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[2013] ZAWCHC 56
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Van Zyl and Others v Master of the High Court of South Africa Western Cape High Court, Cape Town and Another (25059/2011) [2013] ZAWCHC 56; 2013 (5) SA 71 (WCC) (5 April 2013)
REPORTABLE
THE REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
WESTERN
CAPE HIGH COURT, CAPE TOWN
CASE NO: 25059/2011
In the matter between:
CHRISTOPHER
PETER VAN ZYL N.O.
...................................................................
1
st
Applicant
JURGENS
JOHANNES STEENKAMP N.O.
...........................................................
2
nd
Applicant
MARC
BRADLEY BEGINSEL N.O.
.........................................................................
3
rd
Applicant
[in their capacity as
the duly appointed liquidators of
Black River
Development (Pty) Ltd (in liquidation)]
and
THE
MASTER OF THE HIGH COURT OF SOUTH
AFRICA
WESTERN CAPE HIGH COURT, CAPE TOWN
................................
1
st
Respondent
AIK
CREDIT PLC
.................................................................................................
2
nd
Respondent
JUDGEMENT: 5 APRIL
2013
BOZALEK, J:
The applicants, the
liquidators of a company known as Black River Development (Pty) Ltd
(‘
Black River’
), seek to review the decision of
the Master of the High Court (‘
the Master’
) in
terms of which she refused to expunge the proven claim of the second
respondent, AIK Credit PLC (‘
AIK’
), a company
registered in Mauritius, in the liquidated estate of Black River.
The Master does not oppose the application but
AIK does so.
Ultimately the core
issue in this matter requires resolving the tension between the
principle that, once there has been a
concursus creditorum,
no creditor in a liquidated estate can take steps to improve its
position to the prejudice of other estate creditors, on the
one hand
and, on the other, the principle that temporary non-compliance with
the provisions of Regulation 10(1)(c) of the Exchange
Control
Regulations, which requires Treasury approval of any transaction
involving the export of capital, does not present a
bar to the
validity or enforceability of a claim based on such a transaction.
Determination of this
issue first requires, however, a setting out of the transactions
which underlie AIK’s claim, the history
of the litigation
which led to Black River’s liquidation and the several phases
in the proving of a claim by AIK in Black
River’s estate.
BACKGROUND
In February 2008 the
South African Reserve Bank (‘
SARB’
) approved an
intended loan of R50mil from Four Elements Protected Cell Company
(‘
Four Elements
), part of a foreign group of companies,
to Queensgate Residential (Pty) Ltd (‘
Queensgate
Residential’
), a South African company part of the then
Queensgate Group. That loan, however, for reasons which are not
material, ultimately
became a loan from AIK to Queensgate Wealth
Manager (Pty) Ltd
(‘Queensgate Wealth’)
pursuant
to which an amount of €2 350 000.00 was loaned and
advanced in terms of a written agreement.
Two subsidiary companies
within the Queensgate Group, Queensgate Waterkloof Property (Pty)
Ltd (‘
Queensgate Waterkloof’
) and Queensgate
Property (Pty) Ltd, which subsequently became Black River, stood
surety for Queensgate Wealth’s obligations
to AIK. In terms of
various agreements the responsibility for obtaining SARB approval
for the loan rested upon Queensgate Wealth.
As an illustration,
clause 13 of the loan agreement between AIK and Queensgate Wealth
recorded that the borrower (Queensgate
Wealth) ‘
covenant(ed)
that it had obtained the consent of the Reserve Bank of South Africa
for the Loan from AIK and that such consent
is unconditional’
.
Shortly before the
conclusion of the loan agreement between AIK and Queensgate Wealth
the former sought a copy of SARB approval
in respect of the proposed
transaction. This was duly forwarded to AIK by Queensgate Wealth but
upon examination it was found
that the approval referred to
Queensgate Residential and not Queensgate Wealth. In response to a
query in this regard AIK was
sent a letter confirming SARB’s
approval of the name change of the borrower to Queensgate Wealth and
recording that SARB
had amended its records to this effect.
