Swart v Starbuck and Others

• Jurisdiction: South Africa
• Citation: 2017 (5) SA 370 (CC)

Swart v Starbuck and Others
2017 (5) SA 370 (CC)

2017 (5) SA p370

Citation	2017 (5) SA 370 (CC)
Case No	153/16; [2017] ZACC 23
Court	Constitutional Court
Judge	Mogoeng CJ, Nkabinde ADCJ, Cameron J, Froneman J, Jafta J, Khampepe J, Madlanga J, Mhlantla J, Mojapelo AJ, Pretorius AJ and Zondo J
Heard	June 29, 2017
Judgment	June 29, 2017
Counsel	DM Leathern SC (with SJ van Rensburg) for the respondent.

Flynote : Sleutelwoorde

Insolvency G — Trustee — Realisation of assets — Sale of property on authorisation of master — Sale in anticipation of formal appointment as trustee — Sale subsequently authorised by master — Sale valid until authorisation set aside — Insolvency Act 24 of 1936, s 80bis.

Headnote : Kopnota

One H of the future trustees of Mr Swart's insolvent estate accepted, in anticipation of his appointment as provisional trustee, a conditional offer to purchase land belonging to the estate. The condition was that the Master would authorise the sale. The Master appointed the (provisional) trustees and consented to the sale, after which the land was transferred to the purchaser. I The sale and transfer were approved at the second meeting of creditors. The issue that arose in the present case was whether the sale was valid even though the first trustee was not yet appointed provisional trustee when he accepted the offer to purchase. Mr Swart claimed that the sale was unlawful and sought R11,4 million in damages on the ground that the land would have fetched more on auction. His claim was dismissed by the Pretoria J High Court.

2017 (5) SA p371

The governing provisions of the Insolvency Act 24 of 1936 were:

Section 18(3), which granted provisional trustees the same powers as final A trustees, except that they had to obtain the authority of the Master or the court to sell estate property.

Section 80bis, which enabled trustees, before the second meeting of creditors, to obtain such authorisation by recommending the sale to the Master.

Section 82(8), which, read with s 82(1), protected innocent purchasers against B liability arising from unauthorised sales by trustees, by validating the sales and holding the trustees liable to the estate, in double, for any damages incurred by it. This was the section relied on by Mr Swart for his damages claim, but the trustees argued that it was not applicable because they had been granted authority to sell under s 80bis.

In an appeal the Supreme Court of Appeal found that the Master's authorisation C under s 80bis constituted a valid administrative act and that s 82 did not apply because the sale had taken place pursuant to the Master's authorisation. Finally, the SCA found that since the sale was subject to a suspensive condition and only became binding on the fulfilment of the condition, it did not matter that the trustees had not yet been appointed when the offer to purchase was accepted. It accordingly dismissed the appeal with costs (see D [15] – [19]).

In an application for leave to appeal to the Constitutional Court, Mr Swart claimed, in addition to damages, that s 18(3) and s 80bis were unconstitutional.

Majority judgment per Khampepe J

Leave to appeal should, for the following reasons, be refused. The applicability E of s 82(1) read with s 82(8), on which Mr Swart's claim was based, depended on the absence of a valid authorisation of the sale by the Master (see [26]). But the Master's authorisation under s 80bis, which was never challenged by Mr Swart, remained a binding administrative act with valid consequences, including the sale, until set aside (see [27] – [33]). The effect of the suspensive condition was that once the Master's authorisation was F obtained, a legally binding sale came into effect (see [34]). The validity of the sale would endure, regardless of the validity of the Master's authorisation, until the authorisation was set aside, something Mr Swart never attempted (see [35] – [36).

It would in any event be inappropriate for the court to consider the legality of the Master's authorisation in the absence of a rule 53 process (see [37] – [40]). G And even if there were a proper review application before the court, it was 10 years overdue (see [42]). A further impediment to Mr Swart's attack was s 157 of the Act, which shielded the Master's conduct from invalidity based on a formal defect, and Mr Swart was not able to show the substantial injustice required to undo this protection (see [43] – [45]).

Dissenting judgment per Jafta J H

Leave to appeal should be granted and the appeal upheld. Since the trustees purported to exercise a power under s 80bis when no such power vested in them, and the Master knew when he granted the approval that he lacked the required recommendation, there was no compliance with s 80bis (see [89] – [94]). Since the nature and extent of non-compliance could not be described as a mere formal defect, it was fatal to the Master's approval (see I [95], [103]).

Concurring judgment per Zondo J

It was not in the interests of justice that leave to appeal should be granted (see [117]). The question that arose was what the trustees should have done after they were appointed if they sought to avoid the alleged non-compliance with the Act? The only answer was that they ought to have J

2017 (5) SA p372

withdrawn A the application and resubmitted it, which would constitute the height of formalism (see [120]). Hence it was in order that they did not withdraw it (see [120]).

