IN THE HIGH COURT OF SOUTH AFRICA

(WITWATERSRAND LOCAL DIVISION)

CASE NO:  A5050/06

In the matter between:

P G BISON LIMITED 						            Appellant

and

JOHANNESBURG GLASSWORKS (PTY) LTD
(IN LIQUIDATION) 						          First Respondent

MALCOLM SCHMIDT, NO 					     Second Respondent

THE MASTER OF THE HIGH COURT
(PRETORIA) 						                    Third Respondent

J U D G M E N T

MOSHIDI, J:

 [1] 	INTRODUCTION:

 This appeal, with the leave of the Supreme Court of Appeal, is directed against the whole of the judgment of Jajbhay J handed down on 17 May 2006. The judgment has since been reported in P J Bison Ltd v Johannesburg Glassworks (Pty) Ltd (In Liquidation) and Others 2006 (4) SA 535 (WLD). 
 [2] 	THE GROUNDS OF APPEAL:

 The grounds of appeal, which are rather elaborate,  are based on both a point in limine as well as the merits.  For the sake of completeness, the grounds of appeal, as contained in the Notice of Appeal dated 19 December 2006, are as follows:

2.1	 In respect of the  point in limine, His Lordship Mr Justice Jajbhay erred in not finding that:

2.1.1	 the Appellant’s application was not brought late, either in terms of the Common Law or in terms of the Promotion of Administrative Justice Act, No 3 of 2002, (“PAJA”);

2.1.2	 the second ground relied upon in support of the point in limine had to be rejected, as it did not at all deal with the question of the date upon which the appellant and/or its attorney became aware of the fact that the appellant’s claim had been disallowed, but with the irrelevant question as to the date upon which the appellant or its attorney became aware of the application to disallow the appellant’s claim;

2.1.3	the only relevant date in this enquiry is the date upon which the appellant was notified of the third respondent’s decision and the reasons therefore, or ought reasonably to have become aware of the fact that the third respondent disallowed its claim and the reasons therefore and not the date upon which the appellant became aware of the application to disallow the appellant’s claim;

2.1.4	 the third and fourth grounds, relied upon in support of the point in limine, which were based on the contentions that, from the wording of two letters by the appellant’s attorneys, dated 23 February 2004 and 5 April 2005, it appears that the appellant was aware as at those dates, that its claim had been disallowed, had to be rejected in that these letters in fact, prove the contrary;

2.1.5	 the appellant was entitled, as a matter of law and specifically in terms of section 45(3) of the Insolvency Act, No 24 of 1936, (as amended), (“the Insolvency Act”) and in terms of section5 of PAJA, to be notified in writing, by the third respondent of his decision and the reasons therefore;

2.1.6	 taking into account that a finding was made by the court a quo, that it was not proved that the third respondent notified the appellant in writing of his decision to disallow the appellant’s proved claim, it followed that a finding had to be made that the application was not brought late;

2.1.7	the letter by the appellant’s attorneys dated 23 February 2004, does not warrant a finding that the appellant knew as a fact or that it reasonably ought to have known that its claim had been disallowed as at the date of that letter;

2.1.8	from the very wording of this letter, it is clear that the appellant was attempting to find out if the advices by the second respondent were in fact true and correct;

2.1.9	this letter, at worst for the appellant, constitutes nothing more but an attempt to find out what the true state of affairs was and in doing so, the appellant acted reasonably;

2.1.10	this letter constitutes a request to the third respondent to furnish the appellant with notice of his decision and the reasons therefore and to which there has been no response;

2.1.11	the appellant’s attorneys did not leave the matter there and sent a follow-up letter to the third respondent, dated 5 April 2004, which letter, again emphasises the fact that the appellant did not know, as a fact, that its claim had indeed been disallowed;

2.1.12	the letter of 23 February 2004, ought not to be read in isolation and should be read together with the follow-up letter by the appellant’s attorneys dated 5 April 2004, wherein the third respondent was not only expressly referred to the earlier date of 23 February 2004, but also again requested to clarify the situation;

2.1.13	 as at the date of the follow-up letter of 5 April 2004, the second respondent had instituted action against the appellant, to set aside the suretyship as a voidable disposition, which matter was prosecuted past litis contestatio, a trial date was allocated, until this action was withdrawn by the second respondent somewhere towards the end of 2004;

2.1.14	the appellant’s version, that it was not aware of the fact that its claim had been disallowed, is supported and in fact strengthened, by the fact that the second respondent had instituted action to set the suretyship aside;

2.1.15	 i f the appellant’s claim had indeed been disallowed, as contended for by the first and second respondents, there is and can be, no logical reason why the second respondent would want to burden the estate with expensive litigation, to seek to set aside the suretyship, if this claim had already been disallowed by the third respondent at the second respondent’s request;

2.1.16	 any person in the applicant’s position would have believed that its proved claim had not been disallowed, by reason of the third respondent’s non-reaction to the applicant’s attorneys ’ letters of 23 February and 5 April 2004 and the fact that the second respondent instituted action to set the suretyship aside as a disposition at this time;

2.1.17	this action by the second respondent remains unexplained;

2.1.18	the letter of 5 April 2004 is to a large extent determinative herein, as its contents should be evaluated against the fact that the second respondent had by now instituted an action to set aside the suretyship of the appellant;

2.1.19	the following facts are, in addition, pertinent to the question of whether the appellant’s application was brought late:

 2.1.19.1 	 the appellant received notification of the fact that the L & D account, had been confirmed by the third respondent on 19 January 2005;

