THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

Case no: 103/09

THE STANDARD BANK OF SOUTH AFRICA

Appellant

and

THE MASTER OF THE HIGH COURT
First Respondent
(EASTERN CAPE DIVISION)

BASIL BRIAN NEL                                                                 Second Respondent
MICHAEL LEO DE VILLIERS
Third Respondent
________________________________________________________________

Neutral citation:
Standard Bank v The Master of the High Court (103/09)
[2010] ZASCA 4 (19 February 2010)

CORAM:

Navsa, Ponnan, Maya, Snyders JJA and Griesel AJA

HEARD:

19 November 2009
DELIVERED:
19 February 2010
CORRECTED:

SUMMARY:
Liquidators
occupying
position
of
trust
towards
creditors and companies in liquidation ─ required to be independent and to
regard equally the interest of all creditors ─ expected to carry out their
duties without fear, favour or prejudice ─ standard not met ─ liquidators
removed and fees reduced.

________________________________________________________________

________________________________________________________________
ORDER
________________________________________________________________

On appeal from:
Eastern Cape High Court, Grahamstown (Liebenberg and
Plasket JJ sitting as court of first instance).

1.
The appeal is upheld.
2.
The second and third respondents are ordered to pay two thirds of

the appellant’s costs, such costs to include those consequent upon

the employment of two counsel, to be paid by the second and third

respondents in their personal capacities jointly and severally.
3.
The order of the court below is set aside and substituted as follows:
‘1.
The third and fourth respondents are removed as joint liquidators of
Intramed (Pty) Ltd (in liquidation).
2.
The decision of the Master not to disallow or reduce the remuneration of
the third and fourth respondents as joint liquidators of Intramed (Pty) Ltd (in
liquidation) is reviewed, set aside and replaced with an order in terms whereof
the remuneration of the second and third respondents is reduced by five per
cent.
3.
The third and fourth respondents are ordered to pay the costs of the
application including the costs consequent upon the employment of two counsel
where applicable, such costs to be paid by the third and fourth respondents in
their personal capacities jointly and severally.’

________________________________________________________________
JUDGMENT
________________________________________________________________

NAVSA JA (PONNAN, MAYA and SNYDERS JJA concurring)

Introduction

[1] In the winding-up of companies liquidators occupy a position of trust, not
only towards creditors but also the companies in liquidation whose assets vests
in them. Liquidators are required to act in the best interests of creditors. A
liquidator should be wholly independent, should regard equally the interests of all
creditors, and should carry out his or her duties without fear, favour or prejudice.1

The Issue

[2] The central question in this appeal is whether the second and third
respondents, Basil Brian Nel and Michael Leo De Villiers, in their capacity as joint
liquidators of Intramed (Pty) Ltd (in liquidation), discharged their duties in the
manner set out above and, if not, whether they should be removed as such.
Allied questions, include, whether (a) they should, in terms of s 394(7)(a) of the
Companies Act 61 of 1973 (the CA), be subject to the payment of a penalty,
being double that paid out of Intramed’s bank account other than for the sole
benefit of Intramed, and (b) whether, in terms of s 384(2) of the CA, they should
be subject to a reduction or disallowance of their fee. I shall, for the sake of
convenience, refer to the second and third respondents as Nel and De Villiers
respectively, to the appellant as Standard Bank and to Intramed (Pty) Ltd, both in
its pre- and post-liquidation state, as Intramed.

1 See in this regard, Bertelsman et al Mars: The Law of Insolvency 9 ed (2008) pp293-294 and
the authorities cited there.

The order of the Court below and leave to appeal

[3] Standard Bank is a registered commercial bank and a proved creditor of
Intramed. During April 2005 it launched an application in the Grahamstown High
Court for an order that Nel and De Villiers be removed as joint liquidators of
Intramed and sought extensive associated relief, including but not restricted to
that set out in the preceding paragraph. The application was refused with costs
(Liebenberg and Plasket JJ).2 The present appeal is before us with leave
granted, in part by the court below and in part by this court. The Master of the
High Court was cited as the first respondent but took no part in the litigation.

The biggest commercial collapse in South Africa’s history ─ the winding up of the
Macmed group and the appointment of liquidators.

[4] Before being placed in liquidation, Intramed was a wholly-owned
subsidiary of Macmed Healthcare Limited (Macmed). The latter conducted
business through a host of subsidiaries. By all accounts the Macmed group of
companies experienced exponential growth within a relatively short space of
time. In ‘modern’ language the group was a ‘high flyer’. During March 1999,
shortly before its demise, Macmed entered into an agreement with Aspen
Healthcare Holdings Limited, to acquire three of the businesses of South African
Druggists Ltd (an Aspen subsidiary), one of which was to be housed in Intramed.
The businesses were acquired and Intramed conducted a viable business. The
acquisition of the Intramed business, particularly how it was funded, and the
relationship between Macmed and Intramed, as will become apparent, were
central features in prior litigation as they are in the present case.

[5] Both Macmed and Intramed were wound-up because they were unable to
pay their debts. Macmed’s failure was, at that time, widely regarded as the

2 The judgment of the court below has been reported as Standard Bank of South Africa Ltd v The
Master of the High Court and others 2009 (5) SA 13.

biggest commercial collapse in the history of South Africa. The winding-up of
Macmed and its 45 subsidiaries and the associated litigation began slightly more
than a decade ago.

[6] Macmed was placed in provisional liquidation by the Pretoria High Court
on 15 October 1999 and a final liquidation order issued on 9 November 1999. In
the ensuing months Nel and five other persons were appointed first, as joint
provisional liquidators and then, as the final joint liquidators of Macmed.

[7] Intramed was provisionally liquidated on 29 November 1999 and finally on
16 February 2000. On 29 November 1999 the Master appointed De Villiers a
provisional liquidator of Intramed. On 3 December 1999 the Master appointed
Nel as a joint provisional liquidator along with De Villiers. On the 31 May 2000
Nel and De Villiers were appointed as joint final liquidators of Intramed.

[8] Nel was not only appointed a joint liquidator of Macmed and of Intramed
but of each of the other subsidiaries as well. It is safe to say that he was an
influential figure in the liquidation process.

[9] The liquidations of Macmed and Intramed have significant financial
importance. According to the first liquidation account Intramed has assets
exceeding R170 m. According to the amended fourth liquidation account it has
liabilities exceeding R230 m. Standard Bank is a judgment creditor of Intramed in
the amount of R107 728 463.64. Standard Bank is also a major creditor of
Macmed and a number of its other subsidiaries.

Standard Bank’s complaints

[10] Standard Bank contends that Nel and De Villiers, instead of viewing the
winding-up of Intramed as a distinct process, saw it as part of the winding-up of
the entire group and improperly deferred to Macmed and its creditors. Standard

Bank accuses Nel and De Villiers of both using, and failing to use, established
mechanisms for ensuring the proper administration of estates in liquidation. It
alleged that they acted in a manner favouring Macmed and prejudicing Intramed.
This, in the main, relates to the admission of a claim by Macmed in Intramed in
the amount of R325m.

