated 11 March 2004
makes it equally clear that it was only
after the inquiry commenced
that Bidfin was satisfied that it had a claim. When the appellant
submitted her account to the Master
there was no debt which Bidfin
wished to recover: there was only the possibility that a cause of
action for the setting aside
of the payment would be established.
Section 92(4) of the Act requires that when the account is not the
final account the trustee
must set out therein
inter
alia
all
outstanding debts due to the estate and the reasons why these debts
have not been collected. The appellant’s account
was obviously
intended to be the final account and, accordingly, there was no need
to comply with section 92(4).
[9] The real
question to be answered is what is the effect of the confirmation of
the appellant’s account in terms of s 112
of the Act? Is it
irrelevant as far as the appellant’s action is concerned, as
the appellant contends, or does it preclude
the action because it
omitted a reference to the possible claim and no objection was taken
thereto in terms of section 111 of the
Act, as the respondent
contends?
[10] It is
well-settled that s 112, in providing that the confirmation of an
account by the Master ‘shall be final’,
means that the
matters dealt with in the account, being purely estate matters, are
finally disposed of and cannot be reopened –
see
Callinicos
v Burman
1963
(1) SA 489
(A)
at
503B:
Gilbey
Distillers & Vintners (Pty) Ltd and Others v Morris NO and
Another
[1990] ZASCA 134
;
1991
(1) SA 648
(A)
at
657D-658G. The trustee is then obliged to give effect to the matters
dealt with in the account in accordance with s 113 of the
Act: i.e.
distribute the funds or collect from each creditor liable to
contribute the amount for which he is liable. It is also
clear that
confirmation of the trustee’s account relates only to the
matters referred to in the account itself – see
Cools
v The Master and Others
1998
(4) SA 216
(C)
para
24. It does not bring an end to the trustee’s appointment or
the insolvency of the estate – see
Cools
v The Master and Others supra
27;
Standard
Bank of SA Ltd v The Master and Others
1999
(2) SA 257
(SCA)
at
264C-265J. After confirmation of the account the trustee is still
obliged to collect debts and recover property – see
Rulten
NO v Herald Industries (Pty) Ltd
1982
(3) SA 600
(D)
at
605A. And if other funds are available the trustee must deal with
these in a supplementary account – see
Wilkens
v Potgieter NO and Another
1996
(4) SA 936
(T)
at
940J-941E.
[11] It is clear
from the provisions of the Act that once a trustee is appointed he is
vested with the property of the insolvent
(as defined) and exercises
the powers set out in the Act until there is a composition or until
the insolvent is rehabilitated.
The confirmation of the trustee’s
first and final liquidation account does not affect this. The effect
of the sequestration
of the estate of an insolvent is 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 (s 20(1)(a)). The estate of an insolvent includes
all property
of the insolvent at the date of the sequestration,
including property or the proceeds thereof which are in the hands of
a sheriff
or messenger under writ of attachment, as well as all
property which the insolvent may acquire during the sequestration,
except
as provided in section 23 (s 20(2)). The provisions of
sections 23 and 24 make it plain that, subject to certain exceptions,
the
trustee remains vested with all property of the insolvent prior
to sequestration and acquired by him after sequestration. The estate
of the insolvent remains vested in the trustee until the insolvent is
reinvested therewith pursuant to a composition in terms of
section
119 or until the insolvent is rehabilitated in terms of section 127
or 127A (s 25). Unless the trustee vacates the office,
is removed or
resigns or dies the estate continues to vest in him (s 25(2)). When
an insolvent wishes to apply for his rehabilitation
he must give
notice to the trustee (section 124(1)). A trustee who has received
such a notice must report to the Master any facts
which would justify
the court in refusing, postponing or qualifying the insolvent’s
rehabilitation (s 124(4)). (The statement
in
First
National Bank of South Africa v Cooper NO and Another
1998
(3) SA 894
(W)
that
the trustee retains no vestige of power after the confirmation of the
account and payment of the dividends is therefore clearly
wrong.)
[12
]
It is also clear from the provisions of the Act that the submission
and confirmation of accounts are simply steps in the liquidation
process – see
Cools
v The Master and Others supra
(and
in the context of liquidation of companies
Standard
Bank of SA Ltd v The Master and Others supra).
The primary object of the Act is to ensure the proper distribution
of the proceeds of the insolvent’s assets amongst his
creditors
and it is the trustee’s function to discharge that object –
see
Mars
Law
of Insolvency in South Africa
9
ed Bertelsmann et al
513.
To ensure that this is done the Act provides that the trustee must
submit an account of his administration to the Master.
