[15]
As to whether it is a matter for the appellant’s opinion whether a sale is in the course of the
liquidation of an estate, this question was left open in Holden’s Estate v Commissioner for Inland Revenue 1960 (3) SA 497 (A) at 502A-B. It will be noted that the court would appear to have thought that the answer was in the affirmative.
However, that can only have been its view in relation to the Commissioner’s opinion as to the facts relevant to the issue of
‘course of liquidation’. I say that because the meaning of the expression ‘within the course of the liquidation
of the estate’ is clearly not a matter of fact but of law. Therefore, although constraints limit or even bar judicial interference
with the exercise of a discretionary opinion, plainly it is for this court, as it was for the court below, to interfere if the appellant
took a wrong view of what the true meaning of the expression is in law. The nature and extent of such interference is another matter.
I shall deal with it below.
[16]
The appellant’s interpretation of that expression is evident from certain letters written on his
behalf to representatives of the respondent during an exchange of correspondence preceding the hearing in the Special Court. In those
letters the contention is advanced that s 5(1)(a) applies ‘(i)ndien bates van die oorlede verkoop word gedurende die likwidasieproses’ and that ‘(i)n the course of the liquidation’ means “during” the liquidation, (my emphasis).
[17]
I think that interpretation is incorrect. Generally, there is in law a difference between ‘during’
and ‘in the course of’. This is illustrated by the many cases which deal with the respective phrases ‘in the course
of employment’ and ‘in the course of business’, as employed in the various legislative enactments over the years
providing for third party compensation for fatal and bodily injury in motor accidents and in the formulation of the principles of
vicarious delictual liability.
[18]
In Standard General Insurance Co v Hennop 1954 (4) SA 560 (A) the question was whether a registered insurer was liable to compensate an injured passenger who was being conveyed
in a car which was involved in an accident due to the negligence of its driver. The question was whether, even if the driver was
driving in the course of his business, the passenger was being conveyed in the course of that business. The court said (per Centlivres
CJ)
‘The Act does not say that the insurance company is liable if you were a passenger in my car while I was driving in the course of my
business; before the company can be held liable it must be shown that you were being conveyed in the course of my business. The words
used by the Legislature connote that there must be some relationship between your presence in the car and my business.’
[19]
In Ngubetole v Administrator, Cape and another 1975 (3) SA 1(A) the primary question concerned the meaning of the phrase ‘ in the course of employment’ in the then
applicable motor accident compensation legislation. In the judgment, Corbett JA explained that those words would usually, but might not always, mean the same in relation to that legislation as they did in the sphere of
vicarious liability. Subject to the need for a flexible approach that could result in a satisfactory casuistic determination of when,
under the legislation, an act was done ‘in the course of employment’, it nevertheless appeared that such an act was one
done in the exercise of the functions to which the employee was appointed.
[20]
On the strength of the statements in Hennop and Ngubetole to which I have referred, and the many earlier authorities which those judgments cite, I conclude that a sale ‘in the course
of the liquidation of the estate’ in s 5(1)(a) of the Estate Duty Act means a sale between which and the liquidation process
there is some relationship. Put another way, it means a sale effected in the exercise of the functions involved in the liquidation.
In short, the sale must be one in implementation of the liquidation process. It must therefore be by the executor or on behalf of
the executor, in the latter’s capacity as executor, not in the latter’s personal capacity as beneficiary.
[21]
I would add that the legislature had good reason to use the wording it chose. The norm is that estate
duty is based on the value of the estate assets as at the date of the deceased’s death. Section 5(1)(a) permits a departure
from that norm. Heirs and legatees are naturally free to sell their rights to their inheritances for such prices as they see fit.
However, the sale price of estates assets, if that price is to bear upon the assessment of estate duty and thereby play a role in
determining what the beneficiaries eventually receive from the estate, should logically and appropriately be within the powers and
functions of the executor to control. An executor has to act with careful regard in relation to those who have, or might have, an
interest in, or rights to, the estate. In realising estate assets the executor is subject to the views of the heirs and, if necessary,
the Master. This structure seeks to ensure that disposal of estate assets in the liquidation process not only pays heed to the subjective wishes
of the beneficiaries but is also safeguarded by responsible, independent and dispassionate oversight. That being so, if a price is
agreed to by the executor, that fact is, generally, a stamp of reliability signifying the realisation price as a sound enough indicator
of current market value as at the date of sale to justify reliance upon it for purposes of determining the duty. By contrast, unchecked
disposal of their rights by the heirs or other beneficiaries is subject to erratic considerations. Obviously it would normally be
in their best interests to obtain the best possible price but it is not unrealistic to imagine the pressure of straitened financial
circumstances inducing the acceptance of sale prices below current fair market value.
[22]
In the present case, of course, the properties sold included the estate’s erstwhile undivided half-share
in five of the units. An undivided half-share 9is not an attractive purchasing proposition to someone totally unrelated to the holder
of the other half-share. But that negative feature was removed by the respondent’s acquisition, via the distribution agreement,
of sole ownership. In these circumstances, however, the realised price was no guide at all to the market value of the deceased’s
half share, or, for that matter, once all the properties were bundled together, of her solely owned units. Had the disposal been
by the respondent qua executor it would have been necessary for him to have regard to s 5(1) and to the need, in contemplating disposal, to consider carefully
whether the estate assets were being sold for acceptable prices.
[23]
These considerations militate further against construing ‘in the course of’ as ‘during’
even if there can, in theory, be scope for interpreting the same wording in two different statutes to mean different things.
[24]
Section 24 of the Act as it applied to the present case contained a subsection (7) (since repealed) which
empowered the court below to give such decision as in its view the Commissioner ought to have given. It follows that this court can
do the same. It was common cause between counsel that if the appellant’s interpretation of the material words was in our view
wrong we should substitute our decision for his.
[25]
Quite apart from the consideration that in selling to Prinsloo the respondent did not purport to act
as executor but only in his personal capacity as usufructuary, and as his son, Fransie’s, representative, the following further
facts demonstrate that the sale was not in the course of the liquidation:
1.
All the units of land were sold together as one. The merx
included the
respondent’s undivided half share in five of the units.
His property
was not an estate asset. It was not part of the liquidation process to
sell it.
2.
It was not necessary for any estate purpose to sell any of the
immovable estate assets
prior to finalisation of the account.
3.
The sale was consequent upon the decision by the respondent and
Fransie to sell, pursuant to the redistribution agreement, in advance of
their receiving
transfer from the estate.
[27]
It follows that the appellant was not entitled to rely on s 5(1)(a) and that the valuations reflected
in the account are not assailable.
[28]
The appeal is therefore dismissed, with costs.
________________
CT HOWIE
PRESIDENT
SUPREME COURT OF APPEAL
CONCUR:
FARLAM JA
BRAND JA
LEWIS JA
HEHER JA
SAFLII:
|
Terms of Use
|
Feedback
URL: http://www.saflii.org/za/cases/ZASCA/2004/126.html
.RTF of original document