[11] Standard bank also accuses Nel and De Villiers of misappropriating
Intramed’s funds. They are accused of improperly using Intramed’s monies to
pay costs which a court in prior litigation, in relation to an application to review
the Master’s decision to reduce their fees, had ordered them to pay personally.3
Standard Bank alleged that Nel and De Villiers had only repaid the monies with
interest, after this fact had been uncovered by Standard Bank, and after it
persisted in holding them to account.

[12] Furthermore, Standard Bank complains that a fee-sharing agreement
between the liquidators of Intramed and the liquidators of Macmed was such, as
to militate against a proper administration of Intramed’s insolvent estate.
Standard Bank asserts that Nel faced a conflict between his duty to Intramed and
his duty to Macmed and what ultimately became his personal interest in both.

[13] It is necessary at this stage to proceed to consider the material details of
Standard Bank’s case, and to examine the response by Nel and De Villiers.

The R325m claim

[14] The present litigation arose principally, because of the differing views
taken by Standard Bank on the one hand, and Nel and De Villiers on the other, in
relation to the claim of R325m by Macmed in Intramed. That dispute has

3 For the background and litigation history in relation to their fees see Nel and another NNO v The
Master (Absa Bank Ltd and others intervening) 2005 (1) SA 276 (SCA).

telescoped into one concerning the nature of the acquisition of the three
businesses from South African Druggists (SAD), described above.

[15] As stated, Macmed conducted its business through subsidiaries, including
Intramed. The acquisition of the three businesses was structured so as to obtain
maximum tax advantage for the group. This was done by way of more than
twenty interlinked and extremely complex agreements.

[16] It is common cause that the agreements, which do not form part of the
record of the proceedings, are extremely voluminous and complex and involved
many parties. The terms of the agreements were sought to be explained in a
letter dated 29 June 1999 from the company purportedly financing the
acquisition, namely, Peregrine Finance (Pty) Ltd (Peregrine) to Absa Corporate
Bank. I shall, for convenience, refer to the agreements as the Peregrine
structure. The following, in summary, is what is recorded in the letter:

(i)
The Macmed group is in the process of finalising the acquisition of certain

businesses from South African Druggists Ltd at an all in cost of approximately R400 m.

The businesses would be acquired directly by Macmed’s subsidiary companies,

including Intramed.

(ii)
The financing options were either inter-company or external funding. Peregrine proposed

a transaction in terms of which the purchasers, including Intramed, would obtain external

funding. The proposal entailed Peregrine providing the purchasers a loan with a ten-year

fixed interest rate. The loan entitled Peregrine to subscribe for ordinary shares in each of

the purchases, in the loan amount at maturity date.

(iii)
Peregrine would cede and assign all its rights and obligations in terms of the loan

agreements to Willridge Investments (Pty) Ltd (Willridge), a trader in financial instruments

and a subsidiary of Peregrine, for a purchase consideration of R401 m. At the inception

of the transaction Willridge would forward sell the ordinary shares arising on conversion

to investors, for delivery after ten years, for a consideration of R40 m, payable on

signature of the agreement. Macmed would be offered an investment opportunity in ten-

year fixed rate compulsory redeemable preference shares to be issued by Leoridge

Investments (Pty) Ltd, a subsidiary of Peregrine and a preference share investment

company. The preference shares would bear a market related dividend yield with

dividends payable semi-annually in arrears.

(iv)
Peregrine would advance conventional loan funding in the amount of R275m to Willridge

for a period of ten years. In terms of the loan agreement interest and capital would be

repayable in equal instalments over the term thereof.

(v)
Macmed would make a security deposit with Willridge in the amount of approximately

R160m for a period of ten years. In terms of the deposit, Macmed would be entitled, but

not obliged, to withdraw funds on a semi-annual basis in equal tranches over the

term thereof.

(vi)
Willridge would provide the purchasers with an additional loan facility in the amount of

approximately R75m in terms of which the capital would be drawn down semi-annually in

equal trances over a ten-year period. In terms of the additional loan facility, the interest

rate would be fixed at a market related rate and the interest and capital would be

repayable at maturity. The purpose of the additional loan facility is to provide purchasers

with ongoing working capital for the performance of its business operations over the term

ie ten years. The loan facility would be utilised in the production of income.

(ix)
Macmed would be granted a put option by Willridge to put the preference shares issued

by Leoridge to Willridge, in the event of a default by Leoridge.

(x)
Holdings would issue a guarantee to Macmed in respect of all of the Peregrine

companies’ obligations.

[17] It appears from this letter that what was envisaged, were loans by
Peregrine to each of the subsidiaries. It is equally clear from the letter that inter-
company funding was rejected as an option. Put simply, if the letter is to be
believed, it means that a loan by Macmed to the subsidiaries was not the chosen
or preferred option.

[18] That notwithstanding, on 10 May 2000, the liquidators of Macmed proved
a claim in Intramed of R325m on the basis that it was an amount owed by the

latter to the former in respect of the acquisition of the relevant business from
SAD. Nel and De Villiers were instrumental in the claim being admitted by the
Master. It is common cause that the purchase price of the business was in fact
R324 880 000. Thus, the claim of R325m lodged on behalf of Macmed was an
amount of R120 000 in excess of the actual price of the business so acquired.

[19] To properly appreciate and address the present dispute, flashbacks and
switching between different time periods are regrettably, intermittently necessary.

[20] The Peregrine structure took effect on 18 June 1999 when an amount of
R325m was advanced by Peregrine to Intramed. Peregrine, in turn, subscribed
for shares in Intramed at a subscription price in the amount of the purchase price.
The capital sum would be repayable on 18 June 2009 but would be set-off
against Peregrine’s obligation to pay the subscription price. On the same day that
it received the R325m from Peregrine, Intramed transferred that amount to
Macmed. It is common cause that before the money was advanced by Peregrine
to Intramed, Macmed provided the R325m to Willridge, a Peregrine subsidiary.

[21] Standard Bank adopts the position that, in supporting the claim Nel and
De Villiers ignored the Peregrine structure, the accounting records of both
Macmed and Intramed prior to the winding-up (which did not reflect a loan by the
former to the latter), and evidence at the enquiry in relation to the winding-up of
Macmed, where none of the witnesses confirmed the existence of the loan but
rather where uncertainty was expressed concerning it.

[22] It was alleged on behalf of Standard Bank that subsequent to the winding-
up of Intramed, and after the appointment of Nel and De Villiers as liquidators, an
entry was made in the accounting records of Intramed reflecting a loan of R325m
by Macmed to Intramed and that this could only have been done at their
instance. The auditors qualified their report by stating that they were unable to
verify the loan or confirm the amount owing to Macmed.