 2.1.19.2 	 the appellant’s attorneys’ candidate attorney attended the offices of the third respondent on 2 March 2005 and obtained a copy of the L & D account, which reflected the applicant’s claim as expunged;

 2.1.19.3 	 the date upon which the appellant became aware of the fact that it had to bring a review application is 2 March 2005;

 2.1.19.4	 the appellant brought an urgent interdict in the Transvaal Provincial Division to stay any payments from the L & D account;

 2.1.19.5 	 this matter was settled without any objections being raised as to the lateness of the appellant’s proposed review application and as a result, the settlement agreement was made an order of Court on 6 March 2005;

 2.1.19.6 	 in the settlement agreement, the parties recorded their agreement, that the review application had to be brought within 15 days of the date of that order, which was done;

 2.1.19.7 	 as a matter of law, this disentitles the second respondent to raise the point in limine belatedly thereafter;

 2.1.19.8 	 no objection was raised in the answering papers filed by the first and second respondent, that the application was brought late;

 2.1.19.9 	 only late in the afternoon, before the matter was to be argued in the Court a quo, did the first and second respondents give notice, in their Heads of Argument, that they will raise the point, in limine, that the application was brought late;

 2.1.19.10 	 the point in limine was raised as an afterthought;

 2.1.19.11 	 the review application was therefore brought in terms of an agreement reached with the first and second respondents’ attorneys, which was made an order of Court and also only after the appellant received notice that the L & D account had been confirmed on 2 March 2005;

 2.1.19.12 	 in terms of section 7(1)(b) of PAJA, the duty to bring an application for review arises after receipt of the decision and the reasons therefore;

2.1.19.13 	the appellant brought its review application, before it actually received the decision from the third respondent to disallow the appellant’s claim and the reasons therefore and in the premises the application was not brought late.

2.2	In respect of the merits, His Lordship Mr Justice Jajbhay erred in not finding that:

2.2.1 	it is common cause that the deed of suretyship, upon which the appellant’s proved claim is founded, has never been under any attack whatsoever, as far as the entering into thereof is concerned, the legality and validity thereof as far as compliance with statutory requirements and formalities are concerned, the authority of the signatories thereto on behalf of the first respondent, the actual signatures appearing thereon, that the appellant’s claim was properly proved in the first respondent’s estate, that it complied with all the statutory requirements of the Insolvency Act and all other/any relevant requirements pertaining to the proof of claims;

 2.2.2 	the only attack  on the appellant’s claim was by the second respondent, who disputed the appellant’s claim in terms of section 45 of the Insolvency Act, on the basis that “It is the writer’s considered opinion that the suretyship constitutes a disposition as provided for in terms of Sections 26 through (sic) 31 of the Insolvency Act”;

2.2.3	 only a Court with competent  jurisdiction, as defined in the Insolvency Act,  can/may set aside dispositions in terms of sections 26, 29, 30 and 31 of the Insolvency Act and until a properly proved claim in an estate, which is not under any other attack but that it may be a voidable disposition, has been set aside by a Court of competent jurisdiction, the claim remains, for all intents and purposes, in terms of our Insolvency law, a valid and enforceable claim;

2.2.4	until set aside by a Court of competent jurisdiction, a transaction, agreement or a deed of suretyship, is/remains valid and enforceable for the purposes of the winding-up of such an estate, bar any other attack but that it may be a voidable disposition;

2.2.5	 in the premises the third respondent disallowed a perfectly valid and enforceable claim, when he disallowed the appellant’s proved claim in the estate of the first respondent, purportedly in terms of section 45 of the Insolvency Act, for suspecting it to constitute “… a disposition as defined by sections 26 and 31 of the Insolvency Act”, and in so doing acted ultra vires his powers;

2.2.6	in the case of a trustee or liquidator of an insolvent estate, any transaction between an insolvent or bankrupt company and a creditor stands, until proper proceedings are taken to set it aside by the trustee or liquidator;

2.2.7	the trustees or liquidator of an insolvent estate must accept the legal position as he finds it and give effect to it unless he succeeds, by proceedings brought in the proper way, in setting it aside;

2.2.8	the Legislature specifically made provision that certain transactions could be set aside by a Court, because until such time as they are set aside, they remain valid and enforceable;

2.2.9	the first and second respondents contended, inadmissibly so on behalf of the third respondent, that the suretyship indeed constitutes a voidable disposition, because until set aside by a Court of competent jurisdiction, it remains valid and enforceable;

2.2.10	 irrespective of the fact that the third respondent acted ultra vires, having regard to the nature and contents of the record of the proceedings, which is constituted of the documents and material which served before the third respondent, at the time he made his decision to disallow the appellant’s claim, it is clear that the third respondent did not properly apply his mind to the issue before him, in that the contents of the documents and material do not justify his decision;

2.2.11	it is not even clear in terms of which section of the Insolvency Act, the appellant’s claim was purported disallowed;

2.2.12	each of the disposition sections in the Insolvency Act, have onerous requirements which have to be complied with and it was simply impossible to arrive at a properly considered decision on the basis only, of what was contained in these documents and it follows that the third respondent acted in a capricious and arbitrary manner, thus rendering his decision to disallow the appellant’s claim, capable of review and setting aside;

2.2.13	the Insolvency Act provides for creditors of an estate to prove their claims expeditiously and simply and it cannot be contended that the applicant could and should have instituted action against the first and second respondents, based on its suretyship, after the third respondent disallowed its claim, clearly for no valid or lawful reason existing at the time, but for a mere suspicion;