[13
] Briefly
the scheme of the Act is as follows:
(1) Within a period
of 6 months from the date of his appointment the trustee must submit
to the Master a liquidation account and
a plan of distribution of the
proceeds of the property in the estate for payment to creditors –
alternatively, in appropriate
circumstances, a plan of contribution
apportioning liability to contributors (s 91);
(2)
The
contents of the liquidation account are prescribed. It must contain
an accurate record of all monies received and of all monies
disbursed
by the trustee otherwise than in the course of a business which he
carried on for the insolvent estate. The record of
each such receipt
and disbursement must set out the amount and date thereof and
sufficient particulars to explain its nature.
If the liquidation
account is not the final liquidation account the trustee must also
set out therein –
‘(a) all property still
unrealized;
(b) all outstanding debts due to
the estate;
(c) the reasons why
that property has not been realized or those debts have not been
collected.
I
n
that event the trustee shall, from time to time and as the Master may
direct, but at least once in every six months, unless he
has received
an extension of time as provided in section 109, frame and submit to
the Master periodical accounts in form and in
all other respects
similar to the accounts mentioned in subsections (1) and (2)’
(s 92(1)-(4));
(3
) If
the trustee has carried on any business on behalf of the estate he
shall in addition submit a trading account containing the
prescribed
data (s 93);
(4
) The
form of the plan of distribution is prescribed. It must reflect all
claims and make provision for the distribution of the
proceeds of the
property in the insolvent’s estate in the order of preference
set out in sections 95-104 of the Act (s 94);
(5) The form of the
plan of contribution is prescribed. It must show each claim in
respect of which a creditor is liable to contribute,
the amount which
the creditor must contribute and make provision for all the
contributions in accordance with section 106 (s
105);
(6) The trustee
must sign and verify every account submitted to the Master by
affidavit. He is required to say in the affidavit
that the account
is a full and true account of the administration of the estate up to
the date of the account and that so far as
he is aware all the assets
of the estate have been disclosed in the account (s
107);
(7) The trustee
must give notice in the Government Gazette and a prescribed newspaper
that he has submitted the account and that
it will lie for inspection
at the Master’s and magistrate’s offices for 14 days as
from the date of the publication
in the Government Gazette (s
108);
(8) The trustee may
apply for an extension of time within which to submit an account (s
109);
(9) The Master may
compel the trustee to submit an account (s
110);
(10) The insolvent
or any person interested in the account may at any time before the
confirmation of
the
account in terms of s 112 of the Act object to the account in writing
(s 111);
(11) The account is
confirmed by the Master in terms of s 112 which reads as follows:
‘When a trustee’s account
has been opened to inspection by creditors as herein before
prescribed and –
(a) no objection has been lodged;
or
(b) an objection has been lodged and
the account has been amended in accordance with the direction of the
Master and has again been
opened for inspection if necessary as in
paragraph (b) of subsection (2) of section 111 prescribed and no
application has been
made to the court in terms of paragraph (a) of
the said subsection (2) to set aside the Master’s decision; or
(c) an objection has been lodged but
withdrawn or has not been sustained and the objector has not applied
to the court in terms
of the said paragraph (a),
the Master shall
confirm the account and his confirmation shall be final save as
against a person who may have been permitted by
the court before any
dividend has been paid under the account, to re-open it.’
[14
] The
trustee’s power to institute proceedings to set aside improper
transactions in terms of section 32(1) of the Act is
not subject to
any time constraints. While in office the trustee may institute
proceedings at any time if so advised. If at any
time after the
confirmation of his account a trustee becomes aware that there is an
improper disposition which can be impeached
the trustee may institute
proceedings in terms of the relevant section. If the trustee can
institute proceedings it follows that
a creditor may also be able to
institute proceedings in terms of s 32(1)(b). Confirmation of an
account in terms of section 112
therefore has no bearing at all on a
claim in terms of section 32.
[15
] The
court
a
quo
therefore
erred in upholding the special plea and the appeal must be upheld.
[16] Finally it must be recorded that
the respondent did not file heads of argument or appear at the
hearing of the appeal. Shortly
before the hearing the respondent
informed the court by letter that it did not intend to appear and
that it is dormant.
Order
[17
] I The
appeal is upheld and the order of the court
a
quo
is
set aside and replaced with the following order:
‘The special plea is
dismissed with costs’;
II The respondent is ordered to pay
the costs of the appeal.
______________________
B.R.
SOUTHWOOD
JUDGE
OF THE HIGH COURT
I
agree
______________________
W.R.C.
PRINSLOO
JUDGE
OF THE HIGH COURT
I
agree
______________________
L.M.
MOLOPA
JUDGE
OF THE HIGH COURT
CASE NO:
A1088/07
HEARD
ON: 4 November 2009
FOR
THE APPELLANT: ADV. P. ELLIS SC
INSTRUCTED
BY: Mark W. Nixon
FOR
THE RESPONDENT: No appearance
DATE
OF JUDGMENT: 20 November 2009