Brief Summary

Insolvency Law — Liquidation — Dispute over claims — Liquidators disputing claims proven at creditors' meeting — Master of the High Court declining to adjudicate dispute citing factual disputes — Court finding Master's refusal to decide reviewable under s 151 of the Insolvency Act — Decision set aside and disputed claims disallowed.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings concerned an application to review and set aside a refusal by the Master of the High Court to make a decision on disputes raised by liquidators against claims that had already been proved and admitted at meetings of creditors. The review was brought in the context of liquidation proceedings and the statutory framework governing proved claims and subsequent disputes under the Insolvency Act 24 of 1936.

The applicants were Messrs Roering, Botha and Henning N.O., acting as the liquidators of African Brick Centre Limited (in liquidation) and African Brick (Pty) Ltd (in liquidation). The first respondent was the Master of the High Court, Pretoria. The second and third respondents were Nail Red Rust Trading (Pty) Ltd and Wendra Industrial Holdings (Pty) Ltd, respectively, each of whom had proved claims in both insolvent estates. Elmir Property Projects (Pty) Ltd was cited as the fourth respondent, in circumstances connected to the earlier business rescue process and the background to the disputed indebtedness.

Procedurally, the creditors’ claims were proved and admitted at creditors’ meetings in 2022. After receiving the proved claims and supporting material from the Master, the liquidators examined the estate records and documentation as contemplated in section 45(2), and then formally disputed the claims in writing during May 2024 in terms of section 45(3). The creditors responded. On 25 July 2024 the Master declined to confirm, reduce, or disallow the disputed claims, stating that factual disputes required evidence and that the matter should be referred to court. The liquidators then approached the High Court for review relief. Nail Red Rust Trading (Pty) Ltd and Wendra Industrial Holdings (Pty) Ltd opposed the review and also advanced a counterclaim against Elmir, which the court was required to address.

The general subject-matter of the dispute was whether the Master could refuse to make a statutory decision under section 45(3) on disputed proved claims in the liquidation of companies, particularly where the disputes touched on historically complex issues relating to a prior business rescue plan, alleged shareholder loans, and alleged cessions.

2. Material Facts

It was common cause that Yakani Infraco (Pty) Ltd had historical claims within the African Brick group of companies, ostensibly arising from shareholder loan accounts said to total approximately R17.1 million. During a period of financial distress, various companies in the group, including the two companies later liquidated, entered voluntary business rescue proceedings. A business rescue plan was proposed and adopted, and it contemplated (on one version) a reduced or otherwise treated amount of historical shareholder loans, stated in the judgment as R1.756 million. It was also common cause that Yakani adopted the business rescue plan.

In implementing the plan, Yakani sold 74% of its shares to Elmir Property Projects (Pty) Ltd in return for the injection of funds into the companies, and a sale of shares agreement was concluded on 14 February 2014. The judgment recorded that Elmir interpreted this agreement as having reduced Yakani’s historical loans from R17.1 million to R1.756 million, consistent with the plan. The judgment further recorded that Yakani’s claims (to the extent they existed) appeared to have been ceded to Nail Red Rust Trading (Pty) Ltd and Wendra Industrial Holdings (Pty) Ltd during the business rescue, together with certain securities.

Notices of substantial implementation of the business rescue plan were filed and the business rescue proceedings terminated during April 2015. Thereafter, African Brick Centre Limited and African Brick (Pty) Ltd were placed under provisional winding-up on 12 August 2015 and were finally liquidated on 6 December 2021.

At meetings of creditors, the following proved claims were admitted, and these admissions were not in dispute. In the estate of African Brick Centre Limited (in liquidation), a meeting of creditors took place on 10 March 2022, at which Wendra Industrial Holdings (Pty) Ltd proved a claim of R6 224 744.50, supported by a three-page document, and Nail Red Rust Trading (Pty) Ltd proved an equivalent claim supported by an eleven-page document; both were admitted. In the estate of African Brick (Pty) Ltd (in liquidation), a meeting of creditors took place on 5 September 2022, at which Nail Red Rust Trading (Pty) Ltd proved a claim of R2 825 000.00 supported by a five-page document, and Wendra Industrial Holdings (Pty) Ltd proved an equivalent claim supported by a three-page document; both were admitted.

It was also not in issue that, in addition to the claim documents, the creditors apparently made available a lever arch file containing 489 pages of documents at the meetings. However, the court accepted as material that these documents were not referenced in the claim documents, with the result that the documentation could not readily be linked to the claims as proved.

The court treated as significant and undisputed, for purposes of the outcome, that ex facie the materials submitted when the claims were proved contained insufficient information or documentation for the liquidators to ascertain whether the amounts were due. The judgment illustrated this by reference to a claim form describing “monies lent and advanced (ceded to the creditor)” and listing multiple alleged sources of indebtedness (including loans and guarantees) without attaching supporting documentation for the underlying loans, the guarantees, or the cessions.