Cases cited

Bengwenyama Minerals (Pty) Ltd and Others v Genorah Resources (Pty) Ltd and Others B 2011 (4) SA 113 (CC) (2011 (3) BCLR 229; [2010] ZACC 26): dictum in para [85] applied

Brummer v Gorfil Brothers Investments (Pty) Ltd and Others 2000 (2) SA 837 (CC) (2000 (5) BCLR 465; [2000] ZACC 3): dictum in para [3] applied

Camps Bay Ratepayers' and Residents' Association and Another v Harrison and Another C 2011 (4) SA 42 (CC) (2011 (2) BCLR 121; [2010] ZACC 19): dictum in para [62] applied

Cape Town City v Aurecon SA (Pty) Ltd 2017 (4) SA 223 (CC) ([2017] ZACC 5): dictum in para [37] applied

Command Protection Services (Gauteng) (Pty) Ltd t/a Maxi Security v South African Post Office Ltd 2013 (2) SA 133 (SCA) ([2012] ZASCA 160): D dictum in para [21] applied

Corondimas v Badat 1946 AD 548: dictum at 551 applied

De Lange v Methodist Church and Another 2016 (2) SA 1 (CC) (2016 (1) BCLR 1; [2015] ZACC 35): referred to

Department of Transport and Others v Tasima (Pty) Ltd 2017 (2) SA 622 (CC) E (2017 (1) BCLR 1; [2016] ZACC 39): dicta in paras [88] – [93] applied

Diggers Development (Pty) Ltd v City of Matlosana [2012] 1 All SA 428 (SCA) ([2011] ZASCA 247): dictum in para [29] applied

Francis George Hill Family Trust v South African Reserve Bank and Others 1992 (3) SA 91 (A) ([1992] ZASCA 50): dictum at 107B – H applied

Gqwetha F v Transkei Development Corporation Ltd and Others 2006 (2) SA 603 (SCA) ([2006] 3 All SA 245; [2005] ZASCA 51): dictum in para [22] applied

Janse van Rensburg v Muller 1996 (2) SA 557 (A) ([1995] ZASCA 136): applied

Joseph v Halkett (1902) 19 SC 289: dictum at 293 applied

Khumalo G and Another v MEC for Education, KwaZulu-Natal 2014 (5) SA 579 (CC) (2014 (3) BCLR 333; [2013] ZACC 49): applied

Mabaso v Law Society, Northern Provinces, and Another 2005 (2) SA 117 (CC) (2005 (2) BCLR 129; [2004] ZACC 8): referred to

Maphango and Others v Aengus Lifestyle Properties (Pty) Ltd 2012 (3) SA 531 (CC) (2012 (5) BCLR 449; [2012] ZACC 2): dictum in para [109] H applied

Mears v Rissik, Mackenzie NO and Mears' Trustee 1905 TS 303: dictum at 305 applied

MEC for Health, Eastern Cape and Another v Kirland Investments (Pty) Ltd t/a Eye & Lazer Institute 2014 (3) SA 481 (CC) (2014 (5) BCLR 547; [2014] ZACC 6): applied

Merafong I City v AngloGold Ashanti Ltd 2017 (2) SA 211 (CC) (2017 (2) BCLR 182; [2016] ZACC 35): applied

Minister of Home Affairs v Rahim and Others 2016 (3) SA 218 (CC) (2016 (6) BCLR 780; [2016] ZACC 3): referred to

Muller v De Wet NO and Others 1999 (2) SA 1024 (W) ([1999] 2 All SA 163): dictum at 1029D – 1030H applied

Nieuwoudt J v The Master and Others NNO 1988 (4) SA 513 (A): applied

2017 (5) SA p373

Oudekraal Estates (Pty) Ltd v City of Cape Town and Others A 2004 (6) SA 222 (SCA) ([2004] 3 All SA 1; [2004] ZASCA 48): dictum in para [31] applied

Paola v Jeeva NO and Others 2004 (1) SA 396 (SCA) ([2003] 4 All SA 433; [2003] ZASCA 100): referred to

Phillips and Others v National Director of Public Prosecutions 2006 (1) SA 505 (CC) (2006 (1) SACR 78; 2006 (2) BCLR 274; [2005] ZACC 15): B dicta in paras [39] – [40] applied

Pinetown Town Council v President of the Industrial Court and Others 1984 (3) SA 173 (N): referred to

President of the Republic of South Africa and Others v South African Rugby Football Union and Others 2000 (1) SA 1 (CC) (1999 (10) BCLR 1059; [1999] ZACC 11): referred to C

Prince v President, Cape Law Society, and Others 2001 (2) SA 388 (CC) (2001 (1) SACR 217; 2001 (2) BCLR 133; [2000] ZACC 28): dictum in para [22] applied

Roberts v Chairman, Local Road Transportation Board and Another (1) 1980 (2) SA 472 (C): referred to

S v Mhlungu and Others 1995 (3) SA 867 (CC) (1995 (2) SACR 277; D 1995 (7) BCLR 793; [1995] ZACC 4): referred to

South African Defence and Aid Fund and Another v Minister of Justice 1967 (1) SA 31 (C): referred to

Southern Era Resources Ltd v Farndell NO 2010 (4) SA 200 (SCA) ([2009] ZASCA 150): dictum in para [11] applied

Swart v Starbuck and Others [2010] ZAGPPHC 91: approved E

Swart v Starbuck and Others 2016 (5) SA 372 (SCA) ([2016] ZASCA 83): confirmed on appeal

Wolgroeiers Afslaers (Edms) Bpk v Munisipaliteit van Kaapstad 1978 (1) SA 13 (A): dictum at 41D – F applied

Zealand v Minister of Justice and Constitutional Development and Another 2008 (4) SA 458 (CC) (2008 (2) SACR 1...