Singer NO v Master of the Supreme Court, Transvaal Provincial Division and Another (518/92) [1994] ZASCA 60 (30 March 1994)

Case No 518/92

IN THE SUPREME COURT OF SOUTH AFRICA (APPèLLATE DIVISION)

In the matter between:

D G SINGER NO AppellantandMASTER OF THE SUPREME COURTTRANSVAAL PROVINCIAL DIVISION First RespondentABSA BANK LIMITED Second Respondent

CORAM: E M GROSSKOPF, NESTADT, EKSTEEN, HARMS, JJA

et OLIVIER, AJA HEARD: 17 MARCH 1994 DELIVERED: 30 MARCH 1994

JUDGMENT E M GROSSKOPF, JA

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The appellant is the executor in the deceased estate of the late Reuben Plotkin. Shortly after his appointment as executor, the appellant established that the estate was insolvent. He reported the position of the estate to creditors in terms of sec 34(1) of the Administration of Estates Act, no 66 of 1965, (" the Estates Act"). The creditors did not instruct him in terms of that section to surrender the estate under the Insolvency Act, no 24 of 1936, and he consequently proceeded to administer the estate in terms of sec 34 of the Estates Act as an insolvent deceased estate.

Sec 34(7) of the Estates Act requires an executor to submit to the Master, within time periods fixed in the section, an account in the prescribed form of the liquidation and distribution of the estate. Sec 34(7)(b) lays down that this account is to provide for the distribution of the proceeds in the order of preference prescribed under the Insolvency Act in the case of a sequestrated estate.

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Volkskas Bank Limited held a first mortgage bond over certain fixed property of the deceased. This bank has been taken over by Absa Bank Limited and the latter bank has been substituted on the record as the second respondent herein. I shall refer to it as the Bank. The Bank submitted a claim to the appellant in respect of the debt secured by its bond, with interest from the date of sequestration (which is determined pursuant to a deeming provision in sec 34 (5) of the Estates Act) until date of payment.

The appellant prepared a liquidation and distribution account. He knew that the Bank disagreed with him about the manner in which the Bank's claim had been dealt with. He consequently arranged a meeting between himself, a representative of the Bank and an official in the Master's office. The matters in dispute were discussed, and the Master gave directions as to how they were to be handled in the account.

The appellant was dissatisfied with the Master's

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decision, and applied to the Transvaal Provincial Division for review, citing the Master as first respondent and the Bank as second respondent.The application for review was dismissed in the court a quo (Smit J) and with the necessary leave the matter now comes before us on appeal. There was no appearance on behalf of the Master who abides the judgment of the court.

Before considering the matters in dispute it is necessary first to examine the legal basis of the present review proceedings. On appeal before us it was common cause that the review was brought in terms of sec 35(10) of the Estates Act, which was made applicable to insolvent deceased estates by sec 34(9) of that act. Sec 35 deals generally with the framing and lodging of liquidation and distribution accounts. Sub-sec (4) provides that an account is to lie for inspection at the Master's office (and in some cases a magistrate's office), and sub-sec (7) allows interested persons to lodge objections to the account with the Master.

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Sub-sec (9) then provides that if the Master is of opinionthat an objection is well-founded, or if he, mero motu, "isof opinion that the account is in any respect incorrect andshould be amended, he may direct the executor to amend theaccount or may give such other direction in connection

therewith as he may think fit."

Sec 35(10) then provides:

"Any person aggrieved by any such direction of the Master ... may apply by motion to the Court ... for an order to set aside the Master's decision and the Court may make such order as it may think fit".

I turn now to the disputes between the parties.

They mainly concern the interpretation of sec 95(1) of the

Insolvency Act which was made applicable to insolvent

deceased estates by sec 34 (7)(b) of the Estates Act. In so

far as it is relevant sec 95(1) of the Insolvency Act reads

as follows:

"The proceeds of any property which was subject to a special mortgage...[or],..pledge ..., after deduction therefrom of the costs mentioned in subsection (1) of section eighty-nine, shall be applied in satisfying the claims secured by the said property, in their order of preference, with

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interest thereon ... from the date of sequestration to the date of payment ...".

Originally the appellant raised three matters in its notice of motion. Two concerned the ambit of the expression "proceeds of ... property" in sec 95(1) and I deal with them first. The facts in this regard were as follows. The property subject to the Bank's mortgage had been sold on instalments by the appellant. The purchaser paid interest on the unpaid portion of the purchase price. The first question was whether such interest constituted part of the proceeds of the property which, in terms of sec 95(1), should be applied in satisfying the Bank's secured claim.

The second question must be expressed in an abstract way because, as 1 shall show, the facts are not entirely clear. Sec 28(1)(a) of the Estates Act requires an executor to open a cheque account with a bank in the name of the estate and to deposit the moneys of the estate in it. Sub-sees 28(1)(b) and (c) allow the executor to transfer money not immediately needed from the cheque account to a

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savings account, or to place it on interest-bearing deposit with a bank or building society. In this way an estate can earn interest on moneys realized in the course of liquidation. The second question posed was this: if the instalments of the purchase price of the bonded property paid by the purchaser were placed in an interest- bearing account, would the interest so realized constitute part of the "proceeds" of the property within the meaning of sec 95(1) of the Insolvency Act?