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[2024] ZAFSHC 164
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Standard Bank of South Africa Limited v Master of the High Court, Bloemfontein and Others (2423/2023) [2024] ZAFSHC 164 (22 May 2024)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
and
SAFLII
Policy
IN
THE
HIGH
COURT
OF
SOUTH
AFRICA
FREE STATE DIVISION,
BLOEMFONTEIN
Case no.: 2423/2023
Reportable:
NO/YES
In
the matter between:
THE
STANDARD
BANK
OF SOUTH
Applicant
AFRICA
LIMITED
(Registration
number: 1962[…])
And
THE
MASTER
OF
THE
HIGH
COURT,
First
Respondent
BLOEMFONTEIN
ELRICH
RUWAYNE SMITH N.O.
Second
Respondent
TSIU
VINCENT MATSEPE N.O.
Third
Respondent
(In
their
capacities
as
trustees
of
the
Insolvent
Estate of
J.N.
Herselman,
Master's
reference: B109[…])
F.J.
SENEKAL
INC
.
Fourth
Respondent
(Registration
number: 2017[…])
Coram
: Mhlambi
J et
Opperman
J
Heard:
19
February 2024
Delivered:
22 May
2024. This judgment was handed down in court and electronically by
circulation to the parties' legal representatives
via
email
and release to SAFLII on 22 May 2024. The date and time of hand-down
is deemed to be 15h00 on 22 May 2024
Judgment
by:
Opperman J
Summary:
Review
in
terms
of sections
111(2)(a)
read
with
section
111(2)(b)
of the Insolvency Act 24 of
1936
of the decisions of the Master of the
High
Court -
the
issue of "double
dipping"
and claims on account of an erstwhile service provider to the estate
JUDGMENT
[1]
The decision of
the
Master of
the
High Court,
Bloemfontein
(first
respondent) not to uphold Standard
Bank's (applicant) objections
in the
Insolvent
Estate of
J.N.
Herselman, is at the core
of
this review.
[2]
The
applicant objected to the confirmation of 'The Amended Second Final
Liquidation,
Distribution
&
Contribution
Account'.
[1]
There
were
two
objections, respectively dated 16 March 2023
[2]
and 24 April 2023.
[3]
The
objections will be depicted
later
in detail.
[3]
It
is
only
the
applicant
and
the
F.J.
Senekal
Inc.
(fourth
respondent)
that entered into the arena in this review
application. The first, second and third respondents did not oppose.
[4]
In
his opening address and heads of argument
[4]
to the court on the merits of the application for review, counsel for
the applicant indicated that, in regard to the second
prayer
as per the notice of motion dated
16
May 2023, he will only rely on
the
relief
as
far
as:
'2.
That
the
Applicant's
objections
against
aforesaid
liquidation and distribution account be upheld and that the aforesaid
account be amended accordingly;'
[5]
[5]
The
applicant maintained that relief shall be sought in terms of prayer
I
of the notice of motion to be a legality review
[6]
and not in terms of the
Promotion of Administrative Justice Act 3 of
2000
as per prayer 3 and sought in the alternative.
[6]
They affirmed the relief on costs in that
if opposed such costs to be paid by any party opposing the
application. It was only the
fourth respondent that opposed the
application.
[7]
Numerous issues
in
limine
were taken by the fourth
respondent but only the issue on hearsay apparently remained and was
argued in the beginning of the hearing
of the matter. It will be
addressed later.
[8]
The factual context and arguments by the
applicant set out in their heads of argument are the following:
2.1
The
aforesaid
review
lies
upon
the
amended
second
and
final
liquidation
and
distribution and contribution account
filed
by the Second and Third respondents on or about the
14
th
of February 2023
annexed as Annexure
··C" to the founding
papers.
2.2
The Applicant objected to the confirmation
of the aforesaid account, when the account laid for inspection, on
the
16
th
of March 2023,
and a second objection
on the
24
th
of April 2023.
2.3
The main issue about such objections is
based upon the contribution account whereby the Applicant will be
liable to pay a contribution
to the Insolvent Estate of
JN Herselman in the total amount of
R1,085,723.12.
2.4
The review also, amongst others, turn on
vouchers 9A to 9H, being the accounts rendered by Fourth Respondent
for
legal costs
incurred.
2.5
From
the aforesaid vouchers 9A to 9H, the Honourable Court will note that
such vouchers, with reference to Fourth Respondent's accounts,
are
dated
2
December 2019
and
12
February
2020,
although
for
legal
fees
since
15
November 2013.
[7]
2.6
The
Applicant
summarised
the
basis or
the
review
application
in
para
9 of
its
founding affidavit, with reference to paras 9.1, 9.2 and 9.3
[8]
thereof.
2.7
The main contentions in the review
is that the Fourth Respondent only came
into existence on 27 October 2017, and although the accounts of the
Fourth Respondent are
dated
2 December
2019
and
12
February 2020,
such
accounts are for legal costs and fees claimed by Mr FJ Senekal since
2013
to
November 2018,
which
costs and fees are taken up in the amended second and final
liquidation and distribution and contribution account debited
against
the Insolvent Estate of JN Herselman as set out in Annexure "C"
to the founding papers.
2.8
It
is
the Applicant's case that the services rendered by Mr
Senekal since
2013
for the Insolvent Estate, and the
remuneration thereof out of the Insolvent Estate are illegal insofar
as it is contrary to the
provisions of
Section 63(2)
of the
Insolvency
Act
24
of 1936
.
2.9
The aforesaid remuneration to Mr FJ
Senekal, which is now included in the amended second and final
liquidation and distribution
and contribution account
forms the basis of
the bulk of the contribution now levied
against the Applicant in the contribution account (part of
Annexure "C").