2.2.14	 section 45  of the Insolvency Act does not empower the third respondent to disallow properly proved claims on the basis of mere suspicions and/or on the mere say-so of liquidators of trustees, and more specifically so not on mere suspicions and/or the mere say-so of liquidators of trustees, that such claims may constitute voidable dispositions in terms of the Insolvency Act;

2.2.15	the first and second respondents opposed the application mainly on the basis that the suretyship, as a fact, constitutes a voidable disposition and in so doing, attempted to justify the third respondent’s decision, on his behalf, which they are not entitled to do as they were not the decision maker;

2.2.16	only the third respondent’s reasons and the record of the proceedings which served before him, at the time he considered the issue and decided to disallow the applicant’s claim, form the subject matter of the review proceedings and no additional evidence adduced by the first and second respondents was admissible;

2.2.17	the first and second respondents attempted to show that the suretyship actually constitutes a voidable disposition, somehow, on the strength of correspondence and communications between the parties, much of which did not serve before the third respondent, when he made his decision to disallow the appellant’s claim;

2.2.18	whether or not the suretyship constitutes a disposition in terms of the Insolvency Act, remains an aspect for a trial Court to decide once the second respondent institutes action against the appellant in terms of any of the voidable disposition sections in the Insolvency Act;

2.2.19	the question of whether the L & D account had to be re-opened, is largely dependent upon a finding that the decision to disallow the appellant’s claim has to be reviewed and set aside;

2.2.20	if this question is decided in the appellant’s favour, there cannot conceivably be any reason not to re-open the L & D account;

2.2.21	the papers make out a case in support of an order that the L & D account be re-opened;

2.2.21.1	the appellant showed that it was not at fault for not objecting to the L & D account;

2.2.21.2	the appellant had shown something more than ignorance and prejudice;

2.2.21.3	 the appellant has shown that it was genuinely unaware of the L & D account and that its claim was reflected as “expunged” therein;

2.2.21.4	the appellant has shown that once an order is made to review and set aside the third respondent’s decision to disallow the appellant’s claim:

2.2.21.4.1 	that there will be merit in re-opening the account;

2.2.21.4.2	if not re-opened, it will incorrectly, not reflect the appellant’s claim;

2.2.21.4.3 	the account will have to be amended to reflect the appellant’s claim as preferent.

 [3] 	 I deal first with the point in limine.  The opposing arguments, on the point in limine, first raised by the respondents in the court below, are substantially interlinked to the merits of the case. In the court below, the point in limine was succinctly set out by Jajbhay J as follows:

“The point taken is that the application for the review of the Master’s decision expunging the applicant’s claim, in terms of s 45 of the Insolvency Act, is out of time.  It was contended that a period of more than 15 months (4/12/2003 – 18/3/2005) has elapsed between the applicant is being notified by the Master, in a letter stamped 04/12/2003, of the expungement of its claim in terms of s 45(3) of the Insolvency Act.  In all the time, the applicant took no steps to judicially review the Master’s decision.  It was accordingly contended that the applicant has thus delayed unreasonably in coming to court on review and, on that ground alone, the applicant should be non-suited.  The applicant contended that the Master did not notify the applicant of this fact.  It did not receive the communication referred to by the respondents.  According to the evidence before me, the applicant was represented by Attorneys Routledge-Modise.  In terms of the several letters communicated between the applicant’s attorneys and the liquidator, on the one hand, and the Master, on the other, it appears as if the applicant’s attorneys did not receive notification of the Master’s decision set out in a letter dated 4/12/2003.  This was communicated to the Master on 23 February 2004.  From the various correspondences it appears that, during November or December 2003, a letter was forwarded from the Master to the applicant.  The applicant’s postal address was utilised. It was contended on behalf of the respondents that this letter was forwarded by registered mail. The stamp on the document relied upon by the respondents that this letter was sent by registered mail is not clear.  I am not satisfied that this letter was, in fact, forwarded by registered mail to the applicant’s attorneys. ”
 [4] 	 On appeal, the argument on behalf of the appellant was extended and intensified. In advancing the argument that the appellant was not aware of neither the intention, decision, nor the reasons of the Master for expunging the appellant’s claim, reliance was placed on the procedural unreasonableness of the Master both at common law, the Interim Constitution and the provisions of the Promotion of Administrative Justice Act 3 of 2000 (PAJA), in particular sections 1-7.  In addition, reliance was placed on the provisions of s 45(3) of the Insolvency Act 24 of 1936 (the Insolvency Act), to the extent that the Master was obliged to ‘forthwith notify the claimant in writing’ once a claim has been confirmed, reduced or disallowed. S 45(3) of the Insolvency Act has been quoted fully in the judgment of the court below. The appellant contended that it had not received the Master’s letter dated 13 November 2003 containing the Master’s date stamp of 4 December 2003.  This letter was addressed to the applicant at its postal address, namely, P O Box 832, Boksburg, 1460.  In this letter, which appears on p 216 of the bundle of papers, the Master wrote as follows:

“I wish to advise that your claim No 23 for the amount of R3 991 780,20 has been expunged. ”

 [5] 	 According to the appellant the last-mentioned letter, which it did not receive, contained no reasons for the expungement of appellant’s claim.  However, the appellant concedes that later, it received the Master’s report dated 6 August 2005, after the appellant had instituted review proceedings in March 2005.   In paras 2-5 of the report, written by L Lategan, Acting Deputy Master, the following is stated:
 
“2. 	On the 14th of December 2003 I expunged the claim of the applicant being claim No. 23 in the amount of R3 991 780,20 in Johannesburg Glassworks (Pty) Ltd.  (In voluntary liquidation) (‘JG’).