[23] It was pointed out that it is unusual for a claim of the size and nature of
Macmed’s claim to be admitted to proof without reference to supporting
documentation and/or evidence. On the other hand, one finds supporting
documentation that shows Intramed receiving R325m from Peregrine and then
transferring it back to Macmed.

[24] It was contended that the Peregrine structure had the effect that the R324
880 000 required for the acquisition of the Intramed business would never have
to be repaid by Intramed other than from the proceeds of its share issue.

[25] An interest payment on the loan was made by Intramed to Peregrine on
17 September 1999, in the sum of R30 908 760, ostensibly in terms of the
Peregrine structure. This is reflected in one of Intramed’s bank statements. This,
it is contended, is proof of the execution of the Peregrine structure in respect of
which Peregrine is the creditor and Intramed the debtor.

[26] Standard Bank pointed to the fact that a share certificate was issued to
Macmed on 18 June 1999 for 2000 shares in Leoridge Investments in respect of
which stamp duty of R500 000 was paid as yet another example of the execution
of the Peregrine structure.4 Nel and De Villiers responded that this was a small
price to pay to perpetuate a sham.

[27] Standard Bank refers to the fact that the Macmed parties had to pay
Peregrine an amount of R3 300 000 every six months for putting the Peregrine
structure in place. This assertion was, in effect, unchallenged. The first six-
monthly payments appear to have been made.

4 See para (iii) of the Peregrine letter referred to in para 16.

[28] It was contended that Macmed has no legitimate claim against Intramed
and that Nel and De Villiers supported the claim to Intramed’s detriment and for
their personal benefit.

[29] Nel and De Villiers adopted the attitude that the Peregrine structure was a
simulated transaction and that the true transaction was a R325m loan from
Macmed to Intramed. It was submitted on their behalf that if that were not so, it
would mean that Intramed would have received a business from SAD without
giving any value in return. They point to the fact that Macmed supplied R325m to
a Peregrine subsidiary, which amount was, in turn, provided by Peregrine to
Intramed. They contend that the R325m was then utilised by Macmed to pay
SAD for the business to be housed in Intramed. Their response in respect of the
accounting records will be dealt with in due course.

[30] It is necessary to record that during May 1999, before the liquidation of
Macmed, it took an opinion from one of the leading tax experts in South Africa,
concerning the legality (and tax effectiveness) of the Peregrine structure. The
opinion concluded that the Peregrine structure was not assailable by the South
African Revenue Services. No concern or reservation was expressed about its
genuineness.

[31] Mr Carel Braam Viljoen, who represented Peregrine at the time that the
Peregrine structure was put in place, testified during the enquiry into the affairs of
Macmed in terms of s 417 of the CA. He also testified in the course of a trial
between Intramed and Standard Bank. At no time did he state that the
transaction was a sham, nor was it ever put to him that it was a simulated
transaction. In an affidavit in the present case in support of Standard Bank’s case
Mr Viljoen states:
‘Had such a proposition been put to me I would have truthfully answered that it was not a
simulated transaction and that the agreements constituting the Peregrine structure correctly
reflected the intentions of the parties thereto.’

[32] Mr Hanson, a director of Macmed, who signed the Peregrine agreements,
both on behalf of Macmed and Intramed, testified at the Macmed enquiry that the
agreements were genuine. He provided an affidavit in support of Standard
Bank’s case and repeated that evidence. Nel’s response to Hanson is that he
was one of the Macmed directors who perpetrated a massive fraud on Macmed
and that he cannot be believed.

[33] During May 2000 the joint liquidators of Macmed sought an opinion from
two senior advocates on whether the Peregrine structure was a simulated
transaction and on the effect of liquidation on it.  The following is stated in the
opinion:
‘The companies intended to achieve precisely that which the primary purpose of the financing
structure was aimed at. We found nothing in the contracts to suggest that the parties had a
disguised intention. In this case there is a complete correspondence between the “…truth of the
matter…” on the one hand and the writing on the other.  Any attempt at the application of the
maxim “plus valet quod agitur quam quod simulate concipitur” to the facts of this case will be
fruitless. The Financial structure is not simulated.’

[34] This opinion was sought at the time that the Macmed claim was in the
process of being admitted to proof by the Macmed liquidators. Either the claim
preceded the opinion or was proved despite the opinion. It was at the very least
persisted in, despite the opinion.

[35] The following conclusion by counsel in respect of the effect of liquidation is
not unimportant:
‘We are of the opinion that the liquidators are unlikely to undo the effects of the set-off or to
recover any equity pursuant to any possible unwinding of the financial structure in any of the
companies in the Peregrine interests.’

[36] Not content with this opinion, the Macmed liquidators took another, from
two other counsel, which was supplied at the end of August 2000. Counsel
considered the prior opinion and concluded that the agreement was a simulated

transaction. The following is one of the listed bases for concluding that the
agreement was a sham:
‘Ex facie Intramed’s financial records, Macmed made a direct loan to it in an amount of R325
million’.

[37] Another listed reason for the second opinion reads as follows:
‘The R325 million apparently advanced by Macmed to Intramed for the acquisition of the business
was reduced by set-off on loan account’.

[38] It is necessary to record that the second opinion is equivocal about the
effect of the liquidation on the Peregrine structure.5 Importantly, the material part
of the last paragraph of the second opinion reads as follows:
‘In the premises we conclude that Consultant has a better prospect of pursuing the claims against
Intramed based on the direct loan reflected in the latter’s books of account.…’
All of this highlights that the book entries played a significant role in the
conclusion reached in the second opinion concerning the legality of the Peregrine
structure.

[39] The following extract of the evidence of Mr Viljoen (from the enquiry into
the affairs of Macmed), which was referred to in the second opinion obtained by
the liquidators of Macmed, reveals that the money that was supplied by
Peregrine to Macmed emanated from Macmed. However, Mr Viljoen continues to
explain the transaction as follows:
‘Its an alternative to the conventional loan funding. So, in other words, it’s a back-to-back
transaction. They invest in our preference shares, the security deposit and the forward sale of
shares. We then utilise that money that they have given us to give a loan to their subsidiary…’.

[40] This explanation appears to be in line with what is set out in paragraph (iii)
of the Peregrine letter, (para 16 above), which contemplates Macmed receiving a
dividend payable semi-annually.

5 This is dealt with under the heading THE EFFECT OF THE LIQUIDATION OF THE MACMED
GROUP UPON THE STRUCTURE in paras 56-62 of the second opinion.

[41] Possessed of two contradictory opinions, the liquidators of Macmed
obtained yet another legal opinion. The third opinion, which is approximately four
and a half pages long, refers to Mr Viljoen’s evidence, the material part of which
is set out above, and then agrees with the view expressed in the second opinion,
namely, that the Peregrine structure was a simulated transaction. The second
opinion records the following:
‘Consultants will obtain no benefit from regarding the structure as a simulated transaction,
cancelling the agreements constituting the structure or enforcing the agreements constituting the
structure.’
This motivation is significant.

