Court name
Supreme Court of Appeal of South Africa
Case number
162 of 2016

Wishart and Others v BHP Billiton Coal South Africa (Pty) Limited and Others (162 of 2016) [2016] ZASCA 164 (16 November 2016);

Law report citations
[2017] 1 All SA 90 (SCA)
2017 (4) SA 152 (SCA)
Media neutral citation
[2016] ZASCA 164
Coram
Lewis JA
Cachalia JA
Mathopo JA
Mocumie JA
Makgoka AJA

THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA


JUDGMENT


                 
     
             Reportable


           
Case
No: 162/2016


In
the matter between:


WISHART,
GRANT LOGAN
NO                                                               

FIRST APPELLANT


GOEBEL,
ARNO NO 
                                                             


(In
his capacity as co-trustee of the Logan
Trust)                           

SECOND APPELLANT



WISHART, MALCOLM GRANT
NO                                           



(In
his capacity as co-trustee of the Logan
Trust)                               

THIRD APPELLANT



PENGUIN MINING &
PLANT (PTY) LIMITED                                      

FOURTH APPELLANT


COLT
MINING (PTY)
LIMITED                                                                  

FIFTH APPELLANT


and



BHP BILLITON ENERGY
COAL



SOUTH AFRICA (PTY)
LIMITED 
                                                          FIRST

RESPONDENT



EURO COAL (PTY)
LIMITED (IN LIQUIDATION)                            

SECOND RESPONDENT



KLEIN, NORMAN NO
                                                                           THIRD

RESPONDENT



VAN DEN HEEVER,
THEODORE WILHELM NO                             

FOURTH RESPONDENT



MASTER OF THE HIGH
COURT, GAUTENG



SOUTH,
JOHANNESBURG                                                                  

FIFTH RESPONDENT



COMPANIES AND
INTELLECTUAL PROPERTY


COMMISSION
(CIPC)                                                                            

SIXTH RESPONDENT





Neutral
Citation:
Wishart
v Billiton
(162/2016)
[2016] ZASCA 164 (16 November 2016)


Coram:               
Lewis, Cachalia,
Mathopo and Mocumie JJA and Makgoka AJA  


Heard:
               
2 November 2016


Delivered:
         
16 November 2016   


Summary:
         
Section 44(1) of the Insolvency Act
24 of 1936 applies to the proof of claims in the winding-up of
companies and fixes a time-period
for such proof, and for making a
claim after the expiry of the time period with the leave of the
Master or a court.


Only
the Master has the power to expunge a claim under s 407 of the
Companies Act 61 of 1973; a court has the power to review the

Master’s decision made under the section.


ORDER


On
appeal from:
Gauteng Local Division of the
High Court, Johannesburg (Rossouw AJ sitting as court of first
instance).


1
The appeal against the order upholding the first exception is upheld
with costs. The order is replaced with the following:


The
first exception to the particulars of claim is dismissed with costs.’


2
The appeal against the order upholding the second exception is
dismissed with costs including the costs of two counsel.


JUDGMENT


Lewis
JA (Cachalia, Mathopo and Mocumie JJA and Makgoka AJA

  concurring)


[1]
At issue in this appeal is the interpretation of provisions of the
Companies Act 61 of 1973 (the 1973 Companies Act), read with
those of
the Insolvency Act 24 of 1936, in relation to late proof of claims,
and the expungement of claims, in the winding up of
a company.
Although the 1973 Companies Act was largely repealed when the
Companies Act 71 of 2008 came into force (in 2011), those provisions
regulating the winding-up of companies remain in force.


[2]
Penguin Mining & Plant (Pty) Ltd and Colt Mining (Pty) Ltd, the
fourth and fifth appellants and plaintiffs in the court
a quo, seek
to appeal against a decision of the Gauteng Local Division of the
High Court of South Africa (Rossouw AJ) upholding
two exceptions to
their particulars of claim. I shall refer to them as the appellants.
Leave to appeal was given to this court
by the court a quo. The first
to third plaintiffs in the court a quo, trustees of a trust, abide
the decision of the court on appeal.
The first respondent, BHP
Billiton Energy Coal South Africa Ltd (Billiton), is a company that
submitted a claim to proof in the
estate of the second respondent,
Euro Coal (Pty) Ltd (in liquidation) (Euro Coal). The other
respondents are the liquidators of
Euro Coal, the Master of the
Gauteng Local Division, and the Companies and Intellectual Property
Commission. The latter respondents
also play no role in the appeal.