	3. 	I expunge the claim for the following reasons:

3.1 	It seems that the claim of P G Bison Ltd is founded on a deed of surety dated 12 February 2002 guaranteeing the obligations of Kenbow (Pty) Ltd (now in liquidation) to Investec Bank in respect of monies lent and advanced by it to the company in terms of which P G Bison Ltd bound itself as surety and co-principal debtor to Investec for the loan obligations of Kenbow (Pty) Ltd.

3.2 	There appears to be no pre-existing nexus between JG and the applicant and therefore it appears that the suretyship could constitute a disposition as defined by sections 26 to section 31 of the Insolvency Act.

3.3 	The validity of the claim therefore appears to be under suspicion and I therefore expunge the claim (vide Marendaz v Smuts 1966 (4) S.A. 73 (TPD) at 73D-E).
	
4. 	AD PARAGRAPHS 10 AND 12 OF THE APPLICANT’S FOUNDING AFFIDAVIT

I attach hereto a copy of a letter dated 13 November 2004 by the Master to the applicant informing him that his claim (Number 23) has been expunged.

	5. 	I abide the decision of the Honourable Court.”

 [6] 	 The appellant concedes that when it addressed further correspondence to the Master on 1 December 2003 about its claim, the appellant knew that its claim was under attack and suspicion. However, the appellant argued that at that stage, a decision had already been taken by the Master on 13 November 2003 to expunge the claim. Further that later correspondence from the Master, excluding the report quoted above, did not mention the expungement of the claim.  The appellant contends further that it had all along awaited the Master’s reasons for expunging the claim.  

[7] 	Prior to 1 December 2003, the appellant’s attorneys had addressed a letter to the Master of the High Court, on 8 October 2003, parts of which letter is quoted in the judgment of the court below as follows:

“On 13 March 2003 and at the Johannesburg Magistrates’ Court, representations were made to the presiding officer in terms whereof the claim of our client was proven.  After addressing a letter to the liquidator, Mr M Schmidt of Resolution Trust Company (Pty) Limited, a telefax was forwarded to our offices annexing a copy of a registered letter which had apparently been posted to our client on 8 September 2003, in terms of which our client was advised that the claim had been disputed in terms of Reg 18 of the Winding-up and Judicial Management of Companies, as read with s 45(3) of the Insolvency Act 24 of 1936, as amended, and s 339 of the Companies Act 61 of 1973, as amended. ”  When there was no response from the Master, the appellant’s attorneys addressed a follow-up letter to the Master on 24 November 2003 in which the appellant expressed the intention to make further representations and requesting the Master to postpone his decision. 

[8] 	On 8 March 2004, the Master addressed a letter to the appellant’s attorneys, enclosing a copy of the second respondent’s letter of 20 January 2004 addressed to the Master.  The contents of the second respondent’s letter of 20 January 2004 was as follows:
“Receipt of your letter dated 2003.12.19 (received on 2004.01.08) is acknowledged. The writer has perused the letter from Routledge-Modise dated 2003.12.01 and respectfully wishes to point out that the contents thereof appear to be identical to their letter dated 2003.10.08. In this regard the various items raised were fully dealt with in the writer’s letter to yourself dated 2003.11.05.  To reiterate, it is again confirmed that the full reasons for the writer’s dispute of the claim were set out in the letter of 2003.11.05 (a copy which is enclosed) and again it is denied that such reasons constitute ‘mere suspicions of bland and generalised conclusions of law’.  Not only are the reasons fully set out in the previous letter to you, but as previously advised, full particulars and details of the reasons for disputing of the claim had been to both the alleged creditor and its attorneys on countless occasions. In this regard a copy of the writer’s letter addressed to them (and copied to yourself) dated 2003.12.05 is enclosed.  In conclusion, your attention is drawn to the fact that once again Routledge-Modise have not been attempted to address the heart of the matter which is any possible reason or explanation for the validity of its claim.  They continually skirt the issue and merely provide verbose accounts of what has happened in the Estate. Their allegations that they have not been given facts and details are vehemently disputed as dealt with above. ”  Reference was also made to a letter of 5 November 2003 addressed by the second respondent to the appellant’s attorneys.
 [9 ] 	In criticizing the judgment of the court below for upholding in favour of the respondents the point in limine, heavy reliance was placed on the contents of a letter addressed by the appellant’s attorneys to the Master on 5 April 2004.  In this regard it was argued that the purpose of the letter was precisely for the reason that the Master, in the letter of 8 March 2004, referred to in para [5] above, had not informed the appellant that its claim had been expunged. On this basis, the appellant argued that at that stage it was not aware of the decision and reasons for expungement of the claim by the Master. Once more, for the sake of completeness, the letter of the appellant’s attorneys to the Master dated 5 April 2004 is reproduced as follows:

“We refer to your letter of the 8th of March 2004 and the annexure thereto.  	We join issue with the contents of the Joint Liquidators letter to you of the 20th of January 2004, wherein he asserts that we and our client have been furnished with full particulars and details of the basis upon which the objection to our client’s claim is founded. We still await your reply to our telefacsimile to you of the 23rd February 2004 and seek your advice whether a decision has been taken in the matter, as suggested by the Joint Liquidators’ attorney.  On the assumption that it was not, and leaving aside for the moment the Joint Liquidators’ failure to disclose the facts which underpin his objection, we again invite attention to the passage in the judgment of WILLIAMSON J in Netherlands Bank of SA v Stern NO and Another 1955 (1) SA 667 (W) at 673G-674F.   Given this, it seems to us with great respect that the Joint Liquidators’ approach to you for leave is entirely misconceived. It is only the court which is vested with the competence to impeach the suretyship upon which our client’s claim is based.  Until that occurs, we would with great diffidence submit that the matter must be approached on the basis that the suretyship stands quite unimpeached and that any claim derived therefrom cannot, as a matter of law, be expunged pursuant to the Joint Liquidators’ objection.

