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Fulton v Fismer and Another (AR176/08, AR177/08) [2008] ZAKZHC 110 (11 December 2008)

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IN THE HIGH COURT OF SOUTH AFRICA

NATAL PROVINCIAL DIVISION


CASE NO AR176/08

In the matter between:

M.J. FULTON …...............................................................................................Appellant

and

J.H. FISMER …....................................................................................First Respondent

B Z. MBHELE …..............................................................................Second Respondent



and



In the matter between:



CASE NO. AR177/08

M.J, FULTON …...............................................................................................Appellant

and

J.H, FISMER …....................................................................................First Respondent

N.J. MTSHALI ….............................................................................Second Respondent





JUDGMENT



KOEN, J.



[1] The appeals and cross appeals noted in the above two matters relate to three points in limine decided by the court a quo in applications for the rescission of previous orders granted by it

[2] The respective second respondents in the above two appeals are debtors whose estates are subject to administration orders granted pursuant to the provisions of section 74 of the Magistrate's Court Act No 32 of 1944 ("the Act"). The appellant was appointed as the administrator to their estates, and also to the estates of numerous other debtors He was arrested on 25 May 2006 and detained in custody pending trial. On 13 June 2006, an application for bail was refused,, On 10 July 2006, an appeal against the refusal of bail was dismissed, On 14 November 2006, and in terms of an order of the High Court, a curator was appointed to attend to inter alia the administration of the estates under the control of the appellant. The appellant was acquitted of the criminal charges and released on 16 March 2007.



[3] During or about 1 to 8 September 2006, the first respondent obtained an order in appeal AR 176/08 pursuant to a substantive "Application for Substitution of Administrator in terms of Section 74E

(2)". This order:

(a) relieved the appellant of his appointment as administrator of the estate of the second respondent;

  1. appointed the first respondent as administrator to the estate of the second respondent; and

  2. directed that the cost of the application be included in the cost of the Administration order,

A similar order was granted in appeal AR 177/08, save that costs were granted against the appellant. Similar orders were also granted in other estates where the appellant had been appointed as administrator

[4] During August to September 2007 the appellant brought rescission applications in some eight hundred estates in which he was so removed. These applications are based on the orders granted being void ab origine, as contemplated in section 36(1 )(b) of the Act read with rules 49(7) and 49(8) of the Magistrates' Court Rules. The relief claimed is as follows:

"1. That the order granted by this Honourable Court under the provisions of Section 74E(2) of the Magistrates Court Act, Act 32 of 1944 whereby the Applicant was relieved of his appointment as administrator and the First Respondent so appointed be and is hereby rescinded.


2. That the accompanying costs order granted against the Applicant also be and is hereby rescinded.


3. That the cost of this application be paid by the First Respondent on the attorney and client scale".


The applications were opposed on various grounds including that no "good reason" as required by rule 49(7) has been shown.



[5] The two applications forming the subject matter of the present appeals proceeded as "test cases" before the court a quo Three points in limine were identified by the parties' representatives, on which the magistrate subsequently ruled The learned magistrate held on the first point in limine in favour of the appellant that the order relieving the appellant of his appointment as administrator, appointing first respondent and for costs was indeed susceptible to rescission The learned magistrate held on the second point in limine in favour of the first respondent, concluding that first respondent had locus standi to approach the Court "for an appointment". The learned magistrate held on the third point in limine in favour of the first respondent that the non-citation and service of the appellants on the facts and the issues before him were not fatal. By agreement between the parties, the judgment of the court a quo on the three points in limine in the matter forming the subject of appeal AR176/08 would have the same result in the other matter.



[6] The appellant appeals against the findings of the learned magistrate on the second and third points in limine. The first respondent cross appeals against the ruling in respect of the first point in limine,, It follows from the parties' agreement that the same result would apply in respect of both matters and that the outcome of the appeal in the Mbhele appeal (AR176/08) will have the same result in the appeal under case Number AR177/08, In what follows I will deal with the facts relating to the former, inasmuch as they are similar to those in the latter, save where otherwise indicated.