[42] It is clear that Nel was instrumental in the decision by the liquidators of
Macmed to lodge a claim in Intramed. No opinion on the Peregrine agreement
was sought by Nel and De Villiers on behalf of Intramed. Standard Bank
contends that neither Nel nor De Villiers took into account the Intramed
perspective.

[43] Insofar as bookkeeping entries are concerned, what is set out hereafter is
important. Up until the end of October 1999, almost three and a half months after
the Peregrine structure took effect, neither the Macmed nor Intramed financial
records, including Intramed’s balance sheet, reflected a loan of R325m. Macmed,
it will be recalled, was placed under provisional liquidation on 10 October 1999
and final liquidation on 9 November 1999. It is therefore clear that, until then, no
loan to Intramed was reflected in its books of account.

[44] According to a chartered accountant, Mr Deon Millson, who was employed
by Deloitte & Touche at the time and who had been engaged by the financial
director of Intramed to examine the Macmed/Intramed inter-company accounts, it
appears that an entry reflecting the loan was first made in Intramed’s books of
account on 8 December 1999. This was after Intramed had been placed in
provisional liquidation and after De Villiers and Nel had been appointed joint
provisional liquidators and had taken charge of the books of account. According

to Nel, neither he nor De Villiers gave instructions to the auditors, Deloitte &
Touche, to pass entries to reflect the loan.

[45] The audited financial statements of Intramed for the nine months ending
28 November 1999 (the day before Intramed’s liquidation) disclose Macmed as a
creditor of Intramed in respect of the alleged loan of R325 m. These statements
bear the signature of Nel and De Villiers and are dated 15 January 2000 but
appear, from what is said both by the principal deponent on behalf of Standard
Bank and Nel, to have been signed a few weeks later. Deloitte & Touche
qualified these financial statements signed off by Nel and De Villiers as follows:
‘We were unable to confirm the amount owing to Macmed Healthcare Limited as at 28 November
1999 …’

[46] In a letter dated 10 December 1999 Deloitte & Touche state the following:
‘It appears that R325m was borrowed from Peregrine Finance to repay Macmed for the purchase
price of the Intramed business … Based on discussions with Braam Viljoen of Peregrine Finance
and Johan Muller of Macmed, it is our understanding that the Peregrine loan was part of a group
financing scheme which was automatically set-off on liquidation of Macmed. The full R325m
would therefore appear to be payable to Macmed by Intramed. This matter is yet to be resolved.
The R100m raised by the BoE bond has been offset against the R325m.’
Essentially, this is repeated in a letter dated 8 February 2000.

[47] In the review application referred to in para 11 above Mr Nel stated the
following in his founding affidavit:
‘20.12.1   The Intramed books of account were properly kept to reflect the trading assets and
transactions. However the books of account incorrectly reflected the acquisition of the Intramed
division and the funding thereof.
20.12.2 The books of account, as at the liquidation date, were correctly written up and adjusted
under the control of the liquidators to reflect the audited position of it at date of liquidation. This
audit was finalised during February 2000 under the control of the liquidators.’ (My emphasis.)

[48] In the present case, Nel, in his answering affidavit states the following:

‘299.3 It is the duty of liquidators to take control of all assets and business interests, including
the books and records at date of liquidation, which De Villiers and I did on our appointments.
299.4
Therefore, anything that happens after date of liquidation, happens under our control. I
admit that the books and records were brought up to date and audited on our instructions and
under our control.
299.5
It does not follow that we influenced the structure or content of the books and records of
Intramed and the audit thereof. We deny and take exception to the reference that we caused the
Intramed books to be “corrected”.’ (My emphasis.)

[49] For completeness it is necessary to record that Mr Pereira one of the joint
liquidators of Macmed in his affidavit filed in support of proof of Macmed’s claim
in Intramed stated that from evidence and documents at the enquiry, the joint
liquidators of Macmed established that on 18 June 1999 Macmed had lent and
advanced the sum of R325m to Intramed. There were no supporting documents
or evidence annexed to the affidavit. There was no reference to the Peregrine
structure at all. This fact was therefore not brought to the attention of the
presiding officer or the Master. Mr Pereira supplied a confirmatory affidavit from
an attorney who was advising both the joint liquidators of Intramed and of
Macmed.

The charge of misappropriation of Intramed funds

[50] During December 2001 Nel and De Villiers, purporting to act in their
capacity as joint liquidators of Intramed, launched an application in the
Grahamstown High Court, to review and set aside the Master’s ruling that they
were entitled to a total remuneration of only R3 250 000 in respect of the
winding-up of Intramed. They sought an order declaring that they were entitled to
the ‘tariff amount’ of remuneration in the amount of R21 049 941.74.6 Nel and De
Villiers did not seek the leave of the court to have the costs of the review
application paid out of Intramed’s funds. In that application five major South
African banks were intervening respondents, all of whom were substantial

6 This application has briefly been alluded to in para 11 above.

creditors of Macmed or Intramed. They all supported the Master’s ruling.
Standard Bank was one of the intervening respondents.

[51] On 31 October 2002 a full bench of the Grahamstown High Court
(Froneman J, Pillay AJ concurring), dismissed the application and ordered that
the costs be paid by Nel and De Villiers personally. By this time an amount of
R689 747.91 had been paid out of Intramed funds in respect of the review
application.

[52] Aggrieved by the decision of the full bench, Nel and De Villiers appealed
to this court. The appeal was dismissed on 1 April 2004. Van Heerden AJA said
the following:
‘[43]   As I have indicated above, the appellants purported to bring their review application in their
capacity as the duly appointed joint liquidators of Intramed, contending that they were duly
authorised in such capacity to institute the review of proceedings. As correctly pointed out by the
Master in his answering affidavit, the appellants failed to annex any evidence which supported
this contention. The review proceedings were in fact proceedings which should obviously have
been brought by the appellants in their personal capacity and not in their capacity as joint
liquidators ─ the proceedings relate to their entitlement to remuneration and not to a matter falling
within the ambit of their role as liquidators of the Intramed estate. As contended by counsel for
both the Master and the intervening respondents, the appellants were simply seeking to secure a
higher fee for their services than that fixed by the Master. In so doing, they were acting in their
personal capacities and not in any sense in the interests of the creditors of the Intramed estate.
Indeed, the appellants were ─ and still are ─ acting against the interests of the creditors, solely
for their own benefit. This being so, there is no reason whatsoever why the costs of the review
application or of the appeal should be borne by the company in liquidation.’7 (My emphasis.)

[53] It is admitted by Nel and De Villiers that, before and pending the appeal to
this court against the decision of the Grahamstown High Court, Intramed’s funds
were used to pay the costs of the application to review the Master’s ruling. From
the time of the judgment of the full bench up until the time of the exchange of
heads of argument in this court a further amount of R114 761.59 was paid out of

7 Op cit fn 2.

the funds of Intramed in respect of the review application, bringing the total paid
from Intramed’s funds to R804 419.50.