[3]
The court a quo, having upheld the exceptions, gave leave to the
appellants to amend their particulars of claim within 10 days
of the
date of the order, as is customarily done. The attorney for the
appellants wrote to the respondents’ attorneys soon
after the
order was made asking for an extension of time within which to amend
their pleadings, which was granted. This act, the
respondents argue
on appeal, amounted to a peremption of the appeal. I shall deal with
the argument after considering the exceptions.


The
first exception


[4]
The appellants, in their particulars of claim, sought leave to prove
a late claim in the winding-up of Euro Coal ‘in such
manner and
upon such terms and conditions as the Master may determine’.
They alleged that they had objected to the first
Liquidation and
Distribution Account (the L & D account) lodged by the
liquidators with the Master, and asked, in terms of
s 44(1) of the
Insolvency Act, for special leave to prove their respective claims.


[5]
The exception raised to this claim was that s 44(1) was not
applicable in the winding-up of a company, and that s 366 of the
1973
Companies Act governed proof of claims in a winding-up. Section 339
of the 1973 Companies Act provides:



339 Law
of insolvency to be applied mutatis mutandis
.



In the winding-up
of a company unable to pay its debts the provisions of the law
relating to insolvency shall, in so far as they
are applicable, be
applied mutatis mutandis in respect of any matter not specially
provided for by this Act.’


[6]
The question thus arises as to whether the application of s 44(1) of
the Insolvency Act, and particularly the proviso to it
which deals
with fixing a period for the proof of claims, and the late proof with
the leave of the Master or the court, is excluded
by the terms of s
366 of the 1973 Companies Act. Section 366(1) regulates the proof of
claims in a winding up, and s 366(2) gives the Master a
discretion to fix a time within which creditors are to prove their
claims.


[7]
Section 44 of the Insolvency Act regulates proof of liquidated claims
against an estate. Section 44(1) reads:



Any person .
. . who has a liquidated claim against an insolvent estate, the cause
of which arose before the sequestration of that
estate, may, at any
time before the final distribution of that estate  . . . prove
that claim in the manner hereinafter provided:
Provided that no claim
shall be proved against an estate after the expiration of a period of
three months as from the conclusion
of the second meeting of
creditors of the estate, except with the leave of the court or the
Master, and on payment of such sum
to cover the cost or any part
thereof, occasioned by the late proof of the claim, as the Court or
Master may direct.’


[8]
Section 366 of the 1973 Companies Act reads:



(1)      
In the winding-up of a company by the Court and by a creditors'
voluntary winding- up-



(a)
      the claims against
the company shall be proved at a meeting of creditors mutatis
mutandis in accordance with the provisions relating
to the proof of
claims against an insolvent estate under the law relating to
insolvency;



(b)
      a secured creditor
shall be under the same obligation to set a value upon his security
as if he were proving his claim against an
insolvent estate under the
law relating to insolvency, and the value of his vote shall be
determined in the same manner as is prescribed
under that law;



(c)
      a secured creditor
and the liquidator shall, where the company is unable to pay its
debts, have the same right respectively to take
over the security as
a secured creditor and a trustee would have under the law relating to
insolvency.



(2)       
The Master may, on the application of the liquidator, fix a time or
times within which
creditors of the company are to prove their claims
or otherwise be excluded from the benefit of any distribution under
any account
lodged with the Master before those debts are proved.’


[9]
The most recent decision of this court dealing with the meaning of
s 339, and the words ‘mutatis mutandis’
in
particular, and which also determines that s 44(1) of the
Insolvency Act applies in the winding up of a company, is Mayo NO
& others v De Montlehu
2016 (1) SA 36 (SCA) ([2015] ZASCA
127). This court held that s 44(1) of the Insolvency Act governs
the time period within which claims can
be lodged and a late claim be
proved in a winding-up, whereas s 366 governs the procedure for
participation in a distribution
in a winding-up of a company. They
are complementary rather than mutually exclusive. Section 44(1) is
thus applicable to claims
against a company being wound up.


[10]
That conclusion is contrary to the finding of Rossouw AJ in this
matter. He relied on an earlier decision in the division,
which this
court has now said to be wrong (
Stone
& Stewart v Master of the Supreme Court
,
unreported TPD Case No 8828/87 of 18 August 1987). Rossouw AJ did not
agree with the decision of the court a quo in
De
Montlehu
(De
Montlehu v Mayo NO

2015 (3) SA 253 (GJ)), where Kathree-Setiloane J had considered
Stone
& Stewart
to be
incorrectly decided. 