[7] The first and second points in limine are in the nature of Special Pleas, which if successful, would have "the effect of finally and irreversibly disposing of a self contained defence which exists independently of the applicant's application" They are therefore in my view appealable - see Durban's Water Wonderland (Ptv) Ltd v Botha and Another 1999 (1) SA 982 (SCA) at 987 F - H and 992 E - 993 C, Phillips and Others v National Director of Public Prosecutions 2003 (6) SA 447 (SCA) at 452 paragraphs 18 and 19; Metlika Trading Ltd and Others v Commissioner, South African. Revenue Services 2005 (3) SA 1 (SCA) at paragraphs 23 and 24, In the light of these authorities, the appellant did not pursue the appeal in respect of the third point in limine, in my view correctly so, as a finding in respect thereof might not necessarily "finally and irreversibly" dispose of the issue. It is not necessarily a "self contained defence", Possible deficiencies relating to service and citation might have to yield, in the magistrate's judicial discretion as to whether the appellant had demonstrated "good reason", to other considerations The discretion as to whether there is "good reason" must be exercised on a conspectus of all the relevant considerations. It should not be fettered in any way by a piecemeal disposal of potentially relevant individual considerations which are required to be weighed up cumulatively in the final exercise of that discretion. To hold otherwise would mean that relief in the nature of declaratory relief, not dispositive as self contained defences, would be appealable. The finding on the third point in limine was in the nature of an interim ruling on a question of law. Such rulings are not orders and generally not appealable - see Dickinson and Another v Fischer's Executors 1914 AD 424 and Klep Valves (Ptv) Ltd v Saunders Valve Co Ltd_1987 (2) SA 1 (A) at 40^41 The appellant accepted the above and did not pursue his appeal on the third point in limine in argument It will accordingly not be considered further in this judgment,



[8] The first and second points in limine upon which argument was addressed to us, will be dealt with in the order and sequence in which they were identified.



[9] Mr Harcourt on behalf of the first respondent submitted that the judgment in terms of section 74E(2) is an administrative act and not a "judgment" in a "civil case", that the Magistrates' Court was merely performing an administrative or supervisory function in relieving the appellant from his appointment and substituting the first respondent, that not being a judgment that decision was not rescindable. He argued that the appointment of an administrator is analogous to the appointment of a trustee pursuant to the provisions of the Insolvency Act No. 24 of 1936, or a liquidator (or for that matter a judicial manager) in terms of the Companies Act No, 61 of 1973, or the appointment of an executor in terms of the Administration of Estates Act No. 55 of 1965.

Not being a "judgment" as defined In section 1 of the Act, in a "civil case", he argued that if it was to be challenged, this was to be by way of a review application to the High Court (relying on Qosthuizen v Landdros. Senekal en Andere 2003 (4) SA 450 (0))„ Alternatively, the submission is that the appellant should have brought a new application for his "re-substitution" as administrator,




[10] "Judgment" is defined in section 1 of the Act as follows:


"'Judgment' in civil cases, includes a decree, a rule and an order",

The term "civil cases" in the definition of "judgment" is used to distinguish it from "criminal cases", which are dealt with in Part III of the Act.



[11] Any argument that the grant of an administration order (and "decisions" pursuant thereto, including relieving administrators from their appointment) relates to the execution process, as opposed to being a judgment on the merits of a dispute, does not, in my view, preclude such "decisions" from being an "order" in a "civil case". It is an "order" given by the magistrate in a case which is not a criminal case. That it is an "order" appears to be recognized by the express provision in section 83(a) of the Act which renders orders in respect of execution appealable. The grant of an administration order has been accepted to be capable of rescission - see DaMata v FirstRand Bank Ltd 2002 (6)

SA 506 (W) at 5Q7C Alternatively, any argument that such orders do not relate to matters of execution either (and hence are not appealable as such), a proposition with which I have considerable difficulty, does not make them not "orders" as defined and hence administrative acts, not capable of rescission.




