THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Case no: 051/2004
REPORTABLE
In the matter between:
AFRICAN BANK LTD Appellant
and
MELVYN WEINER First Respondent
NW FINANCIAL ADMINISTRATORS (Pty) Ltd Second Respondent
ANTHONY JOHN WEBBSTOCK Third Respondent
Before: Mpati DP, Zulman JA, Cameron JA, Van Heerden JA and
Comrie AJA
Appeal heard: 1 March 2005
Judgment: Tuesday 29 March 2005
Administration orders – Magistrates’ Courts Act 32 of 1944, s 74 – Inter-
relation to s 65 proceedings – Meaning of ‘costs’ in s 74L – Attorney acting
as administrator – Entitlement to fees /costs – Collection fee not to be
duplicated – Attorney-administrator to deposit moneys collected in trust
account in terms of s 78 of Attorneys Act 53 of 1979
2
JUDGMENT
_______________________________________________________
CAMERON JA:
INTRODUCTION
[1] This appeal concerns the working of the system of court-supervised
debt administration created for small debtors in 1944 when the
legislature enacted s 74 of the Magistrates’ Courts Act (the Act). 1 The
provision, which currently applies to debtors whose liabilities total less
than R50 000, 2 offers an alternative to se questration, which in such
cases usually has no advantage for creditors. Use of s 74 procedures
has increased enormously in recent years, and with it disputes between
creditors and court-appointed debt administrators.
[2] The appellant is a commercial bank whose client base is heavily
affected by administration orders. The main respondents are Mr
Melvyn Weiner, an attorney whose practice is confined to managing
debt administrations, and a company he controls and employs in his
business (the administration company). In the Cape High Court the
bank applied for a range of declarat ory orders against Weiner and the
administration company. It had but modest success: the court refused
1 Act 32 of 1944 (‘the Act’). Section 74 was extensively amended when Act 63 of 1976 inserted
sections 74A to 74W. An informative overview: André Boraine, ‘Some thoughts on the reform of
administration orders and related issues’ 2003 De Jure 217-251.
3
the bank the main relief it sought, but granted two declarations
concerning attorneys’ trust accounts and interest. It ordered the parties
to pay their own costs.3 With leave granted by the court below the bank
now appeals, seeking a broader ra nge of orders. Weiner and his
company with similar leave appeal against the two orders that were
granted. In the court below the third respondent, Mr Anthony John
Webbstock, a Gauteng attorney whose work also focuses exclusively
on administration orders, was granted leave to intervene as third
respondent. The court refused the counter application he filed. Against
that he did not appeal. He nonetheless appeared in person before this
court to oppose the bank’s appeal.
[3] This court considered important as pects of s 74 debt administration in
Weiner NO v Broekhuysen
4 ( Weiner 1 ). But significant questions
remained. Although the bank inst ituted its application just before
Weiner 1 was handed down in May 2002, questions not at issue there
inevitably became the central focus of the parties’ contest. Those
questions have wide significance in view of the burgeoning use of
administration orders. Their us e has expanded because in recent
2 GN R1441, Government Gazette 19435 of 30 October 1998, with effect from 1 November 1998.
3 African Bank Ltd v Weiner and others 2004 (6) SA 570 (C), [2003] 4 All SA 50 (C) (Griesel J;
Selikowitz J concurring).
4
years ‘micro-lenders’ such as the bank – which Weiner describes as the
biggest ‘micro-lender’ in the country – have extended credit services to
large numbers of wage- and salary-earners who previously did not have
access to the credit market. ‘Micro-loans’ are generally made without
credit checks and without security bei ng exacted. Those black-listed
for past defaults may qualify, provided they have regular wage- or
salary-earning jobs, since the creditor, instead of demanding security,
secures a direct debit from the em ployer. The recom pense for risk is
high interest, because ‘micro-loans’ fall outside the Usury Act 73 of
1968.
5 But as the credit market has bloomed, so too has the number of
defaulters; and with them, completing the circle, has come a huge
increase in the number of s 74 administrations.
[4] The result all too often has been st atutory restructuring of a debtor’s
debts – but at the cost of an addit ional burden on th e debtor’s income,
namely the administrator’s fees. 6 This has led to clashes of interest
between lenders such as the bank a nd administrators such as Weiner
and his company. The former, who want rapid repayment of
4 2003 (4) SA 301 (SCA).
5 Loans of R10 000 and below are ‘micro-loans’: in General Notice 713, Government Gazette
20145 of 1 June 1999, the Minister of Trade an d Industry used the powers granted by s 15A
(inserted by s 8 of the Usury Amendment Act 100 of 1988 and substituted by Act 91 of 1989) to
exempt money lending transactions not exceeding R10 000 from the central provisions of the
Usury Act.
