IN THE LABOUR COURT OF SOUTH AFRICA
HELD AT BRAAMFONTEIN
Case No:
J883/2001
In the matter between:
VILJOEN, JJ Applicant
And
NKETOANA LOCAL MUNICIPALITY First
Respondent
CHARL JACOB VENTER N.O. Third Party
JUDGMENT
WAGLAY J:
[1] The Applicant was employed by the Respondent as a town clerk.
He was suspended from his employment on the grounds that he
was suspected of dishonest behavior and was ultimately
dismissed on 16 July 1999.
[2] Applicant regarded his dismissal to be both substantively and
procedurally unfair and accordingly referred his dismissal to the
Commission for Conciliation, Mediation and Arbitration (the
ACCMA@) for conciliation and, thereafter, arbitration.
[3] The CCMA commissioner found that the dismissal of the Applicant
by the Respondent was substantively fair but procedurally unfair
and awarded Applicant compensation in the amount of R136
160.00 in an award handed down on 23 March 1999. The award
required the Respondent to pay the said amount by 31 May
1999.
[4] Before the award aforesaid was handed down the Applicant =s
estate was sequestrated. The Applicant was provisionally
sequestrated on 6 August 1998 and finally sequestrated on 17
September 1998. The Applicant is yet to be rehabilitated.
[5] A month after the award was handed down by the CCMA the
Respondent by letter addressed to the Applicant advised the
Applicant that the compensation awarded by the CCMA was set -
off against the amount owed by the Applicant to it and
consequently no monies were payable by the Respondent to the
Applicant.
[6] The Applicant now seeks for the CCMA award to be made an
order of this Court in terms of s158 (1)(c) of the Labour Relations
Act 66 of 1995 (the ALRA@). The Respondent opposes the
application. One of the grounds upon which the application is
opposed is based on the doctrine of effectiveness. According to
the Respondent because the payment of compensation as set out
in the award has been discharged by set-off, if this Court is to
make the award an order of this Court such order will serve no
purpose and be of no effect because it cannot be enforced and
this violates the doctrine of effectiveness.
[7] Respondent=s further argument and based also on the doctrine
of effectiveness, is that the recent amendments to the LRA
render the award sought, superfluous because the amended
sections of the LRA make the award handed down self-executing.
[8] The amendment, which Respondent seeks to rely upon, relates to
the effect and enforceability of an arbitration award issued under
the auspices of the CCMA. The relevant section being s143. This
section in its unamended form read as follows:
A143. Effect of arbitration awards
(1) An arbitration award issued by a commissioner is final and
binding
and may be made an order of the Labour Court in terms of
section 158(1)(c), unless it is an advisory award.
(2) If an arbitration award orders a party to pay a sum of money, the
amount earns interest from the date of the award at the same
rate as the rate prescribed from time to time in respect of a
judgment of debt in terms of section 2 of the Prescribed Rate of
Interest Act, 1975 (Act No. 55 of 1975), unless the award
provides otherwise.@
[9] ss(1) of s143 is now replaced with the following amendment:
A (1) An arbitration award issued by a commissioner is final
and binding and it may be enforced as if it were an order of
the Labour Court,
unless it is an advisory arbitration award.@
[10] In addition to the above, the amendments introduce two
new subsections:
A(3) An arbitration award may only be enforced
in terms of subsection
(1) if the director has certified that the arbitration award is an award
contemplated in subsection (1).
(4) If any party fails to comply with an arbitration
award that orders
performance of an act, other than the payment of an amount of
money, any other party to the award may enforce it by way of
contempt proceedings instituted in the Labour Court.@
[11] Based on the amendments as recorded above I find
Respondent=s submission that the award handed down by the
CCMA is self - executing problematic on a number of levels:
(a) the amendments to the LRA have left s158 (1)(c) in tact for
current purposes B it is therefore still possible to have the
arbitration award made an order of this Court in terms of s158 (1)
(c). While it may be that this section would apply chiefly to
private arbitration awards handed down in terms of the
Arbitration Act (No 42 of 196(5)), there is nothing precluding a
party to a CCMA award having it made an order of this Court.