[54] On 6 August 2003, pending the appeal to this court, the Master wrote to
Nel and De Villiers querying the payment of costs for which they were personally
liable out of Intramed’s funds. The Master asked why these costs were reflected
in the estate account and why estate funds were used to pay them.

[55] On 25 August 2003 De Villiers replied to the Master’s query. It is
necessary to quote the material parts of the letter:
‘1
Kindly return to me all vouchers in respect of legal costs and I will separate legal costs
pertaining to the Joint Liquidators’ remuneration review proceedings against the Master from
other legal costs. To the best of my recollection, no legal costs relating thereto incurred
subsequent to the judgment issued on 31 October 2002 have been paid ex the Joint Liquidator’s
banking account.
2.
Legal costs paid ex the Joint Liquidators banking account, which were ordered against
the Joint Liquidators personally, are in addition to the quantum of the Joint Liquidators’
remuneration the subject of appeal.
3.
Leave to appeal was granted on 5 December 2002.
4.
Should the Appellate Division rule against the Joint Liquidators in the appeal
proceedings, the Joint Liquidators will then be obliged to refund to the estate the costs of the
review proceedings.
5.
No legal costs relating to the review proceedings have been paid ex the Joint Liquidators’
banking account.’

[56] Standard Bank contended, with some justification, that Nel and De Villiers
appear in the letter to both admit and deny that costs were paid from the
Intramed funds under their joint control. Furthermore, so Standard Bank
submitted, words such as ‘to the best of my recollection’ are deliberately
obfuscatory. Given the liquidators’ obvious expertise in the field, coupled with
their duty in terms of s 393(1) of the CA to keep a cash book, one would,
according to Standard Bank, expect a more considered and precise response.

[57] On 10 May 2004, eight and a half months thereafter, and after the
judgment of this court, De Villiers wrote to the Master once again, this time more
emphatically. The relevant part of the letter reads as follows:
‘Legal costs paid ex the Joint Liquidators’ banking account were paid prior to the Judgment
issued on 31 October 2002.’
This we now know to be untrue.

[58] On 20 January 2005, seventeen months thereafter, De Villiers, in a letter
in response to a query by Standard Bank, wrote the following:
‘Legal costs relating to the review proceedings per the Fourth Liquidation and Distribution
Accounts, which were all incurred prior to 31 October 2002, were analysed and have been repaid
to the estate by the Joint Liquidators.’
We now also know that outstanding monies, including interest, were finally repaid
on 25 August 2005.

[59] When, at the outset, the Master challenged Nel and De Villiers’ authority
to bring the review application in Intramed’s name, they responded by stating that
they were acting in their official capacity as liquidators and consequently had
authority to do so. It is equally clear that they were not specifically authorised to
do so but purported to act in terms of the general authority of liquidators to litigate
on behalf of the estate being wound-up.

[60] Even after it became clear to everyone that repayments were due by Nel
and De Villiers it took approximately 16 months after the dismissal of the appeal
by this court before they repaid the total owing to the Intramed estate. According
to Nel and De Villiers, this was, inter alia, due to protracted correspondence with
PriceWaterhouseCoopers (PWC) in whose employ Nel had formerly been. There
appears to have been an arrangement between Nel and PWC in relation to the
fees earned from the Macmed liquidation. The further complication was the fee-
sharing arrangement between Macmed’s joint liquidators. It appears that they
had agreed to share both the fruits and the liabilities that might ensue from the
review application. Their contribution to the costs in the review application also

had to be recovered. These aspects will be dealt with further when the fee-
sharing arrangement is discussed later in this judgment.

[61] Perhaps, because of what is set out at the end of the preceding
paragraph and because of Standard Bank’s persistent efforts to extract every
cent, including interest due to the Intramed estate, the repayment took place in
drips and drabs over the period 7 June 2004 to 25 August 2005.

[62] The following is noteworthy. Standard Bank initially proved a claim in
Intramed at the first meeting of its creditors held in Port Elizabeth on 10 May
2000 in an amount of R107 728 463.64. Almost six months later, on 2 November
2000, Nel and De Villiers lodged a report with the Master in accordance with the
provisions of s 45 of the Insolvency Act, in terms whereof they requested him to
expunge the applicant’s claim. The challenge by the liquidators to the validity of
the claim, ironically, was based on a lack of authority, namely that the
agreements on which Standard Bank relied had not been executed in
accordance with the terms of Intramed’s articles of association and that those
who signed the agreements lacked authority. On 12 January 2001 the Master
expunged Standard Bank’s claim in Intramed. This led to litigation. Standard
Bank was successful in the trial that ensued ─ on 20 August 2004 the
Johannesburg High Court delivered judgment in its favour. This led to Standard
Bank being reinstated as a creditor. From 12 January 2001 to 20 August 2004
Standard Bank had lost its status as a proved creditor in Intramed and
consequently lost the right to vote at or call meetings of creditors. Costly and
protracted litigation also ensued between BoE bank and Nel and De Villiers,
acting in their capacities as liquidators of Intramed in relation to the expungment
of BoE’s claim of R100 m. Similarly, the question in that case was whether the
loan agreements and the underlying securities, in respect of which Intramed was

ostensibly a party, were duly authorised. BoE bank was successful in the Port
Elizabeth High Court and on appeal to this court.8

[63] Standard Bank submits that in dealing with the two claims referred to in
the preceding paragraph Nel and De Villiers were intent on careful scrutiny of
existing valid documents, because of the unstructured relationship between
Macmed and Intramed prior to liquidation, whereas they admitted Macmed’s
claim of R325m without any substantiating documents and in the face of
controverting evidence.

[64] In responding to Standard Bank’s objection to the fourth account, inter
alia, on the basis of what Standard Bank alleged was the misappropriation of
funds in relation to the review application, De Villiers in a letter dated 10 May
2004, wrote the following:
‘Before doing so I reiterate that Standard Corporate and Merchant Bank (SCMB) are not a proved
creditor in the above estate. You have disallowed their claim pursuant to the provisions of section
45(3) of the Insolvency Act and Regulation 3 of the Regulations framed under the Insolvency Act
… SCMB are consequently not a proved creditor and therefore do not have locus standi  to lodge
objection to the account.’ 9
Here, instead of simply dealing with the merits of the objection, which involved an
important matter of principle, Nel and De Villiers dealt with Standard Bank’s locus
standi.

[65] Nel and De Villiers, in dealing with the charge that they had improperly
used Intramed’s funds in the review application, state that they believed that they
were acting on authority and furthermore that they had done so on legal advice
that they were entitled to bring the application in Intramed’s name.

[66] Nel states further, that the advice he received, subsequent to the
judgment of the full bench, was to the effect that since the whole of the judgment

8 See the judgment of this court in De Villiers and another NNO v BOE Bank Ltd 2004 (3) SA 1
(SCA).
9 This refers to the expungment of the claim described in para 62.

and cost order was on appeal to this court there was no reason to repay the
amount in respect of the review application at that stage.

