financial intelligence centre act, no. 38 of 2001 (fica ... · page 1 financial intelligence centre...

FINANCIAL INTELLIGENCE CENTRE ACT, NO. 38 OF 2001 (FICA)AND CORRUPTION – A GENERAL OVERVIEW

JU

LY 2

005IN THIS ISSUE

Financial Intelligence Centre Act... Pg 1

Innocent Trustees Off The Hook -or Not?.......................................... Pg 3

Obituary: Morris Silver ................. Pg 5

Chairman’s Note........................... Pg 6

Creditors and the Tax Man............ Pg 7

Editor’s Note................................. Pg 9

Joint Liquidator’s Fees .................. Pg 9

Liquidator’s LogOn....................... Pg 10

Regional News............................. Pg 11

Access by Insolvent to funds tooppose sequestration.................... Pg 12

FINANCIAL INTELLIGENCE CENTRE ACT, NO. 38 OF 2001 (FICA)AND CORRUPTION – A GENERAL OVERVIEW

Introduction

It is the stated aim of the South AfricanGovernment to ensure our countryremains abreast of international trends.This aim finds its expression in thepromulgation of legislation, such as thePrevention of Organised Crime Act,No. 121 of 1998 (POCA) and theFinancial Intelligence Centre Act, No.38 of 2001 (FICA), which is aimed atcountering money-laundering activitiesand aligning the country with theinternational community.

This legislation has far-reaching effects,and also applies to those who assistcriminals to hide from the law, or toenjoy the fruits of their crimes byconcealing or disguising the propertyin question. Furthermore, merchantswho assist in the process by using oraccepting criminal proceeds inexchange for goods or services, are

equally guilty of money laundering inthe eyes of the law.

Because of the ease with whichinternational borders are crossed,money laundering cannot be addressedin isolation and both the co-ordinatedefforts and mutual legal assistance ofneighbouring countries are required ifthe problem is to be adequatelycountered.

Meaning of Money Laundering

Money laundering is the processwhereby the illicit gains from unlawfulactivities are transformed from theircriminal source and made to appearlegal by means of a single or series oftransactions. Money launderingtraditionally includes all activities aimedat disguising or concealing the natureor source of, or entitlement to, moneyor property derived from criminalactivities.

FICA, which together with POCA,constitutes South Africa’s main anti-money laundering legislation, has beenin effect for approximately two yearsand was effectively imposed on SouthAfrica by international banking practiceand anti-money laundering legislationworld-wide. In order to counter moneylaundering activities in our financialsystem, the South African Governmentdeemed it fit to enact FICA as honestyand market integrity are only too often

undermined by efforts to launder moneythrough our banks, brokers and insurers,to name but a few institutions noweffected by the provisions of the latestlegislation.

Anti-Money Laundering Obligations

FICA sets up a regulatory anti-moneylaundering regime which is intended tobreak the cycle used by organisedcriminal groups to benefit from theirillegitimate profits. FICA creates, interalia, a range of anti-money launderingobligations – including customeriden t i f i ca t ion , record-keep ingrequirements and internal controls – fora number of “accountable institutions”of which a total of nineteen are definedin the legislation. These include banks,securities and investment firms,insurance companies, foreign exchangedealers, casinos, lawyers and estateagents. The identi f icat ion andverification of the client is important asan accountable institution may notestablish a business relationship orconclude a single transaction with aclient unless it has followed prescribedsteps to establish and verify the identityof such a client.

FICA requires South Africa’s banks tocomply with “Know your client”provisions aimed at preventing moneylaundering and maintaining the integrityof the country’s financial systems.Although originally required to verify the

Phyllis Atkinson

identities of their clients by 30 June2004, this has been deferred to an arrayof new cut-off points commencing with31 December 2004 in respect of abank’s “highest-risk clients”.

Accountable institutions are alsorequired to report “suspicious andunusual transactions” to the FinancialIntelligence Centre, established in termsof FICA to receive, analyse anddisseminate such reports. Although theAct makes provision for regulations, thethreshold value for such transactionsis yet to be determined. An indicationof such a transaction would, at present,be the receipt of the proceeds ofunlawful activities or a transaction forwhich there is no apparent business orlawful purpose.

A failure to verify the identity of clients,retain records and report on suspicioustransactions may, on conviction, leadto a fine not exceeding R10 million orimprisonment not exceeding 15 years.

Applicability to Trustees, Liquidatorsand Judicial Managers

Section 29 of FICA places a duty toreport suspicious and unusualtransactions on any person who, interalia, is in charge of or manages abusiness, and who knows or suspects,inter alia, that the business has receivedor is about to receive the proceeds ofunlawful activities.

