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Introduction
[1] This is an opposed application for money judgment for fees incurred in an
application for provisional sequestration of the defendant’s former husband
which sequestration order was set aside.
Background
[2] The applicants, Johannes Hendricus Du Plessis and Nomsa Ursula
Sefanyatso, were joint trustees of the insolvent estate of Dorian Robert
Cabral (“Mr Cabral”). The respondent and her erstwhile husband were
divorced and in terms of the decree of divorce, the husband had to pay
maintenance for the minor children. He defaulted and the sequestration
proceedings were initiated which resulted in the final sequestration order
been granted during June 2021.
[3] After the sequestration order, the respondent, through her attorney,
requested the joint trustees of the insolvent estate to approach the Master
of the High Court to grant the consent to conduct an inquiry into the
insolvent estate of Mr. Cabral in terms of section 1521 of the Insolvency
Act. This was on 17 March 2021. The Master of the High Court granted
the consent on 24 March 2021 to conduct a section 152 inquiry in terms of
the Act.
[4] To enable the applicants to conduct an inquiry, the respondent was required
to indemnify the applicants and all the creditors of the insolvent estate
against any/or all costs relating to the administration of the insolvent estate
and/or the inquiry conducted. The respondent agreed and signed the
1 Insolvency Act, No: 24 of 1936
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indemnity agreement during March 2021. The respondent submitted the
claim which was the only one proved at the creditors meeting. The claim
was in respect of arrear maintenance of the minor children, legal costs and
extra -mural expenses.
[5] The applicants, through their attorneys, conducted an inquiry into the
insolvent estate. At the hearing, Mr Cabral was called, so was his new wife
together with their business partners. The inquiry ran on various dates for
a total of nine days and Mr Morris of Snaid and Morris Inc represented the
trustees of the insolvent estate. The trustees determined that there was a
shortfall of R402 542 -6. The funds in the free residue account totalled
R15 315.50 and following the successful appeal order, the funds were
returned to M r. Cabral as the trustees were not entitled to retain them.
[6] Following the setting of aside of the sequestration on appeal, the bill for
cost related to the inquiry was presented to the trustees and was accepted
by them as fair and reasonable and was found to be in accordance with the
mandate given to Mr Morris. The Master of the High Court refused to tax
the bill on the basis that on the successful appeal sequestration order, the
intermission account cannot be taxed. Without the taxation, the trustees
are not entitled to recover the fees and costs incurred in the insolvent estate.
[7] Consequently, the demand was made against the respondent in terms of the
Indemnity Agreement. The respondent refused to pay and relied on section
73(1) of the Act as the reason for non -payment. She denies that she
concluded the Indemnity Agreement, and that the agreement did not
comply with section 73(1) of the Act. She states that when she signed the
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agreement, she was of the view that the applicants would conduct the
inquiry themselves without the need to use the attorneys and that in any
event, she never consented to the attorneys to be used in the conduct of the
section 152 inquiry. She, furthermore, denies that the firs t application has
the authority to act for the second application.
Issues for determining.
[8] The issue for determination is firstly, whether the applicants required the
consent of all the creditors to conduction an inquiry into the insolvent estate
and secondly whether the indemnity agreement entitles the applicants to
recover the amount claimed from the respondent.
Legal principles and reasons
[9] Once a person is sequestrated, his estate is placed in the hands of the Master
who then appoints the trustee to manage the estate. Section 18(3) states that
“A provisional trustee shall have the powers and the duties of a trustee, as provided in
this Act, except that without the authority of the Court or for the purpose of obtaining
such authority he shall not bring or defend any legal proceedings and that without the
authority of the Court or Master he shall not sell any property belonging to the estate in
question. Such sale shall further more be after such notices and subject to such
conditions as the Master may direct.” It is evident from this section that the
provisional trustee has all the powers except that when he/she institutes
legal action on behalf of the estate, the leave of court is required to
authorise him/her to do so.
[10] Section 73(1) provides as follows:
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“(1) Subject to the provisions of this section and section 53(4), the trustee of an insolvent
estate may with the prior written authorisation of the creditors engage the services of any
attorney or counsel to perform the legal work specified in the authorisation on behalf of
the estate: Provided that the trustee —
(a) if he or she is unable to obtain the prior written authorisation of the creditors due
to the urgency of the matter or the number of creditors involved, may with the prior
written authorisation of the Master engage the services of any attorney or counsel
to perform the legal work specified in the authorisation on behalf of the estate; or
(b) if it is not likely that there will be any surplus after the distribution of the estate,
may at any time before the submission of his or her accounts obtain written
authorisation from the creditors for any legal work performed by any attorney or
counsel, a nd 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 incl uded in the cost of the sequestration of the estate.”