2.10
The aforesaid objections to the amended
second liquidation and distribution
account
are argued as
aforesaid
mainly on the second objection dated
20
April 2023.
[9]
Mr.
F.J. Senekal admitted that the fees that are the bone of contention
here, involve
work
done
by
him
since
2014
until
2017
and was done
in
his capacity as
a
director
of
Matsepes
I
nc.
Mr.
T.V.
Matsepe,
the
third
respondent,
was
also a
director
of
Matsepes
Inc.
and
a
co-trustee
of
the
estate of
J.N.
Herselman. This fact
is
common cause. This fact was admitted
by
Mr.
Senekal in
the
replying
affidavit of
a
case filed
under
number
l
251/2022
in
paragraph
19.9
thereof.
[9]
The
1251/2022
court
order
will
become
relevant
later,
as justification
for
the
finding
of
the
Master
on
one
of
the
objections
by
the
applicant.
[10]
Section
63
of
the
Insolvency
Act
24
of
1936 (insolvency
Act)
prescribes
as follows:
63.
Remuneration of trustee or curator bonis.-
(2) A person who
employs or is a fellow employee or is ordinarily in the employment of
the trustee shall not be entitled lo
any remuneration out of tlie
insolvent estate for services rendered to the estate, and a trustee
or his partner shall not be entitled
to any remuneration out of the
estate for services rendered to the estate, except the remuneration
to which under this Act he is
entitled as trustee.
[11]
The
argument
for
the
fourth
respondent
as
presented
by
counsel
for
the
said respondent in their supplementary
heads of argument is that:
3.1.
In paragraph 7.1to 7.6 of
the answering affidavit Senekal makes the
point that:
3.1.1.
The initial Liquidation and Distribution
account did not include his fees and expenses as part or the
administration costs of the
estate;
3.1.2.
He raised an objection to the Master which
objection was opposed by the co-liquidator
Smith on
the
basis
that
that (sic)
Farmsecure
is
liable
for
Senekal's fees, not the estate.
3.1.3.
On 20 April 2021 the Master made a ruling
that Senekal's fees should be included in the Second and Final
Account.
3.1.4.
The Liquidators did not take the Master's
decision on review and Standard Bank did not object to the inclusion
of Senekal's fees
as administration costs of
the estate when KS 1.1
lay
for
inspection.
3.2.
Mars: The Law of Insolvency in
South Africa, with reference to
Baard
v Estate Baard
1928 CPD
505
,
confirmed
the
principle that
the
Master acts in
a
judicial
capacity
when deciding on objections
lodged
with him and
that
his decisions
are
binding unless set aside.
3.3.
This principle is also in line with the
often-quoted passage of
the
SCA in
Oudekraal Estates (Pty) Ltd
v City of Cape Town and
Others
·'… No
doubt it is for this reason that our law has always recognised that
even an unlawful administrative act is
capable of producing legally
valid consequences for so long as the unlawful act is not set aside."
3.4.
ln
MEC
for Health.
Eastern Cape and Another
v Kirland Investments (Pty)
Ltd t/a
Eye
& Lazer Institute
2014 (3) SA
481
(CC) at paragraphs [99] to [101] the Apex Court has showered the
Oudekraal principle with constitutional authority:
“
[99]
…
[100]
…
[101]
The essential basis of
Oudekraal
was that invalid
administrative action may not simply be ignored, but may be valid and
effectual, and may continue to have legal
consequences, until set
aside by proper process.''
(footnotes
omitted)
3.5.
It
is thus respectfully submitted that the Bank"s failure to review
and set aside the
Master's
decision of
20
April 2021 is fatal. The decision - that Senekal’s
fees
are
administration
costs
in
the
estate
-
stands
until
reviewed
or
set
aside.
(My
emphasis.)
[10]
[12]
The
Oudekraal principle is not as simple as stated above and much have
been said and ruled on the subject. I align myself with the
conclusion by OM Pretorius after intensive research and with
reference to case law
in
his paper
'Oudekraal
After
Fifteen Years: The Second Act (or, A Reassessment of
the
Status and Force of Defective Administrative Decisions Pending
Judicial Review':
[11]
Oudekraal
thinking
should properly be confined to
Oudekraal
contexts
and should be utilized having due regard to the relevant statutory
framework, and not as general propositions ... Otherwise.
we might
extend
Oudekraal
thinking
to situations
where
it is
not
gennane.
[12]
[13]
Reading
of the papers and the arguments beg the question as to what the real
issue is here. The core issue does not lie exclusively
in the
provisions of
section 63(2)
of
the
Insolvency
Act.
This
is
that
Mr. Senekal may not claim for
legal
costs
incurred
during
his
tenure as director
based
on
the
so-called principle of double dipping. This principle was referred to
by Bertelsmann J in the arbitration matter of
ABJ
Knipe and others v CB St Clair Cooper NO and others,
[13]
and
relied
upon
by
the
fourth
respondent
in
their
supplementary heads of argument.
[14]
The question is whether the fourth
respondent may claim for legal costs incurred by Matsepes Inc. before
2017 and without authorization
from Matsepes Inc.
The
claim for the costs is between
Matsepes
lnc. and the Insolvent Estate. As the Master indicated in the reasons
supplied to the court: 'Matsepes was substituted
as the firm of
attorneys by
F.J.
Senekal
Inc.'
Again, the
fourth
respondent
was
only
established
in
2017
and
the claim
is
in
the name of the entity
F.J. Senekal Inc. and not in the name of
Mr. F.J. Senekal
for
work he had done at Matsepes Inc. before 2017.