5
outstanding loans, accuse debt admini strators of seeking – not always
scrupulously – to protract debt adm inistration, creating a perpetual and
lucrative income stream for themselv es, collected directly from source
under court order, while debtors remain yoked indefinitely to
burdensome repayments. To these general allegations Weiner retorted
by accusing the bank of conducting a campaign ‘falling little short of a
vendetta’ against administrators.
[5] In this setting it would be easy to dismiss the parties’ dispute as a ‘turf
war’ between self-interested contestants; but that would not do justice
to the complexity of the underlying issues or to the impact their
resolution may have on creditors, administrators and the debtors
themselves, for whose ultimate protection s 74 procedures exist.
7
[6] On appeal, the issues between the parties narrowed considerably. This
was no doubt in part because the ju dgment of Griesel J (whose general
exposition and factual account I am grateful to adopt), 8 in dealing with
the very wide issues before the High Court, gave a lucid exposition of
the purposes and scope of s 74. I agree with his main general
6 See M A Greig ‘Administration Orders as Shark Nets’ (2000) 117 SALJ 622 at 626.
7 Compare Fortuin v Various Creditors 2004 (2) SA 570 (C); ex parte August 2004 (3) SA 268
(W).
8 2004 (6) SA 570 (C), [2003] 4 All SA 50 (C) paras 1-26.
6
conclusions, which deserve to be u nderscored, since they bear also on
the issues in this Court.
• In interpreting the contested provis ions, Griesel J emphasised that it
was never the intention of the legi slature that a debtor should be bound
up indefinitely in an administration order: on the contrary, ‘the
mechanism of an administration ord er is intended to provide a debtor
with a relatively short moratorium to assist in the payment of his or her
debts in full and to ward off legal action and execution proceedings’.9
• Griesel J also affirmed that t he role and function of the s 74
administrator ‘is akin to that of the trustee in an insolvent estate’: in
collecting and distributing payment s, the administrator occupies a
position of trust vis-à-vis both the debtor and his or her creditors, and
must carry out the duties of administ ration in the interests of creditors
and the debtor independently and impartially.
• He also concluded that an administ rator occupied a fidu ciary position in
relation to moneys collected 10 and, like a trustee, ‘should take
expeditious steps for the purpose of enabling the creditors to obtain as
extensive a payment as possible of their debts’.11
9 2004 (6) SA 570 (C), [2003] 4 All SA 50 (C) para 10.
10 2004 (6) SA 570 (C), [2003] 4 All SA 50 (C) para 12.
11 2004 (6) SA 570 (C), [2003] 4 All SA 50 (C) para 11.
7
First issue: inter-relation betw een s 74 and s 65 proceedings –
administrator’s entitlement to s 65 ‘costs’
[7] The first issue concerns the inter-relation between s 74 and its
associated provisions and s 65 and it s retinue (s 65A – s 65M), which
aim to create a relatively cheap and effective mechanism of execution
for judgments obtained in the ma gistrates’ courts. Before the High
Court the bank’s notice of moti on as eventually amended sought an
order that Weiner, ‘whenever appointed and acting as an administrator’
under s 74, may claim as necessary expenses and remuneration no
more than 12.5% of collected monies received from or on behalf of any
debtor for distribution to creditors.
[8] In seeking this relief the bank aimed to elevate the 12.5% limit
mentioned in s 74L (which deals with the administrator’s entitlement to
expenses, remuneration and costs) to a general cap on all amounts
claimable. Section 74L reads:
(1) An administrator may, before making a distribution –
(a) deduct from the money collect ed his necessary expenses and a
remuneration determined in accordance with a tariff prescribed in the rules;
(b) retain a portion of the money collected, in the manner and up to an
amount prescribed in the rules, to cover the costs that he may have to incur if the
debtor is in default or disappears.
(2) The expenses and remuneration m entioned in subsection (1)(a) shall not
exceed 12½% per cent of the amount of collected moneys received and such
8
expenses and remuneration s hall, upon application by any interested party, be
subject to taxation by the clerk of the court and review by any judicial officer.
[9] The ‘tariff prescribed in the rules’ is set out in Part III of Table B of
Annexure 2 to the Rules:
PART III
GENERAL PROVISIONS IN RESPECT OF PROCEEDINGS IN TERMS OF
SECTION 74 OF THE ACT
1. The following fees shall be allowed in addition to t hose laid down in the Tariff
to this Part:
(a) All necessary disbursements incurred in connection with the
proceedings.