Given the fact that a trustee is requiredto take into his or her possession orunder his or her control all moveableproperty, books and documentsbelonging to the estate of which he orshe is trustee in terms of section 69 ofthe Insolvency Act, No. 24 of 1936, itwould appear that he or she would berequired to report suspicious andunusual transactions in terms of FICA.Although the trustee of an insolventestate does not qualify as an“accountable institution”, it would appearthat he or she may well be bound bythe provisions of section 29.

The liquidator is duty-bound in terms of

section 400 of the Companies Act, No.63 of 1971 to examine the affairs andtransactions of a company before itswinding up and report to the Master onoffences that may have been committedby any of the directors or officers, pastor present. The Master, in turn, isrequired to transmit a copy of suchreport to the Director of PublicProsecutions. Given the Centre’sobjective of, inter alia, makinginformation collated by it available toinvestigating authorities in any event,whether the liquidator is also requiredto report to the Financial IntelligenceCentre in terms of FICA is debatable.However, it may be argued one shoulderr on the side of caution.

Where a company is placed underjudicial management, the judicialmanager assumes the management ofsuch company and is required toconduct such management, subject tothe orders of the Court, in such amanner as he or she may deem mosteconomic and most promotive of theinterests of the members and creditorsof the company. As in the case ofliquidators, he or she is required toreport to the Master on offencescommitted before the commencementof the judicial management. The judicialmanager may, however, be obliged toreport suspicious and unusualtransactions to the Financial IntelligenceCentre which take place during suchjudicial management.

Confidentiality

FICA specifically provides that, subjectto the common law right to legalprofessional privilege in respect ofcommunications between attorney andclient, there is no duty of secrecy orconfidentiality or any other restrictionon the disclosure of information by any

of the other accountable institutions.

The accountable institution can,therefore, no longer hide behind anyconfidentiality clause and is obliged toco-operate by passing on anyinformation to the Financial IntelligenceCentre. In the case of a communicationmade to an attorney, the fact that it wasmade in conf idence does notn e c e s s a r i l y m e a n t h a t t h ecommunication is privileged – although,in essence, communications made inconfidence between the attorney anda client for the purpose of legal adviceor pending litigation remain privileged,a deposit into an attorney’s trust accountfor investment purposes will not enjoythe protection of such privilege. Theattorney will be obliged to disclose suchinformation. It is, therefore, of vitalimportance that the distinction betweenconfidential and privileged informationbe clearly understood as the fact thata communication is made in confidencedoes not necessarily mean that it isprivileged.

Prevention and Combating ofCorrupt Activities Act, No. 12 of 2004(New Corruption Act)

The Act, which is commonly referred toas the “New Corruption Act”, came intoexistence on 27 April 2004.

It not only provides for a general offenceof corruption (section 3) but also for arange of corrupt activities, which arepunishable offences in terms thereof,e.g. offences in respect of corruptactivities relating to specific personsand offences relating to possible conflictof interest and other unacceptableconduct.

Of particular significance are theprovisions of Chapter 7 which deal with

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INNOCENT TRUSTEES OFF THE HOOK – OR NOT?

the legal duty to report certain offencesand extra-territorial jurisdiction in respectof corrupt activities.

The duty to report certain offences

Section 34 provides that any person ina position of authority who knows orought reasonably to have known orsuspected that another person hascommitted:a) Corruption orb) The offences of theft, fraud extortion,forgery or uttering of a forged document,involving R100 000 or more,must report such knowledge orsuspicion or cause same to be reportedto a police official.Failure to comply with this obligationconstitutes an offence and provision ismade for a sentence not exceeding 10years, or a fine or a period of

imprisonment not exceeding 3 years inthe case of a High Court andMagistrate’s Court respectively.A person holding a position of authorityincludes, inter alia, any personresponsible for the overall managementof the business of an employer. Onceagain, in light of the duty to report onoffences to the Master in terms of theCompanies Act, it is debatable whethersection 34 applies to liquidators andjudicial managers in respect of offencescommitted before winding up or thec o m m e n c e m e n t o f j u d i c i a lmanagement. It would, however,appear to apply to trustees.

Extra-Terri torial Jurisdict ion

The New Corruption Act furthermorecriminalises corrupt activities relatingto foreign public officials. The statute

provides that South African courts havejurisdiction in respect of corrupt activitiescommitted outside the country,notwithstanding the fact that suchactivities may not constitute offencesat the place of commission thereof.

The section not only applies toindividuals/citizens, but also to acompany incorporated or registered assuch under any law in South Africa orany body of persons corporate orunincorporated in the country. Theactions of representatives of SouthAfrican companies abroad may thusattract criminal liability for the principalslocally.

Adv Phyllis AtkinsonAssociate DirectorDeloitte Forensic & Dispute ServicesCape Town

In a judgment delivered on 30November 2004 in the matter of B J VDurandt v Federal Insurance Ltd2005 (3) SA 350 (SCA), the SupremeCourt of Appeal upheld the appeal of atrustee in an insolvent estate againstan earlier decision of the Cape HighCourt holding him jointly and severallyliable with his co-trustee for damagessuffered by the estate as a result oftheft of the estate's moneys.