[15]
The
argument
that
the
neglect
of
the
applicant
to
take
the Master's
decision
of 20 April 2021 on review is fatal, may not be accurate. The Master
apparently ruled in the 20 April 2021 decision that
Mr. Senekal's
fees, whilst a director of Matsepes
I
nc.:
'should
be
included
in
the
Second
and
Final
Account'.
That
said, it remains a claim for the benefit and the account of Matsepes
Inc. not the fourth
respondent,
and the
Master
did
not
rule on this issue. It
is
money
that
must
go
to
Matsepes
Inc.,
not
the
fourth
respondent.
In
Standard
Bank
of
South Africa Limited v Master of the High Court Johannesburg and
Others
[14]
the
court held:
[29]
In
Constantia
Insurance Company limited .
..,
the Court dealing with the provisions of s
151
stated
the following:
[19]
...
this court confirmed that in a
review of this kind a court enters into and decides the whole matter
afresh. For this purpose, it
has powers of both appeal and review and
may receive new evidence. In a review under s 151 of the Insolvency
Act, a party
may
therefore raise an issue that was not placed before the Master.
Whether an issue was properly raised in the review application
must,
be determined on the ordinary principles applicable to motion
proceedings. (My
emphasis.)
[16]
The review is in terms of
sections 111(2)(a)
and
111
(2)(b) of the
Insolvency Act and
it reads as follows:
111.
Objections to trustee's account.-
(1) The
insolvent or any person interested in the estate may, at any time
before the confirmation of the trustee's account,
in terms of section
one hundred and twelve, lay before the Master in writing any
objection. with the reasons therefor, to that
account.
(2)
If the Master is of the opinion that any such objection is well
founded or if, apart from any
objection. he is of the opinion that
the account is in any respect incorrect or contains any improper
charge or that the trustee
acted mala tide, negligently or
unreasonably in incurring any costs included in the account and that
the account should be amended.
he may direct the trustee to amend the
account or may give such other direction in connection therewith as
he may think fit: Provided
that-
(a)
any
person
aggrieved
by
any such
direction
of
the
Master
or
by
the refusal of the Master 10 sustain an objection so lodged, may
apply by motion to the court within fourteen days as from the
date of
the Master's direction. or as from the date of intimation 10 the
objector of
the
Master's refusal to sustain his objection, after notice to the
trustee. for an order to set aside the Master's decision and
the
court may thereupon confirm the account or make such order as it
thinks fit;
and
(b)
when any such direction affects the interests of a person who has not
lodged an objection
with the Master, the account so amended shall
again lie open for inspection by the creditors in the manner and with
the notice
hereinbefore prescribed, unless the person affected as
aforesaid consents in writing 10 the immediate confirmation of the
account.
[17]
A
review
in
terms of section
111(2)
is generally about
illegality,
procedural irregularity or irrationality which is such as to justify
intervention by the court. If a judgment was exercised
unreasonably,
irregularly, or wrongly so as to lead to a patently
inequitable
result, a court will
interfere.
[15]
[18]
LAWSA
[16]
noted that any person aggrieved by a decision, ruling, order or
taxation of the Master, or by a decision, ruling or order of an
officer presiding at a meeting of creditors, may bring it under
review by the High Court. A person is 'aggrieved' if his rights
have
been infringed or if he has been wrongfully deprived of some
advantage to which he is legally entitled. The aggrieved
person
may be a creditor, the trustee or the insolvent himself.
[17]
[19]
Further,
that the powers of review conferred are of the widest kind, which
means that the court is not restricted to cases where
some
irregularity has occurred.
Not
only
does the court
possess
the
powers
of
a
court
of
review
in
the legal sense, but it also has the functions of a court of appeal,
with the additional power, after setting aside the decision
arrived
at by the lower tribunal, to
deal
with
the
whole
matter
upon
fresh evidence
as
a
court
of
first
instance.
[18]
OBJECTION
[19]
[20]
The
main issue that lured the objections is based upon the contribution
account whereby the applicant will be liable to pay a contribution
to
the Insolvent Estate in the total amount of R1
085
732.12.
[20]
We refer to the
above-mentioned estate as well as the
"Amended Second and
Final L & D Account"
dated 31 January 2023 alternatively
14 February 2023 as published on 10 March 2023.
We record that we object
against the contribution payable in the amount of R1 085 703.12
should the account be confirmed.
The above objection is
based upon the fact that ii was not Standard Bank but Farmsecure
livestock a further creditor in the estate
who instructed the
liquidators to proceed to arrange an enquiry and to instruct Mr
Senekal to attend to same.
We further confirm that
subsequent to the enquiry the mentioned Farmsecure Livestock also
instructed the liquidators to proceed
to appoint Mr Senekal to attend
to further legal steps as to collect certain assets.
On both the
abovementioned instances it was clearly agreed that Farmsecure
livestock will be liable for all costs incurred by Mr
Senekal and
that all benefits derived from such proceedings will be in terms of
section 104(3) of the Insolvency act for the account
of Farmsecure
livestock.
We confirm that it is
our submission that Farmsecure Livestock on their own and as a
concurrent creditor of the estate with significant
smaller claim than
Standard Bank proceeded to appoint Mr Senekal and subsequently
incurred various legal costs in order/or them
alone to benefit from
any proceeds obtained in terms of
section 104
(3) of the Insolvency
act.
Due to
section 104
(3)
being applicable Standard Bank would never have received any benefit
derived from such proceedings.
It is important to note
that all mentioned facts only came to the attention of Standard Bank
during 2022 and was Standard Bank never
consulted, informed neither
did Standard Bank consent to such costs incurred.