(b) In addition to the fees stated below, the administrator shall be entitled to a fee
of 10% on each instalment collected for the redemption of capital and costs.
…
[10] The problem Weiner 1 confronted was that the tariff could be read as
granting an administrator a 10% fee on top of all ‘necessary
disbursements’. Weiner 1 reconciled this with s 74L by holding that the
statutory formula (‘necessary expenses and remuneration’) was
decisive: it contemplated that all tariff items, including the 10% fee,
could in total amount to no more than 12.5%. 12 But this approach did
not require a decision on the meaning of ‘the costs’ mentioned in s
74L(1)(b). In the wake of the 12.5% total cap Weiner 1 imposed on
administration expenses and remunerat ion, these ‘costs’ have become
a central source of contention between micro-lenders and
administrators, especially attorney-administrators.
9
[11] This was the issue that underlay the main relief the bank sought in
para 1 of its notice of motion. T he question is whether, when a debtor
under administration defaults or disa ppears, s 74L(2) offers an avenue
for recovery of ‘costs’ beyond ‘expenses and remuneration’, and if so to
what extent. Does the 12.5% cap in s 74L(2) cover also ‘the costs’
envisaged in s 74L(1)(b)? If not, wh at costs can be recovered under
subsec (1)(b)? What does the statutorily permitted retainer cover? And
of greatest practical importance, ca n an attorney-admin istrator pocket
the collection costs the rules separately envisage for s 65 proceedings?
[12] The bank contended that the s 74L(2 ) cap limited all recovery by an
administrator, from whatever source, to 12.5% ‘of the amount of
collected moneys’. That cannot be. The cap applies only to ‘expenses
and remuneration’. The phrase appears twice in s 74L – in subsec
(1)(a) (which inserts the indefinite article before ‘remuneration’) and in
subsec (2). It does not appear in s ubsec (1)(b). That mentions only
‘costs’. The wording thus draws a distinction between ‘expenses and
remuneration’ on the one h and, and ‘costs’ on the other. Only the
former are capped at 12.5%.13
12 2003 (4) SA 301 (SCA) paras 19-26.
13 This accords with the reasoning of van Reenen J and Revelas AJ in Weiner NO v Broekhuysen
2001 (2) SA 716 (C) 724H-I, but which Weiner 1 2003 (4) SA 301 (SCA) para 26 found
10
[13] The ‘costs’ that subsec (1)(b) envisages must be inferred from the
contingency for which it provid es, namely the debtor’s default or
disappearance. For this it permits a specific retention to be made. The
retention must be ‘in the manner and up to an amount prescribed in the
rules’. Rule 48(4) states that an administrator may in terms of s
74L(1)(b), before making a distribution, ‘detain’ an amount not
exceeding 25% of what is collected to cover costs occasioned by the
debtor’s default or disappearance, prov ided that the amount in the
administrator’s possession for this purpose may not at any stage
exceed R30.
[14] That was promulgated 27 years ago in 1978. It has never been
revised. The bank calculated that at present-day values the equivalent
would be about R600. If R30 constitute s a cap on all costs recovery, it
would of course have a very signif icant impact on the administrator’s
position.
[15] It seems clear, however, that the provision distinguishes between
retention and recovery, and that it does not limit the costs the
administrator can recover to the R30 retainer. If the retainer was meant
to place a limit on recovery, that could and would have been expressed
unnecessary to decide.
11
much more clearly. The provision does not specify the precise nature
of the costs that the adm inistrator ‘may have to incur’, nor does it limit
their recovery. It merely permits t he administrator to retain some
money ‘to cover’ – meaning ‘to help cover’, or ‘towards covering’ – the
costs actually incurred in the case of default or disappearance.
[16] As Griesel J pointed out, th ere are a number of cross-links between s
74’s provisions and s 65. 14 The expression ‘defaults or disappears’
brings s 74I(2) into play. This pro vides that where the debtor fails to
make the payments to the ad ministrator required under the
administration order, the provisi ons of ss 65A to 65L apply with the
necessary changes. These create a procedure whereby the debtor can
be called up and interrogated and a fres h order to pay by instalments
can be made.