The application for SARB
approval was effected by the borrower, through ABSA’s Retail
International banking branch, and
not by AIK. Accordingly, when AIK
granted the loan to Queensgate Wealth it believed that SARB approval
which was required had
been obtained in respect of the transaction.
Unbeknownst to it, however, the original application reflecting Four
Elements as
the lender had not been revised to substitute AIK as the
creditor. Furthermore, the new loan amount had also not been
revised.
In terms of the loan agreement AIK advanced the sum of
€2 326 500.00 to Queensgate Wealth on 17 April 2008
which
loan was to have been repaid, together with an interest and
costs, within six months.
On 30 June 2008 Black
River signed a deed of suretyship in terms of which it bound itself
to AIK as surety and co-principal debtor
with Queensgate Wealth in
respect of the latter’s indebtedness in terms of the loan
agreement. Thereafter, on 22 July 2008,
a surety mortgage bond was
registered by Black River in favour of AIK. Similar arrangements
were concluded between AIK and Queensgate
Waterkloof.
In April 2009 AIK
applied for the winding up of the principal debtor, Queensgate
Wealth, based upon its failure to repay the debt
due under the loan
agreement. One of the defences raised was that the failure to obtain
the requisite Treasury consent to the
transaction in terms of
Regulation 10(1)(c) of the Exchange Control Regulations rendered the
loan agreement null and void. The
regulation provides as follows:
‘
10(1)
No person shall except with permission granted by the Treasury and in
accordance with such conditions as the Treasury may
impose
…
.
(c)
enter into any transaction whereby capital or any right to capital is
indirectly exported from the Republic’.
This point was upheld by
the Western Cape High Court per Zondi J who found that the loan
agreement was indeed void by reason of
the fact that the requisite
permission had not been obtained from the Treasury. He held
nevertheless that AIK was a creditor
of Queensgate Wealth inasmuch
as it enjoyed a remedy against it in the form of a
condictio
and accordingly was a contingent or prospective creditor having
locus standi
. In May 2009 application was made for the
liquidation of Black River. A provisional order of liquidation was
granted on 4 June
and a final order on 28 July 2009.
In
the meantime, no doubt in response to the point raised in the
Queensgate Wealth liquidation application, AIK instructed attorneys
to apply on its behalf to SARB’s Exchange Control Department
for approval of the original loan. In September
2009 SARB
stated in a letter that it had noted the receipt of the loan in the
amount of €2 326 500.00 by Queensgate
Wealth from AIK.
However, it was only in July 2011 that attorneys acting on behalf of
AIK and the liquidator of Queensgate Wealth
applied to SARB for the
‘
approval/ratification’
of the loan agreement. On
16 August 2011 a meeting was held at the offices of SARB’s
Financial Surveillance Department
to discuss this application at
which meeting an official stated that the loan ‘
may be
regarded as having been regularised’
. This was
subsequently confirmed by SARB upon its receipt of a minute of the
meeting.
Prior to Treasury
approval of the loan being sought and ultimately obtained by AIK the
process of proving claims in Black River’s
estate commenced.
On 8 October 2009 the claim of AIK in the liquidated estate was
admitted to proof in the amount of €2 580 495.00,
an
amount made up of the original sum loaned to Queensgate Wealth
together with interest and costs. On 21 October 2009, however,
AIK’s
attorney addressed a letter to the applicants notifying them that
his client abandoned part of its claim as a result
whereof it was
reduced to €831 750.00 together with interest thereon. The
reason for this abandonment was AIK’s
concession that this was
the amount to which Black River’s indebtedness had been
limited in the surety mortgage bond. In
the original suretyship
Black River bound itself as surety and co-principal debtor for
Queensgate Wealth’s indebtedness
to AIK in terms of the Loan
Agreement ‘
limited to the amount of the registered bond’
which would be in the amount of €831 750.00. In turn the
suretyship mortgage bond recorded that whereas Queensgate
Wealth was
indebted to AIK in the sum of €831 750.00 and whereas
Black River had entered into a deed of surety, Black
River was
indebted to AIK in the aforesaid sum and it bound certain property
in Stellenbosch as a first mortgage in favour of
AIK.