[67] Revealingly, in dealing with the issues raised in the review application, Nel
states the following:
‘In bringing the review application, we were assisted and advised by Tabacks Attorneys and
senior and junior counsel. They advised us that the application ought to be brought in our official
capacity. We are not lawyers, and had no reason not to accept their advice. After the judgment in
the First Court had been delivered, we again sought advice. We separately obtained advice from
three eminent silks. The weight of advice, which we received, was that an appeal ought to be
lodged and that it had good prospects of success. It was implicit in the advice that it was not
wrong for us to have brought the review in our official capacities. Again, we had no reason not to
accept it. …’ 10 (My emphasis.)

[68] We were informed by counsel representing Nel and De Villiers that one of
‘the eminent silks’ had advised against the appeal. This must mean that they had
been advised by at least one eminent senior counsel that the prior and continuing
use of Intramed funds was improper.

[69] Notwithstanding that fact and what this court had said concerning the
review application as set out in para 52 above Nel states adamantly and
unrepentantly that Standard Bank and the intervening creditors were, ‘at all times
aware of the fact that De Villiers and I launched the application in our official
capacities’.

[70] In the present case Nel submitted that the Grahamstown High Court and
Macmed did not make a specific ruling in relation to the application being brought
in their official capacities, but merely held that the Master’s view in this regard
could be addressed by way of an appropriate cost order.

[71] Tellingly, Nel states the following in his answering affidavit:

10 In the reproduction of the quote I have omitted the names of the legal practitioners referred to.

‘De Villiers and I were led to believe that this was a landmark case and the outcome was in the
best interest of the insolvency profession, the Master and creditors and more particularly financial
institution creditors and therefore the costs would be costs in the liquidation.’
I shall deal with the implications of this statement in due course.

[72] Insofar as interest on the Intramed monies is concerned, the following
statement by Nel in his answering affidavit is significant:
‘I accept that the repayment could have been made sooner after the outcome of the appeal and it
is for this reason that De Villiers and I have decided to pay interest on the amount paid in respect
of the costs of the fees review, although we have not been called upon to do so by the Master.
Initially I was of the view that, as we had not been called to pay interest at the time by the Master,
no interest should be payable. However, this view has changed on the advice of our legal
advisors and interest has now also been repaid.’

[73] It is worth noting that despite the negative outcomes in the review litigation
and the criticisms of this court, Nel and De Villiers nonetheless, in resisting the
application for their removal in the court below, initially did so in the name of
Intramed. Thankfully they did not persist in doing so.

The fee-sharing arrangement

[74] It is necessary to deal briefly with this aspect of Standard Bank’s case.
According to Nel, the fee-sharing arrangement between himself and De Villiers in
regard to the Intramed estate was a 42.5/57.5 per cent split in favour of the latter,
who was responsible for the day-to-day administration of the Intramed estate. Nel
states that there was a fee-sharing arrangement between the joint liquidators of
Macmed and those of all of the 45 subsidiary companies. It is these fee-sharing
arrangements that Standard Bank contends were improper and predictably gave
rise to the conflict that Nel and De Villiers could and should have foreseen and
avoided.

[75] In its founding affidavit the bank articulated its concern about the
‘conclusion of fee-sharing or other financial arrangements with persons who are

not liquidators of Intramed but who are liquidators of Macmed, a proved creditor
of Intramed, but whose claim is disputed by the applicant’.

[76] At that stage the bank was not aware of the nature or terms of the fee-
sharing arrangements. It was uncertain about its very existence.

[77] For present purposes it is necessary to record in some detail what is said
by Nel at various places in his answering affidavit in relation to the fee-sharing
arrangement.  First:
‘The joint liquidators of Macmed, because of their direct and indirect involvement in the
investigation, interrogation and administration of the Macmed Healthcare Ltd group entered into a
fee sharing agreement amongst them. This agreement took place in the first week of taking
control of Macmed and its group of subsidiary and associated companies. It did not include any
other joint liquidators appointed with anyone of them in any of the subsidiary liquidated
companies and therefore had no bearing on the carrying out of their duties as joint liquidators in
each of the liquidated companies in which they were appointed. The fee sharing agreement took
place before the liquidation of the subsidiary group companies, including Intramed.’

[78] At another juncture, the following is stated:
‘It is common practice in group estates for liquidators to agree to share fees. The association of
Insolvency Practitioners of SA, the professional body regulating the affairs of the insolvency
practitioners, recognises the sharing of fees amongst liquidators.’
Particulars about what is sanctioned by the Insolvency Practitioners of SA are not
provided.

[79] Later, the following appears, in relation to the review application:
‘166.1 De Villiers repaid 57,5% of the funds, because he would have received 57,5% of the fees
had the application to Court been successful.
166.2
PWC repaid 42,5% of the funds because PWC would have received 42,5% had the Court
application been successful.
166.3
PWC repaid the funds as a result of the relationship between myself and PWC as
explained herein above.
166.4
PWC had to recover the funds from the joint liquidators of Macmed because of the fact
that the said joint liquidators would have shared in the fees in the proportion of one sixth of 42,5%

each, had the application to Court been successful. This was done pursuant to the fees
agreement between the joint liquidators of Macmed as explained in the above paragraphs.’

[80] For reasons that will become apparent there is no need to deal with every
complaint by Standard Bank concerning the fee-sharing arrangement.

The rejection of a request for a meeting

[81] This complaint by Standard Bank relates to the admission of the claim of
R325m by Macmed in Intramed. On 14 October 2004 Standard Bank requested
that a meeting of creditors be convened by Nel and De Villiers with a view to
interrogating the validity of the claim. If the Macmed claim were to be discounted
then Standard bank would, in terms of the size of its claim of R107 728 463.64,
overwhelmingly have represented the greater part of the total value of all claims
proved against the estate. Even if the Macmed claim were taken into account the
Bank’s claim would exceed one-fourth in value of the total of the proved claims.

[82] On 27 October 2004 the request was rejected by Nel and De Villiers as
follows:
‘No purpose will be served by either debating the issue by way of correspondence or by calling a
meeting of the Intramed creditors.’