We now await decision in the matter, postulating of course that the statement by the Joint Liquidators’ attorney that one has already been taken is incorrect. ”

 [ 10] 	It was further argued that although the court below was correct in finding that the appellant probably did not receive the registered letter of 4 December 2003, enclosing the Master’s decision to expunge appellant’s claim, the court below was, however, factually incorrect in finding, as it did, that it was plain from the appellant’s attorneys’ letter of 8 October 2003, quoted above, that by such date, the appellant had received the relevant notification.  It was further argued that the court below in not referring to the letter of the Master in which no mention was made of the fact that the appellant’s claim was expunged, was therefore incorrect in coming to the conclusion in para [11] of the judgment that:

“The letter communicated by the applicant’s attorneys on 5 April 2004, some six weeks after the applicant had been informed by the liquidators’ attorney that the applicant’s claim had been expunged, is further proof of the applicant’s approach in dealing with this matter.  Here, there is no reason to assume that the information from the liquidators’ attorneys that the applicant’s claim had been expunged was, in fact, incorrect.  Although the Master did not respond to this letter, it is clear from the contents of the letter written by the applicant’s attorneys that the understanding that the applicant’s claim had been expunged was prevalent. ”

 [11 ] 	The appellant also argued that since the respondents gave notice, late in the afternoon, before the matter was argued in the court below, that they will raise the point in limine, such point was in fact an afterthought.  In this regard, reliance was placed on the decision in Associated Institutions Pension Fund v Van Zyl 2005 (2) SA 302 (SCA).

 [12 ] 	The appellant’s contention in regard to the point in limine cannot be sustained from what appears hereunder:

 12.1 	The court below found that it was probable that the appellant did not receive the registered letter from the Master dated 13 November 2003 and stamped 4 December 2003.  I respectfully, disagree with the finding of the court below  in this regard.  The appellant’s postal address was used. This letter was crucial in that it contained the Master’s notification to the appellant that its claim of R3 991 180,20 had been expunged.  Section 7 of the Interpretation Act No. 33 of 1957, provides:  “Where any law authorises or requires any document to be served by post, whether the expression ‘serve’, or ‘give’, or ‘send’ or any other expression is used, then unless the contrary intention appears, the service shall be deemed to be effected by properly addressing, prepaying, and posting a registered letter containing the document, and unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.” There is therefore a presumption that the appellant indeed received the letter. The appellant simply denied receiving the letter, without any other contrary evidentiary proof.  See S v Buys 1988 (2) SA 201 (O). 

12.2	Based on the above, it can safely be accepted that a period more than fifteen months had elapsed between the appellant being notified by the Master of the expungement of its claim in terms of section 45(3) of the Insolvency Act.  In all that time, the appellant took no steps to judicially review the Master’s decision.  It follows that the appellant’s contention that the Master did not notify the appellant of its decision cannot be true.

 12.3 	Prior to December 2003, and on 8 September 2003, the second respondent, acting in terms of Regulation 18 as read with s 45(3) of the Insolvency Act and s 339 of the Companies Act, lodged with the third respondent an application to expunge appellant’s only proved claim.  A copy of this application was sent by registered post to the appellant at P O Box 832, Boksburg, 1460.  Second respondent also faxed a copy of the registered letter to expunge appellant’s claim to the appellant’s attorneys on 9 September 2003.  The appellant alleges that it did not  receive this registered letter either.  

12.4 	In appellant’s letter of 8 October 2003 addressed to the third respondent its attorneys acknowledged receipt of the application to expunge the claim.  The letter also dealt with, and disputed second respondent’s reasons for such expungement and then proceeded to deny that they had a copy of such application.  In my view, the court below correctly concluded that it was clear from the letter (8 October 2003) that as early as 8 October 2003, the appellant received the relevant notification.  

12.5 	In addition, in November 2003 and December 2003, the appellant made further representations to the third respondent. In particular on 1 December 2003, the appellant addressed further argument to the third respondent in support of its claim. Moreover, by its own admission, appellant’s attorney, was on 30 September 2003 in possession of second respondent’s letter of 8 September 2003 accompanying the application to expunge.  In this regard, the court below, in my view, correctly found that, from these correspondence, that the appellant’s allegation that it was not aware of the application to expunge was clearly without merit. Furthermore, and similarly, the conclusion of the court below, that in spite of the fact that as far as 23 February 2004, the appellant’s attorney had knowledge of the expungement of its claim, the appellant refrained from instituting review proceedings, cannot be faulted.  It is in fact common cause that the appellant’s attorneys only commenced its action as a result of a letter from the second respondent dated 19 January 2005 in which it was advised that the third respondent had already confirmed the first and final liquidation and distribution account.