(b) s143 (1) does not render every CCMA award self - executing: it is
only those awards which the director of CCMA has certified as
being an award in terms thereof as provided in ss(3). There is
nothing before this Court indicating that the director has certified
the award which Applicant seeks to make an order of Court, as
required by ss(3). The award in question here therefore does not
fall within the self-executing provisions of the new s143 (as
amended).
(c) in any event, the amendments in question do not apply to the
matter before me. It is a well - known principle of statutory
interpretation that legislation is intended by the legislature to
only effect matters after its enactment unless the contrary
appears from the context of the statute. (see Unitrans Passenger
(Pty) Ltd t/a Greyhound Coach Lines v Chairman, National
Transport Commission 1999 (4) SA 1 (SCA).
[12] Where the statutory provisions are procedural in nature
they are said to operate
retrospectively on all matters that come before a Court after the
passing of the statute. It has however now become acceptable
that procedural provisions can and do impact on substantive
rights and therefore emphasis has shifted from a formalistic
identification of amendments as Aprocedural@ or Asubstantive@
to the more purposive criteria of whether or not the statutory
provisions impact upon existing substantive rights and
obligations. Where the amended provisions have an impact on
substantive rights it is deemed that in the absence of the
expression of the Legislature =s intention to the contrary, not to
have retrospective effect. See Unitrans (above) and National
Iranian Tanker Co v MV Pericles GC 1995 (1) SA 475 (A) at 484 A-
B.
[13] In the present matter, the provision in question operates to affect
the substantive rights and obligations of the parties. The nature
and effect of an award handed down under the auspices of the
CCMA is changed by the amendments, altering the rights of the
Applicant and the obligations of the Respondent. Bearing in mind
the principles referred to above the amendment of s143 cannot
be interpreted to apply retrospectively to the present matter.
[14] Respondent=s argument therefore that s143 as amended is
applicable to the present matter and that the award is therefore
self - executing is rejected.
[15] Turning then to the issue of set-off. Respondent firstly argues
that this Court has no jurisdiction to hear the matter as it deals
with set-off. This concern can be dealt with simply. The Applicant
seeks to make a CCMA arbitration award issued in terms of s138
of the LRA an order of this Court in terms of s158 (1)(c) of the
LRA. The Respondent raises the defence of set-off as one of the
basis for its claim that the order sought violates the doctrine of
effectiveness due to set-off. The Respondent goes further in
stating that the set - off should properly be dealt with by the
Acivil courts@.
[16] Apart from the bald allegation that the Acivil courts@ alone have
jurisdiction over the question of set-off there is nothing in the
papers indicating why this Court does not have jurisdiction. This
matter is concerned with making a CCMA award an order of
court, as such it falls squarely within the jurisdiction of the Labour
Court. In addition there is nothing whatsoever precluding the
Labour Court from dealing with common law principles of law. It
does so on a daily basis. s151 (2) of the LRA provides that:
AThe Labour Court is a superior court that has authority, inherent
powers
and standing, in relation to matters under its jurisdiction, equal to
that which a court of provincial division of the High Court has
in relation to matters under its jurisdiction.@
[17] Respondent=s submission therefore that the Applicant should
approach the High Court for a declaratory order as to whether he
can enforce the award in light of the defence of set-off raised is
unfounded and falls to be dismissed out of hand.
[18] With regard to whether there has been a set-off or not I shall deal
with later. What needs to be dealt with before that is whether the
Applicant as an unrehabilitated insolvent is entitled to personally
claim compensation in terms of s194 (1) of the LRA.
[19] For the record I might mention that Applicant =s trustee has been
included in these proceedings as a third party.
[20] In general all property of an insolvent at the date of
sequestration and all property subsequently acquired by or
accruing to him or her during sequestration, vests in the Master
of the High Court, and subsequently in the trustee, upon his/her
appointment.
