Parity Insurance Co Ltd (In Liquidation) v Hill and Another

• Jurisdiction: South Africa
• Citation: 1966 (4) SA 486 (E)

Parity Insurance Co Ltd (In Liquidation) v Hill and Another
1966 (4) SA 486 (E)

1966 (4) SA p486

Citation	1966 (4) SA 486 (E)
Court	Eastern Cape Division
Judge	Munnik J and Eksteen J
Heard	August 1, 1966
Judgment	September 30, 1966

Flynote : Sleutelwoorde

Company — Winding-up — The liquidator — Action for damages instituted against company prior to liquidation — Award thereafter — Successful plaintiff taxing bill of costs for post-liquidation costs only — Writ issued for such costs only — Propriety of — Such costs incurred in the administration — Plaintiff not obliged to H await final liquidation account confirmed.

Headnote : Kopnota

Whilst the action instituted by the first respondent against the applicant for compensation was pending, the applicant was placed in liquidation. The action proceeded and the first respondent succeeded in her claim and was awarded costs. On an appeal the quantum of compensation was reduced and the applicant was granted the costs of appeal. First respondent taxed a bill for her costs of trial from the time of the applicant's liquidation to the conclusion of the trial and, after deducting by way of set-off the costs of appeal taxed by the applicant, sought payment forthwith of the balance and, payment not being forthcoming, thereafter issued a writ for such costs. The applicant

1966 (4) SA p487

applied to have the writ set aside, the basis of its application being that the costs in question ranked as a concurrent claim as costs of administration and were not payable until the final liquidation account had been drawn and lain for inspection for the requisite period and was confirmed. The first respondent contended that, having regard to the powers conferred upon the liquidators in terms of the liquidation order, A as amended, these costs were costs incurred by the applicant in running the business of the company and as such were payable forthwith and, payment having been refused, were properly the subject matter of a warrant of execution.

Held, that the first respondent's contention should be upheld: accordingly the application should be dismissed with costs.

Case Information

Application for an order setting aside a writ of execution. The facts B appear from the reasons for judgment.

D. D v Kannemeyer, S.C., for the applicant. The first respondent's claim for costs incurred after liquidation constitutes a liquidation or administration expense. See Wilson v Limbaba, 1932 NPD 94; cf. sec. C 73 (1) of the Insolvency Act, 24 of 1936. In the result her costs, being costs of liquidation, are provable as a preferent claim. Van der Byl v Langford's Trustee, 7 S.C. 235; Skead v Insolvent Estate Smith, 1922 CPD 261. The liquidator's duty to distribute the estate is provided for in secs. 128 and 139 of the Companies Act, 46 of 1926. His duty to distribute the assets arises immediately after the confirmation D of any account. This account must be laid before the Master of the Supreme Court in terms of sec. 134 of the Companies Act, must lie for inspection in terms of sec. 136, and be confirmed in terms of sec. 138, before the duty to distribute arises.

The first respondent has no more than a preferred claim for the costs in E question against the Company, and the provisions of the Insolvency Act apply in terms of sec. 177 of the Companies Act. See Act 24 of 1936, sec. 97 (2). The first respondent must prove her claim for the costs in question in terms of sec. 179 of the Companies Act, and her claim is only enforceable after the relevant accounts have been approved as mentioned above. A creditor who has a proved claim cannot sue for the F amount due to him until the account has been confirmed. Tiffin v Harsant, 1876 Buch. 50. A liquidator may pay out beforehand, but he does so at his own risk. Molefe v Barker, N.O., 20 C.T.R. 18. Milne, N.O v Cassim and Another, 1962 (1) SA 775 is incorrect, insofar as the learned Judge on p. 776H held that a liquidator cannot claim that the G 'creditor for costs must prove a claim for such costs, and, like any pre-liquidation creditor, take his chance of receiving a dividend'. The applicant does not, in this case, 'shelter behind' sec. 183 of the Companies Act, as in Milne's case, supra, for the applicant contends that, as the first respondent's right to payment is dependent upon H confirmation of the account, her right has not yet accrued, and therefore the warrant was prematurely issued. In any event, Milne's case is distinguishable, in that it deals with the case of a liquidator who has embarked upon litigation after liquidation. The English authorities referred to in Milne's case at pp. 776 - 777 are not of assistance in that, in the instant case, the matter is governed by the specific provisions of the Companies Act and the Insolvency Act referred to above.

N. C. Addleson, S.C., for the first respondent: The issue is whether

1966 (4) SA p488

the first respondent is entitled to payment of her taxed costs, without waiting for the confirmation of the liquidators' accounts. Such costs are not 'costs of administration' payable under the provisions relating A to the distribution of the assets of an insolvent estate; they are costs incurred by the liquidators in running the business of the Company. It is clear from the Court's order that the liquidators had power to conduct the business of third party insurers during the liquidation and to incur all necessary expenses in the ordinary running of such business and had ordered the costs of that business to be costs 'in the B liquidation' or 'in liquidation'. These powers were in fact much wider than those conferred on a trustee by sec. 73 (1) of the Insolvency Act, which applies to a company by virtue of the provisions of sec. 182 of the Companies Act. They are also expressly wider than the powers given to a liquidator under sec. 130 (2) (a) of the Companies Act. The C Court gave the liquidators general power to carry on the business of the Company (under sec. 130 (2) (e) of the Companies Act) without the necessity of obtaining the directions of creditors. This power, read with the special powers, leaves no doubt but that the liquidators were empowered to 'trade' as if the Company were not in liquidation. D Moreover, these powers would not have been asked for were there not funds to enable the liquidators to exercise them and were they not necessary. The defence of third party claims is a normal part of the running of the business which the liquidators were given power to undertake. Such litigation is not of the extraordinary nature normally encountered in liquidation or sequestration. For that reason the liquidators were given full and special powers to litigate. If they E litigate unsuccessfully this is one of the costs of running the business of the Company, just as if they had purchased goods to sell in the...