Standard Bank of South Africa Ltd v the Master of the High Court and Others

• Jurisdiction: South Africa

Standard Bank of South Africa Ltd v the Master of the High Court and Others
2009 (5) SA 13 (E)

2009 (5) SA p13

Citation	2009 (5) SA 13 (E)
Case No	535/05
Court	Eastern Cape Provincial Division
Judge	Liebenberg J and Plasket J
Heard	May 12, 2009; May 13, 2009; May 14, 2009
Judgment	January 15, 2009
Counsel	J Suttner SC (with A Berkowitz) for the applicant.; No appearances for the first and second respondents.; CE Watt-Pringle SC for the third and fourth respondents.; JJ Brett SC (with C Harms) for the fifth respondent.

Flynote : Sleutelwoorde B

Company — Winding up — Liquidator — Removal — Grounds — Misconduct — Discretion of court — Court to take into account length of time elapsed in winding-up, likelihood of disruption, and additional expense likely to be incurred if new liquidator to finalise winding-up — Companies Act 61 of 1973, s 379(2). C

Company — Winding up — Liquidator — Removal — Grounds — Misconduct — Failure to act diligently in respect of proved claim — Failure to dispute claim — Liquidators holding belief that company not indebted to creditor in amount D and on grounds alleged — Although incorrect, belief reasonable — Removal not justified — Companies Act 61 of 1973, s 379(2).

Company — Winding up — Liquidator — Removal — Grounds — Misconduct — Failure to convene meeting of creditors — While incorrect, such decision not being sufficient basis for removal — Companies Act 61 of 1973, s 379(2). E

Company — Winding up — Liquidator — Removal — Grounds — Misconduct — Failure to prove claim by company — Liquidators opting for set-off rather than them proving claim — No ulterior motive shown — Liquidators' decision not otherwise objectionable — Removal not justified — Companies Act 61 of 1973, s 379(2). F

Company — Winding up — Liquidator — Removal — Grounds — Misconduct — Misappropriation of funds — Liquidators funding, from company's estate, unsuccessful application to review decision of master to reduce their fee and to appeal against dismissal of that application — Liquidators acting on legal advice which, while later proving incorrect, consistent with one of two lines of judicial authority — Liquidators' tardiness in repaying costs not prejudicing G company — Removal not justified — Companies Act 61 of 1973, s 379(2).

Company — Winding up — Liquidator — Removal — Grounds — Misconduct — Participation in fee-sharing arrangement with liquidators of other companies in group — Mere participation in fee-sharing agreement not improper — Liquidator in any event appointed liquidator of all companies in group and H therefore obliged to enter into fee-sharing arrangement with co-liquidators in each of companies — Removal not justified — Companies Act 61 of 1973, s 379(2).

Headnote : Kopnota

The applicant bank brought an application in the High Court for the removal of I the liquidators of Intramed (Pty) Ltd (the third and fourth respondents, hereafter referred to as Nel and De Villiers). Intramed (the second respondent) was one of the many subsidiary companies of Macmed Health Care Ltd (the fifth respondent). The liquidation of Macmed in late 1999 (Nel having also been appointed a liquidator of Macmed) had led to the liquidation of its subsidiaries, including Intramed. The focus of the J

2009 (5) SA p14

A proceedings was the alleged misconduct of Nel and De Villiers, in particular -

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their alleged misuse of funds in the Intramed estate for an unsuccessful High Court application and subsequent appeal to the SCA in respect of the master's reduction of the liquidator's fees claimed by Nel and De Villiers;

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B their failure to dispute Macmed's R325 million claim against Intramed;

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an alleged conflict of interest arising from Nel's participation in a fee- sharing arrangement with the liquidators of Macmed (the arrangement being that the liquidators' fees earned in the liquidation of each of the companies in the group were to be pooled and then shared between all the liquidators in the various companies);

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C their failure to prove Intramed's claim of R100 million against Macmed; and

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their failure to convene a meeting of creditors when asked to do so by the bank.

Held, that a court could not remove a liquidator from office unless it was satisfied that it would be to the advantage and benefit of all parties interested in the D winding-up. Relevant here were the expense and inconvenience associated with the appointment of a new liquidator. (Paragraph [8] at 19A - E.)

Held, further, that the phrase 'any other good cause' in s 379(2) of the Companies Act 61 of 1973 encompassed misconduct of any kind not covered by s 379(1) or s 373. 'Cause' was not confined to misconduct or E personal unfitness for office but included any conduct that rendered the removal of the liquidator to the advantage of the parties interested in the winding-up. (Paragraph [10] at 20B - E.)