[11]
On appeal, Billiton argued that, although this court in
De
Montlehu
had
settled the matter, and although it accepted that s 44(1) did apply
to claims in a winding-up, the ratio of the decision was
confined to
the time period and did not affect the balance of the proviso to
s 44(1), which allows a late claim to be proved
with the consent
of the Master or the court. In order to assess the argument it is
necessary to have regard to the formulation
of the judgment of this
court, and what was said by Kathree-Setiloane J in the court a quo in
that matter, which was considered
to be correct by this court.


[12]
Willis JA said in De Montlehu (para 18) that a plain reading
of s 366(2)



does not
affect the applicability of the three-month time period in s 44(1) of
the old Companies Act and the issues that arise therefrom. Neither in
logic nor in the grammar of the respective provisions is there a
reason why the three-month
time period, together with the fixing of
costs and the payment thereof by a later creditor, should not apply
alongside the discretionary
power granted in terms of s 366(2). In
both instances the lodging of claims needs momentum driven by the
factor of time.’



He added (para 19):



Were the
three-month period not to apply [in liquidations], then in the
absence of a time period being fixed by the master in terms
of s
366(2)
, there would be no formal time period within which creditors
would be required to lodge and prove their claims. The risk of
tardiness,
if not inertia, would be ever present. Clearly, this would
not be in the interest of either the creditors or the general public.

The three-month period stipulated in s 44(1) of the Insolvency Act
relating to the proof of claims thus remains the bench mark
in both
sequestrations and liquidations. Section 366(2) does not, therefore,
affect the applicability of s 44(1) of the Insolvency
Act to
companies in liquidation.’


[13]
Despite this, argued Billiton, the decision of this court in
De
Montlehu
was
confined to the application of only three aspects of s 44(1): the
time period, the fixing of costs and payment of costs by
a creditor
that submitted a claim after the three-month period had expired. The
balance of the proviso, dealing with the proof
of a late claim with
the leave of the court or the Master, did not apply to claims in the
winding up of a company. The reason for
that, it was argued, is that
s 366(2) itself provides for a time limit: the Master
may
fix a time within which creditors are to prove their claims or
otherwise be excluded from the benefit of the distribution under
any
account lodged with the Master.


[14]
However, Willis JA said (para 23), ‘s 366(2) relates to
participation in a distribution under a particular account, and
not
to the late proof of claims in general’. He referred in this
regard to
Trans-Drakensberg
Bank Ltd & another  v The Master, Pietermaritzburg &
another
1966 (1) SA
821
(N) at 824H-825E where Van Heerden AJ said, of the predecessor
section (179(2)) in the Companies Act 46 of 1926), that it did not

prevent a creditor from proving a claim after the date fixed by the
Master nor did it exclude from the benefit of the distribution
debts
proved after the date.


[15]
In the court a quo in De Montlehu, Kathree-Setiloane J,
finding that there was no inconsistency between s 44(1) of the
Insolvency Act and s 366(2) of the 1973
Companies Act, said
(para 20):



[T]he two
sections are functionally different, and have different objectives.
Section 366(2) of the Companies Act is a special provision
intended
to enable participation in a distribution under a particular account.
It has no application to the late proof of claims
in general, which
is governed by the proviso to s 44(1) of the Insolvency Act . .
. . Simply put, its objective is to nullify
an attempt by a creditor
to delay proving his or her claim until a lodged account shows that a
distribution is to occur. The proviso
to s 44(1) of the Insolvency
Act, on the other hand, is to prevent proof of a claim after the
expiration of a period of three months
as from the conclusion of the
second meeting of creditors, except with leave of the court or the
master. The overall purpose of
the proviso to s 44(1) of the
Insolvency Act is to ensure that the administration of the estate is
concluded expeditiously.’
(Footnotes omitted.)


[16]
That reasoning was clearly endorsed by this court in
De
Montlehu

Accordingly, the exception to the claim for the leave of the court to
prove a claim on the terms and conditions set by the
Master should
not have been upheld. The appeal against the order upholding the
first exception must thus succeed.  


The
second exception


[17]
The second claim made by the appellants was for the expungement from
the L & D account of Billiton’s claim in the
winding-up of
Euro Coal. The exception taken by the respondents was that an
objection to an L & D account is governed by s
407 of the 1973
Companies Act. Section 403 requires that the account be lodged with
the Master, and s 406 that it lies open for
inspection.  Section
407 regulates who may object to the account and the procedure for
doing so. It reads:



(1)      
Any person having an interest in the company being wound up may, at
any time before the confirmation
of an account, lodge with the Master
an objection to such account stating the reasons for the objection.