During
2022
Standard
Bank
was
informed
of an
application
brought
by
Mr
Senekal
for
certain relief
sought
against the
Trustees
regarding
payment of
the
mentioned costs
incurred.
Standard Bank was not a
party to such proceedings and that we through our attorneys informed
the Trustees that our Standard Bank
denies liability regarding any
contribution payable.
We refer to
section 111
of the Insolvency act which states: ...
Based
on
the
contents of
section
111
and
taking
into
account
the
facts as staled above Standard Bank request (sic) that the objection
be upheld and that the Master direct (sic) that the account
be
amended
and
that
Standard
bank
be
exonerated
from
payment
of
any
contribution relating to the mentioned costs incurred by Trustees
and/or Mr
Senckal.
[21]
(My emphasis.)
[21]
The case above for
the applicant on this aspect
was summarised in
their heads of
argument as follows:
5.
CONCLUSION:
5.1 It
is humbly submitted that the Fourth Respondent, through the backdoor,
when Farmsecure was liquidated, entered
into a Settlement Agreement
with the trustees (Second and Third Respondents) to raise
remuneration against the Insolvent Estate,
contrary to the
provisions of
Section 63(2)
of the
Insolvency Act. To
settle the
aforesaid with the trustees and to have the Settlement Agreement made
an Order of Court, to the detriment of other creditors
in the
Insolvent Estate, especially the Applicant and Wesbank. (My
emphasis.)
[22]
Succinctly as alleged by the applicant,
Farmsecure employed Senekal and undertook to carry the costs of his
work. Farmsecure was
liquidated. Senekal was involved in the
liquidation. F.J. Senekal Inc. now claims from the remaining
entities, such as the applicant,
to contribute to his fees. This
claim caused litigation and a subsequent settlement agreement that
was made an order of the court.
[23]
The defence of the fourth respondent and
the justification of the Master is the settlement
that
was
made
an
order
of
the court
in
case
1251/2022.
The applicant is constrained
by
it, and unequivocally so.
[24]
The
question
is
however
if
the
fourth
respondent;
F.
J.
Senekal
Inc.
may
claim.
[25]
Imperative
is
the fact
that
the
125
l /2022
court
order
is
not
under
attack
here nor
is there any
application
for the setting aside thereof. What
is
on the papers are suspicions of untoward
conduct by some of the parties in the
making of the settlement agreement and the subsequent court order.
The allegations by the
applicant from paragraphs 7.1 to 7.13 in its
founding affidavit were ruled to be based on inadmissible hearsay
evidence that was
struck out
in limine
in the hearing and before the arguments
on the merits in the main application proceeded.
The
fact
that
it
is allegedly
made
on
statements
by the defendant does not rescue the
situation. Even if the allegation were accepted, it did not change
the fact that there is not
an application before the court to set
aside the court order or the settlement agreement. The allegations
will accordingly
be
disregarded on the basis of
inadmissible
hearsay evidence.
[26]
The
court
will
be
amiss
if
it
does
not
supply
reasons
for
the
ruling
that
the
evidence
in
paragraphs 7.1 to 7.13 of the founding affidavit of the applicant is
hearsay
and
inadmissible.
It
is
undisputed
that
Mr.
Pillay
is
not
the
primary
source of the evidence and that the
veracity
of the
information
is dependent on others. Hearsay evidence is defined in section 3(4)
of the Law of Evidence Amendment
Act
45
of
1988
(LEAA)
as
'evidence,
whether
oral
or
in
writing,
the
probative
value
of
which
depends
upon
the
credibility
of
any
person
other
than
the
person
giving
such
evidence'.
There
was
not
any
application
before
the
court
to
allow
said
evidence
on
any
of
the
exceptions
provided
for
in
the
act.
The
prejudice
to
the
administration
of
justice
is
obvious;
evidence
must
carry
veracity
and
be
admissible,
if
not
it
may
not
be
allowed
in
the
adjudication
of
the case.
[22]
If the court
was
wrong
in
this
ruling,
it
does
not
add much
to
the
case
because
the
1251/2022
court
order
was
not
a
target
of
the
review
to
be
set
aside
and
the
issue
of
the
hearsay
evidence
moot
and
peripheral.
[27]
Also,
the
parties
to
the
settlement
that
caused
the
1
251/2022
court
order,
which was also by agreement, were F.J. Senekal Inc. (Applicant) v
Elrich Ruwayne
Smith
N.O.
(Trustee
and
first
respondent),
Tsui
Vincent
Matsepe
N.O. (Trustee and second respondent) and the Master of the High
Court, Bloemfontein (Third respondent).
[28]
The settlement
that became the order decreed
that:
PLEASE
TAKE NOTICE THAT First- and Second Respondents, with prejudice and in
full and
final
settlement, offer to settle the abovementioned application on the
basis set out below:
1.
That
the First-and Second Respondent be directed
to
collect from each creditor liable to contribute to the administration
costs of the insolvent estate of Jacobus Nicolaas Herselman,
Master
Reference B109[…],
such
amount which he/she/it is liable to contribute in
terms
of
the
provisions of
section
113
[23]
of
the
Insolvency
Act,
>
24
of
1936 ("the Act")
after
taxation of the Applicant's costs and following the procedure
prescribed by the Act regarding amendment of the liquidation and
distribution account;
2.
That
the First- and Second Respondent be directed to claim a contribution
from the proven creditors of the estate lo
defray
such sequestration and administration cost, as is provided for in
Section 106(a) - (c)
[24]
of
the Act following taxation of the Applicant's
costs
and
amendment
of the account;
3.