After being notified by the Master of the admitted claims and being furnished with the materials submitted, the liquidators considered the claims in terms of section 45(2) and then, on 22 May 2024, lodged a written dispute with the Master, providing reasons and requesting reduction and/or expungement of the claims. The creditors responded on 27 May 2024, maintaining that the claims should stand.

The judgment recorded that issues relevant to whether the claims should be allowed included disputed questions about the interpretation of events surrounding the business rescue plan, whether it was valid, and whether conditions relating to transactions entered pursuant to it were fulfilled. The Master regarded these as factual disputes requiring evidence for proper adjudication.

On 25 July 2024, the Master concluded that, because of the factual disputes about the business rescue plan and its adoption and implementation, the parties would need to refer the matter to court for a ruling. The Master indicated that the office would abide the court’s decision, rather than confirming, reducing, or disallowing the disputed claims.

3. Legal Issues

The central legal question was whether, once a trustee or liquidator disputes a claim after it has been proved at a meeting of creditors and reports the dispute to the Master with reasons under section 45(3) of the Insolvency Act 24 of 1936, the Master is statutorily obliged to make a decision to confirm, reduce, or disallow the claim, or whether the Master may lawfully decline to decide on the basis that factual disputes require court determination.

A further issue was whether the Master’s refusal to make a decision under section 45(3) constituted a reviewable “decision, ruling [or] order” under section 151 of the Insolvency Act, read with the relevant company-law provisions applicable to liquidations.

Because the review invoked the statutory review jurisdiction described in the authorities, the court also had to determine what decision ought to have been made once it found the Master’s refusal reviewable and unsustainable. This required an application of the section 45(3) options to the facts accepted as material, especially the admitted inadequacies in the substantiation of the proved claims and the Master’s own conclusion that the dispute involved matters requiring evidence.

Finally, the court had to determine the fate of a counterclaim brought by the second and third respondents against the fourth respondent (Elmir), which was advanced in the context of the same contested business rescue history.

The dispute predominantly concerned the application of statutory duties and reviewability (questions of law) to the established procedural history and the Master’s stance, with an evaluative component in deciding what the appropriate section 45(3) outcome should have been given the Master’s position and the state of the claims as proved.

4. Court’s Reasoning

The court’s reasoning began with the text and structure of section 45(3) of the Insolvency Act, which provides that once a trustee disputes a proved claim and reports the dispute with reasons, “thereupon the Master may confirm the claim, or … reduce or disallow the claim” after affording the claimant an opportunity to substantiate it. The court treated section 45(3) as prescribing a mandatory decision-making stage: once the statutory process is engaged by a dispute report, the Master must select one of the three outcomes contemplated by the section.

On that approach, the Master’s stated reason for inaction—namely the presence of disputes of fact requiring oral evidence—did not create a further option under section 45(3) to decline to decide. The court considered that the statutory scheme requires a Master’s decision as a necessary procedural step before dissatisfied parties can pursue the further consequences contemplated by the section, including the ability of a claimant to establish a disallowed claim by action at law. The court identified that the Master’s approach produced a procedural impasse: the Master asserted that the liquidators could not proceed with liquidation and distribution accounts until the dispute was resolved by a court, yet the statutory scheme made the claimant’s route to court dependent on the Master having made a decision.

Turning to reviewability, the court relied on section 151 of the Insolvency Act and the Supreme Court of Appeal’s explanation in Nel and Another NNO v The Master (ABSA Bank Ltd and Others intervening) 2005 (1) SA 276 (SCA) that section 151 constitutes the so-called “third type of review”, a statutory review power that may combine aspects of appeal and review, allowing a court to enter upon and decide the matter afresh. In that framework, the refusal by the Master to decide under section 45(3) was treated as a reviewable decision, and the court considered the refusal irrational in light of the consequences identified, including the inability of the liquidation to progress and the absence of a proper procedural route to finality without a Master’s decision.

The court further drew on the guidance in Constantia Insurance Company Ltd v The Master, Johannesburg High Court and Others 2023 (5) SA 88 (SCA), which emphasised that where reduction or expungement is contemplated, the Master must apply an objective mind to the material before him or her, and should not reduce or expunge without sufficient grounds. The court also referenced Mantis Investments Holdings (Pty) Ltd and Another v De Jager NO and Another 2024 (3) SA 431 (SCA) for the proposition that the section 45(3) procedure is peremptory, and that the status of a proved claim becomes conclusive if not properly taken further within the statutory scheme.