[21] The insolvent estate consists of all of the insolvent =s property as
stated above. There are, however, a number of important
exceptions to this rule, as appear in the Insolvency Act No 24 of
1936 (the AInsolvency Act @) as well as other statutory
enactments. These exceptions include remuneration for work
done: s23(9)) of the Insolvency Act stipulates that the insolvent
may recover for his own benefit the remuneration or reward for
work done or professional services rendered by or on his behalf
after the sequestration of his estate; Pension monies : the
insolvent may recover for his own benefit any pension to which
he is entitled for services rendered by him, s23 (7); and
compensation for personal injuries and defamation, s23 (8).
[22] With regard to compensation for personal injuries and
defamation, the relevant part of s23(8) of the Insolvency Act
provides:
A The insolvent may for his own benefit recover any
compensation for any loss or damage which he may have
suffered, whether before or after the sequestration of his estate,
by reason of any defamation or personal injuryY@
[23] In Santam Versekeringmaatskappy Bpk v Kruger 1978 (3) SA 656
(A) the Appellate division confirming the decision of the court a
quo: 1977 (3) SA 314 (O) held that the words compensation for
any loss or damage include not only general damages
(compensation for pain and suffering, loss of amenities, etc) but
also special damages (e.g. medical expenses and loss of
earnings).
[24] In the decision handed down by the Appellate Division in the
Santam matter (supra) the Court commented that the right of
action for general damages Ais not transmissable and >cleaves
to= the person who enjoys it - hence the appellant =s concession
that the Respondent is entitled to claim general damages for his
own benefit.@ (at 663 B-C)
[25] In the decision of the court a quo, Steyn J had the following to say
regarding the underlying reasoning for the various exceptions set
out in the Insolvency Act:
A Die Wetgewer is deur middel van die Insolvensiewet
primêr daarop
ingestel om die insolvent en sy bate s van mekaar te
skei, beheer van die boedel aan die kurator oor te dra
en die bates na die krediteure op >n
sekere rangorde van voorkeur oor the skuif. Die liggaam van die
insolvent word egter nie ook so oorgeskuif nie. Sy persoonlike
integriteit
bly onaangetas en sy status gedeeltlik ook. Die beleid van die
Wetgewer is klaarblyklik dat die insolvent as mens en nuttige
landsburger gehoue moet bly en in staat moet wees om homself
te rehabiliteer. Hy kan, met sekere uitsonderings en onderworpe
aan sekere beperkings, nog steeds vryelik kontrakteer en moet
slegs soveel van sy inkomste of verdienste aan sy krediteure
afstaan as wat na die Weesheer se oordeel nie vir die onderhoud
van hom en sy afhanklikes nodig is nie. In daardie sin is die
insolvent is liggaam =n Abate@ wat by tot voordeel van homself
en sy familie selfs na sekwestrasie kan aanwend. So bly hy na my
mening daarop geregtig om na sekwestrasie sy liggaam gesond
te hou en na siekte of besering weer sover en so spoedig
moontlik tot volle krag en doeltreffendheid te laat herstel of
genees. Skade aan sy vlees of gees berokken, is gevolglik sy
skade en vergoeding daarvoor kom hom persoonlik en vir eie
voordeel toe.@
at pg 317 C-F.
[26] The above passage was referred to with approval by the
Appellate Division. Miller JA expressed at 664 D-G, the following:
AYThe need not to leave the insolvent destitute of means
whereby to
support himself and his dependant is recognized by Roman-
Dutch law (see, eg. Voet 42.3.8), and the pattern of South African
legislation shows that not only has the insolvent for very many
years been entitled to retain, to the extent reasonably necessary
for the support of himself and his dependants, money which is
derived from specified sources. (Section 21 (3), (4) and (5) of the
1916 Act and the comparable sections of the current Act.) The
sources so specified relate not to his business, trade or
occupation but to circumstances personal to him, such as his
right to receive a pension, or damages suffered by reason of
bodily or other injuries he has personally sufferedY@
[27] The decision in Santam (supra) makes it clear that the exception
in s23 (8) of the Insolvency Act relates to injuries suffered by the
insolvent personally which Acleave@ to him/her and which, due to
their personal nature are not transferable as an ordinary property
right. Compensation for these types of personal loss does not fall
within the general insolvent estate and may therefore be claimed
personally by the insolvent for his own benefit.