Certain of the recordals
in the surety mortgage bond arguably purported to extend Black
River’s indebtedness to AIK beyond
the aforesaid figure but in
the light of the abandonment by AIK of anything other than its claim
for €831 750.00, it
is unnecessary to consider the
question of the precise ambit of the surety mortgage bond in this
respect.
On 11 May 2011 the
applicants’ attorney addressed a letter to the Master
requesting that she expunge AIK’s claim in
terms of
s45
of the
Insolvency Act, No 24 of 1936
by reason of the fact that the
underlying loan agreement was void for lack of Treasury approval in
terms of
Regulation 10(1)(c).
In doing so they relied upon the
judgments of Zondi, J in the Queensgate Wealth and Queensgate
Waterkloof winding up applications.
In response to these
representations AIK’s attorneys addressed a letter to the
Master on 6 June 2011 disputing that there
were any grounds for an
expungement and relying on the judgment of the Supreme Court of
Appeal in
Oil Well (Pty) Ltd v Protech International Ltd and
Others
2011 (4) SA 394
(SCA) which had been delivered on 18
March 2011. In that matter the Court held that failure to obtain
prior Treasury consent
for an agreement hit by Regulation 10(1)(c)
of the Exchange Control Regulations did not render such agreement
void.
A month later the
applicants’ attorneys responded to the above letter in a
further letter addressed to the Master still
contending that AIK’s
claim should be expunged. In the light of the
Oil Well
judgment they no longer maintained that the initial loan agreement
or transaction was void but expressed the view that the transaction
could not be ‘
enforced’
without the necessary
consent from the Treasury being obtained. It was further contended
that any
ex post facto
application for approval of the loan
could not assist AIK since, if it was successful, ‘
AIK
would obtain a right that it did not have as at the date of
institution of the concursus and thereby become a creditor under
circumstances where it was not previously a creditor to the
substantial prejudice of other creditors of Black River’.
On 12 September 2011 the
Master refused the applicants’ request that she expunge AIK’s
claim. By this time Treasury
approval had finally been obtained.
Furthermore, the Master reasoned that the
Oil Well
judgment
had in effect overruled Zondi, J’s finding that the loan was
invalid for want of approval in terms of Regulation
10(1)(c), and
had found that it was not in the public interest that the Exchange
Control Regulations be used as a means to escape
from contractual
relations. The Master appears also to have expressed doubt that the
underlying loan required SARB approval in
terms of Regulation
10(1)(c) as it did not amount to the ‘
export of capital’.
LEGAL FRAMEWORK
The review application
is brought in terms of
s151
of the
Insolvency Act, read
together
with
s339
of 1973’s Companies Act, in turn read with Item 9 of
Schedule of 5 of 2008 Companies Act.
Section 151 reads as
follows:
‘…
any
person aggrieved by any decision, ruling, order or taxation of the
Master or by a decision, ruling or order of an officer presiding
at a
meeting of creditors may bring it under review by the Court and to
that end may apply to the Court by motion, after notice
to the Master
or to the presiding officer, as the case may be, and to any person
whose interests are affected …’
It was common cause
between the parties that the nature of the review before this Court
is a wide one, the Court being entitled
to have regard to the nature
of the evidence placed before the Master and, if satisfied that such
decision was wrong, to correct
it and substitute same with that of
its own. As was stated by the Supreme Court of Appeal in
Nel
and Another NNO v The Master (Absa Bank Limited and Others
intervening)
1
:
‘
South
African courts have long accepted that the review envisaged by
s151
of the
Insolvency Act is
the “third type of review”
identified more than 100 years ago in Johannesburg Consolidated
Investment Company v Johannesburg
Town Council … i.e. where
Parliament confers a statutory power of review upon the Courts. In
the Johannesburg Consolidated
Investment Company case, Innes CJ
stated... with reference to this kind of review, that a Court could
“…
enter
upon and decide the matter de novo. It possesses not only the powers
of a Court of review in the legal sense, but it has the
functions of
a Court of appeal with the additional privileges of being able, after
setting aside the decision arrived …,
to deal with the matter
upon fresh evidence…”
The applicants sought to
have AIK’s claim expunged in terms of
s45
of the
Insolvency
Act which
provides for the delivery by the officer presiding at a
meeting of creditors to the trustee or liquidator of every claim
proved
against the insolvent estate together with every supporting
document. Sub-section 3 thereof provides that if a trustee disputes
a claim after it has been proved against the estate ‘
he
shall report the fact in writing to the Master and shall state in
his report his reasons for disputing the claim’.