Durandt had been appointed togetherwith one Van Rensburg as joint trusteein an insolvent estate. The co- trusteessigned separate undertakings and

bonds of security in favour of the Master.The trustees then arranged betweenthemselves that Van Rensburg wouldattend to the day to day administrationof the estate. Van Rensburgsubsequently forged Durandt's signatureon transfer documents in respect of animmovable property owned by theestate and decamped with theproceeds.

It was common cause between theparties that Durandt was entirelyinnocent, and had not been negligentin administering the estate or otherwisein breach of any duty on his part.

Fedsure, which had issued the suretybond to the Master for the co-trustees'liability in terms of the undertakings andbonds of security given by them, paidthe Master the amount of the loss tothe estate. Fedsure then sought toexercise its right of recourse againstthe trustees.Van Rensburg was nowhere to be foundand the case proceeded againstDurandt only.

The Cape High court found in Fedsure'sfavour on the basis that co-trusteeswere jointly and severally liable evenwhere they did not act jointly and in theabsence of any fault on the part ofDurandt. The finding was based on theinterpretation of Section 56(4) of theInsolvency Act ("the Act") and thecommon law Roman Dutch position.

On appeal the Court focussed on theterms of the undertaking and bond ofsecurity given by Durandt to the Master.

The Court found that while the Mastercould enforce the terms of the standardundertaking and bond of securityfurnished to him by trustees orliquidators under Section 56(2) of theAct, the Master has no general powerto recover money from the debtors ofan insolvent estate on its behalf.Accordingly, the Master was only ableto recover any losses suffered by theestate from the trustees pursuant to theundertaking and bond of security givenby them.

INNOCENT TRUSTEES OFF THE HOOK – OR NOT?

Natasha Kapp

In this matter the Court found thatwhen Durandt signed the undertakingand bond of security in favour of theMaster, there was no reason why heshould not have undertaken liability forhis own loss or default alone and thaton a proper construction of theundertaking, Durandt's liability wasconfined to any loss or damages whichwere suffered by the estate or by anyother person by reason of the fact thathe himself had failed to perform properlyhis functions as a trustee or becauseof maladministration on his part. As thetheft of the estate property by VanRensburg was not due to such a failureby Durandt nor was it due to hismaladministration, the Court held thatthe Master had no claim against himarising from the undertaking. It thereforefollowed that as Durandt was not liableto the Master on the undertaking,Fedsure could not exercise any right ofrecourse against him.

The Court did not decide the questionof the interpretation of Section 56(4) of

the Insolvency Act which holds trusteesjointly and severally liable for every actperformed by them jointly and whetheror not the common law rule whichrendered each co-trustee jointly andseverally liable for every act performedin the administration of the estate, evenwhere he/she did not act jointly and/orwas innocent of that act, survived thecoming into operation of the Act. HeherJA stated obiter that he had some doubtas to whether the common law rulesurvived the coming into operation ofthe Act.

In a strongly-worded dissentingjudgment, Conradie JA was of the viewthat there are sound practical reasonswhy joint trustees should be jointly andseverally liable and that on the facts inthis matter, i t was a sensibleinterpretation that the two trustees, bysigning separate but ident icalundertakings, had intended to be andwere jointly and severally bound to theMaster.

The judgment therefore does not resolvethe issue finally.

No doubt the Master and insurersissuing surety bonds for trustees andliquidators will respond to the judgmentby ensuring that joint trustees andliquidators henceforth sign a singledocument in which they clearly bindthemselves jointly and severally andthat surety bonds will be issued only onthat basis.

Insolvency Practitioners will be welladvised to hold professional indemnityinsurance, particularly in respect of jointappointments.

Natasha KappJan S. de Villiers AttorneysCape Town

“To create a transparent environment in which our members irrespective of race, creed or gender,

can practise their profession in accordance with the Constitution of the Republic of South Africa,

so as to provide an effective, professional service to all stakeholders by skilled, independent

practitioners with the highest integrity and being mindful of:

• community interests

• the Constitutional Rights of individuals; and

• a sustainable economy.”

The Aipsa Mission StatementThe Aipsa Mission Statement

1. The recent passing of Morris Silverlast year brought to an end an era inthe practice of insolvency law whichwas distinguished by the presence andpractise of giants in that field who pavedthe way in making it not only a boutiquespecialisation but who opened the doorsto its acceptance as one of the mostinteresting areas of the Law having dueregard to the advent of commercialmaturi ty through technologicalbreakthroughs.