[83] In a letter to the Master dated 22 November 2004 Nel and De Villiers said
the following:
‘Standard Bank is of the view that the joint liquidators of Intramed should call a meeting of proved
creditors of Intramed to debate the issues raised in their letter dated 14 October 2004. The joint
liquidators of Intramed, in their letter dated 27 October 2004, advised Standard Bank that they are
of the view that no purpose will be served by calling a meeting of the Intramed creditors. We are
still of same view, not only that it will serve no purpose by calling a meeting of Intramed creditors,
but because, if we accept that Macmed, as proved creditor, can vote at the said meeting, that the
creditors in value will vote against the joint liquidators of Intramed bringing an application to set
aside the Macmed claim. In addition, the minority concurrent creditors, because of the complexity
of the Peregrine agreements, (26 agreements in all) would not understand nor interpret the legal
issues raised therein or as presented by Macmed and/or Standard Bank. The costs of such

expungement application would be prohibitive and would, as a result of the protracted Court case
without any clear indication of success, absorb most of the benefits which the concurrent
creditors may expect in the event the Macmed claim is not expunged by the Courts. There are
various other scenarios that would be introduced to the equation in the event of Macmed claim is
expunged one of which is the introduction of a new creditor Willridge (Peregrine) claim for an
amount of R325m.’

[84] With reference to s 41 of the Insolvency Act11 24 of 1936 (the IA), the
Court below held that Nel and De Villiers were mistaken in not recognising that
they were obliged to call the meeting at the request of a creditor representing
one-fourth of the of the value of all claims proved. The Court below held further,
that Nel and De Villiers were mistaken about Macmed being able to outvote
Standard Bank. Section 52(6) of the IA provides:
‘[A] creditor may not vote on the question as to whether steps should be taken to contest his
claim or preference.’
It went further, stating that the fact that the issue had been debated before was
no basis for refusing to convene a meeting to decide it. Finally, the Court below
was critical of the attitude adopted by Nel and De Villiers that the minority
concurrent creditors would not understand the complexities of the Peregrine
structure, stating that it was irrelevant to the decision whether to convene a
meeting or not.

[85] However, the Court below did not consider the failure to call a meeting a
sufficient basis for the removal of Nel and De Villiers. The court concluded that
Standard Bank’s complaint concerning the R325m claim was without foundation
as the two liquidators acted on legal advice as they did in respect of the use of
Intramed funds in the review application. Furthermore, the court below held that
no prejudice had been suffered by the estate as all the monies had been repaid.

11 Section 41 provides: ‘The trustee of an insolvent estate may at any time and shall, whenever
he is so required by the Master or by a creditor or creditors representing one-fourth of the value of
all claims proved against the estate, convene in the manner prescribed by subsection (3) of
section forty, a meeting of creditors (hereafter called a general meeting of creditors) for the
purpose of giving him directions concerning any matter relating to the administration of the estate
and shall state in such notice the matters to be dealt with at that meeting.’

However, the court below erred in stating (at para 7) that the capital amount
owing had been repaid by August 2004. It was in fact only repaid a year later.
The
court
below
concluded
that
the
fee-sharing
arrangement
was
unobjectionable. The present appeal is directed against all these conclusions.

Failure to prove an Intramed claim of R100m in Macmed

[86] This relates to three loans made by BoE bank to Intramed totalling
R100 m, which Intramed, in turn, lent Macmed. This complaint, as will become
evident, is inextricably linked to the disputed claim.

[87] As indicated in para 62 above, BoE bank initially proved its claim in the
amount referred to in Intramed but this claim was later expunged by the Master
at the instance of Nel and De Villiers. This led BoE to institute an action in the
Port Elizabeth High Court in which it succeeded in establishing its claim. Nel and
De Villiers appealed that decision but this court dismissed the appeal.12

[88] After the judgment of this court the result was that Intramed owed BoE
R100m while Macmed contended that it was owed R325m by Intramed. Nel and
De Villiers took the view that set-off applied and that Macmed’s claim in Intramed
stood to be reduced to R225m. This, of course, assumes the validity of the
Macmed claim. Consequently, Nel and De Villiers refused to prove Intramed’s
claim of R100m in the Macmed estate. Once again, the court below considered
that Nel and De Villiers, acting on legal advice, did not behave improperly.

Other material facts

[89] In dealing with Standard Bank’s complaint that the amount of R325m was
R120 000 more than the actual purchase price of the business which was
R324 880 000, Nel and De Villiers merely state that the amount was an

12 See note 6.

approximation and has been reduced to R225 m. This is a reference to the
R100m set-off referred to in the preceding paragraph. There is therefore, in
effect, no explanation for the excessive claim. The claim of R225m, it should be
added, even allowing for the set-off still exceeds what can legitimately be claimed
by approximately R120 000.

[90] In respect of the Macmed claim in Intramed it is necessary to record the
following. The Macmed claim was proved at the first meeting of creditors of
Intramed on 10 May 2000. It was reflected in the first and second account in
Intramed. These accounts were subsequently confirmed by the Master in 2001.
Pursuant thereto and on behalf of Intramed, Nel and De Villiers paid dividends of
R15 647 916.13 and R6 706 249.77 ─ a total of R22 354 165.90 ─ to Macmed. In
the court below, Standard Bank, wisely, did not seek to interfere with the
payment of these dividends under the first two accounts. The most recent
liquidation and distribution account in Intramed is the amended fourth account. It
was lodged with the Master by Nel and De Villiers in accordance with s 403 of
the CA and lay for inspection from 10 to 24 December 2000. It reflects an amount
of slightly less than R36m as part of the free residue account. These are monies
available for distribution to proved creditors. If, on proper examination of the
Macmed claim, it emerges to be invalid the destination of the free residue will
change significantly. It is that end which in part motivates the present litigation
exercise.

[91] In dealing with the review application in relation to their fees in the
winding-up of Intramed Nel and De Villiers are on record as stating that the
application was considered a landmark case by professional liquidators and that
they were supported in the application by their professional association.

Conclusions

[92] I shall deal first with the claim of R325m. Section 45 of the IA provides:

‘(1)
After a meeting of creditors the officer who presided thereat shall deliver to the trustee
every claim proved against the insolvent estate at that meeting and every document submitted in
support of the claim.
(2)
The trustee shall examine all available books and documents relating to the insolvent
estate for the purpose of ascertaining whether the estate in fact owes the claimant the amount
claimed.
(3)
If the trustee disputes a claim after it has been proved against the estate at a meeting of
creditors, he shall report the fact in writing to the Master and shall state in his report his reasons
for disputing the claim. Thereupon the Master may confirm the claim, or he may, after having
afforded the claimant an opportunity to substantiate his claim, reduce or disallow the claim, and if
he has done so, he shall forthwith notify the claimant in writing: Provided that such reduction or
disallowance shall not debar the claimant from establishing his claim by an action at law, but
subject to the provisions of section seventy-five.’13

[93] It is clear that once a claim is proved a liquidator is under an obligation to
examine all available books and documents. The mere admission of a claim does
not ratify it or make it res judicata.14 The importance of corroborating documents
is clear. The presiding officer is obliged to deliver every document in support of
the claim to the trustee. In the scheme of things, liquidators are required to
examine all available books and documents for corroboration or comparison. In
Estate Friedman v Katzeff 1924 WLD 298 the court, in dealing with a similar
section in the previous Insolvency Act 32 of 1916, said the following at 304:
‘In my view there can be no doubt that the word “shall” where used in sec. 43 of the Act is
peremptory and not directory, and it is therefore the duty of the Court to see that the provisions of
the Statute are complied with.’
The liquidator’s duties in this regard are therefore peremptory.

