Fey NO and Whiteford NO v Serfontein and Another

• Jurisdiction: South Africa
• Judge: Hoexter JA, Nestadt JA, Nienaber JA, Nicholas AJA and Harms AJA
• Judgment Date: 26 February 1993
• Citation: 1993 (2) SA 605 (A)
• Hearing Date: 09 November 1992
• Court: Appellate Division

Hoexter, JA.:

This is an appeal with leave of the Court below (Thirion J) F from an order made in the Natal Provincial Division dismissing with costs an exception to a declaration. The declaration was filed in proceedings in which the excipients were cited as the defendants. The excipients are the appellants in this appeal. The essential facts, the cause of action upon which the plaintiffs sought to rely, and the nature of the exception noted G by the defendants are conveniently summarised in the judgment of Thirion J:

'The estates of the plaintiffs were finally sequestrated as insolvent in April 1991. The defendants were appointed as trustees in the plaintiffs' insolvent estates. Thereafter the plaintiffs launched an application in which they claimed inter alia an order declaring the defendants unfit to act as trustees in their insolvent estates.

H The application was opposed and eventually the issue of the defendants' fitness as trustees was referred to trial and plaintiffs were ordered to file a declaration. The plaintiffs did so. The relief which they pray is an order removing the respondents (the defendants) from the office of trustees in plaintiffs' insolvent estates.

The grounds relied upon by plaintiffs for an order removing the defendants from the office of trustees in their insolvent estates are I pleaded as follows in para 8 of the declaration: . . .'

(The learned Judge then quotes in full the averments set forth in para 8 of the declaration.)

'The exception to the plaintiffs' declaration is taken on the ground that as a matter of law the Court has no general power to remove the respondents (the defendants) from their positions as trustees and is, J furthermore, not entitled to

Hoexter JA

A remove the respondents from their positions on the grounds averred in para 8 of the declaration.'

Both in the Court below and before us the matter was argued on behalf of the plaintiffs by Mr Hartzenberg. He informed us that at the exception stage counsel then appearing for the defendants did not persist in the B second limb of the exception (that the complaints against the defendants listed in para 8 of the declaration were insufficient to warrant removal of trustees at all). In this Court the argument on both sides was chiefly confined to the point whether, having regard to the relevant provisions of the Insolvency Act 24 of 1936 as amended, the Supreme Court possesses what C the notice of exception describes as a 'general power' to remove from office a trustee in insolvency on the grounds of his misconduct; or whether such power resides only in the Master of the Supreme Court. We were invited to deal with the appeal on that footing. In these circumstances it is unnecessary, I think, to burden this judgment with details of the discursive and somewhat rambling averments made in para 8 D of the declaration. The malfeasance imputed to the defendants by the plaintiffs involves charges of dishonesty, recklessness, and incompetence in the discharge of their duties as trustees. In para 9 of the declaration the plaintiffs plead that the defendants should be removed from their trusteeships on the ground of their misconduct ('wangedrag').

E During the argument on appeal one of the matters raised was whether, assuming the existence of the Court's general power to remove a trustee in insolvency for misconduct, the plaintiffs should not have joined the Master as a party to the proceedings. This was a point neither raised nor explored in the Court below. Since argument, however, there has been filed F with the Registrar of this Court an affidavit by the Master of the Supreme Court (Natal Provincial Division) in which he states, inter alia, that he is aware of the appeal and that he abides the decision of this Court.

In 1916 Parliament, by the Insolvency Act 32 of 1916, repealed the existing statute law of insolvency in the various provinces of the then G Union of South Africa and substituted a uniform law of insolvency and assignment. Its structure largely followed the Transvaal Insolventiewet 13 of 1895, which was essentially an adaptation of the Cape Ord 6 of 1843 - likewise adopted by the Natal Legislature as Ord 24 of 1846. On 1 July 1936 the Insolvency Act 24 of 1936 ('the Act') came into force. Broadly speaking, the Act consolidates the provisions of the previous Union H statutes. The Act has often been amended. The most comprehensive of the amending statutes were Act 16 of 1943 and Act 99 of 1965.