[17] There are other cross-links. Where an administration order provides
for payments out of future emolum ents or income, s 74D requires the
court to authorise so far as is applicable the issue of an emoluments
attachment order (s 65J) or a garni shee order (attaching debts owed to
the debtor)(s 72), but permits the su spension of the orders. Where the
debtor breaches the conditions of suspension, s 74I(3) provides a quick
14 See 2004 (6) SA 570 (C), [2003] 4 All SA 50 (C) paras 46-47.
12
way to activate a suspended emoluments attachment order or a
garnishee order. Legal steps entai ling costs pursuant to default or
disappearance are contemplated also in subsecs 74J(8)15 and (9).16
[18] All this shows that ‘the costs’ the administrator ‘may have to incur’
are distinctive and separate from the ordinary expenses of an
administration. They are not incl uded under ‘necessary expenses and
remuneration’. They can be sep arately recovered. Where the
administrator employs an attorney, the attorney’s reasonable charges
for the steps authorised, duly taxe d and scrutinised, will be recoverable
as ‘costs’ under s 74L(1)(b).
[19] What is the position where t he administrator is him- or herself an
attorney (a situation the provisions clearly contemplate: s 74E(3); s
74J(7)(b))? There was de bate before us as to whether an attorney-
administrator can instruct him- or herself to take the legal steps
authorised, and thus, as attorney, pocke t the resultant fees. The point
was given currency, and the parties’ dispute about it some sting,
15 ‘If the debtor should at any time, despite a re gistered letter of demand from the administrator,
be 14 days in arrear with the payment of any in stalment and if steps in terms of s 74I(3) cannot
be taken [emoluments attachment or debt garnishing] or have been taken unsuccessfully, or if the
debtor had disappeared, the administrator shall forthwith notify the creditors in writing thereof and
request their instructions.’
16 ‘If within the period allowed in a notice contemplated in subsection (8) the majority of the
creditors instruct him to do so, or fail to re spond, the administrator shall institute legal
proceedings against the debtor for his committal for contempt of court or take such steps as may
be necessary to trace the debtor who has disappeared, as the circumstances may require.’
13
because Weiner is an attorney, and because the bank contests his
entitlement to levy any separate attorney’s fees.
[20] Griesel J found that the ‘close working relationship’ between Weiner’s
law practice and the various administration companies he employs
(which include the second respondent) led to a ‘blurring of functions’,
since there was no real distinctio n between his role as attorney-
administrator and that of his admin istration company. Weiner himself
alleged that his role ‘in applying for an administration order on behalf of
the applicant/debtor is separate and distinct f rom his role as an
administrator once an administrati on order has been granted’. He
claimed that once appointed as administrator he uses ‘the
administrative and infrastructural support’ of his administration
company ‘in order to implement and monitor the proper functioning of
an administration order’: ‘in short’, he alleged, he fulfilled the functions
of an administrator ‘through the offi ces of’ the administration company
as opposed to his legal practice. Th is semantic play led Griesel J to
find an ‘ambivalence’ in Weiner’s position, observing that it suited him
on occasion to rely on his status as a practitioner, and on other
occasions to claim that he is not acting as a practising attorney in
14
conducting the administration. 17 Those comments were well
warranted.
[21] It is obvious that an attorney who is appointed as an administrator in
terms of s 74E(1) acts in the capacity of an attorney throughout: he or
she does not dispense with professional functions or duties at any point
in the administration. The attorney-administrator takes both the
benefits and the burdens of a practitioner’s professional position and
responsibilities.
[22] For the purposes of s 74L(1 )(b) this enables an attorney-
administrator to carry out the legal work required by the section, and to
charge the reasonable cost s so incurred to the administration. It was
suggested that this kind of ‘auto-instruction’ or ‘self-briefing’ could lead
the attorney-administrator to genera te illusory work and thus charge
unnecessary fees. That is true; but such a temptation could arise in
any professional setting, and can be m onitored in a s 74 administration
by the creditors’ scrutiny of the steps taken and the reasonableness of
the professional fees charged for them.
The 10% collection fee under s 65
17 2004 (6) SA 570 (C), [2003] 4 All SA 50 (C) para 71.
15
[23] A quite different question is w hether the attorney -administrator is
entitled to levy a collection fee under s 65 and its associated provisions
and claim it as a ‘cost’ under s 74L. Part I of Table B of Annexure 2 to
the Rules of the Magistrates’ Courts (which contains general provisions
in respect of s 65 proceedings) provides, in addition to the tariff
specified in that part, for a 10% collection fee ‘on each instalment
collected’.
18 We were told that some a ttorney-administrators levied an
additional 10% collection fee in the s 65 setting, adding it as a s 74L(2)
‘cost’ on top of other s 65 co sts and s 74L ‘expenses and
remuneration’; and in his submissions before us, Mr Webbstock frankly
declared that he himself did so.