[12] Section 74E (2) provides:



"An administrator may on good cause shown be relieved of his appointment by the court and the court may appoint any other person in his place." (my emphasis)


"The Court" is defined in the Act to mean "a Magistrates' Court'*. "Magistrate" is defined separately and distinctively. The fact that the provisions of sections 74 and 74A to 74 V throughout mainly, if not exclusively, refer to "the Court" and not to a "magistrate", does not mean that a magistrate, even in performing a function in Chambers, is necessarily acting in an administrative capacity, and that the express wording of section 74E (2) must yield to some other meaning or inference. A Judge in Chambers, when granting a warrant or interim order, acts as a Court in a judicial manner and not in an administrative or like capacity - compare Pretoria Portland Cement Co Ltd and Another v Competition Commission and, Others 2003 (2) SA 385 (SCA); Zuma & Ano v NDPP and Ors [2008] 2ACC 13 at paragraph 90,

[13] The Act clearly contemplates particularly the relieving of an administrator from his functions as administrator, but also the appointment of another in his place, to be the responsibility of "the Court", where a magistrate sitting as a judicial officer exercises a judicial discretion It does not contemplate an administrative act and that the directive or decision issued by "the Court" and handed down, being anything other than a judgment within the definition of section I of the Act.

[14] In further support of the argument that the decision to remove the appellant was an administrative act only capable of review, it was submitted that problems could arise with a rescission ab initio, operating retrospectively, particularly whether it would result in all the work performed by the first respondent since his appointment being "undone" in an attempt to restore the status quo ante. In my view those problems would not arise as the rescission would probably operate prospectively. In any event, whatever distributions might have been effected by the first respondent pursuant to his appointment could hardly be challenged or sought to be reclaimed as creditors receiving payment from the debtors estate clearly would be entitled thereto, It is difficult to conceive of any condictio lying. The fact that the payer (first respondent) of those payments might not have been properly appointed, would not affect the validity of the payments.


[15] The analogy with trustees, liquidators, executors and the like, is not a valid one. Generally those functionaries are appointed, or their nomination approved by the Master of the High Court, an administrator, clearly acting in an administrative capacity Those decisions are reviewable. There is no persuasive reason why the appointment of an administrator and even more importantly the removal of an administrator, simply because an administration order is in the nature of a scaled down insolvency, should be construed as anything other than an order of the Court, in a civil matter, giving effect to the expression of a judicial discretion, by way of appropriate judgments, rulings or orders. As with the provisions of section 65, the legislature consciously used the word "the Court", as opposed to "Magistrate".



[16] The grant of an administration order is by its very nature an order pronounced by a Court of law. The appointment by a court of law of an administrator thereafter is likewise clearly an order in a civil case - see Oosthuizen v Landdros Senekal en Andere (supra) and Foschini Retail Group (Fty) Ltd v Zietsman and Another [2007] 2 All SA 93 (C). The order granted is one appealable as a judgment in a "civil case" - see by analogy also Mnisi v Magistrate. Middelburg and Others [2004] 3 All SA 734 (T), Fortein and Others v Various Creditors 2004 (2) SA 570 (C) and Cape Town Muncioalitv v Dunne 1964 (1) SA 741 (C).

[17] The fact that the court granted costs orders (in the two different forms in the matters before us), as sought by the first respondent, took the decision as a whole out of the category of remotely being an administrative act and placed it squarely within the parameters of a court order



[18] The learned magistrate's conclusion on the first point in limine was correct and the cross appeal falls to be dismissed. I turn to consider the second point in limine.



[19] In launching the application in terms of section 74E (2), the first respondent did not represent the second respondent, any creditor or other party interested in the second respondent's estate, nor did he act in any representative capacity. He had no direct or substantial interest in the matter save for personal future financial gain once the appellant was relieved of his appointment and he was appointed in his place.



[20] It is a jurisdictional pre-requisite to an administrator being relieved of his appointment in terms of section 74E (2) of the Act, that "good cause" must be shown. A court has a discretion to determine whether good cause has been shown It is a discretion to be exercised judicially having regard to all the circumstances of a particular case. The question as to what exactly may constitute "good cause", was left open by the Supreme Court of Appeal in Weiner N.Q. v Broekhuvsen 20Q3 (4) SA 301 (SCA) at 308 B - D„



