Muller and Another NNO v Bryant & Flanagan (Pty) Ltd

• Jurisdiction: South Africa
• Citation: 1978 (2) SA 807 (A)

Muller and Another NNO v Bryant & Flanagan (Pty) Ltd
1978 (2) SA 807 (A)

1978 (2) SA p807

Citation	1978 (2) SA 807 (A)
Court	Appellate Division
Judge	Wessels ACJ, Rabie JA, Joubert JA, Van Winsen AJA and Trengove AJA
Heard	March 14, 1978
Judgment	March 29, 1978

Flynote : Sleutelwoorde H

Company — Winding up — The liquidator — Executory contract not specifically provided for in Insolvency Act entered into by company prior to liquidation — Liquidator vested with a discretion either to abide by or terminate contract — intention must be clear — Act 61 of 1973 s 339 —

1978 (2) SA p808

Liquidators choosing to continue with an executory contract — Liquidators thereby binding themselves to pay in full for pre-liquidation work, no fresh contract having been entered into in lieu thereof. A

Headnote : Kopnota

A trustee in insolvency, and thus a liquidator of a company in liquidation (see s 339 of Act 61 of 1973), is invested with a discretion to abide by or terminate an executory agreement not specifically provided for in the Insolvency Act which was concluded by the company in liquidation before its liquidation. Such agreement does not terminate automatically on the B company being placed in liquidation. The liquidator must make his election within what, regard being had to the circumstances of the cases, is a reasonable time. Should he elect to abide by the agreement the liquidator steps into the shoes of the company in liquidation and is obliged to the other party to the agreement to whatever counterprestation is required of the company in terms of the agreement. No right in law resides in the liquidator to abide by the contract and at the same time unilaterally make a stipulation derogating from the other party's rights under the contract.

C The respondent had entered into a building contract with the T company. While building was in progress T was placed under liquidation and the appellants were appointed liquidators. At the time of liquidation T owed the respondent an amount for work already performed. The appellants took up the attitude that respondent only had a concurrent claim for such work. Appellants obtained an order declaring that they were not obliged to pay D as a preferent claim any amounts owing to the respondent save and except an amount for repairing a beam. On an appeal this order was reversed: the Court holding that, if the appellants chose to continue with such an executory contract, they thereby bound themselves to remunerate the other party in full for the pre-liquidation work. In a further appeal the Court had regard to a letter written by the appellants, from the terms of which the Court found that the appellants had elected to abide by the contract, and had not entered into any fresh contract.

E Held, that by so doing the appellants bound themselves to fulfil the obligation undertaken by T under the contract and therefore no ground existed for interfering with the order of the Court a quo.

The decision in the Natal Provincial Division in Bryant & Flanagan (Pty) Ltd v Muller and Another NNO 1977 (1) SA 800 confirmed. F

Case Information

Appeal from a decision in the Natal Provincial Division (JAMES JP, DIDCOT J and HEFER J) reversing a decision of SHEARER J reported in 1976 (3) SA 210. The facts appear from the judgment of VAN WINSEN AJA.

I W B de Villiers SC (with him A J du P Buys) for the appellants: On a proper interpretation of the correspondence between the parties, there was no basis for finding that the appellant conveyed to the respondent that they were abiding by the contract. There could only be an abiding by the contract if the appellants conveyed to the respondent that they were prepared to continue the contract and to perform all their obligations in H terms thereof. See Goodricke & Son v Auto Protection Insurance Co Ltd (in liquidation) 1968 (1) SA at 724C - E; Uys and Another v Sam Friedman Ltd 1934 OPD at 86; Chadwick v Henochsberg 1924 TPD at 705 - 706. In order to hold the appellants liable for the works done prior to the provisional liquidation order the respondent must prove that the appellants unequivocally abided by the contract. See Goodwin v Noble 120 ER 219; White v Hunt 23 LT 559; Williams v Taylor 21 LT 612; English & Empire Digest vol 5 (1976) para 7995 etc. Abiding by the contract should be as unequivocal as the acceptance of an offer. See Boerne v Harris 1949 G

1978 (2) SA p809

(1) SA 793; Van Jaarsveld v Ackermann 1975 (2) SA 753.

D J Shaw QC (with him K R McCall) for respondent: The appellants do not dispute that a trustee can only insist upon performance of a A pre-sequestration contract if he, in turn, is prepared to perform the insolvent's outstanding obligations under the contract, both past and future. The principal South African authorities in which the principle of election by a trustee to continue a contract has been discussed or applied are Wilson's Trustee v Martell (1856) 2 Searle 248; Truter v Joubert's Trustee (1899) 16 SC 375: Scheinfeld's Trustee v Murray & Co 1920 CPD at B 94 - 96; Estate Friedman v Katzer 1924 WLD at 301 - 302, Chadwick v Henochsberg 1924 TPD 703; Uys and Another v Sam Friedman Ltd 1934 OPD 80, 1935 AD 165; Tangney and Others v Zive's Trustee 1961 (1) SA at 452H - 453B; Ward v Barret NO and Another 1963 (2) SA at 553D - 554G; Ex parte Liquidators of Parity Insurance Co 1966 (1) SA at 470 - 471; Goodricke &, C Son v Auto Protection Insurance Co Ltd 1967 (2) SA 501, 1968 (1) SA at 723H - 724H; Montelindo Compania Naviera SA v Bank of Lisbon and SA Ltd 1969 (2) SA at 141G - 142B; Thorne NO v The Government 1973 (4) SA at 44E - G, 1974 (2) SA at 8B, 9G - H; Ex parte Venter and Another NNO: In re Rapid Mining Supplies (Pty) Ltd 1976 (3) SA at 280H - 282D. The question D is: (a) whether the appellants, they having elected to continue the building contract and the respondent having performed its obligations thereunder, are obliged to remunerate the respondent in full for its pre-liquidation work, as was decided by the Court a quo, or (b) whether the appellants' obligation to remunerate the respondent was dependent upon E their having tendered to do so, as was decided by SHEARER J or upon their having agreed to do so, as contended by the appellants. There appears to be no authority in support either of the finding by SHEARER, J that, in the absence of payment or a tender to pay for the pre-liquidation work, the claim for such work remains concurrent, or in support of the appellants' contention that, only if the liquidator agrees to pay F pre-liquidation debts as a cost of administration, do such debts become so payable. None of the cases referred to above deals specifically with the question as to whether, if a liquidator has affirmed a contract and the other party, without first insisting, on a tender of payment, has performed his part, he is entitled to be paid in full. The exceptio non adimpleti contractus has nothing to do with this case. It is true that, G upon an application of the general principle, the respondent could have refused to complete the contract unless the appellants performed or tendered to perform their obligations thereunder. There was, however, no obligation on the respondent to rely on the exceptio or to cancel the contract. In the light of the appellants' demand that the respondent H complete the contract it was entitled to do so and, having, done so, to payment in full in terms of the contract.

On a proper reading of the authorities, it is the election of the trustee to adopt or repudiate the contract which is crucial, not his tender to perform. The other...