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[2008] ZAWCHC 116
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Shargey NO v Albertus NO (A279/2008) [2008] ZAWCHC 116 (31 October 2008)
REPORTABLE
IN
THE HIGH COURT OF SOUTH AFRICA
(CAPE
OF GOOD HOPE PROVINCIAL DIVISION)
CASE
NO: A279/2008
In
the matter between:
NORMAN
WOOLF SHARGEY, NO.
Appellant
and
THE
MAGISTRATE, ATLANTIS
M
H ALBERTUS, NO.
Respondent
DRAFT
JUDGMENT: 31 OCTOBER 2008
BAARTMAN,
AJ
[1]
On 30 August 2002, an Atlantis magistrate placed the estate of
Miss M Africa
(Africa)
under
administration in terms of Section 74 (1) of the Magistrate's Court
Act 32 of 1944
(the
Act).
The
Court appointed Mr Melvyn Weiner
(Weiner),
an
attorney, as administrator over Africa's estate. Weiner wished to be
relieved as administrator of Africa's estate. On 29 February
2008,
Appellant applied, with the consent of Weiner, to replace him as
administrator. This is an appeal against the refusal to
appoint the
Appellant as administrator over the estate of Africa, in terms of
Section 74E(2) of the Act.
[2] Appellant
is a non-practicing attorney. He does not keep a trust account. He
told the Court a
quo
that
he would use the trust account of the attorney who appeared for him
in the administration application. He intended to instruct
that
attorney to hold in his trust account and distribute money collected
in the administration. Appellant further told the Court
a
quo
that
the Attorney's Fidelity Guarantee was applicable to the account he
intended to use.
[3] The
magistrate in refusing the application held:
The
Appellant as a non-practicing attorney was exempted from providing
security to the satisfaction of the Court as required
in terms of
Section 74E(3) of the Act: (see
Weiner
NO. v Broekhuysen
2002(2)
All SA 231(C)).
The
duties of an administrator in terms of Section 74J of the Act
include collecting money from the debtor, exercising control
over
it and its subsequent distribution. Money collected must be
deposited in an
account
as
set out in Section 74J(7)(a) or (b).
(c) Section
74J(7) made provision for only (a) an administrator who is a
practicing attorney
(attorney-administrator).
He
must deposit money collected in the course of the administration
into a trust account kept in terms of the Attorneys Act and
(b) one
who is not a practicing attorney
(non
attorney-administrator).
He
must deposit all money collected into a separate trust account held
at any bank in the Republic of South Africa.
(d) The
Appellant relied on his status as an attorney for exemption from
providing security and he further denied the obligation
to hold a
separate trust account. The Magistrate likened the Appellant to the
Respondent in the African Bank matters in that
he claimed exemption
but refuted the obligation incumbent upon being an attorney in such
a matter. He referred to the matters
of
African
Bank Ltd v Weiner and Others
2004(6)
SA 570 CPD
(the
first African Bank matter)
and
African
Bank Ltd v Weiner and Others
2005(4)
SA 363 SCA
(the
second African Bank matter).
(e) The
Court had a discretion over whom to appoint as replacement for an
existing administrator. In terms of the Act, a non-attorney
administrator must provide security to satisfy the Court that money
collected will be properly administered, therefore Appellant,
as an attorney- administrator, has to satisfy the Court that
he is able to ensure due compliance with the duties of
the
administrator.
(f) The
Court doubted whether Section 26 of the Attorneys Act 53 of 1979
(the
Attorneys Act)
covers
persons such as Africa. In his judgment the magistrate said:
"...is
die hof nie oortuig dat die reeling tussen die applikant en sy
prokureur toelaatbaar en/of wenslik is nie.
[4]
The issue in this appeal is whether the use of another attorney's
trust account over which an administrator has no control
satisfies
the provisions of Section 74J(7).