[28] The next issue, and an issue which has been the subject matter
of some debate is whether or not the term Apersonal injury @
means injury affecting the rights of personality: see Smith C The
Law of Insolvency (3ed) 91. In De Wet NO v Jurgens 1970 (3) SA
38 (A) the Appellate Division considered what was included in the
definition of the words Apersonal injury@ as they appear in s23
(8) of the Insolvency Act, more specifically, the court was called
upon to determine whether an action for adultery (contumelia)
and alienation of affection (loss of consortium) fell within the
ambit of this section.
[29] The court in that matter found that, although the ordinary,
everyday meaning of the words Apersonal injury@ refer to bodily
injury, the terms could be used in a wider sense, which would not
be limited to physical injury alone. The court went on to hold that
the context of this section supported the wider meaning:
A YDit is egter hoogs onwaarskynlik dat die Wetgewer, vir sover
hy bedoel het dat vergoeding vir liggaamlike beserings geëis kon
word, so =n enge betekenis van die woord Aletsel@ in gedagte
kon gehad het, want dit is moeilik om te begryp waarom by
vergoeding wou beperk het tot gevalle waar daar verwondings of
kwetsure was. M.i. moet dus aanvaar word dat die Wetgewer nie
bedoel het om Aletsel@ in sy geheel enge betekenis te gebruik
nie. Uit die woordeboekbetekenisse waarna hierbo verwys is, wil
dit verder blyk dat in Afrikaans, altans, Aletsel= ook =n wyer
betekenis as liggaamlike besering het, al is dit dan ook >n minder
gewone betekenis. Vgl. Abeskadiging@ ( Kernwoordeboek),
Anadeel, skade @ ( H.A.T.) A,damage,harm@ ( Tweetalige
Woordeboek) en Ahurt, damage, injury@ (Groot Woordeboek)@
at 50 C-E.
[30] The Court thus held that the term Apersonal injury @ was not
limited to injuries of a physical nature, stating at page 53 A-C:
A In verband met die vraag of =n enge of wye betekenis aan
Apersoonlike letsel@ gegee moet word, wil ek ten slotte byvoeg
dat dit na my mening onwaarskynlik is dat die Wetgewer sou
bedoel het om die skuld-eisers van =n insolvent geregtig te maak
op geld wat hy ontvang om hom te vergoed vir geestelike leed
wat hy weens die een of ander persoonlikheidskrenking gely het.
Dit is m.i. ook onwaarskynlik dat die Wetgewer sou bedoel het
om vergoeding wat t.o.v. beserings aan =n insolvent se liggaam
betaal is, teen sy skuldeisers te beskerm, maar nie ook geld wat
ter vergoeding van geestelike leed betaal is nie. Ek kan aan geen
rede dink waarom die Wetgewer op hierdie wyse sou wou
onderskei het nieY@
[31] It should be noted that the Appellate Division, in coming to the
above finding, explicitly considered the matter of Ex Parte Wood
1930 SWA 117, to which this Court was referred by counsel for
the Respondent. In the Wood case, Bok J held that the term
Apersonal injury@ did not include an insult, however it should be
noted that the section in question in that matter was s21 (4) of
the Insolvency Ordinance 1928 (SWA), which provided that an
insolvent could sue in his own name for any damages claimable
Aby reason of any insult or personal injury @. The court there,
therefore while accepting that Apersonal injury @ could bear a
wide meaning, adopted a narrow approach because the Insolvent
could in any event base his claim on the Ainsult@ provision in
that Act. The court stated:
A In its widest possible sense, personal injury would include an
insult, and as it is specially enacted that besides reason of a
personal injury the insolvent can also sue by reason of any insult,
it seems probable that the word injury is here used in a narrower
sense.@
[32] The court =s finding in Wood cannot therefore affect the
interpretation set out in De Wet and accordingly the term
Apersonal injury@ as used in s23 (8) of the Insolvency Act should
be interpreted broadly and should not be limited to physical
injury alone.
