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

• Jurisdiction: South Africa
• Judge: Kannemeyer JP
• Judgment Date: 24 August 1988
• Citation: 1990 (2) SA 217 (SE)
• Hearing Date: 10 August 1988
• Court: South Eastern Cape Local Division

Kannemeyer JP:

This matter results from the insolvency of one Marsal ('the insolvent') in whose insolvent estate the first respondent is the I duly appointed trustee. During 1978 and 1984 respectively the Swartkops Hotel and off-sales and the Phoenix Hotel and off-sales were subleased by Progressive Holdings (Pty) Ltd and the second applicant to the insolvent. Both of these companies are associate companies of the first applicant. The main leases contained an undertaking by the lessees that the premises would continue, during the currency of the leases, to be J premises licensed

Kannemeyer JP

A under the Liquor Act. It was a condition of the subleases that the provision in the main lease would be binding on the insolvent.

The insolvent's estate was provisionally sequestrated on 2 July 1985. The directors of W A Gilbey SA (Pty) Ltd became concerned that the due discharge by its affiliated companies of their obligations to the lessor in relation to the liquor licences would be jeopardised. Apart from this, the first respondent had informed an informal meeting of creditors B on 16 July 1985 that in view of the losses being sustained in continuing to conduct the insolvent's business, he would be obliged to close them. The first and second applicants are substantial creditors in the insolvent estate. Eventually an agreement was reached, the terms of which are contained in a telex from the first applicant to the first C respondent, the relevant portion of which reads:

'Gilbey's feel that they cannot have the business closed as this could jeopardise the licence. We propose that we move in on Monday, take over the stock and pay you therefor at cost. We will "manage" the hotel and off-sales on your behalf, the loss (or profit) to be for our account.'

D (See annexure A to the founding affidavit.)

The first respondent says, in para 18 of his opposing affidavit, that at a meeting held on 5 August 1985 at which one Borquin, a director of the three applicants (which are all associated companies) was present, made 'specific reference' to the fact that

'as part of the expenses in the operation of the business, provision E would have to be made for the fees to which I am entitled in terms of the tariff which is 6% of the turnover of the business being operated under my control'.

The first respondent claims to have made this aspect clear to the directors of the applicants on several occasions apart from at this meeting.

F Borquin, in reply to the above says:

'I deny that first respondent even mentioned in my presence that he would be entitled to receive a fee of 6% of the turnover of the business. I have considerable experience in and knowledge of the liquor trade in South Africa and I have always been aware of the fact that the profit margins in such businesses are small. Accordingly, had the trustee at any stage mentioned to me or in my presence, that he would G charge a fee of 6% of the turnover of the business as a just charge against the business I would not have agreed to the arrangement which was proposed.'

Whether or not the first respondent told the creditors of his intention to charge this fee is the major ground of factual disagreement between the parties.

H According to the applicants, they then caused Rebel Discount Liquor Group (Pty) Ltd ('Rebel'), a company which handles the retail sales on behalf of the Gilbey group of companies, 'to take over the businesses and to conduct them for the profit and/or loss of the third applicant'. It is alleged that Rebel 'has the expertise and the personnel available for the conduct of retail liquor selling'.

I The applicants' case is that after this agreement was reached, their group, using the services of Rebel, took over virtually the entire operation of the businesses which had belonged to the insolvent and that the first respondent was thereafter merely the nominal manager thereof. This suggestion is vehemently denied by the first respondent who claims that he was actively engaged in the conduct of the businesses. I do not J intend to

Kannemeyer JP

A set out the details of what it is alleged was done by Rebel and by the first respondent respectively. Suffice it to say that the applicants' version is to be found in paras 32 - 5 of the applicants' founding affidavit deposed to by Brian Dennis Bailey, a director of the applicant companies, while the first respondent's reply to these paragraphs is contained in paras 29 - 35 of his opposing affidavit.

B The first respondent lodged a first and a second liquidation and distribution account with the second respondent. These accounts were both duly advertised as lying for inspection but no objections were received thereto. They were confirmed by the second respondent and the C dividends awarded thereunder have been paid. The first respondent admits that he did not circularise creditors in the insolvent estate with copies of these accounts but points out that he was not, in law, required to do so. However, when the applicants requested a statement of account of the businesses, he forwarded a copy of the first liquidation and distribution account before, as I understand the position, it had D been confirmed.

In the above two accounts the fees claimed by the first respondent are clearly reflected. On the fourth page of annexure B to the founding affidavit one finds a fee of 6% claimed on R1 560 255,82, namely R93 615,35 in respect of the first liquidation and distribution account while on the third page of the second account, annexure D to the E founding affidavit, a fee of 6% on R1 485 093,36, namely R89 105,60 is claimed. Reference to the Second Schedule to the Insolvency Act 24 of 1936, under 'Tariff B' shows that 6% is the fee provided for: 'On sales by the trustee in carrying on the business of the insolvent or any part thereof, in terms of s 80.' In his founding affidavit (para 50) Bailey F says it was only after he had received a letter dated 19 June 1987 from the first respondent that his 'attention was drawn to the fact that first respondent was including a fee based on 6% of turnover of the business in the shortfall he was claiming'. Bailey is a chartered accountant. The first respondent contends that to a man with this G experience 'a cursory examination of the account would have clearly shown that the trustee's remuneration was in relation to the turnover of the business'. Bailey, in his replying affidavit, concedes that 'the applicants were at fault in not becoming aware of the position regarding the first respondent's fees once they were in possession of the liquidation account'. He goes on to say that this aspect is irrelevant to the issue whether the first respondent is entitled to the fees H claimed in the first and second accounts which were allowed on taxation by the second respondent.

The applicants claim that the first respondent's fees, insofar as turnover is concerned, were allowed by the second respondent without him having the full facts available and that this was a result of the first I respondent concealing relevant facts from or failing to convey these facts to the second respondent.

The applicants now seek relief against the first respondent in the following form:

'A.

Be pleased to take notice that the applicants hereby call upon J the respondent to show cause:

Kannemeyer JP

(i)

A why the second respondent's confirmation on 8 September 1986 of that part of the first respondent's first interim liquidation account in the insolvent estate Juan Ignacio Marsal, which allows first respondent a fee in the sum of R93615,35 and the second respondent's confirmation on 2 June 1987 of that part of the second interim liquidation and B distribution account in the said estate which allows the first respondent a fee in the sum of R89 105,60, should not be reviewed, set aside or corrected;

(ii)

why David Alexander Morris personally should not be ordered to pay the applicant's costs of suit, de bonis propriis, on...