 12.6 	The appellant’s attorneys’ letter of 5 April 2004 addressed to the third respondent, some six weeks after it had been informed by second respondent’s  attorney that its claim had been expunged, was found by the court below to be further proof of the appellant’s dilatory and negligent manner in dealing with this matter.  There was no reason to assume that the information from the second respondent’s attorneys that its claim had been expunged was incorrect.  Although the third respondent did not respond to the appellant’s letter of 5 April 2004, and notwithstanding that the appellant had been informed that the claim had been expunged, the appellant nevertheless did nothing further to establish the status of the claim. The court below, in my view, correctly found that this, in itself, constituted negligent conduct on the part of the appellant.

 12.7 	In argument before us, counsel for the appellant submitted strenuously that once the appellant had proved a claim, it had nothing further to do but await the third respondent’s reasons for expunging the claim. In this regard, counsel for the appellant relied on several provisions of the Promotion of Administrative Justice Act No 3 of 2000 (PAJA).   On the contrary, the whole history of the matter is more than sufficient proof of the appellant’s dilatoriness and unreasonable delay in approaching the court for the review of the matter even after it had been informed that the first and final liquidation and distribution account had been confirmed.  The court below, in taking into account that other creditors were unduly prejudiced by the protraction, concluded that on this ground alone, read with the relevant provisions of PAJA, the appellant could not succeed.  This conclusion cannot be challenged. The evidence clearly establish that more than 180 days had elapsed in terms of the provisions of s 7(1)(a) and (b) of PAJA.  The correspondence between the respective attorneys demonstrate convincingly in fact that the disputed issues were fully ventilated between the parties, and that the appellant must have known much earlier than it alleges, that the third respondent had objected to its claim.  The conclusion that the appellant had full and timeous details of the third respondent’s attitude regarding its claim and that the appellant dismally failed to take any steps in regard thereto, is irresistible.  The appellant must fail on the point in limine. The submission by the appellant that the point in limine in the circumstances was raised rather late as an afterthought, is without merit at all. The case of Associated Institutions Pension Fund v Van Zyl is of no assistance to the appellant in the particular circumstances of this matter.

[13] 	
 13.1 	The finding of the court below in dismissing the application on the merits as well, require some consideration.  The appellant contended for the reopening of the first and final liquidation and distribution account mainly on the basis that such account does not reflect the appellant’s expunged claim and was therefore incorrect.  On the other hand, the first and second respondents argued that no purpose would be served in reopening the account; that prejudice alone to the appellant was not enough to reopen the account;  and that the appellant was obliged to prove grounds for restitutio in integrum such as justus error or fraud referred to in Kilroe-Dailey v Barclays National Bank Ltd 1984 (4) SA 609 (AD).

13.2	In the present matter, the first and final liquidation and distribution account of the first respondent (the company) was confirmed by the Master on 21 October 2004 in terms of s 408 of the Companies Act.  The appellant was informed thereof on 19 January 2005.

13.3	S 112 of the Act provides as follows:

“When a trustee’s account has been open to inspection by  creditors  as herein before prescribed and –

(a)	no objection has been lodged; or
(b)	an objection has been lodged and the account has been amended in accordance with the direction of the Master and has again been open for inspection if necessary as in paragraphs (b) of subsection (2) of section one hundred and eleven prescribed and no application has been made to the court in terms of paragraph (a) of the said subsection (2) to set aside the Master’s decision; or

(c)	an objection has been lodged but withdrawn or has not been sustained and the objector has not applied to the court in terms of the said paragraph (a), 

the Master shall confirm the account and his confirmation shall be final save as against a person who may have been permitted by the court before any dividend has been paid under the account, to reopen it.”  The court below considered the relevant authorities and case law as to when an application for the reopening of an account may succeed as well as the requirements therefor.  These included Meskin Henochsberg on The Companies Act, Volume 1 at 865;  Kilroe-Dailey v Barclays International Bank Ltd (supra) at 627;  S A Clay Industries Ltd v Katzenellenbogen NO and Another 1957 (1) SA 220 (W) 224; and Wispeco (Pty) Ltd v Herregel NO and Another 1983 (2) SA 20 (C) at 25-7.  In Wispeco (supra) at 28B-C, the following is said:  “It seems to me, however, that such an applicant bears a further onus: he would have to show the Court that there is merit in the reopening of the account. A Court will not reopen an account if it cannot be shown that the applicant has some prospect of success of having the account varied or corrected (see Desai v Assignee, Estate Desai NO (supra at 513)). No purpose would obviously be served in merely reopening the account if it is likely to remain in the same form as originally drawn. The applicant must establish at least prima facie that the account is incorrect and would have to be amended.”

 In the present matter, it is common cause that no payments were made to creditors in terms of the account by agreement between the parties and pending the outcome of this matter.  There are, however, other creditors.  In S A Clay Industries (supra) at 224, Kuper J states:  “It must be remembered that the whole machinery of the Act is directed towards a speedy liquidation and distribution of the assets of an insolvent estate.  It is for that reason that the section precludes the reopening of an account when a dividend has been paid under the account.  After confirmation and before the payment of a dividend the aggrieved person must show something more than ignorance and prejudice;  he must show that his failure to object has been induced by justus error or by fraud.”  In the Kilroe-Dailey case, at 626G Galgut AJA states:  “The principle which runs through all these cases is that an applicant must show grounds for restitutio in integrum such as justus error or dolus before a Court will order reopening of a confirmed account.”  In the current appeal, the appellant does not allege fraud or make out a case for justus error. There was instead an inexplicable delay on the part of the appellant in attending to this matter.  In my view, the appellant has not discharged the onus of establishing even prima facie that any good purpose would be served in reopening the account.  However, in the view I take in this matter as indicated below, this does not signify the end of the appellant’s proved claim.