Thereafter the Master may confirm, reduce or disallow the claim
after having provided the claimant an opportunity to substantiate
his claim. It is not in dispute that the proper procedures were
followed in this matter and that all parties were afforded an
opportunity to make representations regarding the validity of the
claim.
THE ISSUES
The primary issue
distilled in the course of argument was how to reconcile the
Oil
Well
decision regarding the effect of a failure to obtain
Treasury permission to enter into an affected transaction in terms
of the
Exchange Control Regulations (in this case the loan
agreement) with the common law relating to the effect of a
concursus
creditorum
in an insolvent estate. A secondary issue was raised,
namely, whether the Exchange Control Regulations were applicable in
the
first place, AIK’s argument being that the underlying
transaction or agreement did not involve an export of capital or any
right thereto. The final issue was whether costs should be awarded
against the applicants in the event that their application
to
expunge was unsuccessful.
THE ARGUMENTS OF THE
PARTIES
On behalf of the
applicants it was contended that the crucial provisions of the
Oil
Well
judgment provide that, absent the required Treasury
approval, a claim which otherwise requires such approval is not
enforceable.
It was further argued that a long line of authority has
established that once a
concursus creditorum
has been
established by a winding up order no creditor of the insolvent or
liquidated estate can thereafter enter into any transaction
regarding estate matters which prejudices the general body of
creditors. Noting that the
Oil Well
decision did not deal
with the context of an insolvency or winding up, applicants’
counsel contended in effect that the
ratio in
Oil Well
was of
no assistance to AIK since it had not obtained SARB approval for the
loan by the critical time of
concursus
with the result that
its claim was unenforceable and fell to be expunged.
Relying on the judgment
in
Oil Well
and its antecedent case,
Barclays National
Bank Ltd v Thompson
1985 (3) SA 778
(A), Mr Duminy SC, who
appeared together with Mr Edmunds, argued on behalf of AIK that
Treasury approval in terms of Regulation
10(1)(c) does not create
new rights. Rather the position is that the underlying transaction
is not invalid and only in instances
where Treasury consent is
refused will a debtor be entitled to resist the claim on that
ground. Since SARB approval was eventually
obtained by AIK on 16
August 2011 there was no basis for the applicants to argue that the
claim was unenforceable. AIK’s
counsel argued in the
alternative that even if the claim based on the underlying loan
agreement was unenforceable as at the institution
of the
concursus,
AIK was nonetheless a preferent creditor in Black River’s
liquidated estate because the security mortgage bond passed by
Black
River was wide enough to cover the liability of Queensgate Wealth to
AIK in terms of the enrichment claim alluded to by
Zondi J in the
liquidation application.
ANALYSIS
The principle that upon
a
concursus creditorum
coming into existence in an insolvent
estate no creditor may improve his position vis-à-vis other
creditors has long been
established in our common law. In
Walker
v Syfret N.O.
2
the Appellate Division stated as
follows:
‘
The
sequestration order crystalises the insolvent’s position; the
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 into 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.
3
The
effect of a winding up order is to establish a concursus creditorum,
and nothing can thereafter be allowed to be done by any
of the
creditors to alter the rights of the other creditors’.