Having found the refusal reviewable, the court proceeded to the question of what decision ought to have been made. The court reasoned that the Master’s own conclusion that the matter involved disputes of fact requiring evidence led to the inference that the claims were not suitable for confirmation on the materials. The court treated the presence of unresolved factual disputes, coupled with the deficiencies in how the claims were substantiated when proved, as indicating that the claims should not have been admitted as proven in the first place. On that basis, and because the Master had neither confirmed nor reduced the claims, the court considered that disallowance was the only logical section 45(3) decision available in the circumstances described.

In dealing with the opposition, the court noted that the second and third respondents advanced far-reaching allegations, including allegations of misconduct by business rescue practitioners who were not parties to the proceedings, and these issues related to historical events preceding liquidation. The court considered that such contentions reinforced the conclusion that the disputes could not be properly resolved on the papers, and did not displace the procedural and evidentiary difficulties underpinning the section 45(3) outcome adopted.

On the counterclaim, the court considered it ill-conceived in the context of these proceedings because the matters it raised were intertwined with the broader dispute about the business rescue plan and related transactions, which the Master had already characterised as requiring evidence. The court therefore found no merit in pursuing that counterclaim in this application and dismissed it.

5. Outcome and Relief

The court reviewed and set aside the Master’s refusals dated 25 July 2024 to decide the disputes under section 45(3) in respect of the proved claims in both insolvent estates. Substituting for that refusal, the court ordered that the claims proved by Nail Red Rust Trading (Pty) Ltd and Wendra Industrial Holdings (Pty) Ltd in each estate were disallowed, while expressly preserving the statutory entitlement to establish the disallowed claims by an action at law as contemplated in section 45(3).

The court imposed a time condition: any such action to establish the disallowed claims had to be instituted within 60 days of the order.

The court dismissed the second and third respondents’ counterclaim.

On costs, the court ordered that the applicants’ costs (as between attorney and own client) were to be paid in the administration of the respective insolvent estates, jointly and severally. The costs of the opposition were ordered against the second and third respondents, jointly and severally, payable to the respective insolvent estates on the party and party scale, including counsel’s costs on Scale C.

Cases Cited

Nel and Another NNO v The Master (ABSA Bank Ltd and Others intervening) 2005 (1) SA 276 (SCA).

Johannesburg Consolidated Investment Co v Johannesburg Town Council 1903 TS 111.

Constantia Insurance Company Ltd v The Master, Johannesburg High Court and Others 2023 (5) SA 88 (SCA).

Mantis Investments Holdings (Pty) Ltd and Another v De Jager NO and Another 2024 (3) SA 431 (SCA).

Wilkens v Potgieter NO and Another 1996 (4) SA 936 (T).

Legislation Cited

Insolvency Act 24 of 1936, sections 45(2), 45(3), 75, and 151.

Companies Act 61 of 1973, sections 336 and 339.

Promotion of Administrative Justice Act 3 of 2000, sections 6(2)(d) and 6(2)(e)(iii) (referred to but not relied upon for the decision).

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The Master’s refusal to make a decision under section 45(3) after the liquidators had disputed proved claims was held to be impermissible, because section 45(3) contemplates that the Master must decide to confirm, reduce, or disallow the claim once properly seized with a dispute.

That refusal constituted a reviewable decision under section 151 of the Insolvency Act, and it was set aside. Given the Master’s stated inability to resolve the disputes on the papers and the deficiencies surrounding the proof and substantiation of the claims, the court held that the appropriate section 45(3) outcome was disallowance of the claims, subject to the creditors’ statutory right to establish them by action at law within a specified period.

The respondents’ counterclaim was held to be without merit in the context of this application and was dismissed.

LEGAL PRINCIPLES

Section 45(3) of the Insolvency Act 24 of 1936 requires that when a trustee or liquidator disputes a claim after it has been proved and reports that dispute with reasons, the Master must make a decision within the statutory options, namely to confirm, reduce, or disallow the claim. The section does not contemplate a further option allowing the Master to decline to decide merely because factual disputes exist.

A refusal by the Master to perform the decision-making function envisaged in section 45(3) constitutes a reviewable act under section 151 of the Insolvency Act, which provides for a statutory form of review (the “third type of review”) enabling a court to set aside the Master’s decision and, where appropriate, to determine the matter afresh.

Where the Master concludes that the dispute cannot be resolved without evidence and the proved claims are materially deficient in substantiation on the papers, the statutory mechanism may properly result in disallowance of the claims under section 45(3), without depriving the claimants of the statutory right to pursue an action at law to establish their claims, subject to applicable constraints imposed by the court’s order.

Roering NO and Others v Master of the High Court, Pretoria and Others (2024/146523) [2026] ZAGPPHC 24 (3 February 2026)