[21] Section 74E (2) is silent as to how the "good cause" is to be "shown" In particular, can it be said that good cause can be "shown" before Court if the Court acts mero motu (or $uo-motu)7 It is not necessary to decide whether a Court acting mero motu can satisfy the test for good cause shown to itself, as the order in casu was sought and obtained on the basis of an application brought by the first respondent, supported by affidavit. Any deficiencies of form aside, the parties have never been in any doubt that it was an application brought by the first respondent seeking an order relieving the appellant from his appointment, appointing the first respondent as administrator and for costs,, There has never been a suggestion that the Magistrate acted mero motu.. The first respondent was bringing an application and he clearly accepted the onus of showing "good cause" by advancing in the founding affidavit the temporary absence of the appellant due to his incarceration. The order sought, at least insofar as it claimed relieving the appellant from his appointment, detracts from the rights of the appellant and prejudices his rights, particularly considering also that he probably would have had to provide security in terms of section 74E (1) and would have invested material and labour in his appointment and work as administrator, all legally recognised rights worthy of protection and not liable to be removed without due process.



[22] The only parties with a direct and substantial interest in the appointment and execution of the duties of an administrator are the debtor (second respondent) and his creditors. The only interest a person seeking appointment as administrator can have, is pecuniary,, In my view an application in terms of section 74E (2) has to be brought by someone who has locus, An expectation of profit does not constitute locus. I am in respectful agreement with the dicta in Fulton v Buthelezi Case No. AR805/03 NPD at page 16 [2006] JOL17856 (N) where it was held that:



"Zietsman, himself, would not have had locus standi to apply for the appellant to be relieved of his appointment as administrator and/or the appointment of

himself..."


The judgment of Fulton v Buthelezi is distinguishable on the facts from the present, but the quoted dictum remains relevant and apposite to the circumstances also of this case.



[23] It is legally untenable, would create a dangerous precedent and be contrary to accepted legal principle if potentially competing incumbents to appointment of administrators to debtors in terms of section 74 were to be held to be vested with the necessary locus standi to apply to Court for an order in terms of section 74E (2). It could create a flood of applications by a number of competing administrators who all have no interest other than personal financial gain Even If the administration of a debtor's estate was to be left rudderless during the vacuum left by the absence, for whatever reason, of the appointed administrator, then the appropriate party to bring such application would be those directly affected, either the debtor or then one or more of his creditors. The first respondent had no interest in the actual subject matter of the proceedings apart from his hope of financial gain - see Nieuwoudt v The Master and Others NNQ 1988 (4) SA 513 A at 528 F-531 H The first respondent was not mandated nor did he seek to represent any debtor or any of the creditors.



[24] The first respondent did not have the required locus standi and the learned Magistrate erred in concluding in respect of the second point in limine that he did. In reaching that conclusion the learned Magistrate said that there is no particular category of people indicated or designated in section 74E (2) to bring such application, and that there was nothing to indicate that Mr Fismer would not have locus standi,, Accordingly, he concluded that "the court has a discretion in general" and that "to exclude any suitable person such as Mr Fismer would go beyond the purpose and the scope of section 74".


[25] The fact that, the section is silent as to who may apply, does not mean that anyone can apply. The provision clearly must be read and understood against the background of the common law, specifically the requirement that an applicant must have a legally recognized or affected right. The first respondent failed to establish such right, Even if I was wrong and it could be said that the first respondent had locus standi to apply for his own appointment, he certainly did not have locus standi to apply for the appellant to be relieved of his appointment.



[26] It follows, if the second point in limine should have been decided in favour of the appellant, that the orders in terms of section 74E (2) should never have been granted and are void ab origine. The lack of locus standi in iudicio, constituted good reason per se for the orders to be rescinded. Had the court a quo come to that conclusion, it should then have granted the applications for rescission.



[27] The matter was novel and one of some complexity and justified the employment of two counsel on appeal.



[28] The following order is granted in each of the two appeals:

(a) the cross appeal is dismissed with costs;

(b) the appeal against the second point in limine is upheld with costs such costs to include the costs consequent upon the employment of two counsel; and

(c) the Magistrate's finding in respect of the second point in limine is set aside and substituted with the following :

An order is granted in terms of paragraphs 1, 2 and 3 of the Notice of Application .."


VAN DER REYDEN, J. I agree


Date of Hearing 7 November 2008

Date of Judgment 11 December 2008

Counsel for Appellant K. Kemp SC

E Crots


Instructed by Pitcher & Fismer

Counsel for 1st Respondent A W M Harcourt

Instructed by Lyle & Lambert Attorneys