2. Morris Silver, like so many of hispeers, came out of the cauldron of Witsuniversity in the 1950’s and entered intopractice in an area of the law which wasregarded somewhat distastefully andas suspect by many of the so-calledestablishment law firms which wouldnot deign to practise in that milieu – anattitude which has seen a dramatic volteface in more recent years.

3. Commencing practice for his ownaccount after serving his articles asboth a clerk and a bookkeeper in 1960,Morris Silver was a landmark in thepractise of insolvency and commerciallaw in Johannesburg for over 40 years,until he was forced to retire early in2001 due to the debilitating effects ofhis illness and ultimately his untimelypassing at age 75.

4. Over the last 30 years, he was thesenior partner of M J Silver Rothbartand Cohen until his retirement after a

few months as a consultant with SlootBroido. He brought to every firm in whichhe was involved, an eccentric yetlovable genius, and while he may havebeen regarded, and rightly so, as thescourge of many of his colleagues whodared to invade his turf; of Magistratesand Assistant Masters who had thetemerity to consider that they couldteach him anything about insolvencyand of liquidators and trustees who mayhave overstepped the boundaries ofethical conduct and practise, he wasjust as likely, having exposed theshortcoming or practise complained of,to spend inordinate time in preventingthe long arm of the law in using hisexposes to punish the perpetrators. Hewas famous for leading liquidators tothe edge of an abyss and then stoppingwhen they conceded they had learnttheir lesson, and more often than notbecoming their champion in the future.

5. Tales of his exploits resound in theannals of how [or how not to] conductan insolvency enquiry. His incredibleunderstanding of the machinations ofdirectors and their accountants andwhere to find the key to the fraud, thetheft and the defalcation, was legend.Few among his colleagues, then andeven today, could understand theintricacies of double entry accounting;of reading and understanding a balancesheet and of isolating those suspectentries which paved the route tosuccessful recoveries.

6. Morris was highly respected for hisability but greatly feared as well. ManyHigh Court Judges, today and fromyears before, would contact him todiscuss draft judgments and the legalprinciples they wished to opine upon.But that help did not come free of cost– there is a lovely story about an urgentapplication where Morris went off toregale the duty judge, in this case theLate Geoff Leveson, while counsel wasbeing sought and briefed. When the

matter was called in Chambers,Leveson J remarked that he was givingthe Order to get Morris out of hisChambers rather then on the merits ofthe matter, his ears having beenovertaxed by Silver-isms on any numberof subjects and always spiced with the‘good old days’ when lawyers werelawyers and judges interpreted law, notwith political or modern mores in mind,but as purists.

7. Many witnesses who bore the bruntof his fierce and pointed examination,after collapse and settlement, chosehim as their representative in the futureand received the same valued serviceand insight into the law that they hadbeen forced to suffer as the erstwhilemiscreants. Many of the Masters of theHigh Court regarded Morris as a firmand respected friend, never seekingnor expecting a ruling or decision tingedby that friendship. When practising hisbeloved profession, he had no friends,only a client to protect and an adversaryto be vanquished. Costs bore norelevance in his equation; but by thesame token, a good settlement wasalways encouraged rather thanextensive and expensive litigation. Hewas a true servant of what was good,right and just in the law and never bentthose principles.

8. The last of those giants has nowgone. The practice of Insolvency Lawis that much poorer and will never reachthe heights and passions known so welland which he so embodied. R.I.P. Morris– from whichever side of the dock onestood, he is certainly deserving of thataccolade and of the respect he gainedfrom all who were associated with him.

ABOUT THE AUTHOR:

Stanley Rothbart is the senior directorof Rothbart Inc., Attorneys inJohannesburg, and a partner of MorrisSilver for some 28 years.

Morris Silver

TO ALL MEMBERS

NATIONAL COUNCIL: TRANSFORMATION

In accordance with the mandate received at the last annual general meeting of our Association and in compliancewith the wishes of members expressed at various regional meetings during the year, your Council has madeevery effort to facilitate the transformation of our organisation to an organisation which not only acts in the bestinterests of al l i ts members and practit ioners in general, but which is seen to do so.

Although we have been committed to transformation for a very long time, it has become evident that ourcommitment and ideals have not been effectively conveyed to the wider insolvency practitioner community.

As a result of the resignations as councillors of Messrs Galloway, Reynolds and Schoerie we have been ableto appoint councillors in their place and stead, in accordance with our Constitution.

After careful consideration we approached two senior insolvency practitioners and practising attorneys in Gauteng,Messrs Nano Matlala and Juanito Damons. These two gentlemen, after having been assured of our commitmentto transformation and our stated ideal to act in the best interests of all our members and insolvency practitionersin general, have now become members of our Association. They have also been duly appointed as councillors.We have also decided to make such Council more representative as far as gender is concerned and we willshortly appoint a female practitioner to our Council.