[24] Neither principle nor the wording of the statute in my view
countenances an attorney-administrator levying a collection fee under s
65 in addition to the ‘expenses and remuneration’ that may be claimed
under s 74L.19 The two statutory debt-recovery mechanisms – s 65 and
s 74 – must after all be interpreted together. Section 65 proceedings
18 Para 3(b) of Part 1 of Table B reads in par t: ‘A fee of 10% on each instalment collected in
redemption of the capital and costs of the action , subject to a maximum amount of R300.00 on
every instalment. Where the amount is payabl e in instalments the collection fees shall be
recoverable only on payment of every instalment.’ The provision goes on to state expressly that
the 10% collection fee specified is in substituti on for and not in addition to the 10% collection fee
recoverable where a judgment debt is payable in instalments (para 13 of Part 1 of Table A).
19 I leave out of account here, and express no view on, the example Mr Webbstock cited in
argument – that of an attorney- administrator who collects a debt on behalf of a debtor to whom it
is owed.
16
are invoked to enforce the prim ary mechanism of s 74 debt
administration. Section 65’s prov isions apply ‘wit h the necessary
changes’ (mutatis mutandis ), and s 65I expressly provides that an
application for an administratio n order has preference over s 65
proceedings. Section 65 proceedings are therefore subsidiary to
administration order proceedings.
[25] Against this background it would be unconscionable, on any basis, if
the 10% collection fee in Part I of Table B for s 65 proceedings were
drawn in addition to the 10% collecti on fee permitted in Part III for s 74
administrations. There is only one operative collection, and that is the
collection under s 74, for which the colle ction fee of 10% is specified as
part of the 12.5% maximum permitted in s 74L(2). If a further collection
is alleged to take place by virtue of s 65, no additional fee can be
collected in respect of it as a ‘cost’ under s 74L.
[26] If, in the example debated before us , the administrator gives over the
task of collecting from a defaulting debtor to an outside attorney and the
administrator allows that attorney the s 65 10% collection fee as a s
74L(1)(b) ‘cost’, the administrator cannot then him- or herself claim
collection commission under s 74. There can be only one collection
commission, claimed only once.
17
[27] In the result, the statutory scheme entails two conclusions. First, only
one collection commission can be cl aimed. There can be no double-
levying. Second, where the administrator is an attorney, no collection
fee can be claimed under s 65 in addition to s 74L ‘expenses and
remuneration’. Differently stated, an attorney-administrator can claim
only one collection fee, and that is th e collection fee th at forms part of
the total ‘expenses and remuneration’ allowed by s 74L(2).
Is the bank entitled to declaratory relief on appeal that it did not
pertinently seek in the court below?
[28] The declaration the bank sought in the High C ourt about the ambit of
s 65 costs recovery und er s 74L addressed the iss ue in general terms.
The order sought said nothing specific about the s 65 collection fee.
Griesel J therefore noted that the question the bank’s amended first
prayer raised for decision was wheth er the costs arising from recourse
to the provisions of s 65 had to come from the administrator’s
‘expenses and remuneration’ unde r s 74L(1)(a) or from s 74L(1)(b)
‘costs’. Since the answer was the latter, the declaratory relief the bank
sought was refused.
18
[29] On the approach the bank pursued before th e High Court, that was
clearly correct. But ten weeks af ter the High Court delivered its
judgment, and after both main parties had lodged applications for leave
to appeal, the bank applied under Ru le 42 for an ambiguity to be
removed from the judgment by the ins ertion of a clarificatory sentence
stating that the ‘costs’ the judgment dealt with did not include ‘the fee of
10%’ permitted for s 65 collections. The three res pondents opposed
this application. The bank abandon ed it when the High Court granted
both the bank and Weiner and his adm inistration company leave to
appeal in terms of an agreed draft order. In the bank’s notice of appeal
there then appeared for the first ti me a prayer for an alternative order
that dealt squarely with the s 65 10% collection fee.
[30] Counsel for the bank conceded that this was an unusual procedure,
since the question of the s 65 collect ion fee and its place in the inter-
relation between the two statutory mechanisms was not specifically
argued before the High Court. He drew our attention to Paola v Jeeva
NO,20 where this Court on appeal stated its views on issues germane to
the parties’ dispute that were not decided in the court below (though
there both parties asked it to do so).
20 2004 (1) SA 396 (SCA) para 17.
19
[31] I do not think it is necessary to invoke Paola’s case. The first prayer
the bank sought in its notice of motion (which was amended during the
course of argument before the High Court) fairly put in issue all matters
relating to the inter-connection between s 65 and s 74, including the
collection fee. It is true that in the High Court the matter was not
argued on the basis that this was the central question. That emerged
only later. But the relief the bank sought, and has at all stages
persisted in seeking, covered the collection fee issue. In these
circumstances I do not think that the bank should be left remediless.