[33] Having determined that compensation awarded consequent
upon personal injury does not form part of the insolvent estate
and that personal injury is not limited to physical injury, I need to
determined what is the nature of compensation awarded in
procedurally unfair dismissal disputes. This enquiry concerns the
application of s194 (1) of the LRA (now amended) which, at the
relevant time stated:
A(1) If a dismissal is unfair only because the employer did not follow a
fair procedure, compensation must be equal to the remuneration
that the employee would have been paid between the date of
dismissal and the last day of the hearing of the arbitration or
adjudication, as the case may be, calculated at the employee=s
rate of remuneration on the date of dismissal. Compensation may
however not be awarded in respect of any unreasonable period of
delay that was caused by the employee in initiation or
prosecuting a claim.@
[34] The nature and basis of compensation award under this section
was after some initial controversy finally settled by the Labour
Appeal Court in the matter of Johnson & Johnson (Pty) Ltd v
Chemical Workers Industrial Union (1999) 20 ILJ 89 (LAC). In this
matter the Court held that once a decision was made to award
compensation as a remedy in circumstances of dismissal which
are found to be procedurally unfair, s194 (1) of the LRA sets out
how the amount of compensation must be calculated. However,
with regard to the nature of compensation under s194 (1) of the
LRA the Court had the following to say:
A[41] The compensation for the wrong in failing to give effect to an
employee=s right to a fair procedure is not based on patrimonial
or actual loss. It is in the nature of a solatium for the loss of the
right, and is punitive to the extent that an employer (who
breached the right) must pay a fixed penalty for causing that
loss. In the normal course a legal wrong done by one person to
another deserves some form of redress. The party who
committed the wrong is usually not allowed to benefit from
external factors which might have ameliorated the wrong in
some way or another. So too, in this instance. The nature of an
employee=s right to compensation may be exercised in
circumstances where the employer has already provided the
employee with substantially the same kind of redress (always
taking into account the provisions of s 194(1)), or where the
employer=s ability and willingness to make that redress is
frustrated by the conduct of the employee.@
[35] An award of compensation in terms of s194 (1) is therefore not
an award of damages in the contractual sense, but rather a
combination of solatium for the employee and punishment
against an employer for unfair treatment in the employment
context.
[36] The nature of solatuim in the context of the actio injuriarum has
been expressed in the following terms:
ATwo basic civil remedies are available to a person to protect his
or her personality rights: he or she can apply for an interdict
restraining or prohibiting the infringement of these rights or bring
an action to recover damages for an impairment of reputation,
dignity (including privacy, or physical integrity).
AAn award of damages under the actio injuriarum, serves two
broad purposes: vindication of the plaintiff =s personality and
providing him or her with a solatium (or solace) for wounded
feelings. The objective of the plaintiff is to compensate for
impairment of personality rights.
AThe remedy for damages under the actio injuriarum is a
personal one. It is not transmissible, on the death of the plaintiff,
to his or her heirs or estate, or, on the death of the defendant,
against his or her heirs or estate, unless the closing of pleadings
stage (litis contestatio) has been reached. The Aquilian action, in
contrast, is transmissible both ways, even prior to the
commencement of pleadings@
Burchell J Personality rights and Freedom of Expression: The
Modern Actio Injuriarum 435.