We sincerely wish to thank Messrs Matala and Damons for accepting the aforementioned appointments andtrust that they will assist us in bringing structure to the insolvency profession and to ensure that Governmentwill grant us an audience to convey the aspirations of our members and to assist us in formally regulating theinsolvency profession.

Your continued support is not only appreciated, but essential to the welfare of our profession.

Best regards

Yours sincerely

L VON W BESTERCHAIRMAN

Administration OfficePO Box 36073Menlopark, 0102Tel: (012) 998 0683Fax: (012) 993 0172Email: [email protected]

THE ASSOCIATION OF INSOLVENCY PRACTITIONERSOF SOUTHERN AFRICA

(Association incorporated under Section 21 of the Companies Act )(Reg No 1986/002363/08)

CREDITORS BEWARE: THE TAXMAN WILL GET YOU, EVEN IF ITIS NOT FOR YOUR OWN TAX LIABILITYCREDITORS BEWARE: THE TAXMAN WILL GET YOU, EVEN IF ITIS NOT FOR YOUR OWN TAX LIABILITYEver thought it would be possible to beheld liable for the tax of an individualor entity other than your own?

The simple truth is that it is possible, ifthe interpretation of South AfricanRevenue Services (“SARS”) of theprovisions of Section 22(3) of theValue Added Tax Act, Act 89 of 1991,as amended, is applied to situationswhere the vendor is sequestrated orliquidated.

In order to understand the abovestatement, it is necessary to considerthe provisions of Section 22(3). Thesection reads as follows:

“Where a vendor who is required toaccount for tax payable on an invoicebasis in terms of Section 15 –

(a) has made a deduction of inputtax in terms of Section 16(3) inrespect of a taxable supply of goodsor services made to him; and

(b) has within a period of twelvemonths after the expiry of the taxperiod within which such deductionwas made, not paid the fullconsideration in respect of suchsupply;

an amount equal to the tax fraction,as applicable at the time of suchdeduction of that portion of theconsideration, which has not beenpaid, shall be deemed to be taxcharged in respect of a taxablesupply made in the next followingtax period after the expiry of theperiod of twelve months: Providedthat the period of twelve monthsshall, if any contract in writing in

terms of which such supply wasmade provided for the payment ofconsideration or any portion thereofto take place after the expiry of thetax period within such deduction wasmade, in respect o f suchconsideration or portion, becalculated as from the end of them o n t h w i t h i n w h i c h s u c hconsideration or portion was payablein terms of that contract.”

It is furthermore necessary to considerthe provisions of Section 53(1)(a) of theVAT Act, which stipulates “Where, afterthe death of any vendor or thesequestration of his estate, anyenterprise previously carried on bythe vendor continues to be carriedon by or on behalf of the executoror trustee of his estate or anythingis done in connection with thetermination of the enterprise, theestate of the vendor, as representedby the executor or trustee, as thecase may be, shall for purposes ofthis Act, be deemed to be a vendorin respect of the enterprise.”

INTERPRETATION OF SARS

SARS made a ruling in a particularliquidation matter that the deemed taxreferred to in Section 22(3) is to be paidas a cost of administration where thetwelve-month period expires after theeffective date of liquidation. This rulingappears to be based on the following:

(1) As a result of the provisions ofSection 53(1)(a), the trustee/liquidatorfills the shoes of the vendor and isrequired to declare and account for anyoutput tax.

(2) Due to the vendor claiming inputVAT prior to liquidation/sequestrationand full consideration not having beenpaid, the liquidator/trustee is requiredto account for output tax in relation tothe amount outstanding in terms ofSection 22(3), where the twelve-monthper iod exp i res a f ter date o fliquidation/sequestration.

(3) Due to the period within which theliquidator/trustee is to account for thedeemed output tax in terms of Section22(3), falling within the administrationperiod, such deemed tax is payable asa cost of administration.

EFFECT OF SARS RULING

The effect of the ruling is that ap rev ious l y unknown cos t o fadministration is now to be takenaccount of in determining whether adanger of a contribution exists or not.

Let me illustrate this point by way of apractical example:

Assume the following facts exist:

1. Gross Amount available for distribution to preferent and concurrent creditors amount to R200 000.00.

2. Preferent Creditors

Only employee claims ofR100 000.00 and no claims fromSARS for VAT or PAYE, etc.

3. Concurrent Creditors

Concurrent creditors of R2m andit is assumed that all of them were involved in VAT’able transactions with the liquidatedcompany and in all instances thetwelve-month period prescribedin Section 22(3) expires after theliquidation date. The tax portionwould therefore be approximatelyR245 000.00.




Should the SARS ruling on Section22(3) be applied the result will be thata contribution of R45 000.00 will have to be levied against proven creditorsin order to pay the shortfall to SARS.The creditor who proved a claim or whoapplied for liquidation/sequestration nowhave to pay for no other reason but adeemed VAT liability of the liquidatedvendor.