Held, further, as to the alleged misappropriation of money, that there were two distinct approaches to the issue of whether, when a liquidator or an executor challenged the master's decision as to his or her remuneration, the resulting F costs had to be born by the challenger or the estate in question. (Paragraph [19] at 23C - D.)

Held, further, that the mere fact that there were two divergent strands of authority gave lie to the suggestion that the advice on which Nel and De Villiers had acted was so bizarre that they ought to have sought guidance from another source. They had been entitled to rely on that advice even if it later proved G to be wrong. (Paragraph [20] at 23D - G.)

Held, further, that since Nel and De Villiers' tardiness in repaying the costs had not prejudiced the company, it did not amount to sufficient reason for their removal. (Paragraph [29] at 25C - D.)

Held, accordingly, that the bank had not succeeded in proving, in relation to the costs associated with the review and appeal, that Nel and De Villiers had H acted in a way that justified their removal as liquidators. (Paragraph [30] at 25D/E.)

Held, further, as to their failure to dispute the fifth respondent's claim, that it was clear that neither Nel nor De Villiers had believed that the company was not indebted to Macmed in the amount and on the grounds alleged by Macmed's own liquidators. The question was whether their stance had I been a reasonable one. (Paragraph [38] at 27E.)

Held, further, that it appeared from the evidence that, although it was subsequently shown to be incorrect, their belief had been reasonable at the time they had held it. (Paragraph [49] at 29F - G.)

Held, further, that it followed that the manner in which Macmed's claim was dealt with by the liquidators did not constitute a ground for their removal. J (Paragraph [50] at 29G/H.)

2009 (5) SA p15

Held, further, as to Nel's participation in a fee-sharing arrangement with the A liquidators of the fifth respondent, that the mere fact that he had entered into the fee-sharing arrangement did not mean that he had acted inappropriately. Nel was in any event in a unique position since he was appointed as liquidator in all of the companies in the group and would therefore have had to enter into a fee-sharing arrangement with his co-liquidator or co-liquidators in each of the companies, including Macmed. It was thus B clear that the fee-sharing agreement was no reason for the removal of Nel or De Villiers as liquidators. (Paragraphs [61] - [62] at 31C - E.)

Held, further, as to Nel and De Villiers' failure to prove the company's claim in Macmed, that the applicant bank had failed to prove its allegation that they had acted out of ulterior motive. Nor had the bank shown any other valid objection to their decision to opt for set-off rather than prove the claim. C There was thus no basis for their removal on account of the way in which they had dealt with Intramed's claim against Macmed. (Paragraphs [67] and [70] at 32A - D and 33D/E.)

Held, further, as to Nel and De Villiers' failure to convene a meeting of creditors, that while that decision had been incorrect in a number of respects, it did not constitute a sufficient basis upon which to conclude that they ought to D be removed from office. (Paragraphs [75] - [76] at 34C - G.)

Held, accordingly, that even if Nel and De Villiers had taken decisions that might in retrospect have been wrong, or committed certain errors of judgment, it was not established that their removal was justified. Even if they were guilty of misconduct, the liquidation process was so advanced that there was no point in removing them at this late stage. (Paragraph [80] at 35D.) E Application dismissed.

Cases Considered

Annotations

Reported cases

Caldeira v The Master and Another 1996 (1) SA 868 (N): dictum at 874D - E F applied

Collie NO v The Master 1972 (3) SA 623 (A): referred to

De Hart NO v The Master 1971 (3) SA 366 (O): referred to

De Villiers and Another NNO v BOE Bank Ltd 2004 (3) SA 1 (SCA) ([2004] 2 All SA 457): referred to

Gore and Another NNO v The Master 2002 (2) SA 283 (E) ([2002] 1 All SA 334): G referred to

Hudson and Others NNO v Wilkins NO and Others 2003 (6) SA 234 (T): dictum in para [18] applied

Intertrade Two (Pty) Ltd v MEC for Roads and Public Works, Eastern Cape, and Another 2007 (6) SA 442 (Ck): referred to

Intramed (Pty) Ltd (In Liquidation) and Another v Standard Bank of South H Africa Ltd and Others 2008 (2) SA 466 (SCA): referred to

Ma-Afrika Groepbelange (Pty) Ltd and Another v Millman and Powell NNO and Another 1997 (1) SA 547 (C) (1996 CLR 751): dictum at 566B - E applied

Master of the Supreme Court v Griffiths' Trustee 1909 TS 984: referred to

Nel and Another NNO v The Master (Absa Bank Ltd and Others Intervening) I 2005 (1) SA 276 (SCA): referred to

Niewoudt v The Master and Others NNO 1988 (4) SA 513 (T): referred to

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