Western Flyer Manufacturing (Pty) Ltd v Dewrance and Others NNO: In re Dewrance and Others NNO v North West Transport Investments (Pty) Ltd (Under Judicial Management) and Others

• Jurisdiction: South Africa
• Judgment Date: 11 August 2005
• Citation: 2007 (6) SA 459 (B)

Western Flyer Manufacturing (Pty) Ltd v Dewrance and Others NNO: In re Dewrance and Others NNO v North West Transport Investments (Pty) Ltd (Under Judicial Management) and Others
2007 (6) SA 459 (B)

2007 (6) SA p459

Citation	2007 (6) SA 459 (B)
Case No	819/04
Court	Bophuthatswana High Court
Judge	Pistor AJ
Heard	May 16, 2005
Judgment	August 11, 2005
Counsel	Adv Joubert SC (with M D Cochrane) for the applicant; F H Terblanche SC (with H H Steyn) for the respondents; L C J Maree SC for the liquidators

Flynote : Sleutelwoorde B

Insolvency — Creditors — Legal proceedings by — Application for setting aside impeachable C transaction entered into by insolvent — Indemnity for costs — Adequacy of — Bank indemnity in specified amount — Trustee to be satisfied as to adequacy of sum tendered — Limit on sum disqualifying document as indemnity in respect of costs of application — No proper D indemnity furnished — Defect not nullifying entire proceedings — Creditor permitted to proceed — Insolvency Act 24 of 1936, s 32(1)(b) and s 157(1).

Insolvency — Creditors — Legal proceedings by — Application for setting aside impeachable transaction entered into by insolvent — Indemnity for costs — Adequacy of — Letter of E indemnity — Trustee to be satisfied as to adequacy of sum tendered — Creditor a shell company and providing no information in letter upon which liquidator able to conclude that creditor able to substantiate indemnity — No responsible liquidator would accept such indemnity — No proper indemnity furnished — Defect not nullifying entire proceedings — Creditor permitted to proceed — Insolvency Act 24 of 1936, s 32(1)(b) F and s 157(1).

Insolvency — Creditors — Legal proceedings by — Application for setting aside impeachable transaction entered into by insolvent — To be brought in name of trustee — Trustee to be applicant, albeit nominal applicant — Impermissible for proceedings to be instituted by creditor on behalf of trustee — Creditor instituting G proceedings in own name — Creditor not purporting to or being authorised to institute proceedings on behalf of liquidators — Creditor lacking locus standi.

Headnote : Kopnota

The applicant, a creditor of a company in liquidation, made application in the High Court against the liquidators of the company, H in terms of the provisions of s 32 of the Insolvency Act 24 of 1936, for the setting aside of certain dispositions by the company, namely, a suretyship, a notarial bond and the perfection of the notarial bond. Prior to institution of the proceedings, the applicant provided the liquidators with a letter of indemnity and an indemnity from a bank in purported compliance with its obligation, in terms of the provisions of I s 32(1)(b) of the Act, to indemnify the trustee/liquidators against the costs of the application. The respondents objected in limine that, contrary to the provisions of s 32(1)(b) of the Act, (1) the applicant had failed properly to indemnify the trustee/liquidators against the costs of the application; (2) the applicant had failed to bring the application in the name of the trustee/liquidators; and (3) the perfecting J

2007 (6) SA p460

order was not susceptible to reversal in terms of the provisions of s 32 of the A Act as a disposition in compliance with a Court order was not a 'disposition' as defined in the Act.

Held, as to (1), that the trustee (liquidator) had to be satisfied that the indemnity tendered by the creditor was adequate for purposes of the s 32(1)(b) proceedings. (Paragraph [26] at 465G - H.)

Held, further, that it was common cause that the applicant was a 'shell company'. The letter of indemnity tendered by the B applicant contained no information regarding the assets of the applicant or the financial basis upon which the liquidators might have come to a conclusion that the applicant was in a position to substantiate its undertaking. No responsible liquidator would have accepted an indemnity for the costs of the present magnitude from a shell company. (Paragraph [34] at 467C - D.) C

Held, further, that the bank indemnity did not constitute an indemnity in respect of the costs of the application since it had a restriction in respect of the amount. (Paragraph [35] at 467D - E.)

Held, further, that, consequently, the applicant instituted the present application without having given a proper indemnity in terms of s 32(1)(b) of the Act. (Paragraph [40] at 468G.) D

Held, further, that the granting of an indemnity in terms of s 32 of the Act was clearly a prerequisite for the institution of proceedings by a creditor in the name of the trustee. The failure to provide such an indemnity was therefore an irregularity. (Paragraph [44] at 468J - 469A.)

Held, further, that although this irregularity was a 'formal defect of irregularity' as intended in s 157(1) of the Act, a substantial injustice that could not be remedied by an appropriate E order of the Court had not been committed. Consequently the proceedings were not a nullity because of the improper indemnity. (Paragraphs [42] and [55] - [56] at 468H - I and 470I - 471B.)