If it is assumed that SARS is correct inthe interpretation of the law as set outin the VAT Act, it is clear that in certaincircumstances a situation may arisewhere a creditor can become liable fort h e t a x l i a b i l i t y o f t h eliquidated/sequestrated entity. This isclearly a situation that could never havebeen intended by the Act. Due to thedifficulty that arises it appears that theliquidator/trustee should, where such asituation arises, apply in terms ofSection 72 of the VAT Act for a rulingby the Commissioner.

The difficulties with the ruling of SARSin respect of Section 22(3) in insolvencymatters, apart from the above, appearto be as follows:

1. No account is taken of the creation of a concursus.

2. Implementation destroys the purpose of the amendments to the Labour Relations Act, the Basic Conditions of EmploymentAct and Section 98(A) of the Insolvency Act to protect employees.

3. The administrative burden on both the liquidator and SARS employees can be seen as unreasonable.

4. It may result in unduly delayingany distribution to creditors.

It is clear that the effect of theseprovisions on all stakeholders oninsolvency matters were not consideredwhen the Act was drafted. It wouldappear that by applying these provisionsthe intent of Government to protectemployees and possibly savebusinesses, are completely defeated.

The solution to the aforementionedwould be an amendment to the relevantprovisions, excluding same in matterswhere the vendor is liquidated. Thiswill only happen if sufficient pressure isput on SARS by various organizationswhose members are affected.

Do your bit by applying the provisionsof Section 72 of the VAT Act, where youare confronted by the above situation.

Jurgens SteenkampKPMG, Cape Town

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T H E R I G H T C H O I C E F O R Y O U R A S S E T

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Movables

I was recently approached by a JointLiquidator to make a cheque out to theliquidator personally and not to thecompany he was employed by.Inter alia, this request has various effectson the Joint Liquidator who is to makethe payment.

I am of the view that no payment canbe made to a liquidator personallyunless he furnishes you with proof thathe is registered for VAT and providesyou with a VAT invoice.

Should he or she not comply with therequest to provide a VAT invoice,

payment should be made to thisliquidator without the VAT portion andthe VAT portion should then berecalculated back into the insolventestate.

The other matter that arises is thatshould you refuse to make payment toyour Joint Liquidator and you pay thecompany by which he is or wasemployed, a potential claim can belodged against you due to the fact thatyou have not made payment to the rightentity as the fee should be paid to theliquidator.

I am of the view that we should impresson our members that should anypayments be made personally to anyliquidator, a VAT invoice must beobtained or in the absence thereofpayment must be made without the VATportion.

Philip TorreTorre TrusteesPretoria

EDITOR’S NOTEEDITOR’S NOTE

Adam Harris

The report of the much-heraldedMinisterial Committee of Enquiry intothe Insolvency Industry, which met overa period of several months anddoubtless at great cost, appears simplyto have slipped into oblivion.

This Committee succeeded a numberof task-teams, workshops, meetings,and pane ls appo in ted underGovernment's guidance, to investigatevarious aspects of the beleagueredInsolvency Industry.

What is the product, paid for by ourtaxpayer's rand, which all this has

delivered? Not much, actually. Lots offrustration. Lots of delay. Lots ofuncertainty.

N o w w e h a v e t h e C a b i n e tannouncement that a Task Team is tobe appointed. Another Task Team. Thisis presumably to further investigate whatwas doubtless thoroughly investigatedby the Ministerial Committee of Enquiry.We don’t know, really, because we havenever seen any report from theCommittee although this was apparentlyfurnished to the Minister almost 5months ago.

The Cabinet minute tells us that:

"The mee t i ng app roved theestablishment of an Inter-departmentalTask Team to investigate issuespertaining to the Liquidations Industry.The Team will report, among others, onbusiness rescue and jud ic ia lmanagement, a Code of Conduct forthe Masters' Offices and the LiquidationsIndustry, and the overall regulation ofthe industry. It was also greed (sic) toset up an Inter-ministerial Committeeon Climate Change.”

(To quote my friend Jack: “Presumablythe ‘Climate Change’ is a separate issuere la t i ng to d rough ts o f t hemeteorological variety, rather than areference to the current level ofliquidations. The reference to ‘greed’is hopefully an error of purelytypographical nature”.)

Humour aside, we do have anunregulated Insolvency Industry. Wedon’t have any business rescuelegislation. We do still have a 1936Insolvency Act. In short, we do have avast amount of work to do to pullourselves into line with what is expectedby those roleplayers and stakeholders,(both local and international) whorequire and are entitled to certainty andprogress in the Industry.