[37] The actio injuriarum is not limited to defamation but includes
injury to property, dignitas and other rights. While it is not
necessary to postulate whether the Labour Appeal Court in
Johnson & Johnson (supra) intended to fit s194 (1) compensation
under the banner of the actio injuriarum by the use of the word
Asolatium@ or simply as a statutory claim for compensation in
circumstances where an employee has been unfairly dismissed, it
is clear that compensation flowing from an unfair dismissal claim
is payable as a solatium (solace) for the unfair treatment of the
employee.
[38] There would therefore seem to be no difference in principle
between a solatium under the actio injuriarum and compensation
awarded in terms of s194 (1) of the LRA: both are awarded as a
result of some injury (unfair treatment in the course of dismissal
in the case of the latter) to the applicant/plaintiff personally.
There is also, in the case of compensation awarded in terms of
s194 (1) of the LRA an element of punishment, meted out against
the employer who has been unfair, which is also present under
the actio injuriarum.
[39] Having regard to the above it is not necessary to decide whether
s194 (1) compensation falls under any of the various banners of
the actio injuriarum. The decisive question is that of whether an
action for unfair dismissal constitutes Apersonal injury @ within
the meaning of s23 (8) of the Insolvency Act i.e. does the unfair
treatment inherent in a procedurally unfair dismissal amount to a
Apersonal injury@ within the expanded meaning of s23 (8) of the
Insolvency Act?
[40] The answer to the above is that it does. An unfair dismissal
constitutes an injury to the personality of an employee in a very
personal sense because it affects the livelihood and the future
employment prospects of an individual. Compensation awarded
in terms of s194 (1) of the LRA is aimed at providing solace to the
employee personally for the unfair treatment she or he has
suffered at the hands of the employer. In the light of wider
meaning of s23 (8) of the Insolvency Act the only conclusion that
must be drawn is that compensation under s194 (1) constitutes
compensation for a Apersonal injury@ within the meaning of that
section.
[41] In the circumstances the compensation award handed down in
favour of the applicant is claimable by the Applicant personally
notwithstanding his status as an insolvent. This then brings me to
the issue of set - off as claimed by the Respondent.
[42] Set - off or compensatio is a method whereby contractual and
other debts may be extinguished. It operates where two parties
are reciprocally indebted to each other. If the debts are equal,
both are discharged; if they are unequal, the smaller is
discharged and the larger is reduced by the amount of the
smaller. See Christie The Law of Contracts (4ed) 552.
[43] The basic conditions for set-off are:
(a) the existence of mutual indebtedness between the parties;
(b) that both debts are liquidated and same in nature;
(c) that both debts are fully due and legally payable.
[44] As soon as the above conditions are fulfilled set-off operates
automatically. Where it is relied upon as a defence, it should be
pleaded in order to prove its occurrence, but once proved it will
be accepted as operating from the moment of the debts mutual
existence. In Schierhout v Union Government 1926 AD 286 at
289-290 the court had the following to say in respect of the
doctrine of set - off:
AY When two parties are mutually indebted to each other, both
debts being liquidated and fully due, then the doctrine of
compensatio comes into operation. The one debt extinguishes
the other pro tanto as effectually as if payment had been made.
Should one of the creditors seek thereafter to enforce his claim,
the defendant would have to set up the defence of
compensatio by bringing the facts to the notice of the Court B as
indeed the defence of payment would also have to be pleaded
and proved. But, compensatio once established, the claim would
be regarded as extinguished from the moment the mutual debts
were in existence together.@
[45] It is therefore acceptable for Respondent to raise the defence of
set-off in these proceedings. It was also possible for Respondent
to institute separate proceedings at a later date raising set-off
against the judgment debt. This would however have had
adverse costs implications for the Respondent.
[46] In the present matter however set-off has to be considered in the
insolvency context i.e. what is the effect of the sequestration of
the Applicant=s estate on the Respondent=s claim of set-off?