4
This principle was
endorsed by the Appellate Division in
Ward
v Barrett NO and Another
and
in
Durmalingham v Bruce NO
5
where
,
after reference to
Ward v
Barrett NO
6
and
Walker
v Syfret N.O.
the Court
held:
‘
The
position in the present case is, in my view,
exactly
the same. Whatever rights the respondent may have had against the
insolvent prior to the insolvency the whole position was
altered by
the insolvency… The claim of each creditor has to be dealt
with by the trustee as it existed at the date of the
sequestration of
the insolvent’s estate. At that date, the respondent was merely
a concurrent creditor insofar as the proceeds
of realisation of the
certificates relating to the International Bus are concerned.
Assuming the correctness of the facts alleged
in the declaration, the
respondent was, at that date, entitled to claim rectification of the
notarial bond so as to give him a
preference in respect of such
proceeds. The respondent’s personal right against the insolvent
could not be converted into
a jus in rem under a registered bond. A
mistake, moreover, can be rectified only so long as third parties are
not injured thereby…’
7
The decision in
Oil
Well
built upon the principle established in
Barclays
National Bank Limited v Thompson
1985 (3) SA 778
(A) where the
Appellate Division was required to consider whether a foreign
resident (the respondent) was entitled to recover
funds in legal
proceedings against a local bank (the appellant) based on a
transaction in which it was common cause that prior
Treasury
approval had not been obtained in terms of Regulation 3(1)(e) of the
Exchange Control Regulations. That regulation provides
that no
person could without Treasury permission ‘
make any payment
to, or in favour, or on behalf of a person resident outside the
Republic, or place any sum to the credit of such
person’.
The
appeal concerned an application to amend granted by the trial court
allowing the respondent to amend his particulars of claim
to
introduce a fresh paragraph alleging that subsequent to the
transaction the Treasury had granted the respondent permission
in
terms of Regulation 3(1)(e) for payment of the claim. The appellant
had objected to the proposed amendment on the basis that
it was not
competent in law since its effect would be to include a cause of
action which had not existed at the time of issue
of the summons.
The Appellate Division
held that a plaintiff resident outside the Republic who has a claim
sounding in money against a defendant
who is an incola of the
Republic and who seeks legal redress by instituting action against
such defendant in a South African
Court in whose area of
jurisdiction the defendant is domiciled, will not incur any
disability either in suing a defendant or
in obtaining the Court’s
judgment in his (the plaintiff’s) favour on account of the
absence of Treasury permission,
within the meaning of Regulation
3(1)(c) of the Exchange Control Regulation, for payment by the
defendant to the plaintiff of
the amount of the latter’s
claim. It held further that the presence or absence of Treasury
permission is relevant only
insofar as it may be necessary to
consider whether, in making due performance of his legal and fully
exigible obligation to the
judgment creditor, the judgment debtor
commits the criminal offence created by Regulation 22 of the
aforesaid regulations.
In reaching this
conclusion the Court quoted with approval from the judgment of Van
Winsen J in the case of
McConnel v SA Stevedores Service Company
Holdings (Pty) Ltd and Another
1976 (2) SA 126
(C) where the
learned judge stated the following of the Exchange Control
Regulations:
‘
The
object of the regulations is the control of foreign exchange in the
national interest. That aim is likely to be achieved just
as
effectively by securing Treasury approval, for example during the
course of an action, or after judgment,
as
by securing it before the issue of summons.’
At para H on page 794
Hoexter JA on behalf of the Court in
Barclays National Bank Ltd v
Thompson
(supra) stated as follows:
‘
I
am unable to accept the argument that Treasury exemption or
permission is a fact which “entitles” the plaintiff to
payment. This argument, as counsel for the plaintiff pointed out,
confuses legal liability with performance. What entitles the
plaintiff to payment is the existence of a valid claim reinforced
(should the Court uphold it) by judicial decree. The presence
or
absence of Treasury exemption or permission is relevant only insofar
as it may be necessary to consider whether in making due
performance
of his legal and fully exigible obligation to the judgment creditor
the judgment debtor commits or does not commit
the criminal offence
created by reg 22. The commission or avoidance of the offence by the
judgment debtor has nothing whatsoever
to do with the independent
existence of the plaintiff’s claim and its due enforcement by
the legal process.’