Adam HarrisJan S. de Villiers AttorneysCape Town

JOINT LIQUIDATORS' FEESJOINT LIQUIDATORS' FEES

LIQUIDATOR’S LOGON

The Web Watch forInsolvency Practitioners

LIQUIDATOR’S LOGON

The Web Watch forInsolvency Practitioners

Jack Crook

This column first appeared in the AIPSANewsletter of March 2001, opening withthe words: “The Internet has becomean enormous information resource, andthe Insolvency Practitioner with accessto it is a mouse-click away from a widevariety of news, documents, updatesand discussions of practical interestand use. Some information you mustpay for, but a lot of it is free.”

Four years on we have faster and betteraccess to the Web, more efficient searchengines, and a vastly increasedreservoir of information out there incyberspace. No one who wants toremain competitive in our Age ofInformation can afford to ignore thisresource – use it!

I have revisited, and updated andconsolidated, many of the links thathave appeared in Liquidator’s LogOnover the years. I start off in this issuewith sites giving access to South AfricanCourt decisions and legislation.

Judgments

For judgments of the ConstitutionalCourt, Supreme Court of Appeal, Land

Claims Court and Eastern Cape HighCourt, go to the Wits Law School siteat http://wwwserver.law.wits.ac.za.

You can subscribe for e-mail notif-i ca t ion o f new dec is ions a twww.server.law.wits.ac.za/lists.htm.

Judgments of the Cape High Court areto be found at the University ofS t e l l e n b o s c h s i t e(http://law.sun.ac.za/cgi-bin/list.php),and judgments of the Free State HighCourt at University of the Free Statesite (www.uovs.ac.za/fac/law/highcourt).

Labour Court decisions appear only tobe available online on a subscriptionbasis (e.g. www.caselaw.co.za - LabourAppeal Court, Labour Court, CCMAawards), although Wits Law Schoolgives free access to judgments before2001 at www.server.law.wits.ac.za/labourcrt.

Legislation

The following websites all give freeaccess to various pieces of relevantSouth African legislation -

• Acts Online at www.acts.co.za (includes Companies Act and CloseCorporations Act)

• South African Government Online (www.info.gov.za/documents/index.htm)

• The Department of Justice (www.doj.gov.za/legislation_list.html)

• KwaZulu-Natal Law Society at

www.lawsoc.co.za/members/legalresources/usefulleg/index.htm

The Insolvency Act is available in outlineform on the KwaZulu-Natal Law Societysite at www.lawsoc.co.za/members/legalresources/usefulleg/InsolvencyAct.htm, and the full Act may be accessedon a subsc r i p t i on bas i s a twww.butterworths.co.za.

The Department of Labour has acomprehens i ve co l l ec t i on o fE m p l o y m e n t l e g i s l a t i o n a twww.labour.gov.za/legislation/index.jsp.South African Government Online(www.info.gov.za/documents/index.htm)has full information on new Bills. Thesite links to the website of TheParliamentary Monitoring Group(www.pmg.org.za) , which hasinformation on Bills status, progressreports on Bills in Committees, Bills tobe tabled shortly, Parliamentaryschedule and minutes of ParliamentaryCommittees. You can also register fore-mail alerts if you want to keep trackof legislation.

If you come across any other sitesof interest, I would appreciate yoursending them to me, Jack Crook, [email protected].




REGIONAL NEWS SNIPPETS

EASTERN CAPE NEWS

The Eastern Cape seems to be quiet and being one of the less active areas, hasseen huge growth in property prices only at a later stage. Even our Karoo townshave now been sold out to Gautengers and Capetonians. With less than 20% ofthe number of liquidations of 1999- 2000, it appears that lean times lie ahead for us.

We are however thankful for the time to finalize old estates and have more timeto enjoy the beauty of our province.

To illustrate the tranquility of the Eastern Cape, AIPSA's next National Councilmeeting will be held in Joubertina on 29th July 2005 and all local members cancontact me if you wish to meet and get to know the council on the 30th July.Exciting new developments are taking place.

NORTHERN REGION

On Friday 20 May 2005 the Northern Region proudly hosted a workshop presentedby Rene Becker, an Attorney and a commissioner who has extensive experienceon the subject of enquiries and how it finds application in the insolvency environment.

The workshop was held at the Volkswagen Conference Centre in Midrand andwe are very pleased to report that approximately 70 people attended the workshopand was very well received. Further workshops are being planned for the restof the year.

Members of the Northern Region are reminded that the annual general meetingwill take place on 24 August 2005. Nomination forms have been forwarded toall members and same must be returned to the administration offices of AIPSAor to the Chairman by no later than 4 July 2005.

REGIONAL NEWS SNIPPETS

WESTERN CAPE

Winter arrived in the Western Cape, accompanied by rain (to the relief of most)and heavy traffic (to the frustration of all).The Western Cape Council in line with the transformation goals of the Association,co-opted Hillary Plaatjies on the local council and it is expected that her inputwill assist the council and the association in achieving our goals.