The determination of the question added to its notice of appeal
depends solely on legal argument; there is no further evidence that can
be adduced. That the que stion was not drawn to the attention of the
court below, or pertinently embodied in the declarator sought, will be
reflected in dealing with the costs order granted in the court below.
[32] Given the general importance of the parties’ dispute, the breadth of
the declarator originally sought, and t he fact that the issues have been
exhaustively covered in evidenc e and argument, there can be no
barrier to granting the bank the declarator it inserted into its notice of
appeal.
20
Second issue: no legal costs claimable by administration company
[33] The High Court also refused t he bank a declarator stating that
Weiner’s administration company cannot recover legal costs for
preparing and bringing an application for an administration order.
There is really no disput e here, because Weiner does not contend that
his company can ever claim such costs. As Griesel J pointed out, both
Weiner and his company in the answering affidavits expressly
disavowed the company’s entitlement to any such costs. On appeal the
bank pointed out that Weiner claimed to ‘fulfil the functions of an
administrator through the offices of [the administration company] as
opposed to my legal practice’. From this the bank sought to extract the
inference that Weiner does not act as an att orney-administrator in
conducting administrations. Counsel contended that the ‘apparently
seamless relationship’ between Weiner and his administration company
suggests that legal cost s connected with applicatio ns for administration
orders are collected and reco vered for the benefit of the administration
company in a manner contrary to law.
[34] But as already observed (para 21 above), Weiner’s semantic shifts
about his and the company’s role in the administration process cannot
detract from his continuing professi onal responsibilities and duties: an
21
attorney appointed as an administrat or acts in a professional capacity
throughout, and does not dispense wi th professional functions or duties
at any point in the administration. The bank as creditor is of course
entitled to clear proof that legal charges sought to be recovered were
properly and reasonably incurred. But that is a different matter. The
finding as to Weiner’s continuing role and responsibilities as an attorney
puts paid to the need f or a declarator, and for the reasons Griesel J
gave the appeal cannot succeed.21
Third issue: Can Weiner claim legal costs for implementing an
administration order ‘when he does not act as a practising attorney’?
[35] The third issue the bank raised on appeal yields to the same logic.
The bank sought a declaration that Weiner can claim no costs for the
implementation of an administrati on order ‘when he does not act as an
administrator in his capacity as a practising attorney’. The answer is
that Weiner can never so act. That he farms out duties to his
administration company can make no difference, for, as Griesel J
pointed out, ‘the simple fact is that where legal work ha s to be done or
21 2004 (6) SA 570 (C), [2003] 4 All SA 50 (C) paras 50-53.
22
is done, legal costs will be incurred’, whether to the credit of Weiner’s
legal practice or that of an outside attorney.22
[36] It is true, as the bank emphasis ed, that Weiner may be placed in a
undesirable conflict in that, as administrator, he can generate additional
fees for his legal practice by engaging in litigation related to his
functions as administrator. But that, as pointed out earl ier (para 22), is
a matter for ethical oversight and the creditors’ scrutiny: it is not a
matter for which a structural solution can be prised from the statute.
For reasons similar to those given in relation to the second issue, the
appeal here too cannot succeed.
Fourth and fifth issues (Weiner’s appeal):
[37] The High Court granted the bank two inter-related orders declaring
that –
1. all monies received by or on behalf of Weiner when he takes
appointment and acts as an administrator shall be deposited into the
trust account that he keeps in t erms of s 78 of the Attorneys Act 53
of 1979;
23
22 2004 (6) SA 570 (C), [2003] 4 All SA 50 (C) para 55.
23 Section 78 of the Attorneys Act 53 of 1979 so far relevant reads:
’(1) Any practising practitioner shall open and keep a separate trust banking account at a banking
23
2. any interest that may accrue on any sums of money received by
Weiner or his administration company from or on behalf of a debtor
under administration in terms of s 74 and deposited into a separate
trust account in terms of s 74J(7)(a) 24 shall form part of the monies
available for distribution to creditors.
[38] During argument before us, counsel for Weiner and the
administration company rightly aba ndoned the appeal agai nst the first
order. As Griesel J observed in granting it, 25 Weiner invoked his
attorney’s status when seeking exemption from the obligation to provide
security (applicable in terms of s 74E (3) to an administrator ‘who is not
institution in the Republic and shall deposit therein the money held or received by him on account
of any person.