Dealing with the
argument that the effect of Regulation 3(1)(c) was to deny to
plaintiffs residing beyond the Republic who could
not obtain the
necessary Treasury approval the right of access to our courts,
Hoexter JA stated that the notion
that such access could be denied by a purely administrative act
‘
unrelated to the
administration of justice is, I think, repugnant both to ordinary
notions of justice and to common sense’
adding
that
‘
(b)earing in
mind the purpose of the regulation there is, I consider,
nothing in the language of
regulation 3(1)(c) which even remotely carries such an implication.
Embodied in the regulations is
a criminal sanction which is designed
to enforce compliance therewith. The penalty prescribed for
non-compliance is a stiff one.
In my view the Legislature was here
content with the said criminal sanction as being sufficient to
ensure compliance with reg
3(1)(c)’
8
.
Finally the learned judge quoted with
approval from the article in 1982 (99) SALJ at 125 – 135 by AC
Beck where the author
concluded:
‘
Treasury
permission has no bearing on the jurisdiction of a court and, in
fact, does not even constitute a defence to the action
– it is
merely a limitation on payment, which can be removed by the Treasury
at any time, and there is no reason why the
plaintiff should have to
wait for this before obtaining a judgment.’
In
Oil Well
,
Harms DP on behalf of the Court stated as follows (at para 17):
‘
[17]
Reliance on the Regulations in order to escape contractual
obligations is not something new. However, as Steyn CJ said nearly
50
years ago, the Regulations are there in the public interest and not
to provide “an unwilling debtor with a ready instrument
for
evading liability”, or “to grant a selective moratorium
to a particular class of defaulting debtors”. Their
purpose,
said Trollip JA, is to enable the Treasury to exercise proper control
over transactions effecting foreign currency, in
order to protect the
Republic’s foreign reserves.
[18]
Debtors remained undaunted and relied especially on Regulations
3(1)(c) to evade judgment. After a number of conflicting judgments
this Court held, in spite of the peremptory language of the provision
(“no person shall”), that the prior consent of
the
Treasury was not required in order to obtain a court order for
payment…
……
[24]
In search of the elusive interpretation or meaning expressed in the
Regulations, it is necessary to reiterate that the object
of the
Regulations in general is to regulate and control foreign currency,
and the object of Regulation 10(1)(c) in particular
is to “control
foreign exchange in the public interest and to prevent the loss of
foreign currency resources through the
transfer abroad of assets held
in South Africa”. The Regulations are, accordingly, for the
public interest and not to protect
any private interests. They were
adopted for the sake of the Treasury and not for the sake of
disgruntled or disaffected parties
to a contract. This is apparent
from the penalty provision …’
Finally, Harms DP
concluded
9
:
‘
This
does not mean that in the in the absence of Treasury consent the
transaction is enforceable without more. Parties who enter
into a
contract that may conceivably be hit by the Regulations are, unless
the contract provides otherwise (in this case it did
not provide
otherwise), both obliged to take the necessary steps to obtain the
Treasury’s consent (something expressly agreed
to by the
parties). This must be so because of the supposition that the parties
negotiated in good faith and intended to enter
into an effective
contract. There is nothing preventing the Treasury from consenting to
a transaction ex post facto, a necessary
corollary of the judgment in
Barclays National Bank Ltd v Thompson (supra). This means that the
transaction absent consent is not
void at the behest or election of
one of the parties to it. A party faced with a claim based on a
transaction which that party
believes is covered by the Regulation
can therefore not rely only on the lack of consent to avoid the
claim. The defendant may
in appropriate circumstances file a dilatory
plea pending the determination by the Treasury of its application for
the necessary
consent. Once the Treasury refuses to grant consent,
the defendant would be entitled to resist that claim on that ground.
Furthermore,
if performance took place without consent, neither party
may claim restitution. It would then be for the Treasury to invoke
regs
22A, 22B and 22c to undo the effect or proposed effect of the
transaction.’