In Act 32 of 1916 the power of the Court to declare a person disqualified from being a trustee was dealt with in s 59, whose essential provisions have since remained unaltered. The Court's power to remove a I trustee was dealt with in Act 32 of 1916 in s 60. This section underwent considerable modification both in the 1936 and the 1965 Acts. In the 1916 Act ss 59 and 60 read as follows:

'59 The Court, on the application of any person interested, may, either before or after the appointment of a trustee, declare that the person appointed or proposed is disqualified from holding the office of trustee, J and, if he has been

Hoexter JA

A appointed, may remove him from office and if it so thinks fit, may declare him incapable of being elected trustee under this Act during the period of his life or such other period as it may determine, if -

(1)

he has accepted or offered or agreed to accept from any auctioneer, agent, or other person, employed on behalf of the estate, any share of the commission or remuneration of or any other benefit whatever B from that auctioneer, agent, or other person; or

(2)

in order to obtain or in return for the vote of any creditor or in order to exercise any influence upon his election as trustee he has -

(a)

procured or been privy to the wrongful omission of the name of a creditor from any list or schedule by this Act required; or

(b)

directly or indirectly given or offered or agreed to give to any person any consideration; or C

(c)

offered or agreed with any person to abstain from investigating any previous transactions of the insolvent; or

(d)

been guilty of or privy to the splitting of claims for the purpose of increasing the number of votes.

60. The Court, upon the application of the Master, the trustee himself, or D any other person interested may remove any trustee on any of the following grounds -

(a)

His desire to resign his office, subject to the production of the certificate mentioned in s 61, absence from the Union, ill-health, or any fact tending to interfere with the performance of his duties as trustee;

(b)

insolvency or other legal disability;

(c)

misconduct as trustee, including any failure to satisfy a lawful E demand of the Master or a commissioner appointed by the Court, or to perform any of the duties imposed upon him by this Act;

(d)

illegality in his election or appointment, or disqualification for any of the reasons mentioned in s 58.

The Court may remove any provisional trustee on any ground that it may deem sufficient.'

F In Act 24 of 1936, prior to its amendment in 1965, s 60 of the Act read as follows:

'60. Upon the application of the Master or of any other person interested the Court may remove a trustee from his office on the ground -

(a)

that he was not qualified for election or appointment as trustee or G that his election or appointment was for any other reason illegal, or that he has become disqualified from election or appointment as a trustee; or

(b)

that he has failed to perform satisfactorily any duty imposed upon him by this Act or to comply with a lawful demand of the Master; or

(c)

that he is mentally or physically incapable of performing satisfactorily his duties as trustee.'

H Since the amendment of the Act in 1965, and in its present form, s 60 reads as follows:

'60. The Master may remove a trustee from his office on the ground -

(a)

that he was not qualified for election or appointment as trustee or that his election or appointment was for any other reason illegal, or I that he has become disqualified from election or appointment as a trustee or has been authorised, specially or under a general power of attorney, to vote for or on behalf of a creditor at a meeting of creditors of the insolvent estate of which he is the trustee and has acted or purported to act under such special authority or general power of attorney; or

(b)

that he has failed to perform satisfactorily any duty imposed upon J him by this Act or to comply with a lawful demand of the Master; or

Hoexter JA

(c)

A that he is mentally or physically incapable of performing satisfactorily his duties as trustee; or

(d)

that the majority (reckoned in number and in value) of creditors entitled to vote at a meeting of creditors has requested him in writing to do so; or

(e)

that, in his opinion, the trustee is no longer suitable to be the trustee of the estate concerned.'

B In terms of s 59 of the Act the Court still retains the power of declaring that a person is disqualified from holding office as a trustee, and the power of removing him on the ground of such disqualification. The provisions of s 59, however, have no application to the case pleaded by the plaintiffs. As far as s 60 is concerned, the following appears from its legislative history outlined above: (1) In s 60 of Act 32 of 1916 (see C para (c) of the section) 'misconduct as trustee' was one of the grounds whereon the Court might remove a trustee. The word 'including' shows that 'misconduct' bears a broader meaning than the mere 'failure to satisfy a lawful demand of the Master or a commissioner appointed by the Court, or to perform any of the duties imposed upon him by the Act'. (2) After the D enactment of Act 24 of 1936 the statutory power of removal...