[5]
Section 74J(7) provides as follows:
â
An
administrator shall deposit all monies received by him from or on
behalf of debtors whose estates are under administration-
(a)
if he is not a practicing attorney, in a separate trust account
with any bank in the Republic, and no amount with which
any such
account is credited shall be deemed to be part of the
administrator's assets or, in the event of his death or
insolvency,
his deceased or insolvent estate;
(b)
if
he is a practicing attorney, in the trust account that he keeps in
terms of Section 33 of the Attorneys, Notaries and Conveyancers
Admission Act, 1934 (Act 23 of 1934)."
[6] An
attorney, "encompasses practicing as well as non-practicing
attorneys" as described in Section 74E subsection
(3).
[7] The
language of the section is clear. The legislature intended Section
74J(7)(a) to be applicable only to no n-practicing
attorneys, The
language of the section clearly indicates that only practicing
attorneys are bound by the provisions of Section
74J(7)(b). The
Court a
quo
correctly
found that Appellant was bound by the provisions of Section
74J(7)(a).
[8] I
now consider whether the arrangement to pay the money into the
administrator's attorney trust account, over which the administrator
has no control, satisfies the duty imposed on a non-practicing
attorney-administrator. I considered why administration orders
are
enacted. Cameron JA in the second African Bank matter approved what
was said by Griesel J in the first African Bank matter.
He says at
page 368 D - F;
"It
was never the intention of the Legislature that a debtor should be
bound up indefinitely in an administration order:
on the contrary,
'The mechanism of an administration order is intended to provide a
debtor with a relatively short moratorium
to assist in the payment
of his or her debts in full and to ward off legal action and
execution proceedings."'
[9]
The learned judge describes the role and function of an
administrator as:
"...'akin
to that of the trustee in an insolvent estate': in collecting and
distributing payments, the administrator
occupies a position of
trust
vis
a vis
both
the debtor and his or her creditor, and must carry out the
duties of administration in the interest of creditors and
the debtor
independently and impartially.' "
[10]
He also concluded that:
"...'an
administrator occupied a fiduciary position in relation to moneys
collected and, like a trustee, should take expeditious
steps for the
purpose of enabling the creditors to obtain as extensive a payment
as possible of their debt'. "
[11]
Counsel for the Appellant in argument said:
"As
a consequence, it is respectfully submitted that the Respondent's
concern regarding the Appellant and his attorney's
arrangement
is misconceived as it is an arrangement that the Appeal
Court considered and accepted as valid..."
[12]
The Respondent in the African Bank matters deposited money
collected in the course of various administrations into a separate
trust account over which he had control. However, the Appellant in
this matter will have no control over funds once paid into
the
attorney's trust account he intends using.
[13]
Therefore, I am of the view that the proposed arrangement between
Appellant and his attorney does not advance the purpose
of the
legislation since the proposed arrangement undermines the
legislation because Appellant will incur an extra expense with
each
distribution, which means the attorney's costs ncurred in each
distribution will reduce the money available for distribution.
The
Act envisages that an administrator may, in appropriate
circumstances, engage the services of an attorney although not to
do
what the administrator is essentially appointed to do. By acting
in the manner proposed by the applicant he will
flaunt
all the safeguards provided for in the Act. Therefore, the
magistrate correctly found the arrangement unsatisfactory.
I am of
the view that what is contemplated by the Appellant will subvert the
clear language of Section 74J(a).
[14]
As indicated above, the administrator has to take
"...expeditious
steps for the purpose of enabling the creditors to obtain as
extensive a payment as possible of their debt."
I
am also of the view that opening a separate trust account with any
bank in the Republic is a necessary and expeditious step
that
Appellant must take.
[15] It
could never have been the intention of the legislature to impose
upon a practicing attorney the duty to deposit money
into a
specified account, whilst, simultaneously intending that once that
attorney ceases practicing as an attorney to absolve
him from the
burden of both section 74(7)(a) and (b).
I
According propose that the appeal be dismissed.
BAARTMAN,
AJ
I
agree, and it is so ordered.
TRAVERSO,
ADJ