That
the costs of this Application shall form part of the administration
costs of
the
insolvent estate. (My
emphasis.)
[25]
[29]
Important to note at this stage is that the
court was conditional by stating that:
... directed to collect
from each creditor
liable to contribute
to the administration
costs of the insolvent estate of Jacobus Nicolaas Herselman, Master
Reference B1 09/2013.
such amount which he/she/it is liable to
contribute.
..
and
...
after taxation of
the Applicant's costs and following the procedure
prescribed
by the Act regarding amendment of the liquidation and distribution
account:.
..
[30]
Following from the undisputed facts, it is
apparent that the applicant, F.J. Senekal
Inc. did
not
incur
the
costs claimed
before
2017;
it
was
possibly
Mr. F.J.
Senekal
as
director
of
Matsepes
Inc. The
process
in
terms
of
the
Insolvency
Act
had
to
be
concluded
which
would
have
involved
any
objections
to the
decisions
by
the
Master
and
the
review
application
in
terms of section
111
of
the
Insolvency
Act. The
issue
was the
liability
to
F.
J. Senekal Inc., which ought to have been
picked
up
during taxation.
[31]
The
Master, without observing the conditional provisions of the court
order, relied directly and exclusively on the 1251/2022 court
order
and supplied the following reasons
[26]
to the court
in
casu
against
the objections:
1.
The
notice of motion and applicant's founding affidavit have been served
on me.
2.
I
am the First Respondent and I do not oppose the application.
3.
Applicant's
founding affidavit contains the background which led to this
application.
4.
I
can
confirm that the
Second
meeting
of
creditors
took
place
at
the
Magistrate's court,
Petrus
Steyn on 14 July 2014. In terms of the stipulations of
sections
40(3)(a)
of the
Insolvency Act, 24 of
1936
,
as amended. the purpose of
the
Second meeting of
creditors
is the proof of claims against the estate and the receiving of the
report of the trustees on the affairs and condition
of the estate and
giving the trustee directions in connection with the administration
of the estate. The Trustees report and directions
by creditors are
dealt with in
section 81
of the Insolvency Act,
supra.
5.
According
to MARS, The Law of Insolvency in South Africa, Ninth Edition,
paragraph 15.14 on page 329:
"After
consideration of the trustee's report and documents submitted
therewith, it is competent for creditors to give him (the
trustee)
such directions as to the future administration of the estate as they
deem fit." MARS confirms further on the same
page: "If a
resolution has been duly carried at a meeting of creditors it is
binding on all creditors, unless set aside by
the court."
6.
On
page one of the Index of Record of Proceedings the Honourable Court
will note that a Mr L.S. Stoffberg appeared by proxy on behalf
of the
creditor Standard Bank (applicant) at the Second meeting of
creditors.
7.
The
Honourable Court will note on page 11 of the Index of Record of
Proceedings that the very same Mr Stoffberg who appeared on
behalf of
Standard Bank also voted for the acceptance of the resolutions at the
Second meeting of creditors. The Master never received
notice that
any creditor applied to the court for the setting-aside of the
resolutions adopted at the Second meeting of creditors.
8.
The
Master received an objection (The First objection) from applicant on
17 March 2023, annexure "A."
Applicant
objected against the contribution payable in terms of the trustees
Amended Second and Final Liquidation. Distribution
and Contribution
Account signed by the trustee E.R. Smith on 3I January 2023 and
signed by trustee T. V. Matsepe on 14 February
2023, a copy of the
Account is attached and marked annexure "B."
9.
The
Master rejected the First objection and the reason for the Master's
decision is the Court order dated 06 October 2022 issued
by the High
Court of South Africa, Free State Division Bloemfontein in case
number 1251/2022, annexure "C."
[32]
Imperative is that on reading the order and
settlement agreement, the ultimate result
is that there was no
instruction that the claim
by F. J. Senekal
Inc. must be
paid;
but
was
it
ordered
that
due
process
must
be
followed
after
taxation and establishment of the legality
of the claim.
[33]
The
liability
of
Standard
Bank
to
contribute
was
to
be
established
and
processed
in
terms
of
the
law.
The
liability
to
contribute
was
correctly
placed on Standard Bank in terms of the
court order/settlement agreement in terms of
sections 113
and
I 06
of
the
Insolvency
Act and
as
per the court order.
[34]
The failure to establish who has the right
to the claim is where the case derails. This calamity links to the
second objection.
OBJECTION
2
[27]
[35]
A major issue is whether Mr. Senekal, in his capacity as director of
Matsepes Inc. or subsequently
as F.J. Senekal Incorporated, has a
right to the fees he claimed whilst he was working as a director at
Matsepes before his resignation.
The contract was entered into
between Matsepes and the estate; not the estate and Mr. Senekal. It
does not follow that if Mr. Senekal
took over the file from the firm
Matsepes, that he automatically took over their claims against the
estate before he took control
of the file. The claim still lies with
Matsepes.
[36]
The fourth respondent, F.J. Senekal Inc. only came into existence on
27 October 2017. Although
the accounts for the fourth respondent are
dated and came into existence on 2 December 2019 and 12 February
2020, such accounts
are for legal costs and fees claimed by Mr. F.J.
Senekal since 2013 to November 2018. These costs and fees are taken
up in the
Amended Second and Final Liquidation and Distribution and
Contribution account debited against the estate of J.N. Herselman as
set out in Annexure ‘C’ to the founding papers. It is
further the summary of the applicant in their founding affidavit
that:
9.
SUMMARY
9.1
ln summary it
seems that the contribution in the
insolvent estate was caused by legal fees and enquiry
costs
raised by the Fourth Respondent for work done by Mr FJ Senekal,
whilst he was a director and employee of Matsepes Inc.
