Bank of Lisbon and South Africa Ltd v the Master and Others
Jurisdiction | South Africa |
Judge | Rabie CJ, Jansen JA, Corbett JA, Joubert JA and Galgut AJA |
Judgment Date | 30 September 1986 |
Citation | 1987 (1) SA 276 (A) |
Hearing Date | 19 May 1986 |
Court | Appellate Division |
Galgut AJA:
A company, George de Pontes and Partners (Pty) Ltd C ('the company'), was, because of its inability to pay its debts, wound up by order of Court dated 29 May 1979. Second respondent was initially appointed as provisional liquidator and thereafter as liquidator of the company. I shall refer to him as the liquidator. Third, fourth and fifth respondents are creditors of the company. The first respondent is the Master of D the Supreme Court (Transvaal Provincial Division). The only creditors who proved claims in the estate of the company were the appellant and third, fourth and fifth respondents. In the affidavit in proof of its claim for R58 327,77 appellant, to which I shall refer as 'the bank', stated that it had received security from the company in the form of -
'... a general pledge and cession signed by the company in favour of the bank E in terms whereof the company pledged to the bank inter alia all present and future book debts. A copy of the pledge and cession is annexed hereto marked "B", but the bank is unable to value its security at this stage with the information at its disposal.'
In para 7 of the affidavit the following is stated:
'The bank relies entirely on its security and all suretyships that it may hold for the said debt for the satisfaction of its F claim.'
The Master, after considering written representations which were made to him (as to which more later), directed, on 20 October 1981, that the liquidator should, in the relevant liquidation and distribution accounts, reflect the bank's claim as a concurrent claim.
The bank challenged this ruling and applied in the Transvaal G Provincial Division for an order -
'calling upon first respondent to show cause why his decisions of 20 October 1981 in the estate of George de Pontes and Partners (Pty) Ltd ("the estate") should not be reviewed and corrected so as to direct second respondent to amend the first liquidation account and the second and final liquidation and contribution accounts respectively in H the estate so as to reflect that applicant is not liable for any costs of realisation nor any costs of administration in the estate.'
The matter came before Ackermann J and he dismissed the application. The bank then appealed to the Full Court of that Division. That appeal failed and the present appeal before us I is against the decision of the latter Court.
The third, fourth and fifth respondents were cited because of their respective interests in the matter. No relief was sought against them if they did not oppose. They did not in fact oppose.
The security upon which the bank relied in its proof of claim is clearly a cession of book debts in securitatem debiti J executed by the company in
Galgut AJA
A favour of the bank on 10 December 1977. Prior to the above cession the company had executed, also in securitatem debiti, a cession of its book debts in favour of Nedbank Ltd. Nedbank at the date of the winding-up order was in the process of collecting the debts and continued to do so with the consent of the liquidator. It collected approximately R6 530 in excess of B the amount owing to it. The sum was handed to the liquidator. I shall refer to the Nedbank cession as the first cession and the bank's cession as the second cession.
Provision was made in clause 23 of the second cession for the contingency of a prior cession. The clause reads:
Without derogation from any warranty given C by me/us to the bank in terms hereof, should it transpire that any security(ies) promised or purported to be given in terms hereof is/are subject to any prior pledge and/or cession with the result that the bank is in whole or part deprived of such security(ies) or precluded from taking delivery thereof, these presents shall, insofar as the particular security(ies) subject to such prior pledge and/or cession is/are concerned, or insofar as the particular part(s) of such security(ies) D is/are concerned as the case may be, operate as a pledge and cession to the bank, upon all the terms and conditions herein set out, of all my/our reversionary rights and all my/our remaining right(s), title and interest in and to such particular security(ies) and the subject-matter thereof, as well as all my/our rights of action and recourse against the prior pledgee(s) and/or cessionary(ies) thereof.'