(2)       
If the Master is of opinion that any such objection ought to be
sustained, he shall direct
the liquidator to amend the account or
give such other directions as he may think fit.



(3)       
If in respect of any account the Master is of the opinion that any
improper charge has
been made against the assets of a company or that
the account is in any respect incorrect and should be amended, he
may, whether
or not any objection to the account has been lodged with
him, direct the liquidator to amend the account, or he may give such
other
directions as he may think fit.



(4)      (a)
        The liquidator or any
person aggrieved by any direction of the Master under this section,

or by the refusal of the Master to sustain an objection lodged
thereunder, may within fourteen days after the date of the Master's

direction and after notice to the liquidator apply to the Court for
an order setting aside the Master's decision, and the Court
may on
any such application confirm the account in question or make such
order as it thinks fit



. . .’


[18]
The respondents asserted, in response to the particulars of claim,
that as there was no allegation in the particulars that
a decision
had been taken by the Master, by which the appellants were aggrieved,
the claim was excipiable. The gist of the exception
is that
objections to an L & D account must first be made to the Master:
only when he or she has made such a decision can a
review of it be
undertaken by a court. In the absence of an allegation that the
Master had made a decision, the particulars disclosed
no cause of
action.


[19]
Rossouw AJ upheld the exception, finding that the appellants’
remedy was statutory – a review in terms of s 407
– and
that a court has no jurisdiction to expunge a claim. The appellants
argue that the decision of the court a quo flies
in the face of the
authority in
Millman
& another NNO v Pieterse & others

1997 (1) SA 784 (C).  In that matter, the liquidators of a
company instituted action to claim expungement of the claims of
certain creditors
that had been admitted to proof at the first
meeting of creditors. The defendants excepted to the claims on the
basis that a court
has no jurisdiction to expunge claims, but is
confined to reviewing a decision of the Master under s 151 of the
Insolvency Act.


[20]
The court in Millman dismissed the exception, holding that it
had the jurisdiction to review a decision at common law, and that s
151 of the Insolvency
Act did not oust that jurisdiction. Section 151
provides that any person aggrieved by a decision of the Master may
review it on
application to a court. Friedman JP and Farlam J in
Millman stated (at 788G-I):


There
 is a  strong  presumption  against the ouster or
curtailment of the Court’s jurisdiction. . . .
The mere fact
that the Legislature has created an extra-judicial remedy is not
conclusive of the question whether the Court’s
power has been
restricted. It is in every case necessary to consider all the
circumstances and then to determine whether a necessary
implication
arises that the Court’s jurisdiction is either wholly excluded
or at least deferred until the domestic or extra-judicial
remedies
have been exhausted.’


[21]
That court considered that since the Insolvency Act did not expressly
‘oust’ the court’s jurisdiction, and
since there
appeared to be no intention in the Act to deprive the court of the
power to expunge a claim, especially where there
were complicated
factual disputes, it had the power to expunge the creditors’
claims in an action brought by the liquidators.
It is not clear to
me, however, what power the court had that it considered was ousted.
Insolvency administration is wholly a creature
of statute:
The
Master of the High Court (North Gauteng High Court, Pretoria) v
Motala NO & others

2012 (3) SA 325 (SCA) ([2011] ZASCA 238) para 5. The various statutes
regulating insolvency of individuals and companies have always
conferred
the power to expunge a claim on the Master. It is only once
the Master has made the decision whether or not to expunge a claim
that it becomes subject to review by a court.


[22]
The court a quo held that
Millman
is distinguishable on the facts: the plaintiffs were liquidators, not
creditors, as in this case, and the claims sought to be expunged
were
not included in the L & D account, but had been admitted to proof
at the first meeting of creditors.


[23]
On appeal, the appellants argue that the decision of Rossouw AJ did
not take into account the judgment of this court in Fey NO and
Whiteford NO v Serfontein & another
1993 (2) SA 605 (A),
which held that the power of the court at common law to remove a
trustee of an insolvent estate on the ground of misconduct
was not
displaced by the enactment of the Insolvency Act. Hoexter JA said (at
613F-G):


It
is trite law, moreover, that statutes in derogation of the common law
are to be strictly construed. The common law will be displaced
only
where the terms of the statute are irreconcilably opposed to the
common law.’


