Ward v Barrett, NO, and Another

• Jurisdiction: South Africa
• Judge: Caney J
• Judgment Date: 01 October 1962
• Citation: 1962 (4) SA 732 (N)
• Hearing Date: 12 September 1962
• Court: Natal Provincial Division

Caney, J.:

This application is brought under the provisions of proviso (a) to sec. 68 (9) of the Administration of Estates Act, 24 of 1913, for G an order setting aside a direction of the Master overruling an objection to the accounts of the first respondent in her capacity as executrix testamentary of the estate of her late husband. The Master is cited as the second respondent. I shall refer to the first respondent as the executrix and to her late husband as the deceased; he died on 5th December, 1958.

H It is common cause that on 1st April, 1954, the deceased bought from the applicant some six acres of land with the buildings thereon and an hotel business and a bottle store business, including the good will, stock, furniture, fixtures, fittings and equipment of these businesses. As security for payment of part of the purchase price the deceased was to pass in the applicant's favour a second mortgage bond on the immovable property and notarial bonds over the furniture and equipment of the hotel business and over the liquor licence of the bottle store business; the debt to be so secured was £20,000 (R40,000). The mortgage bond and the one notarial bond were duly passed and registered, but the

Caney J

notarial bond over the licence of the bottle store had not been passed when the deceased died; it seems there had been some dispute between the applicant and the deceased.

On 29th October, 1959, a meeting of the deceased's creditors 'requested A (the executrix) to continue running the businesses' of the hotel and the bottle store 'with the sole object of selling the same as going concerns by private treaty'. On 9th June, 1960, the executrix reported in writing to creditors under the provisions of sec. 48 (3) (b), the position of the estate, namely, amongst other things, that she had been unable to sell the businesses by private treaty and that they were B 'still running at a loss'; that she had been 'unable to realise the assets at a figure which would make the estate solvent' and therefore considered that 'she must now regard the estate as being insolvent'. She accordingly informed the creditors that unless a majority in number and value instructed her in writing on or before 23rd June to surrender the C estate, she would proceed to realise and distribute it as if she were a trustee distributing an insolvent estate. No creditor did so instruct her and, though on 24th February, 1961, a provisional order of sequestration of the estate was made, this was discharged on 24th March, 1961. The executrix continued throughout to administer the estate, conducting the businesses until she sold them, and eventually prepared D and lodged with the Master her first liquidation and distribution account, which is now challenged in the following circumstances.

The applicant had claimed to be entitled to have the executrix pass the notarial bond which the deceased had not passed over the liquor licence E of the bottle store business. On 22nd June, 1960 (the day before the expiry of the time fixed by the executrix for creditors to instruct her to surrender the estate if they so wished) the executrix executed a special power of attorney authorising her agent to pass the notarial bond, which the agent did on 25th July 1960. This, the executrix reported to creditors, was in fulfilment of the obligation of the deceased which, she said, she was obliged to perform in the course of F her duties. The bond was registered in the Deeds Registry on 22nd September, 1960. At the time the bond was passed the debt owing by the applicant had been reduced to £19,000 (R38,000), for payment of which sum the bond was passed as collateral security. In the distribution of the estate the executrix has awarded the applicant the nett proceeds of G the realisation of the immovable property (after payment of the amount of the first mortgage bond over it) and those of the movable assets of the hotel covered by the applicant's notarial bond, in all R10,515.36, as a preferential claim. The balance of the applicant's claim, however, the executrix has ranked as a concurrent claim. The proceeds of the realisation of the goodwill of the bottle store business, in amount H R11,200, the executrix has allocated to free residue. The applicant claims a preference over so much of this as is attributable to the liquor licence of the bottle store, by virtue of the notarial bond passed in her favour on behalf of the executrix. On 18th June, 1962, the applicant lodged with the Master an objection to the executrix's accounts in this regard. His rejection of this objection is now challenged.

The issue is whether the notarial bond created a preference. Mr.

Caney J

Hardman, for the applicant, contended that the registration of the notarial bond created a jus in rem and therefore a preference and that this must be recognised and given effect unless and until the bond was A set aside by the Court on some ground recognised in law; he referred to decisions relating to those transactions hit at by secs. 26, 29, 30 and 31 of the Insolvency Act, 24 of 1936, and corresponding sections of earlier insolvency statutes. Anyway, he submitted, here the estate had not been placed under sequestration and, although the bond was not passed, nor registered, until after the executrix had entered upon the B type of administration contemplated by sec. 48 (3) (b), this was not a sequestration and the executrix had been under the obligation to fulfil the deceased's promise to pass the bond; this she had done, as a proper act of administration, whilst she was running the business. In support of the proposition that the estate was not under sequestration, Mr. Hardman submitted that sec. 48 (3) (b) enjoined the executrix only C to distribute, not to realise, the estate as insolvent. The passing of the bond was part of the process of realising the businesses bought from the applicant, in order to preserve them as assets of the estate, for otherwise the applicant would have cancelled the sale. Even if, however, administration under sec. 48 (3) (b) were equivalent to sequestration...