By parity of reasoning I
consider that a claim by a creditor against an insolvent estate
cannot be rejected for the sole reason
that it is based upon a
transaction requiring Treasury approval in terms of s10(1)(c) but
which approval has at the relevant
time neither been obtained nor
refused. To hold otherwise would lead to ‘
greater
inconveniences and impropriety’,
the phrase used by Voet
as referred to in
Standard Bank v Estate Van Rhyn
1925 AD 266
at 274, and deliver a windfall advantage to competing creditors in
the estate. It ignores the fact that the underlying transaction,
the
loan agreement, was not void and that Treasury approval therefor
could still be sought.
On behalf of the
applicants’ Mr Goodman SC argued that a failure to expunge the
claim in the circumstances of the present
matter would allow AIK to
convert a non-enforceable claim as at the date of the winding up of
Black River to an enforceable claim
thereafter by the obtaining of
Treasury consent, thereby disturbing the
concursus
, altering
the rights of other creditors to the prejudice of the general body
of creditors and was accordingly impermissible.
Although
Oil Well
may appear to suggest that the claim is temporarily unenforceable
until such time as Treasury permission is obtained for the
underlying transaction that statement must be seen in context. As
applicants’ counsel himself observed the decision in
Oil
Well
in no way sought to address the application of the
principle which it confirmed in the context of a winding up.
To hold that a claim by
a creditor based on a transaction in respect of which Treasury
approval has not been obtained is irrevocably
unenforceable because
a
concursus creditorum
intervened before such approval was
sought would, I consider, produce an arbitrary and inequitable
result not intended by the
regulations. The argument that until
Treasury consent is obtained the transaction is not enforceable and
that allowing the claim
will impermissibly disturb the
concursus
creditorum
is based, in my view, upon a narrow reading of para
25 of the judgment in
Oil Well
where Harms DP stated that
this does not mean that in the absence of Treasury consent the
transaction is enforceable ‘
without more’
.
Significantly, in the same passage, citing
Barclays National Bank
Ltd v Thompson,
he goes on to state that, this does not mean
that the transaction, absent consent, is void at the behest or
election of one of
the parties thereto. At best an affected party
may file a dilatory plea pending the determination by the Treasury
of the application
for the necessary consent.
The argument for the
applicants relied heavily on the principle that the rights of other
creditors should not be prejudiced by
anything done post
concursus
since the positions of the parties are frozen as at that date
and their rights and obligations are determined on that basis. I
consider, however, that it is a misconception to view
ex post
facto
Treasury approval as an interference with the position
obtaining at the
concursus creditorum
and therefore of no
effect. This view appears to be based on the assumption that without
Treasury consent AIK’s claim is
invalid and on the premise
that the underlying transaction was void. As the leading decisions
on the effect of the Regulations
have made clear, there is nothing
preventing SARB from affording the relevant transaction the
necessary consent
ex post facto
. At best for the competing
creditors as at
concursus creditorum
they had no more than a
spes
that the transaction underlying AIK’s claim would
ultimately not receive Treasury consent in which event the claim
might
be unenforceable. Applying the principles in
Oil Well
and
Barclays National Bank Ltd
in an insolvency context must,
in my view, of necessity lead to the recognition of a claim whose
only defect is that Treasury
consent has yet to be obtained in terms
of Regulation 10(1)(c) of the Exchange Control Regulations,
notwithstanding that a
concursus creditorum
has intervened.
Should such consent be thereafter refused a different situation
arises and argument may then arise as to the
validity of the claim.
That question, however, does not require to be addressed in the
present matter since Treasury consent
was ultimately obtained prior
to the Master taking her decision not to expunge the claim.
As was made clear in
Oil
Well
until such time as Treasury consent has been granted or
refused the party wishing to avoid the transaction can do no more
than
file a dilatory plea in response to an action enforcing the
transaction. As the Supreme Court of Appeal has held, until such
time as Treasury approval is in fact refused there is no defence to
the claim, nor is it conditional. Since Treasury approval was
ultimately obtained by AIK there is, in my view, no basis in law for
the applicants to argue that AIK’s claim must be treated
as
unenforceable.
