Gilbey Distillers & Vintners (Pty) Ltd and Others v Morris NO and Another

• Jurisdiction: South Africa
• Judge: Joubert ACJ, Smalberger JA, Nestadt JA, Kumleben JA and Friedman AJA
• Judgment Date: 16 November 1990
• Citation: 1991 (1) SA 648 (A)
• Hearing Date: 17 September 1990
• Court: Appellate Division

Nestadt JA:

This appeal arises from a dispute between appellants, as creditors in an insolvent estate, and first respondent, the trustee. It concerns the remuneration claimed by the trustee for his services. Two B amounts are involved. They were respectively reflected in first and second liquidation and distribution accounts as owing to him by the estate. The accounts were confirmed by the Master. Appellants applied to the South Eastern Cape Local Division to review and set aside the confirmation of that part of each account allowing the fees in question. C An order declaring that the trustee was not entitled to the remuneration claimed was also sought. The Master was cited as second respondent. The matter came before Kannemeyer JP, who dismissed the application. However, the learned Judge granted leave to appeal to this Court. Hence this appeal.

The judgment a quo has been reported in 1990 (2) SA 217. It details D the nature of the dispute between the parties and how it arose. Perhaps these matters can be summarised as follows. The insolvent's business was that of a hotel-keeper. He also sold liquor through what are termed off-sales outlets. Appellants feared that if, consequent upon sequestration, trading ceased, the insolvent's liquor licences in respect of the business might be cancelled. In this event they, as major E creditors and (in effect) lessors of the premises, would be prejudiced. So they proposed to the trustee that in order to preserve the liquor licences the business be carried on. The trustee was agreeable to this. Sales of liquor accordingly continued for over two years. These sales are the genesis of the trustee's claim to the contentious remuneration. The claim is based on s 63(1) of the Insolvency Act 24 of 1936 ('the F Act'). This section entitles a trustee to a reasonable remuneration for his services 'to be taxed by the Master according to tariff B in the Second Schedule to this Act'. Item 4 of this tariff provides for remuneration at the rate of 6% 'on sales by the trustee in carrying on the business of the insolvent, or any part thereof, under s 80'. Section 80 empowers creditors (or the Master) to authorise the trustee to carry G on the insolvent's business. The trustee's attitude was that the sales in question were effected by him whilst carrying on the business of the insolvent (with the consent of creditors) and that he was accordingly entitled to a fee based on item 4. In the first account submitted by him there was therefore included under 'Trustee's Remuneration' an amount of H R93 615,35, representing the prescribed percentage of the turnover of the business during the period covered by the account. Similarly, the second account contained a claim for remuneration in the sum of R89 105,60, being 6% of subsequent sales. These accounts, as I have indicated, were confirmed by the Master. This was, of course, after they had (separately) been advertised and lain open for inspection in terms I of s 108. Confirmation took place in terms of s 112 of the Act. It will be necessary in due course, when considering whether the section has the effect of excluding the Court's review jurisdiction, to refer again to its provisions. Suffice it at this stage to say that it enjoins the Master, when a trustee's account has been open to inspection by creditors and no objection has been lodged under s 111, to confirm the J account. There were no objections to either account.

Nestadt JA

A Appellants explain their failure to object by saying (in the founding affidavit) that it was only after confirmation of the second account that it was realised that the trustee was claiming the fees in question. When this became known, they voiced their opposition to such claim. It was based on the contention that it was appellants, and not the trustee, who had continued the insolvent's business and achieved sales; item 4 B did not therefore apply; and the trustee was not entitled to the remuneration claimed. The founding affidavit goes on to submit that the Master, in confirming the accounts, was unaware of these facts; they had been concealed or misrepresented by the trustee.

The conflict as to who carried on the insolvent's business (and C effected sales in doing so) requires amplification. Kannemeyer JP refers to the point at 219I - 220B. It is obviously central to the dispute between the parties. If, indeed, the trustee did carry on the business, that is an end to the matter. He would be entitled to the remuneration claimed and the review proceedings would have rightly been dismissed. The application did not make out the case that because the trustee was D not effecting sales personally or through his own staff, the Master should in terms of s 63(1) have taxed his remuneration in a reduced amount. Pursuant to the decision that the business should not be closed, the parties agreed that appellants would 'manage [it] on your [the trustee's] behalf'. This is what happened. Certain employees of a company engaged by appellants moved in and took over the administration E of the business (including the existing staff). They acted under the supervision of appellants. This continued throughout the period in respect of which the trustee claimed remuneration in terms of the tariff. Appellants' affidavits detail what their management involved. In short, it may be said that the day-to-day running of the business was in F their hands. This included the ordering and taking delivery of stock; sales thereof to the public; the receipt and banking of the proceeds of such sales; the drawing up of certain financial statements; giving the staff instructions and paying the salaries of some of them. Of particular importance is that the resultant profit or loss was for appellants' account. This was specifically agreed to with the trustee. Indeed, at his insistence, appellants indemnified the estate against G liability for any trading losses. There is some dispute as to what the trustee's functions were. But, adopting the principle of Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A) at 634F, it may be said that he retained what he terms 'overall control' of the conduct of the business; he was 'ultimately responsible' for its H management. This meant that all purchases had to be approved by him; he would then arrange for their payment; appellants were obliged to and did give him daily reports about the income and expenditure of the business; he approved the engagement and dismissal of staff; he paid the salaries of most of the employees as well as the general running expenses of the I business (including the cost of stock); he ensured compliance with the liquor licences which, of course, vested in him; what are referred to as trading accounts, such as the cash book and bank reconciliation statements, were prepared by him; and he conducted and controlled the banking account of the business.

The business was, I consider, carried on in terms of s 80. Indeed, this proposition was not challenged in the founding affidavit. And, as I J have

Nestadt JA

A said, creditors approved of this course. The nice point that arises, however, is whether, in view of the division of responsibilities referred to, the trustee is rightly to be regarded as having effected sales in carrying on the business within the meaning of this expression as used in item 4. I assume that the tariff does not permit of a joint B carrying on of the business. But plainly it does not require a trustee to act personally. He can, and usually will, employ or depute someone to carry on the business for him (Klatzkin v Noble NO 1915 AD 713 at 717). Was that the position here? Or did the trustee abdicate the task of carrying on the business in favour of appellants? In arguing for an affirmative answer to the last question, appellants' counsel stressed C the fact that it was appellants and not the estate who stood to profit or lose from the carrying on of the business; this was said to be inconsistent with the notion of the trustee carrying on the business; it was appellants as managers who did this (and effected sales); the 'overall responsibility' on which the trustee relied was insufficient; it was a residual duty which flowed simply from his...