Held, further, as to (2), that it was clear that an applicant in an application for the setting aside of a disposition (such as the present application) had to be the trustee (the F liquidators in the present case), albeit that the trustee was the nominal applicant. It was not acceptable that a creditor instituted an application 'on behalf of' the trustee. (Paragraphs [59] - [60] at 471F - G.)

Held, further, that, on the facts, the applicant had not purported to or been authorised to institute the proceedings in the name of the liquidators. (Paragraph [63] at 472B - C.) G

Held, further, that the second point in limine also had to be decided against the applicant. It followed that the applicant did not have the necessary locus standi to institute the application and it, accordingly, fell to be dismissed. (Paragraph [68] at 473I - 474A.) H

Held, further, as to (3), that, in terms of the definition of 'disposition' in s 2 of the Act, a disposition in compliance with a Court order did not constitute a disposition for purposes of the Act. (Paragraph [71] at 474E.)

Held, further, that the third point had to succeed and, on that ground, the application had to be dismissed. (Paragraph [82] at 476F.)

Cases Considered

Annotations

Reported cases I

Cambridge Plan AG v Cambridge Diet (Pty) Ltd and Others 1990 (2) SA 574 (T): applied

Cekeshe and Others v Premier, Eastern Cape, and Others 1998 (4) SA 935 (Tk): referred to

Dabelstein and Others v Lane and Fey NNO 2001 (1) SA 1222 (SCA): dictum at 1228A - D applied J

2007 (6) SA p461

Eagles Landing Body Corporate v Molewa NO and Others 2003 (1) SA 412 (T): dictum at 417G - H applied A

Ex parte Henning 1981 (3) SA 843 (O): referred to

Ex parte Oosthuysen 1995 (2) SA 694 (T): referred to

Ex parte Slabbert 1960 (4) SA 677 (T): applied

Jacobs en Andere v Polmed Medical Fund en Andere 2001 (2) SA 502 (T): distinguished B

Lane and Another NNO v Dabelstein and Others (Lane and Another NNO Intervening) 1999 (3) SA 150 (C): dictum at 165F - H applied

Mall (Cape) (Pty) Ltd v Merino Ko-operasie Bpk 1957 (2) SA 347 (C): referred to

Opperman v Estate Opperman 1924 CPD 422: dictum at 424 applied

Rhino Hotel & Resort (Pty) Ltd v Forbes and Others 2000 (1) SA 1180 (W): applied C

Sentrachem Ltd v Prinsloo 1997 (2) SA 1 (A): dicta at 22B - C and 24D - E applied

Swadif (Pty) Ltd v Dyke NO 1978 (1) SA 928 (A): dicta at 938B and 940A applied

Volkskas Beperk NO v Barclays Bank (DC & O) 1955 (3) SA 104 (T): dictum at 108A applied D

Wolpe v Gale 1980 (3) SA 259 (W): distinguished.

Statutes Considered

Statutes

The Insolvency Act 24 of 1936, ss 32(1)(b) and 157(1): see Juta's Statutes of South Africa 2006/7 vol 2 at 1-551 and 1-580. E

Case Information

Application for the setting aside of dispositions in terms of s 32 of the Insolvency Act 24 of 1936. The facts appear from the reasons for judgment.

Adv Joubert SC (with M D Cochrane) for the applicant.

F H Terblanche SC (with H H Steyn) for the respondents. F

L C J Maree SC for the liquidators. [*]

Cur adv vult.

Postea (August 11). G

Judgment

Pistor AJ:

Introduction

[1] This is an application for an order that certain dispositions by a company, Durabuild (Pty) Ltd (in liquidation) be set aside in terms of s 32 of the Insolvency Act, 1936 (Act 24 of 1936 - hereinafter referred to as the Act). H

[2] Both the citation of the parties and the form of the relief sought are relevant to the outcome of this matter. The parties are cited as stated in the heading of this judgment. I intend to revert to them later herein. I

[3] The relief sought (apart from a prayer for costs), is set out in the notice of motion:

2007 (6) SA p462

Pistor AJ

'(1) That Western Flyer Manufacturing (Pty) Ltd is ordered to indemnify the applicants in accordance with the provisions of s 32 of A the Insolvency Act 24 of 1936 in respect of any costs relating to this application and the relief sought herein.

(2) That Western Flyer Manufacturing (Pty) Ltd is hereby authorised to proceed with this application in the name of the applicants.

(3) That the purported suretyship by Durabuild (Pty) Ltd (in liquidation) in favour of the second respondent alternatively the B first respondent dated 19 March 1999 be set aside alternatively impeached.

(4) That the notarial bond purportedly passed by Durabuild (Pty) Ltd (in liquidation) over all its movable property in favour of the second, alternatively the first respondent (BN/18346/99) be set aside alternatively impeached.

(5) That the respondents take all such steps as may be necessary in order to procure the payment of the proceeds of the C auction on 16 May 2002 in respect of the assets of Durabuild (Pty) Ltd (in...