(2) (a) Any practitioner may invest in a separate trust savings or other interest-bearing account
opened by him with any banking institution or bu ilding society any money deposited in his trust
banking account which is not immediately required for any particular purpose.
(b) Any trust savings or other interest-bearing account referred to in paragraph (a) shall
contain a reference to this subsection.
(2A) Any separate trust savings or other interest-bearing account –
(a) which is opened by a practitioner for t he purpose of investing therein, on the
instructions of any person, any money deposited in his trust banking account; and
(b) over which the practitioner exercises exclusive control as trustee, agent or
stakeholder or in any other fiduciary capacity,
shall contain a reference to this subsection.
(3) The interest, if any, on money deposited in te rms of subsection (1) and the interest on money
invested in terms of subsection (2) shall be paid over to the [attorneys fidelity] fund by the
practitioner concerned at the prescribed time and in the manner prescribed.’
24 Section 74J reads in part:
‘(7) An administrator shall deposit all moneys received by him from or on behalf of debtors whose
estates are under administration –
(a) if he is not a practising attorney, in a separate trust account with any bank in the Republic, and
no amount with which any such account is credited shall be deemed to be part of the
administrator’s assets or, in the event of his d eath or insolvency, of his deceased or insolvent
estate;
(b) if he is a practising attorney, in the trust ac count that he keeps in terms of [s 78] of the
[Attorneys Act 53 of 1979].’ [Statutory reference updated.]
25 2004 (6) SA 570 (C), [2003] 4 All SA 50 (C) paras 71-73.
24
an officer of the court or a practitioner’) – but at the same time
disavowed that status when seek ing to avoid the duty s 74J(7)(b)
imposes on ‘a practising attorney’ to deposit administration moneys in
his attorneys’ trust account. Of c ourse this cannot be. The attorney-
administrator is appointed as an a ttorney, takes office as an attorney,
executes the administration as an attorney and is not at any stage
during that process exempt from the obligations that s 78 imposes.
[39] On appeal Weiner persisted in challenging the second order granted.
The evidence showed that instead of opening an account for each
debtor’s payments – which would entail prohibitive expense and
administrative complexity – Weiner cumulated all debtors’ monies into a
s 74J(7)(a) ‘separate trust account’ for each entity through which he
conducted the relevant administration orders, the deposits being on call
and thus generating a higher rate of interest. He explained that the
interest that accrues to each such trust account is then applied to cover
bank charges as well as the premium of a fidelity insurance policy of R3
million covering himself and his staff.
[40] The bank’s calculations suggested that a fairly substantial amount of
interest accrued in this way to We iner. Despite s 78 of the Attorneys’
Act, the Fidelity Fund drew no benefit from this interest; while despite s
25
74J(7)(a), Weiner appeared to treat it as part of hi s assets. That, too,
cannot be. Interest received must go either to the Fidelity Fund or to
the creditors. This follows from the wording of the statute. Section
74J(1) requires an administrator to distribute ‘all payments and other
funds’ received ‘from or on behalf of’ debtors pro rata among the
creditors.26 ‘Other funds’ clearly includes interest. Section 74J(7)(a)
insulates from the administrator’s private estate all amounts with which
any separate trust account ‘is credited’: such credits clearly include
interest.27
[41] These leave room for only one co nclusion: net interest received on
debtors’ payments, if not paid to the Fidelity Fund, must be distributed
to creditors. (I say ‘net interest’ since interest received must naturally
be off-set against bank charges directly incurred in its accrual.)
[42] Weiner and Webbstock protested that calculating interest accruing on
the payments made by each individual debtor before its distribution
would be too difficult or costly. But this complaint lost force in the face
26 Section 74J(1) reads in part: ‘An administrator s hall collect the payments to be made in terms of the
administration order concerned and shall keep up to date a list (which shall be available for inspection,
free of charge, by the debtor and creditors or their attorneys during office hours) of all payments and
other funds received by him from or on behalf of the debtor, indicating the amount and date of each
payment, and shall, subject to section 74L, distribute such payments pro rata among the creditors’.
27 The wording of s 74J(7) is set out in footnote 24 above.
26
of evidence the bank produced th at appropriate computer programmes
were available for its ready calculation.
[43] Griesel J observed that since th e first order obliged Weiner to deposit
debtors’ payments into his attorney’s trust account, the grant of the
second order (declaring that interest on a s 74J(7)(a) account is
available to creditors) was ‘strictly speaking’ redundant. 28 He
nevertheless granted the order bec ause in the past Weiner had
deposited moneys into various s 74J(1)(a) accounts, from which
interest had in the past been earned. The order was meant to deal with
these receipts. I agree with the learned judge’s reason for granting the
order. On appeal, counsel for Wein er in addition gave an undertaking
that Weiner would give a proper account ing to creditors in respect of
past interest earned, and that despite practical problems he would pay
it over to creditors as required by the statute.