9.2
Matsepes Inc. could never have raised such
fees or enquiry costs against the insolvent estate in
and because of
section 63(2)
read with
section 73
of
the
Insolvency
Act 24 of 1936
.
9.3
As explained above, whatever
fees and/or costs are applicable, should
have been in and because of the direct agreement or agreements
between Matsepcs Inc. and/or
FJ Senekal Inc. and/or FJ Senekal and/or
Hector Van Aardt Attorneys on behalf' of Farmsecure.
9.4
As referred to above, I invite the
Fourth Respondent to furnish any written
proof
of any instruction to it by the insolvent estate to render services
for the estate.
(My
emphasis.)
[37]
These
were
the
reasons
from
the
Master:
10.
On
24 April 2023 the Master received another objection (the Second
objection) from applicant against annexure "B."
11.
A
copy of the Second objection is attached hereto and marked annexure
“D.” The Second objection stands on three legs
and I will
now deal with them separately:
A.
Objection against the admissibility of
voucher 6 dated 2015/08/21, which reflects the amount collected
through enquiry and paid
to F.J. Senekal Inc. (fourth respondent).
This amount is reflected on page five. item 6 of
annexure "B." The reason
for this objection by the applicant is that
the amount collected during 2015 could not have been paid to F.J.
Senekal Inc. (Registration
number: 2017[…]) as the named
entity did not exist at that time.
Objection
A
was
rejected by the Master
and the reason
for the Master's decision is that Mr F.J. Senekal
was appointed to conduct
the enquiry and litigation, when he was a
director at Matsepes Inc.
Matsepes was
substituted as the firm of attorneys by F.J. Senekal Inc
.
When Mr
Senekal
left Matsepes as director on
01
October 2017, no fees were due, owing or
payable to Matsepes from the enquiry or litigation, because a
suspensive condition existed
in terms whereof the litigation and
enquiry
fees
would only be paid once the litigation
is
successfully
completed.
This is confirmed on the
following
pages in
the
Index of
Record
of Proceedings: page 12. page 14 and pages 22-3
1
.
B.
Objection against voucher 7, reflected as
item 7 on page
5
of
Annexure
"B." According to the objector (applicant) there was an
agreement between the trustees and Farmsecure that all
expenses
relating to the
livestock would be
paid
directly
by Farmsecure.
Objection
B was rejected by the Master
and the
reason for the Master's decision is that there is
no agreement to that effect on the Master's
file.
C.
Objection
C
was
against vouchers
9A
to 9H
being
accounts
rendered
by
FJ
Senekal
Inc. for legal costs incurred. These are reflected
as items numbers 9A
to
9H on page
5
of
Annexure "8," The reason
for
the objection being that Matsepes
Attorneys
was appointed to
attend
to
all
litigation
and
enquiry
related
matters and
these
legal
services
were rendered before 2018
and again, the entity F.J. Senekal Inc. did
not exist before 2017.
Objection
C was rejected by the Master
and the
reason for the Master's decision is that Mr F.J. Senekal
was appointed to conduct
the enquiry and litigation, when he was a
director at Matsepes
Inc.
Matsepes
was
substituted as the
firm
of attorneys by F.J. Senekal Inc.
When
Mr Senekal left Matsepes as director on 01 October 2017, no fees were
due, owing or payable to Matsepes from the inquiry or
litigation,
because a suspensive condition existed in terms whereof the
litigation and enquiry fees would only be paid once the
litigation is
successfully completed. This is confirmed on the following pages in
the Index of record of proceedings: page
12. Page 14
and pages 22 -
31
12.
I
have no further facts to bring under the attention of the Honourable
Court and I abide by the decision of the Honourable Court.
(My
emphasis.)
[38]
The
above is based on the double dipping principle in
De
Jager's Trustees v The Master
[28]
in
that F.J. Senekal Inc. did not receive any duplicated remuneration or
double compensation. The aim of
the
prohibition in
section 63(2)
is to prevent a trustee and his partner
from recovering double remuneration. The fourth respondent refers to
the arbitration matter
of
ABJ
Knipe and others
v
CB St Clair Cooper NO and others
[29]
that
he attached to his heads of
argument
and made the following observation:
18.8
Simply put:
Section 63(2)
is a prohibition against payment of
remuneration (if the jurisdictional
facts have been established) and not, as
the Bank
wants to
have it, tacit essentialia of
an
agreement between a trustee and a service provider of an estate.
18.9
The facts in
casu
are
that:
18.9.1
Matsepes Inc. did not raise an invoice as service provider to the
estate for any work
done by Senekal.
18.9.2
Senekal
did
legal
work
for
the
estate
on the
basis
that
his
fees
will
only
become due and payable at the end or the sequestration process, but
the estate will carry the legal costs and
legal expenses, like for instance, advocates fees, sheriff's costs
etc., during the litigation
process.
18.9.3
Senekal parted ways with Matsepes Inc.
during 2017.
18.9.4
Senekal raised his invoices against the
estate only after the litigation on behalf of the estate was
finalised and at a time when
there was absolutely no relationship
between him, Matsepes Inc
and/or
Mr
Matsepe.
18.9.5
There is no evidence of double dipping
between Senekal, Mr
Matsepes
and/or Matsepes Inc. Standard Bank's reliance on
section 63(2)
is
misconstrued and the application ought to be dismissed with costs.
[39]
If counsel for the fourth respondent is
correctly understood, then he agrees that Mr. Senekal, in his
personal capacity, could not
claim for work done by Matsepes Inc. in
terms of
section 63(2)
whilst he was the director there;
however, the position
is different now. Now he may claim
because
there
were no claims at
the
time when
the
tile was
taken
over.