[11] In Patel v Paruk’s Trustee2 Tindall JA said the following on the correct
interpretation of section 73(1):
“The original proviso, prohibiting the trustee from instituting or defending any legal
proceedings without the prescribed consent, was enacted, as between the trustee and
the creditors, in order to protect the estate from being dissipated in litigation. Th e
Legislature could not have intended that steps taken by a trustee to institute or defend
proceedings must necessarily be a nullity because the prescribed consent had not been
obtained. An interpretation to the contrary would bring about a result that, wh ere there
is not enough time to enable the trustee to obtain such consent, he may be powerless to
issue a summons timeously in order to prevent a claim due to the estate from becoming
prescribed or to file a plea in order to prevent a default judgment from being obtained
against the him.”
2 1944 AD 469 at 475
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[12] In the instant case, the respondent was the only proven creditor, and the
inquiry came at her insta nce. It is therefore inapt to suggest that the consent
of the general body of creditors should have been sought and given before
the inquiry could commence because the consent alleged to have been
missing would not have been given because there was only one proof of
claim by the respondent.
[13] The respondent contends that she was of the view that the applicants would
conduct the inquiry themselves and impliedly not make use of the services
of an attorney for that purpose. The answer to that contestation was dealt
with in Muller v The Master and Othe rs3, Preiss J said the following on the
interpretation and application of section 73(1) of the Act in disputed legal
costs:
“Section 73 empowers a trustee to obtain legal advice and to employ an attorney or an
attorney and counsel for legal proceedings in which an estate is involved. The costs so
incurred are included in the costs of sequestration. Section 73(2) (a) provides that all costs
which are not subject to taxation by a Taxing Officer of the Court, shall be taxed by the
Master according to the latter's tariff.”
Although Preiss J dealt with the controversy about the taxation of the costs,
the principle is clearly articulated that the services of the attorney can be
used and the reason the costs need to be taxed is to ensure that the insolvent
estate is protected from the disposition of its property through legal costs.
3 [1992] 4 All SA 470 (T) at p 474
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[14] I turn to the wording of the Indemnity Agreement which is drafted as
follows:
“INDEMNIFICATION FOR COSTS IN THE INSOLVENT ESTATE OF
DORIAN CABRAL MASTER REFERENCE NUMBER: G768/20
I the undersigned Candice Cabral Identity (omitted to protect privacy )
of Hertford Road Bryanston Sandton. Do hereby indemnify the trustees of the
aboveme ntioned estate together with all creditors being secured ,concurrent or
contingent creditors of any and all costs relating to the administration of the estate and
or any inquiry run by the trustees either upon my instruction or on their own fruition or
otherwise .Subject to that should any funds be recuperated , and subject to the Master’s
approval, I am claim such costs from the estate as costs of the administration.
Thus, done and signed at BLACKHEATH on this 15th MARCH day of 2021. In the
presence of the undermentioned witnesses.”
[15] The unambiguous wording of the indemnity shows that the indemnity is
for “any and all costs … relating to… any inquiry .” There is no basis for a wider
interpretation of the meaning of the words used by the parties to exclude
the costs of attorneys or counsel.
[16] There is no controversy that the respondent signed the Indemnity and that
the terms thereof are what they purport to be. From the face of it, it is
evident that the agreement env isaged inter alia, the costs related to the
inquiry into the estate. In my view, that the sequestration order was set
aside in an appeal is of no moment. The Indemnity Agreement was not
dependent on any condition and the parties agreed about its terms.
[17] Mr Bolus submitted that because the applicants had not sought the consent
from the creditors to engage in the services of the attorneys in the conduct
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of the inquiry in terms of section152 of the Act, they are in violation thereof
and that the claim for costs incurred should not be favourably
considered.This argument is without merit because firstly, the consent of
the Master was sought and granted before the inquiry could be embarked
upon. From the papers, there is no contr oversy with the consent given by
the Master of the High Court. In any event, the consent by the Master of
this Court is not disputed. It is also not that Mr. Morris conducted the
inquiry on behalf of the applicants for the days that the proceedings took
place wherein the respondent together with her legal representatives were
present. The papers show that the respondent’s own legal representatives
advised her that it would cost effective for them not to continue to be
present in the inquiry. To suggest that there is no proof of the mandate
given by the applicants to Mr Morris of Snaid and Morris Attorneys to
assist the trustees to conduct the inquiry. Accordingly, the defence must
fail.
[18] I now deal the counterclaim by the respondent. The respondent contends
that her father who made the payment was under the misapprehension that
the respondent was liable for the costs. The respondent’s claim is based on
what should be an enrichment claim. She does not make a case for
enrichment. In any event, it is permissible for a third party to pay a debt of
behalf of the debtor. In our law, this is not unique, and it is acceptable for
the creditor to accept such payment. Having already ruled that the
indemnity agreement is in order, I have no basis to rule otherw ise with the
payment received by the applicants from the respondent’s father.
Consequently, the counterclaim must fail.
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DATE APPLICATION HEARD : 03 September 2024
DATE JUDGMENT HANDED DOWN : 24 February 2025
APPEARANCES
Counsel for the Applicant: Adv L.M. Olivier SC
Instructed by: Snaid & Morris Inc
Counsel Respondent: J.N. Bolus
Instructed by: Bolus Attorneys