[44] In conclusion I allude to a question that arose in the course of
argument, namely into what type of s 78 attorneys’ trust account an
attorney-administrator is obliged to d eposit debtors’ payments. Interest
does not have to accrue to the Fidelit y Fund. In terms of s 78(2A) of
the Attorneys Act, an attorney may on the instructions of a client open a
28 2004 (6) SA 570 (C), [2003] 4 All SA 50 (C) para 74.
27
separate trust savings or other int erest-bearing account for the benefit
of the client. The questi on was debated whether an attorney-
administrator might not secure instru ctions to deposit moneys received
into a s 78(2A) interest-bearing acc ount, and, if so, whether a single
such account for all debtors might not ease the administrative load
arising from the opening of multiple accounts (subject, of course, to a
proper accounting to creditors in respect of interest). The wording of
the relevant provisions may not preclude this, but since the question
was not fully argued I express no view on it.
[45] Weiner’s appeal against the se cond order must therefore fail.
SUMMARY OF FINDINGS
[46] To summarise the conclusions of this judgment:
46.1 The ‘costs’ the administrator may have to incur in terms of s 74L(1)(b)
are separate and distinct from the ordinary expenses of an
administration. They are not included under ‘necessary expenses and
remuneration’. The 12.5% cap does not apply to them. They can be
separately recovered.
46.2 The R30 retention permitted in terms of s 74L(1)(b) does not limit the
costs that can be recovered under that provision.
28
46.3 Where a debtor defaults or disappears, and the administrator employs
an attorney, the latter’s reasonable charges for the authorised steps,
duly taxed and scrutinised, will be ‘costs’ under s 74L(1)(b).
46.4 An attorney who is appointed as an administrator in terms of s 74E(1)
acts in the capacity of an att orney throughout: he or she does not
dispense with professional functions or duties at any point in the
administration. He or she takes both the benefits and the burdens of
an attorney’s professional position and responsibilities.
46.5 For the purposes of s 74L(1)(b) th is means an attorney-administrator
can carry out the legal work required by the section, and charge the
reasonable costs so incurred to the administration.
46.6 The 10% collection fee the Rules allow for s 65 proceedings cannot
be claimed in addition to the collection fee the Rules permit for s 74
proceedings. Only one collection commission can be claimed.
46.7 In addition, where the administrat or is an attorney, no collection fee
can be claimed under s 65 on t op of s 74L ‘expenses and
remuneration. Differently stated, an attorney-administrator can claim
only one collection fee, and that is the collection fee that forms part of
the total ‘expenses and remuneration’ allowed by s 74L(2).
29
46.8 The attorney-administrator is not at any stage of the administration
exempt from the obligations that s 78 of the Attorneys’ Act 53 of 1979
imposes.
46.9 Net interest received on debtors’ payments deposited to a separate
trust account by an administrator w ho is not a practising attorney must
be distributed to creditors.
Costs
[47] The bank has established that it is entitled to an order it did not
obtain in the court below. That represents substantial success on
appeal, and I consider that the bank is entitled to its costs of appeal.
(No order was sought against Webb stock.) But the bank did not
expressly seek the order it has now obt ained until it filed its notice of
appeal. In these circumstances I th ink the costs order Griesel J made
in the court below should be left undisturbed.
[48] The following order is made:
1. The bank’s appeal succeeds with costs.
2. The order of the court below is varied only to the extent that an
additional order is granted in the following terms:
‘It is declared that the first respondent, whenever appointed and
acting as an administrator in terms of s 74 of the Magistrates’ Courts
30
Act 32 of 1944, is entitled to re cover in respect of necessary
expenses and remuneration no m ore than 12.5% of collected
moneys received from or on behalf of any debtor for distribution to
the creditors of that debtor, such limit of 12.5% not to apply in respect
of costs arising from recourse to the provisions of sections 65A to
65L of the Act, save that the fee of 10% referred to in para 3(b) of
Part I of Table B of Annexure 2 to the Magistrates’ Courts Rules shall
not be recoverable in circumstances where the first respondent is
both the administrator and the attorney seeking to recover such fee.’
3. The appeals of the first and seco nd respondents are dismissed with
costs.
E CAMERON
J U D G E O F A P P E A L
CONCUR:
MPATI DP
ZULMAN JA
VAN HEERDEN JA
COMRIE AJA