Gilbert v Bekker and Another

• Jurisdiction: South Africa
• Judge: Coetzee J
• Judgment Date: 27 April 1984
• Hearing Date: 11 April 1984
• Court: Witwatersrand Local Division

Coetzee J:

This is the extended return day of a rule nisi which G was issued by GOLDSTONE J on 13 December 1983 in the following terms:

"It is ordered:

1.

That a rule nisi be and is hereby issued calling on the respondent to show cause, if any, to this Court on 31 January 1984 at 10 am, or so soon thereafter as H counsel may be heard, why the following order should not be made:

(i)

Interdicting and restraining the first respondent from allowing the second respondent to act as the first respondent's agent in the administration of the applicant's provisionally sequestrated estate and, in the event of the applicant's I estate being finally sequestrated, in such sequestrated estate.

(ii)

That the respondents pay the costs of this application jointly and severally, the one paying, the other to be absolved, alternatively that the first respondent pay the costs, alternatively that the second respondent pay the costs.

Coetzee J

2.

A That the respondent is to file his answering affidavit by 16 January 1984, and applicant to file his replying affidavit by 23 January 1984.

3.

That the costs of this application are reserved."

This is a very unusual case. It is without precedent. It is apparently the first time that a Court has been asked to B interfere in the day to day management or administration of an insolvent estate by the trustee.

The first respondent was appointed provisional trustee in the applicant's insolvent estate on 12 October 1983. The second respondent was the sequestrating creditor. The applicant says that the second respondent has since early 1982, when a dispute C arose between them, embarked on a crusade against him and his family. She has done everything in her power to cause him harm. Threats, intimidation, and general harassment are alleged. Soon after his appointment, the first respondent enlisted her as his agent and has allowed her to conduct on his behalf a full scale investigation into the affairs of the applicant and his family. D This is strongly resented by the applicant and he contends that it is improper for the first respondent to administer the insolvent estate in this fashion.

Many of the applicant's allegations are denied by the first respondent. He admits however that he has to a limited extent employed the services of the second respondent. She is the E largest single creditor in a very complex estate. He says that she has provided him with a mass of information relating to the affairs of the applicant, information that would have taken him months to obtain from other sources, if at all. This information will be invaluable to him when he institutes interrogation proceedings in terms of the Insolvency Act. He states the following:

"(vi)

F The extent to which I have employed the services of the second respondent is very limited. At various times I asked her to collect copies of documents at banks or building societies. I could have employed any member of my staff to do this, but it made sense to send someone who knew exactly what documents I needed. In many instances I collected the documents myself."

G The first respondent goes on to say that he himself has spent the equivalent of a full working month investigating the affairs of the applicant and that it is his intention to initiate in due course interrogation proceedings in terms of either s 65 or s 152 of the Insolvency Act.

I do not think that it is necessary to resolve any of the H factual disputes. A fundamental question of law arises in limine. Has the Court any power at all to supervise in this fashion the trustee's general administration or management of the estate? This is not a case of any particular act of his which has legal consequences being called into question and I which is sought to be set aside because it is in conflict with statutory provisions or is otherwise unlawful. On the contrary, the Court is invited to say to the trustee: "Although you have not done anything which is in conflict with statutory provisions or requirements, I do not agree with the way you are doing your job. You should not use certain clerks for this particular avenue of investigation on which you have embarked. It is inadvisable. Failure to dismiss

Coetzee J

them or to do that part of the work yourself or through other A clerks may very well amount to maladministration on your part. You are forbidden to do yo3r work in this way."

Mr Goodman, for the applicant, does not rely on any particular provision of the Insolvency Act. He seems to have some kind of inherent power of the Court in mind, onex that derives from the B fact that the trustee is an officer of the Court from which it would follow, so the argument runs, that the Court can control the manner in which its officers perform their functions. He relies strongly on the view expressed by GOLDSTONE J when he granted the rule nisi. The learned Judge then said:

"This matter seems to me to be different in one important C respect and that is that here one is dealing with an officer of the Court in regard to his duties as a trustee of an insolvent estate. In these circumstances and quite apart from the question of urgency, the Court must see to it that its officers, who are operating subject to its control, act properly."

This passage appears in a brief judgment which dealt only with the issue of the rule nisi. It does not appear that this D question was fully argued or argued at all. I am sure it is not his considered view. It looks as if it is no more than his prima facie view which was all that was necessary to grant the rule. He did not intend to bind the Court on the return day in respect of this issue, in the sense that that has been finally decided. I believe that I am at large to deal also with this E problem afresh on the return day when the question of a permanent interdict falls for decision.

The first question which is posed by this argument relates to the trustee's position vis-à-vis the Court. Is he an officer of the Court? If so, what does it mean and what flows from it?

My first blush reaction to this question was that it is quite F inaccurate, in the scheme of our insolvency legislation, to regard the trustee as any kind of officer of the Court. After all, he is elected by the creditors and not appointed by the Court and is furthermore not under the control of the Court but under that of the Master. Our Courts are not entrusted with G insolvency administration as in England. The Court, when called upon to do so, merely applies the law to a given situation. In England, however, bankruptcy administration is conducted not only by the Judges and Registrars of the Courts (which function also as "bankruptcy Courts") but by certain officers appointed for the purpose of bankruptcy administration. They are official receivers and trustees. They H are by statute designated officers of such Courts. See Halsbury's Laws of England 3rd ed vol II at 254 and further, in relation to some of the Court's functions, para 772 at 383:

"It is the trustee's duty to use his own discretion in the management and distribution of the estate, but he must have regard to any directions given by resolution of the creditors in general meeting or by the committee of inspection; in case of conflict the directions of the creditors overrule those of I the committee.

He may apply to the Court for directions in relation to any particular matter arising under the bankruptcy, but there is no obligation on the Court to give him directions, and where he has obtained a decision he should not as a rule appeal from it. As an officer of the Court he must act as is just and right, and the Court will not allow him to take advantage of a mistake."

Coetzee J

A There is therefore a completely different approach to insolvency administration in England where it is fundamentally the Court's function. The day to day administration is done through its officers. One can fully understand how in this scheme of things a trustee has duties qua officer of the Court.

Yet, amazingly, there is actually some authority in South B Africa for regarding the trustee as an officer of the Court. This requires careful examination and evaluation.

In Mars' Law of Insolvency in South Africa 7th ed at 239 the following is said in the introduction to the section dealing with the nature of the office of trustee:

C "A trustee occupies a position of trust, not only towards creditors but also towards the insolvent himself. He is an officer of the Court, upon whom devolves the duty of doing everything necessary for or collateral to the administration and distribution of the estate of an insolvent. He does not act in the public interest but in the interests of creditors.

In England it has been authoritatively declared that the Court D in bankruptcy ought not to allow, and will not allow, a trustee, being its officer, to insist upon a rule of law or of equity in the administration of an estate which would lead to an unjust and...