[47] To answer the above question one needs to consider the
insolvent estate. Upon the sequestration of the estate of the
insolvent, a concursus creditorum is instituted. This, according to
Walker v Syfret NO 1911 AD 141 at 166, means that:
Athe hand of the law is laid upon the estate, and at once the
rights of the general body of creditors have to be taken into
consideration. No transaction can thereafter be entered with
regard to estate matters by a single creditor to the prejudice of
the general body. The claim of each creditor must be dealt with
as it existed at the issue of the order.@
[48] One of the effects of concursus creditorum is that a set-off, the
requisites for which materialize only after the institution of the
concursus, cannot occur. (see Meskin Insolvency Law 5-50 (1)
and the authorities cited at footnote 4). In the case of compulsory
sequestration of an estate the concursus is instituted once the
order for provisional sequestration of an estate has been made.
Where, however a set-off is accomplished before the
sequestration it will not be affected by the sequestration subject
to s46 of the Insolvency Act which empowers the trustee of the
insolvent estate to disregard the existence of a purported set-off
under certain circumstances.
[49] In Thorne & another v The Government 1973 (4) SA 42 (T) it was
held at 45 F-G that:
A In regard particularly to the question of set - off, the rule is
that, once a concursus creditorum has been established, there
can be no compensation unless mutuality between the respective
claims existed at the date of the order Y[authorities cited] Y The
mutuality here required is that the reciprocal debts both existed
and that both were liquidated and payable, before the concursus
creditorum was established.@
[50] The court accordingly held that, as the two claims relied on had
arisen after the liquidation order, the requisite Amutuality@ was
not present before the concursus. The court therefore ordered
that the respondent was not entitled to withhold payment of the
amount purportedly set - off. In the subsequent appeal of this
matter the Appellate Division in The Government v Thorne and
Another 1974 (2) SA 1 (A) held at 9 E that:
A The breach occasioned by the abandonment of the Y contract
occurred only after liquidation had supervened. Once liquidation
of the company occurred, appellant =s Arights of deduction@
(which, for the reasons stated above are in law no more than a
right to set-off) deriving from the breach of the Y contract were
no longer effectiveY@
[51] In Roman Catholic Church (Klerksdorp Diocese) v Southern Life
Associates Limited 1992 (2) SA 807 (A) the court at 815 A - C
confirmed the above position thus:
AThe effect of the winding-up order was to established a
concursus creditorum Y Thereafter there could be no set-off
unless there existed, at the date of the order mutuality between
respective claims: or reciprocity of debts as it is also called Y In
the present case there was no mutuality between respective
claims Y prior to liquidation in as much as neither the loan nor
the policy had become due and payable as at the date of the
winding up order.@
[52] The above demonstrates that the requirements for set-off must
be met prior to the sequestration in order for it to be effective.
Where a debt against a soon - to - be -insolvent party arises, in
the absence of a counter - debt coming into existence prior to the
date of the provisional sequestration order, the creditor is obliged
to submit its claim along with all the other creditors, to be dealt
with in accordance with the general concursus creditorum.
[53] In the matter before me there is nothing to indicate that the debt
in question was proved against the insolvent estate by the
Respondent. It is not open for a creditor to neglect to prove its
claim against the insolvent estate and then claim set-off upon
debt owed by it to the insolvent after the sequestration of his or
her estate. Where the set-off is composed of debts which arose
prior and subsequently to sequestration respectively, there
cannot be said to be the requisite mutuality or reciprocity of
indebtedness. In other words the requirement that the debt exist
between the same parties is jeopardized once the trustee is
appointed to the insolvent estate.
[54] De la Rey E Mars: The Law of Insolvency (8ed) 347 (and the
authorities cited there) properly states that:
AThe mutuality of indebtedness essential for the operation of set
- off must have existed prior to the sequestration, and once it is
shown the court will not by extensive interpretation of the law
deprive a creditor of the right of set - off.@
[55] The Respondent in this matter argued that both the debts in
question Abecame mutually payable after sequestration@ and
relying on the passage from Mars: The Law of Insolvency (8ed)
348 which states:
A Where both debts in respects of which set - off is claimed come
into existence after sequestration, there is nothing to prevent its
operating@
contended that set-off can take place in respect of debts which
arose after sequestration. The broad interpretation which
Respondent seeks to give this passage is not warranted. A proper
reading of the relevant passages of Mars makes it clear that
operation of set - off for debts arising after sequestration are very
limited. The specific examples appearing in that authority is set -
off between the trustee of the insolvent estate and a creditor, in
situations where there is no prejudice to other creditors. Debts
arising after the sequestration of the insolvent =s estate will in
the ordinary course be against the trustee of the estate, in whose
charge the estate is vested.
