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[2008] ZAWCHC 282
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Shargey NO v Magistrate Atlantis; Albertus NO (A279/2008) [2008] ZAWCHC 282 (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. Appelfant further tofd 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).
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
alF money collected into a separate trust account held
at any bank
in the Republic of South Africa.
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).
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 attorneyadministrator, 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 appiikant 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:
"An
administrator shall deposit ait monies received by him from or on
behalf of debtors whose estates are under adm inistra
tion-
(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 non-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 Sank 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, ! 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 incurred 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 couid 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, DJP