13.4 	In the court below, the appellant contended that the Master acted ultra vires his powers by disallowing the applicant’s claim for suspecting it to constitute ‘a disposition as defined by ss 26 to 31 of the Insolvency Act’.  The court below, in my view, quite correctly, concluded that such was not the case.  It is indeed the appellant’s case that only a court may set aside dispositions in terms of ss 26, 29, 30 and 31 of the Insolvency Act and, until a properly proved claim which is not under any attack but that it may be a voidable disposition has been set aside by a court of competent jurisdiction, the claim remains, for all intents and purposes, in terms of the insolvency law, a valid and enforceable claim.  In this regard the appellant relies on the case of Netherlands Bank of South Africa v Stern NO and Another 1955 (1) SA 667 (W).  Although it is conceded that neither the Master nor the second respondent (liquidator) had the authority to set aside the claim as contended for by the appellant, the uncontroverted evidence show that it is indeed not the case of the Master or the second respondent that the claim was set aside.  However, the second respondent acted in terms of the provisions of s 45(3) of the Insolvency Act.  This section provides as follows:  “If the trustee disputes a claim after it has been proved against the estate at the meeting of creditors, he shall report the fact in writing to the Master and shall state in his report his reasons for disputing the claim.  Thereupon the Master may confirm the claim, or he may, after having afforded the claimant an opportunity to substantiate his claim, reduce or allow the claim, and if he has done so, he shall forthwith notify the claimant in writing:  Provided that such reduction or disallowance shall not debar the claimant from establishing his claim by an action at law, but subject to the provisions of section seventy-five.”  In terms of this provision, the second respondent then, as appears from the correspondence between it and the appellant, made a report to the Master and also the details thereof.  The appellant also made representations to the Master.  The Master, as he was obliged to do, considered the matter and disallowed the claim, i.e. expunged the claim.  In doing so, the Master merely executed his administrative duty. See Caldeira v The Master and Another 1996 (1) SA 868 (N).  It is plain that disallowing the claim is not tantamount to setting aside the claim.  The Master in essence did not purport to invalidate or set aside the disposition.  He merely expunged (reduced, disallowed the claim) from the list of proved claims, as he was indeed entitled to do.  I am unaware of a definition of the word “expunge” in the context of insolvency legislation. The word is not defined in s 2 of the Insolvency Act, nor is it mentioned in s 45(3) of such Act.

13.5 	In support of its contentions, the appellant relies on the quotation in the Netherlands Bank of South Africa v Stern case, at 674B-E, where Williamson J set out the following:  “But in the case of a trustee or a liquidator any such transaction between an insolvent or a bankrupt company and a creditor stands until proper proceedings are taken to set it aside. The trustee or liquidator must accept the legal position as he finds it and give effect to it unless he succeeds, by proceedings brought in the proper way, in setting it aside. The “proper  way” seems to be by way of action duly instituted; see Clark v Paterson's Trustee, 1913 T.P.D. 489 at p. 492, Mars on Insolvency, 3rd ed. p. 195. A fortiori a creditor in the position of the second respondent must accept the legal position as he finds it until he or the trustee or liquidator succeeds in the proper way in setting the disposition aside.”

Indeed the court a quo cautioned that the above quotation must be considered in its proper context having regard to the provisions of s 45(3) of the Insolvency Act, quoted above.  It appears to me that the reliance by the appellant on the quotation in the Netherlands Bank of South Africa v Stern case, is of no assistance to it. The appellant appears to confuse the use of the synonymous words ‘reduction’ and ‘expunge’.  If anything, the quotation relied upon by the appellant in the judgment of Williamson J above, rather lends credence to the case of the second respondent and the Master.  On proper reading, what is said by Williamson J is that where it appears that the claim falls within the voidable preference category, it can be set aside by order of court. This can be done by either the appellant in this case or the second respondent.  The appellant is at liberty to ‘establish its claim at law’ by instituting an action.  Indeed, the dictum of Williamson J falls squarely in line with the provisions of s 45(3) of the Insolvency Act which clearly does not entitle the Master or the second respondent to set aside the claim of the appellant.  In fact, s 45(3) of the Insolvency Act, postulates an independent investigation by the trustee, a placement of the facts of such investigation before the Master, and the Master then deciding whether the claim is allowed or not. On the facts before us, it can hardly be suggested that the Master did not apply his mind to the matter presented to him.  The court in the Caldeira case dealt with a situation where it was alleged that the Master had not applied his mind to the facts.  This is clearly not the case in the present matter.  The Master has applied his mind fully to the facts presented to him by the second respondent, and in my view, quite correctly, disallowed the claim for the reasons advanced.

13.6 	In argument before us, counsel for the appellant suggested that the Master is not allowed to deal with the situation of voidable dispositions.  This in fact by logical reasoning suggests that the Master in exercising his discretion in terms of s 45(3) of the Insolvency Act, must be selective. This would imply that the Master first has to establish whether a particular claim is a complex or straightforward one.  If it is the former, such as a voidable disposition, then the Master is not allowed to deal therewith.  If it is the latter type of claim, such as a simple debt between creditor and debtor, then the Master is allowed to deal with it.  This suggestion is by all accounts untenable.