In
the result,
there
would not be any double
payment or prejudice to the estate.
[40]
Despite the above argument, the relevant
question remains whether one service provider may claim on a legal
relationship between
two other entities. There did not exist a
contract or agreement with F.J. Senekal lnc. before it was
established and instructed
in that capacity, notwithstanding the fact
that the payments were suspended on the order of the Master. Senekal
was merely a director at Matsepes Inc. and,
although he did work for the estate, it was in his capacity as
director of Matsepes
Inc. He cannot claim for such work as the claim
belongs to Matsepes Inc. up until 2017.
CONCLUSION
[41]
It follows that:
1. The 1251/2022
court order mandated the collection from each creditor liable to
contribute to the administration costs of
the insolvent estate of
Jacobus Nicolaas Herselman, Master Reference B109[…] and
directed to claim a contribution from the
proven creditors of the
estate to defray such sequestration and administration costs.
Standard Bank does not apply for the court
order to be set aside; it
suspects it as illegal and maintains that the Farmsecure estate
should carry the costs but that is not
the order of the court and
that does not take their case further. Standard Bank was represented
at the 14 July 2014 meeting of
the creditors and condoned the
resolutions. Standard Bank is liable as a contributor in terms of the
1251/2022 order. lf Standard
Bank wants for the 1251/2022 order to be
set aside it is another case for another day; it is not the
application here. The question
is whether F.J. Senekal Inc. has a
claim for the contributor to honour?
2.
The claims of F.J. Senekal Inc. against the
insolvent estate of J.N. Herselman
before
2017 for services
provided
by
Matsepes
Inc. cannot be lawful. Even if Matsepes Inc. did not claim, it is not
for Senekal
Inc.
to just step
in
and
claim
the
monies
without
any
mandate
and
because F.J. Senekal Inc. ''took the file
over". This is an issue between F.J. Senekal Inc. and Matsepes
Inc. It is not an
issue of double dipping; it is an issue of the
rightful claimant.
3.
The decision of the master to cause the
applicant to contribute the amount of R1 085 723.12 payable to F.J.
Senekal Inc. was based
on unsound legal principles, irregular and
unlawful. The prejudice to the administration of justice in that
entities may claim
from insolvent estates for services rendered by
another entity and without authority of the actual service provider
at the time;
may cause severe detriment to the control of the
veracity of claims. The authority and discretion of the Master do not
comprise
and allow for this.
4.
Costs must follow
the cause and
Standard
Bank
is
the
successful party in that the claim of R1
085 723.12 is not payable by them to the fourth respondent. The
fourth respondent shall
carry the costs of the
application.
[42]
ORDER
1.
The first respondent's decision not to uphold the applicant's
objections against
the Amended Second Final Liquidation, Distribution
& Contribution Account of the Insolvent Estate of J.N. Herselman,
Master's
reference: B109[…], which objections were dated the
16
th
of March 2023 and 23
rd
of April 2023, is
reviewed and set aside in terms of
section 111
(2)(a) read with
section 111
(2)(b) of the
Insolvency Act 24 of 1936
;
2.
The
applicant's
objections
against
aforesaid
Liquidation,
Distribution & Contribution Account are
upheld and the aforesaid account must be amended accordingly;
3.
The
costs
of
this
application
for
review
shall
be
paid
by
the
fourth respondent.
OPPERMAN
J
I
concur
MHLAMBI
J
Appearances
For
applicant:
ADVOCATE
P
ZIETSMAN
SC
Instructed
by: Phatshoane
Henney Attorneys
Bloemfontein
For
the fourth
respondent:
ADVOCATE
P.J.J. ZIETSMAN
SC
Instructed
by: F.J. Senekal Inc.
Bloemfontein
[1]
Annexure
'C'
at
pages 56
to
73
of
the
bundle
"Index” dated
20
-
09
-
2023
(“the
Bundle”).
See paragraph 2.2 of
the
heads of argument for the applicant.
[2]
Pages
74 to 75 of the Bundle.
[3]
Pages
79 to 80 of the Bundle.
[4]
See
paras 5.2 and 5.3.
[5]
The
notice of
motion
contains five prayers as per pages 2 to 4 of the Bundle. Only
prayers I, 2 as amended now, and 4
remain
applicable.
[6]
According
to Harms, judicial review has bifurcated into two genera: reviews
under PAJA and those under the principle of
legality.
It
depends
on,
inter
alia,
the
nature or
source
of
the
public power
that
was exercised: executive or administrative. When a power was sourced
in legislation or subject to substantial
constraints.
it
is
likely
to
be administrative in
nature.
See Civil Procedure, Civil Procedure in
the
Superior
Courts,
Part
B
High
Court,
UNIFORM
RULE
53
REVIEWS,
REVIEWS
IN
GENERAL: April 2024 -
SI
79,
https://www.mvlexisnexis.co.za/lndex.aspx
on
14
May 2024 with reference to
Mbuthuma
and Another v Walter Sisulu University and Others
[2019]
ZAECMI-IC
79:
2020 (4)
A
602 (ECM) and
CompCare
Wellness Medical Scheme v Registrar of Medical Schemes and Others
[2020]
ZASCA 91; 2021 (1)
SA
15
(SCA).
[7]
This
fact is important since F.J. Senekal Inc. was only established in
2017. In essence the claim is for services rendered by
Matsepes Inc;
F.J. Senekal was a director of Matsepes Inc. at the time.