Prior to proving its claim the bank had written to the E liquidator confirming that he (the liquidator) had 'knowledge of our (the bank's) pledge over debtors and that you would be collecting the book debts and would account to us in due course'. The liquidator replied stating:
'I confirm my knowledge of the fact that you hold a pledge over the sundry debtors and in this regard I must inform you that the claim of the Netherlands Bank, who hold the first pledge over the sundry debtors, has now been settled in full and F consequently the total proceeds of the debtors will now be subject to your pledge.'
At the time when the winding-up order was made the company was in the process of performing certain contracts. The liquidator decided to have these contracts completed. The ultimate cost of so doing was in the order of R97 000, whereas the amount which G accrued to the company therefrom was approximately R55 000. He then adopted the attitude that the bank was liable for the R97 000 and that it could collect the R55 000 from the debtors.
Pursuant thereto the liquidator framed a first liquidation and distribution account. It was advertised as lying for H inspection. He thereafter drew a second liquidation and distribution account. The second account does not, as far as affects this case, alter anything in the first account. Neither account has been confirmed. In the first account the bank was reflected as a secured creditor but the cost of completing the executory contracts was shown as an amount to be deducted from any sum due to the bank. The bank lodged an objection to that I account with the Master and with the liquidator. It contended that it was not liable for the costs occasioned by the completion of the executory contracts and submitted that the shortfall resulting from the liquidator's decision to complete those contracts should not be confused with the costs of realisation of its security. The liquidator responded to the J objection in a letter dated 4 March 1981 to the Master. He wrote:
Galgut AJA
'On the information furnished me, I accepted that the objector A (the bank) was to be treated as a secured creditor after Nedbank Ltd released its security and treated it as a secured creditor. It was also specifically arranged between the objector and myself that as soon as Nedbank Ltd had realised sufficient security to satisfy its claim, I would realise the balance of claims against debtors on behalf of the objector for the benefit of the objector.'
The liquidator also submitted that he was 'now' of the view B that at the date of liquidation the bank was not in possession of any security and was not a secured creditor because at that time the cessionary of the book debts was Nedbank which was, at the relevant time, in possession and control of the security.
A great deal of correspondence followed. It appears therefrom C that the bank, in a letter to the Master, eventually conceded that it held no security for its claim and was not a secured creditor. It, however, stressed that in its proof of claim it had specifically relied on its security; that 'since the bank relied on its security only there would be no concurrent claim proved by it even if (as is the case now) there is in fact and in law no security'; that it was accordingly not liable to D contribute towards costs which had been occasioned by the completion of the executory contracts; that such costs were not costs of realisation of the security but were costs of administration for which it was in any event not liable.
The Master in a letter dated 20 October 1981 then ruled:
'As you and the liquidator have conceded that your client does E not have a secured claim, I am directing the liquidator to amend the account to reflect your client's claim as concurrent. Under the circumstances it is no longer necessary for me to rule on your submissions as to the extent of your client's security or for which costs he would or would not have been liable as a secured creditor in terms of s 89(1) of the Insolvency Act 24 of 1936 as amended.'
It was this decision which the bank brought on review before F the Court of first instance. The relief which it sought has been set out above.
I pause to mention that in terms of s 339 of the Companies Act 61 of 1973 the provisions of the law relating to insolvency shall, in so far as they are applicable, be applied mutatis mutandis in the winding-up of a company, unable to pay its G debts.
It is necessary to refer to the following sections of the Insolvency Act 24 of 1936 ('the Act').
The relevant definitions in s 2 are as follows:
'security', in relation to the claim of a creditor of an insolvent estate, means property of that estate over which the creditor has a preferent right by virtue of any special mortgage, landlord's legal hypothec, pledge or right of retention;
'property' means movable or immovable property wherever situate within the Republic, and includes contingent interests in property other than the contingent interests of a fideicommissary heir or legatee;
'movable property' means every kind of property and every right or interest which is not immovable property.
Section 44(4) provides that a claim shall be proved, at a meeting of creditors, by affidavit setting out the relevant facts and particulars in support of the claim and if the creditor holds security therefor 'the nature and particulars of J that security.'
Galgut AJA
A Section 45(2) requires the trustee to examine all claims for the purpose of ascertaining whether the estate...
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