Given the view that I
take of this matter it is unnecessary to consider AIK’s
alternative arguments, namely, that the Regulations
were of no
application in the first place and further that even on the
applicants’ version that the loan was unenforceable
at the
institution of the
concursus
, AIK was a preferent creditor in
the Black River estate by virtue of the security mortgage bond being
wide enough to cover the
liability of Black River to AIK in terms of
an enrichment claim.
In the result and for
these reasons the application falls to be dismissed.
COSTS
There remains only the
question of costs. Section 151bis of the Act, entitled ‘
Cost
of Review’
provides as follows:
‘
If
the Court reviewing any matter referred to in s151 confirms a
decision, ruling, order or taxation of the Master or officer referred
to in that section the costs of the applicant for the review of that
matter shall not be paid out of the assets of the estate concerned
unless the Court otherwise directs’.
In Van Zyl N.O. v The
Master and Another
1991 (1) SA 874
(E) the purpose of this statutory
provision was described as follows (at 880B – C):
‘
Section
151bis seems to me to have been designed to discourage persons -
including trustees in insolvent estates (Wynne and Godlonton
NNO
v Mitchell and Another NNO; Wynne and Cornish NNO v Mitchell and
Another NNO
1973 (1) SA 283
(e)
at
292) - who may be aggrieved by any decision of the Master from
lightly bringing that decision in review on the assumption that
whatever the result of the review may be, the costs will come out of
the estate. This will only happen if in the view of the Court
good
grounds exist for such an order. In the present case no such
good
grounds
have been advanced or made out, and I see no reason why the general
body of creditors should be mulcted in the costs of
the applicant's
unsuccessful application.’
On behalf of AIK it was
argued that applicants took an immediate view that the first
respondent’s decision to recognise
AIK’s claim should be
set aside and did not reconsider their decision when the
Oil Well
judgment was drawn to their attention nor even when they learnt
that Treasury consent had been granted in respect of the loan. AIK
contended furthermore, that the review application served primarily
to protect the interest of another major proven creditor
and was not
undertaken in the interests of the general body of creditors.
I do not consider,
however, that there is substance in these contentions. In the first
place it appears that prior to the launching
of the application the
liquidators notified all creditors in the estate of the proposed
step and called for any objections thereto
to be made known. Nor
does the allegation of bias towards the interests of another
creditor appear to be borne out by the facts.
Subsequent to the
launching of the application that creditor’s claim was itself
expunged and set aside pursuant to an order
of this Court. Without
any further information on the subject it does not appear that the
liquidators stood to gain any advantage
from the outcome of the
present application. There is also nothing to suggest that the
course which they adopted in launching
the review application was
not done on the basis of legal advice and what must be borne in
mind, furthermore, is that the view
which they took of the matter
was, at the least, reasonably arguable. In the circumstances I see
no warrant for ordering that
the applicants pay the costs of this
application, let alone for making a punitive order such as a special
costs orders against
both the liquidators and their attorneys
de
bonis propriis
on an attorney and client scale as was initially
sought by on behalf of AIK.
For these reasons the
following order is made:
The application is
dismissed;
The costs of both the
applicants and the second respondent shall be costs in the winding
up of Black River Development (Pty) Ltd
(in liquidation).
_________________________
L. J.
BOZALEK
JUDGE OF THE HIGH
COURT
For the Applicant:
Adv R Goodman SC
As
instructed by: Edward Nathan Sonnenbergs
Ref:
Ms J Langford
For
the 1st Respondent: n/a
As
Instructed by: n/a
For
the 2
nd
Respondent: Adv W Duminy SC et Adv M Edmunds
As
Instructed by: Scheibert and Associates
Ref:
Ms H Cronje
1
2005
(1) SA 276
(SCA) at para [22]
2
1911
(AD) 141
3
Per
Innes J at page 166
4
Per
De Villiers CJ at page 160
5
1964
(1) SA 807
(D)
6
1963
(2) SA 546
(A)
7
At
811 F – H
8
At
page 795 E – J
9
At
para 25