[24]
The respondents, on the other hand, argue that
Millman
is not only different, but also wrongly decided. In
Bank
of Lisbon and South Africa Ltd v The Master & others

1987 (1) SA 276 (A) at 287G it was held that the admission of a claim
by the Master at a meeting of creditors did not amount to
ratification of
the claim or render it res judicata. (See also
Estate
Friedman v Katzeff

1924 WLD 298 at 303.) And in
Standard
Bank of South Africa v The Master of the High Court & others

2010 (4) SA 405 (SCA) ([2010] ZASCA 4), this court held that, before
resorting to review proceedings under s 151 of the Insolvency Act, a
liquidator
is obliged to follow the procedures set out in s 45 of the
Act. The section is peremptory (para 93). That is contrary to the
decision
in
Millman.


[25]
Section 45 of the Insolvency Act requires that every claim proved
against an insolvent estate at a meeting of creditors, and
all
documents supporting such claim, must be delivered to the trustee,
who must examine all available books and documents to ascertain

whether the estate owes the claimant the amount claimed. If a trustee
disputes a claim after proof at a meeting he or she must
report on
this to the Master, explaining why the claim is disputed. The Master
may confirm the claim, or, after affording the claimant
an
opportunity to substantiate the claim, reduce or disallow it. It is
this decision that triggers the review procedure under s
151 of the
Insolvency Act. 


[26]
The court’s jurisdiction is not, in my view, ousted: the
trustee has first to comply with s 45 before a decision can
be
reviewed, but that hardly amounts to an ouster of jurisdiction, if
ever the court had the power to expunge a claim. In finding
that
procedure by action instead of implementing the provisions of ss 45
and 151 of the Insolvency Act is permissible, the court
in
Millman
did not apparently take fully into account the principle that a
review under s 151 is one where the court has the powers of appeal

and review, and can hear further evidence, deciding the matter de
novo. See the classic statement of Innes J in Johannesburg
Consolidated Investment Co Ltd v Johannesburg Town Council

1903 TS 111 at 117. The court in
Millman
was alive to this, but nonetheless considered that s 45 was not
peremptory. In so far as the decision is not consonant with the

principle enunciated in Standard
Bank
above, it is
incorrect.


[27]
I consider that the appellants should have invoked the procedures set
out in s 407 of the 1973 Companies. The power to
expunge a claim
or to reduce it is conferred on the Master alone. (See B Galgut et al
(eds)
Henochsberg on
the Companies Act 61 of 1973
,
Volume 1, pp 861-862 (service issue 20) and the authorities cited
there.) Only when the Master has made a decision in this regard
may
an interested person approach a court to review it. The second
exception was thus correctly upheld by the court a quo.


Peremption
of the appeal


[28]
The respondents argued that by asking for an extension of time in
which to file amended particulars of claim, the appellants’

attorney had indicated an intention not to appeal, which had the
effect of perempting the appeal. There is no need to consider
whether
the appellants manifested a clear intention to acquiesce in the order
of the court a quo. The order in respect of which
the letter was
written was not appealable. The request by the attorney had nothing
to do with the orders on the two exceptions,
which were appealable.
The respondents fairly conceded at the hearing that the appeal had
not been perempted.


Costs


[29]
The appellants have succeeded in so far as the first exception is
concerned, but failed in so far as the second exception is
concerned.
They are entitled to the costs of the appeal in relation to the first
order. The respondents are entitled to the costs
of the appeal in
respect of the second order, and there is no reason to deprive them
of the costs of two counsel, for which they
have asked.


[30]
Accordingly:


1
The appeal against the order upholding the first exception is upheld
with costs. The order is replaced with the following:


The
first exception to the particulars of claim is dismissed with costs.’


2
The appeal against the order upholding the second exception is
dismissed with costs including those of two counsel.


_______________________


C
H Lewis


Judge
of Appeal


APPEARANCES


 


For
the Second, Third, Fourth and


Fifth
Appellants:                                          

L E Combrink


Instructed
by:                                              

Venns Attorneys, Pietermaritzburg


                                                                              

Pieter Skein Attorneys,
Bloemfontein


 


For
the First Respondent:                         

J Suttner SC (with him P Cirone)


                                                                              

Hogan Lovells (South
Africa) Incorporated


                                                                              

as Routledge Modise Inc,
Johannesburg


                                                                              

Webbers, Bloemfontein





For
the Second, Third and Fourth


Respondents:          
           

                       

E Theron (with him A Thomson)


Instructed
by:                                               

Ric Martin Attorneys, Pretoria


                                                                              

McIntyre & Van der
Post, Bloemfontein