Furthermore, an open meeting was held, which meeting was attended by over40 people. At the meeting, members received valuable information on FICA,the effect of recent judgments in respect of Landbank’s right of preference andjoint liability of liquidators, how to deal with Capital Gains Tax issues and attorneysBills of Cost.

Diplomas were handed out to successful candidates in the AIPSA diploma course.Two of our members, S Gore and Brian Smith, were handed their honorarymembership certificates. Further workshops of this nature are planned for later in the year. Being an election year, theAGM will be held in August and notices in this regard will be sent out in due course.

The local council will meet with the Western Cape office of SARS’s enforcement centre to discuss various issues relatingto tax. A meeting with the Master of the High Court is also planned to take place during the course of June 2005.

As at the end of May 2005, the total number of appointments in the Western Cape was approximately 230. It is therefore,not strange that Western Cape practi t ioners also look at other regions to source some work.

The council did not receive any new complaints thus far, this year, against any members. This is either the result of goodwork or no work at all being done. We hope that the first mentioned reason is the case and therefore, would like to say“WELL DONE” to all our members.

SAMSUDIEN v BERRANGE N.O. & OTHERS 2005 (3) SA 529 (N)Judgment by Levinsohn J handed down on the 19th August 2004in the Natal Provincial Division.

AIPSA: The Association of Insolvency Practitioners of Southern AfricaPO Box 36073, Menlo Park, 0102

Website: www.aipsa.co.za • E-mail: [email protected]: (012) 998 0683 • Fax: (012) 993 0172

National Council

Chairman: Mr L von W Bester, Cape Trustees, Durbanville, Cape TownDeputy Chairman: Mr AD Pellow, Westrust (Pty) Ltd, JohannesburgSecretary/Treasurer: Mr PG Torre, Torre Trustees (Pty) Ltd, Pretoria

Councillors: Mr AS Harris, (non-practising member) Jan S de Villiers Attorneys, Cape TownMr JC Crook, Stanhope Trustees SA (Pty) Ltd, Mowbray, Cape TownMr TG Nell, Insollex Insolvency Practitioners, Pretoria

Chairpersons:KwaZulu Natal Council Mr P deV Berrangé, Berrangé & Wood Inc, PietermaritzburgWestern Cape Council Mr JJ Steenkamp, KPMG Administrators (Pty) Ltd, Cape TownEastern Cape Council Mr DJ Strauss, Strauss Trustees CC, JoubertinaNorthern Region Council Mr AD Pellow, Westrust (Pty) Ltd, Johannesburg

SAMSUDIEN v BERRANGE N.O. & OTHERS 2005 (3) SA 529 (N)

Contribution from Insolvent’sfunds to oppose sequestrationproceedings.

The Liquidator of NRB Holdings Limited,applied urgently and ex parte for thesequestration of the joint estate of Dato’and Datin Samsudin. Although initiallyopposed by the Insolvents, the Courtruled that the parties were married toeach other in community of property.Between the provisional order and thefinal order being granted, applicationwas made by Datin (Lady) Samsudinfor the release of a sum of money toenable her to effectively oppose theapplication for the sequestration order. The Trustees of the Joint Estate hadtaken control of a substantial amountof money and Datin Samsudin arguedthat her hands were tied as she couldnot oppose the application withoutfunding. The First and SecondRespondents (The Trustees) opposedthe application on the grounds that theCourt did not have the power to order

the release of such funds.For the purposes of the application, theCourt (Levinsohn, Jaccepted that theprovisional order of sequestration wasproperly granted. It was assumed thatthere was a bone fide dispute betweenApplicant and Respondent and that ifthe Joint Provisional Trustees did notrelease funds to Datin Samsudin, shewould suffer prejudice as she would beprevented from opposing the final order.

The question which the Court had todecide was whether or not it had theauthority to come to Samsudin’sassistance. As there was no precedentfor the order, it was necessary to applyprinciples based on common law andexisting statutory provisions. In termsof the Matrimonial Property Act No. 88of 1984 spouses married in communityof property have the right to litigate. Itis an entrenched practice for a wifemarried in community of property toclaim a contribution towards the costsin matrimonial proceedings - such right

is based on a duty of support owed byone spouse to another. By implication,the spouse requesting such contributionwould be entitled to have access to theassets of the joint estate for fundingsuch litigation.

The Insolvency Act provides for aTrustee to allow the Insolvent suchfunds that are necessary for the supportof the Insolvent. Included in this dutyof support is a duty to provide acontribution towards costs.

As the sequestration applicationinvolved the proprietary status of themarriage and Datin Samsudin’s rightsto the assets, it was held that thesewould be issues in respect of which shewould be entitled to a contributiontowards costs. It was held in the interestof justice that she was entitled to a fairand reasonable contribution towardsher costs, which amount was set by theCourt at R450,000.00.

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