[56] The only exception is where the insolvent is permitted by her/his
trustee to trade or carry out his profession. The debts that arise
within the course of such trade or professional practice, after the
consent has been granted by the trustee, should be able to be
set-off.
[57] Even if I assume that Respondent =s submission that set - off in
respect of debts that arose after the insolvency can take place is
of some merit, Respondent must satisfy this Court that the debts
in question are capable of being set-off and that both arose after
the sequestration of the Applicant =s estate, i.e. as the
Respondent is the party relying on set - off, the onus is on it to
prove that both debts arose after the sequestration of the
Applicant=s estate and that there is no bar to the one claim
being set-off against the other.
[58] The Applicant was provisionally sequestrated on 6 August 1998
and finally on 17 September 1998. The arbitration hearing
commenced on 5 March 1998 continued with a number of
postponements inbetween, and the award was handed down on
23 March 1999. The award required the Respondent to pay
compensation to the Applicant by 31 May 1999. The debt owed
to the Applicant thus arose after the Applicant=s sequestration.
[59] For Respondent to succeed in its allegation that both debts arose
after the sequestration of the Applicant =s estate it is required to
prove that the debt allegedly owed to it by the Applicant arose
after the sequestration of the Applicant =s estate. There is
nothing before the court that can justify this conclusion.
[60] The Respondent =s opposing papers simply allege that the
Applicant was aware of his indebtedness to the Respondent. The
papers do not set out the date on which such indebtedness
arose. The opposing papers refer to two judgment debts but no
court orders are attached, nor does the Respondent attempt to
set out the dates upon which the judgments were handed down.
This Court has therefore no way of knowing whether or not the
alleged debt owing to the Respondent by the Applicant arose
after the sequestration of the Applicant=s estate.
[61] In the circumstances Respondent has failed in its very first and
basic step of alleging and proving facts necessary to prove that
both the debts came into existence after the sequestration of the
Applicant=s estate.
[62] Had the Respondent succeeded in satisfying this Court that the
debts did arise after the sequestration of the Applicant =s estate,
the Respondent would still have failed to successfully claim set-
off. This is so because Respondent =s claim lies against the
Insolvent Estate and not against the Applicant personally. The
debt owed to Respondent is not one which in terms of any law
falls outside the ambit of being claimed against the insolvent
estate, nor is it a claim which arose in circumstances referred to
in paragraph [56] above. While the Respondent, therefore, has to
submit its claim to the Insolvent Estate, the debt that it owes in
terms of the arbitration award is not a debt that has accrued to
the insolvent estate but to the insolvent personally. There is
therefore no mutuality of debts or reciprocity of claims for
purposes of set-off.
[63] In the result there is no basis for me to refuse the application
sought. With regard to costs I am satisfied that this is a matter in
which costs should follow the result.
[64] In the result:
(a) The arbitration award issued by the CCMA dated 23 March 1999
is hereby made an order of court. Respondent is therefore
required to pay to the Applicant the sum of R136 160.00 together
with interest thereon at the rate of 15,5% per annum as and from
1 June 1999 to date of payment.
(b)Respondent is to pay the costs of this application.
____________
Waglay J
Date of judgment: 27 November 2002
for the Applicant: Adv J.W. Steyn instructed by Le Roux,
Mathews Du Plessis
for the Respondent: Adv J.Y. Claasen instructed by Grimbeek, van
Rooyen and Partners Inc
for the Third Party: no appearance.