[8]
9.1
In
summary it seems that the contribution in the insolvent estate was
caused by legal fees and enquiry
costs
raised by the Fourth Respondent for work done by Mr FJ Senekal,
whilst he was a director and employee of Matsepes Inc.
9.2
Matsepes Inc. could never have
raised such fees or enquiry costs against the insolvent estate in
and because of s
63(2)
read with
s 73
of the
Insolvency
Act
>
24 of
1936.
9.3
As explained above, whatever fees
and/or costs are applicable, should have been in and because of
the direct agreement or agreements between
Matsepes Inc. and/or FJ Senekal Inc. and/or FJ Seneka.l and/or
Hector Van Aardt Attorneys
on behalf of Farmsecure.
9.4
As referred to above,
I
invite the Fourth Respondent to
furnish any written proof of any instruction to it by the insolvent
estate to render services
for the estate.
(My
emphasis.)
[9]
See
pages 418 to 419 of the Bundle.
[10]
See
Moleya,
NI
'The effect of the
Oudekraal
principle on the
rule
of
law'
De
Rebus,
August
2018
(De
Rebus
in
2018 (Aug) DR 28).
[11]
DM
Pretorius
·Oudekraal
After
Fifteen
Years:
The Second Act
(or,
A
Reassessment
of
the
Status and Force of
Defective
Administrative
Decisions Pending Judicial Review)'
(2020)
STELL
LR
3.
[12]
Ibid
at
36.
[13]
ABJ
Knipe
and
others
v
CB
St
Clair
Cooper
NO
and
others
was
an
arbitration
hearing
in
Bloemfontein and presided
over
by retired judge Bertelsmann. The award
was
made on
22
May
2021.
[14]
Standard
Bank
of South Africa limited v Master of the High Court Johannesburg and
Others
[2023]
ZAGPJHC 989.
[15]
Harms
D
Civil
Procedure
in the Superior Courts:
·uniform
Rule 53 Reviews, Reviews in General'. Last Updated: April 2024 - SI
79. Also available online:
https://www,mylexisnexis.co.za/lndex.aspx
.
Accessed 15 May 2024.
[16]
11
LAWSA
2ed
para
372.
[17]
See
in
this
regard
Jeeva
and Another v Tuck NO and
Others
1998
(1) SA
785
(SE) at 792-793.
[18]
Johannesburg
Consolidated Investment Co v Johannesburg Town Council
1903
TS
111
at 117.
[19]
Pages
74 and 75 of the Bundle.
[20]
Para
2.3 of the heads
of
argument
for the applicant.
[21]
Pages
74 and
75
of the Bundle.
[22]
See
S
v
Ndhlovu
and
Others
[2002]
ZASCA
70
;
[2000]
3
All
SA
760
(SCA)
para
14.
See also
Vulcan
Rubber Works (Pty) Ltd
v
South African
Railways
and
Harbours
[1958]
3
All
SA
241
(A)
at
250-251.
[23]
'113.
Distribution
of estate and
collection
of contribution from creditors.-
(1)
Immediately after the confirmation of a
trustee's account, the trustee shall give notice of the confirmation
in the Gazette and
shall state in that notice according to the
circumstances, that a dividend to creditors is in course of payment
or that a contribution
is in course of collection from the creditors
and that every creditor liable to contribute is required to pay to
the trustee the amount for which he is so
liable.
(2)
If any contribution is payable. the trustee shall specify fully in
that notice the
address at which the payment of the contribution is
to be made, and shall deliver or post a copy of the notice to every
creditor
liable to contribute.
(3)
Immediately after the confirmation of a trustees account the trustee
shall in accordance
therewith distribute the estate or collect from
each creditor liable to contribute the amount for which he is
liable.'
[24]
'106.
Contributions
by
creditors
towards
cost
of
sequestration
when
free
residue
insufficient.
Where there is no free residue in
an
insolvent estate or
when
the free residue is insufficient to meet all the expenses, costs and
charges mentioned in section ninety-seven, all creditors
who have
proved claims against the estate shall
be
liable to make good any deficiency, the non-preferent
creditors
each in
proportion
to the amount of his claim and the secured creditors each in
proportion to the amount for which
he
would
have ranked
upon
the
surplus
of
the
free
residue,
if
there
had
been
any:
Provided
that-
(a)
if all the creditors who have proved
claims against the estate are secured creditors who would not have
ranked upon the surplus
of the free residue, if
there had been any, such creditors shall
be liable to make good the whole
of
the deficiency, each in proportion to the
amount of his claim;
(b)
if a creditor has withdrawn his claim, he
shall be liable to contribute in respect of
any deficiency only so far as is provided
in section fifty-one, and if
a
creditor has withdrawn his claim within five days after the date of
any resolution of creditors he shall be deemed to have withdrawn
the
claim before anything was done
in
pursuance of that resolution;
(c)
if all the creditors who would have ranked
upon the surplus of the free residue. if there had been any, have
withdrawn their claims
and, after payment of
their contribution in terms of paragraph
(b) there is still a deficiency, the remaining creditors whose
claims have been proved
against the estate shall, notwithstanding
the fact that they would not have ranked upon the the surplus of
the free residue, if
there had been any, be liable to make good
such deficiency, each in proportion to the amount of his claim.'
[25]
Pages
52 to 55 of the Bundle.
[26]
Pages
85
to
129
of
the
bundle "INDEX
OF
RECORD
OF
PROCEEDINGS'"
dated
7
June
2023
compiled by the Master. Hereafter referred to as the “Master's
Bundle".
[27]
Pages
79 to 80 of the Bundle.
[28]
De
Jager's Trustees
v
The Master
1918
CPD
535.
[29]
Footnote
13.