13.7 	The correspondence between the parties indeed show that as early as 25 January 2003 the second respondent advised the appellant that its claims against the first respondent company were defective and constituted voidable dispositions or preferences.  In this regard, the second respondent’s report and notice of the second general meeting of creditors held on 13 May 2003, and received by the appellant, stated in connection with the appellant’s claim in the amount of R3 991 780,00 as follows:  “It would appear that the basis of the claim (together with any supporting security) constitutes a voidable disposition and should the creditor submit its claim same will be challenged accordingly.”  It is common cause that this claim is the only claim proved by the appellant and which claim was expunged by the Master.  It is the subject-matter of the present review and the reopening of the account as stated earlier.  In this claim, the appellant relies on the suretyship executed by the first respondent in its favour, a general covering cession of debtors of the first respondent. The second respondent disputed appellant’s claim on the basis that it was a voidable disposition in terms of the Insolvency Act.  In spite of the appellant’s knowledge that its claim was disputed from the onset, and also with the full knowledge of the provisions of s 45 of the Insolvency Act, the appellant clearly adopted a supine attitude for twelve months until informed of the confirmation of the account.
 
13.8 	It is also significant to note that in its founding papers, the appellant failed to disclose to the court crucial and pertinent correspondence between the parties, being annexures to the second respondent’s answering affidavit marked “MS3”, “MS18” and “MS21”.  In addition, the second respondent met with appellant’s attorneys to discuss the matter, inter alia, on 1 August 2002. At this meeting the appellant was informed that “the security and underlying security given by it fell foul of section 26 of the Insolvency Act and therefore constitute a disposition without value”.  Although the appellant denies the meeting and the contents of the discussion thereat, in a letter to the second respondent, on 7 August 2002, the appellant’s attorneys wrote as follows:  “… we are further of the respectful opinion that even if loans were made by Kenbow to Johannesburg Glassworks (Pty) Ltd in order to enable Johannesburg Glassworks (Pty) Ltd to liquidate some of its indebtedness to financial institutions to prevent them from proceeding to liquidate the company, that this must be interpreted as a disposition with value.”  This clearly deals with the issues discussed at the meeting of 1 August 2002.  The correspondence reveal several further meetings held between the parties wherein the validity of the appellant’s claim was discussed.  The conclusion that the appellant was at all material times made aware of the second respondent’s reasons for resisting the appellant’s claim, is inescapable.  Therefore, the appellant’s allegation that it has “no knowledge as to why applicant’s claims were dismissed by the third respondent” (the Master), is untrue.  The appellant further contends that the Master dismissed its claim without affording the appellant the opportunity to be heard.  This allegation is plainly not supported by the correspondence, in particular, appellant’s attorney’s letters dated 8 October 2003, 24 November 2003 and 1 December 2003, all addressed to the Master.  In par 4.36.9 of the answering affidavit, the second respondent states as follows: “I point out in this regard that the estate of the first respondent is now being mulcted in substantial legal costs in opposing the review application and also an action instituted on behalf of the applicant, and it is the creditors of the first respondent which will ultimately suffer prejudice should first respondent succeed in its opposition.”  From this, it is self-evident that the second respondent and the creditors of the first respondent are being prejudiced as a result of the delay occasioned by the present proceedings, more particularly as the liquidation and distribution account has been confirmed and creditors’ dividends remain unpaid.

13.9 	The court a quo in arriving at its conclusion also reviewed the several correspondences communicated by the second respondent to the Master, as well as the appellant’s attorneys, and quoted extensively from the letter of 5 November 2003 from the second respondent to the appellant’s attorneys. It is unnecessary to repeat the contents of this letter for the present purposes.  The court below, in my view, quite correctly, found that the various correspondences emphasise that the second respondent ‘had always been of the opinion that the applicant’s alleged claim, as well as its security, constituted a disposition as provided for in terms of ss 26 to 31 of the Insolvency Act’. It appears to me that the appellant fails to comprehend the provisions of s 26 of the Insolvency Act.

13.10 	The court below found that the appellant has failed to establish any basis for the unnecessary protraction in the institution of the review proceedings which resulted in undue prejudice to other creditors.  In my view, there is no reason why the appellant could not have instituted the action.  The delay was unreasonable.  See in this regard Associated Institutions Pension Fund v Van Zyl (supra) at 321.  Indeed, the proviso in s 45(3) of the Insolvency Act enjoins the appellant to have instituted such proceedings.  As it turned out, during argument, counsel for the appellant informed us that the appellant had in the interim in fact commenced such proceedings as envisaged by s 45(3) of the Insolvency Act.  This, in my view, the appellant should have done in the first place, instead of the unsuccessful application in the court a quo. The matter could have been resolved earlier.  The finding of the court below remains unassailable on all the issues raised by the appellant.

13.11 	For all the aforegoing reasons, the present appeal falls to be dismissed with costs.  

13.12	In the result, the following order is made:

“The appeal is dismissed with costs.”

					        _______________________________
						                D S S MOSHIDI
					               JUDGE OF THE HIGH COURT
WITWATERSRAND LOCAL DIVISION

	I agree:

				                  _______________________________
							     J P HORN
						 JUDGE OF THE HIGH COURT
WITWATERSRAND LOCAL DIVISION

	I agree:

					    _________________________________
							E M MAKGOBA
					     ACTING JUDGE OF THE HIGH COURT
                                                          WITWATERSRAND LOCAL DIVISION

COUNSEL FOR THE APPELLANT	ADV L HALGRYN

INSTRUCTED BY				ATTORNEYS ROUTLEDGE-
MODISE

COUNSEL FOR THE FIRST
AND SECOND RESPONDENTS		ADV N KADES SC

INSTRUCTED BY				ATTORNEYS WEBBER WENTZEL
						BOWENS

DATE OF JUDGMENT: 16 NOVEMBER 2007