11 June 2021 by and Business Rescue, Restructuring & Insolvency Newsletter

Blowing hot and cold – the court’s take on a Master’s decision to go back on her decision in the appointment of liquidators

The doctrine of “functus officio” dictates that the decisions of officials are deemed to be final and binding once made. Thus, the decision of the Master, as an officer of the court, is deemed to be final and binding once it is published, announced or otherwise conveyed to those affected by it.

In an interesting line of litigation, in De Wet and Another v Khammissa and Others (358/2020) [2021] ZASCA 70 (4 June 2021), the Supreme Court of Appeal (SCA) has provided finality in what became a peculiar back and forth of decisions by the Master in respect of the appointment of liquidators in an insolvent estate. The doctrine of “functus officio” was thus considered.

In giving some context to the above, the litigation was pursuant to liquidation proceedings of a company and the appointment of liquidators in respect of same. On 31 August 2017, the Master decided not to appoint Gert de Wet and Johan Engelbrecht as additional joint liquidators of Duro Pressing (Pty) Ltd (in liquidation) (Duro) following the death of one of the existing joint liquidators (the first decision). However, on 25 October 2017, the Master then decided to appoint Gert de Wet and Johan Engelbrecht as additional joint liquidators of Duro (the second decision). The existing joint liquidators challenged the lawfulness of the second decision.

The second decision came about after the Master had received a letter from attorneys acting on behalf of an undisclosed group of creditors requesting reasons for the first decision. Once the reasons were provided, the undisclosed group of creditors requested that the Master reconsider the first decision.

As such, the Master reconsidered the first decision and handed down the second decision, and issued an amended certificate of appointment reflecting Gert de Wet and Johan Engelbrecht as additional joint liquidators of Duro.

The existing joint liquidators launched an application seeking to review and set aside the second decision, and for confirmation of the first decision as valid. They argued that the second decision was:

  • ultra vires;
  • procedurally unfair;
  • taken arbitrarily or capriciously; and
  • not rationally connected to the information before the Master.

In a scramble of argument and submissions raised by both parties on the grounds of insolvency law and company law in the court a quo, the SCA was able to rummage through what was described as the “unnecessary” legal argument, identifying the root of the issue: whether the Master had become functus officio once she had made the first decision, and thus had no power to revoke it and replace it with the second decision. In considering this issue, it became evident that the legal question was that of an administrative law nature rather than one of insolvency or company law.

In coming to its decision, the SCA highlighted the importance of the courts’ central role in the identification of issues and the necessity for the court to be able to identify the true issue for determination and to not allow the freight of unnecessary legal argument and application murky the metaphorical waters.

The SCA went on to highlight that the appeal turned on the question of the legality of the second decision. The question to be considered was whether the Master had the power to vary the first decision or whether the first decision was final.

The SCA considered commentary by Hoexter wherein the author explains that finality is a point arrived at when a decision is published, announced or otherwise conveyed to those affected by it, i.e. it must have passed into the public domain in some manner. In considering this literature, and the facts before it, the SCA found that the Master’s first decision had in fact passed into the public domain, thus, in the absence of any statutory provision to state otherwise, the Master had no power to revoke the first decision.

The SCA accordingly found the Master’s first decision to be final and irrevocable, thus rendering the second decision invalid. On this basis, the SCA found that the appeal failed.

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