[94] In The Law of Insolvency Catherine Smith suggests that in addition to
books and documents ‘…clearly the trustee may also have regard to any

13 This section must be read with s 339 of the CA which provides:
‘In the winding-up of a company unable to pay its debts the provisions of the law relating to
insolvency shall, in so far as they are applicable, be applied mutatis mutandis in respect of any
matter not specially provided for by this Act.’
14 Bank of Lisbon and South Africa Ltd v The Master 1987 (1) SA 276 (A) at 287G.

evidence given by the insolvent and other witnesses’.15 This suggestion is apt. It
accords with the duties and obligations of a trustee referred to in para 1 above.

[95] In Estate Wilson v Estate Giddy, Giddy & White & Others 1937 AD 239 at
245 De Wet JA stated the following:
‘By virtue of section 43 of the Insolvency Act it is the duty of the trustee to examine every claim
proved against the estate and to satisfy himself that the estate is indebted to the creditor in the
amount of the claim. It seems to me that for this purpose the trustee is entitled to a clear and
unambiguous statement of the causa debiti and in this case the trustees were justified in
objecting to the contradictory statements in the proofs of debt.’

[96] In Commentary on the Companies Act16 the learned authors, under the
title Duty thoroughly to acquaint himself with the affairs of the company and to act
openly, state the following concerning a liquidator:
‘He owes a duty to the whole body of members and the whole body of creditors, and to the court,
to make himself thoroughly acquainted with the affairs of the company, and to suppress nothing
and conceal nothing, which has come to his knowledge in the course of the investigation, which is
material to ascertain the exact truth.’17

[97] Furthermore, a liquidator must act with care and diligence. In Commentary
on the Companies Act the learned authors state the following:
‘A liquidator must act with care and skill in the performance of his duties. He has a duty to
exercise particular professional skill, care and diligence in the performance of his duties, and will
incur liability if he fails to display that degree of care and skill which, by accepting office, he holds
himself out as possessing. Thus a high standard of care and diligence is required of a liquidator.
He must act reasonably in the circumstances. The test as to what is or is not reasonable in any
given circumstances is not whether the conclusion arrived at is reasonable, but is that of a
reasonable man “applying his mind to the conditions of affairs”, which means “considering the
matter as a reasonable man normally would and then deciding as a reasonable man normally
would decide”.
Relevant here is the fact that in cases of uncertainty or doubt, the liquidator has the opportunity of
safeguarding himself either by obtaining the directions of the Master or the court or by obtaining

15 Third edition 1998 at p 227.
16 M S Blackman, R D Jooste, G K Everlingham, M Larkin, C H Rademeyer, J L Yeats Vol 3 at
14─376.
17 Ex Parte Clifford Homes Construction (Pty) Ltd 1989 (4) SA 610 (W) at 614.

the directions of the creditors or members. Where, in such circumstances, the liquidator, for
example takes upon himself the burden of deciding on the validity of a claim, he also takes upon
himself the risk of its turning out that the payment constituted a misapplication of the funds under
his control.’18

[98] I have a deep sense of disquiet about the manner in which Nel and De
Villiers treated the claim of R325m. The parties were agreed that this court
cannot reach a definitive conclusion concerning the Peregrine structure and its
effect or its validity. Standard Bank submitted that the claim was not properly
assessed or interrogated.

[99] The evidence of Viljoen, the pre-liquidation accounting records of Macmed
and Intramed, the concerns expressed by Deloitte & Touche, the interest
payment of approximately R30m, the subscription for shares by Macmed and
Leoridge Investments, the stamp duties paid, the six monthly payments for
putting the Peregrine structure in place, of which R3 300 000 had already
apparently been paid, the subscription by Peregrine for shares in Intramed at a
subscription price equal to the purchase price, which meant that Peregrine
would, upon maturity date be an equity holder in Intramed, were all matters
deserving earnest consideration. It is clear that these issues were not given the
attention they deserved. Such consideration as given was perfunctory and
dismissive.

[100] In Commentary on the Companies Act the learned authors state the
following:
‘Where a group of companies is placed in liquidation, the conflicts of interest involved in acting as
the liquidator for more than one of those company may, in the circumstances, result in the court
refusing to appoint the liquidator of one of the companies as the liquidator of another or, where
that appointment has already been made, in removing him from office as liquidator of another or
other companies within the group.’19

18 Op cit 14─378.
19 Op cit 14─382.

[101] What is distressing is that Nel did not appreciate the conflict situation he
found himself in. As the liquidator of Macmed seeking to prove a contentious
claim in Intramed he was motivated by the interests of a creditor. As liquidator of
Intramed, together with De Villiers, he was obliged to consider the interests of the
debtor.

[102] In weighing up the genuineness of the claim of R325m the Intramed
perspective was improperly ignored. The conflict should have been recognised
and guidance sought on the position Nel and De Villiers found themselves in.

[103] The reliance by Nel and De Villiers on legal advice is too glib. Nel and De
Villiers informed the second and third opinions they received. The accounting
records, quite clearly, played an important role in the conclusions arrived at. Nel
is a chartered accountant and must, together with De Villiers, have been aware
of the importance of the qualification of the financial records of Intramed by
Deloitte & Touche. It was admitted that the financial statements were finalised
after Intramed and Macmed had been placed in liquidation, under the control of
Nel and De Villiers. It could not be otherwise. It does not appear from either the
second or third opinions that this fact was brought to the attention of counsel. Nor
does it appear that they were informed about the historical financial records up
until the end of November 1999.

[104] As rightly pointed out in the first opinion obtained by Nel and De Villiers, a
party alleging that the transaction was a simulated one bears the onus of proving
it.20 There is some force in Standard Bank’s contention that on the documentary
and other information available to Nel and De Villiers the scales were tipped the
other way.

[105] Furthermore, the opinion from the leading tax expert, which did not
interrogate the genuineness of the transaction, appears not to have received

20 See Zandberg v Van Zyl 1910 AD 302 at 314.

sufficient, or any, consideration. A further question arises: Why was a second
opinion sought by the Macmed liquidators, with Nel and De Villiers being the
driving force? In addition, it could rightly be asked, why, whilst in the process of
seeking the opinion or after obtaining it, they nonetheless persisted with the
claim. Despite the existence of the opinion, Nel and De Villiers as joint liquidators
of Intramed failed to dispute the claim. This was done in the face of controverting
documentary evidence and the qualification by Deloitte & Touche. This clearly
demonstrates the conflict that Nel found himself in and should have been more
attuned to.

[106] Whereas accountants are not required to have legal knowledge in general
they ought to know the importance of substantiating documents. So too, must
liquidators. The latter must at the very least have knowledge of the relevant legal
principles relating to their duties and functions. But, even if they did not in this
particular instance, their conduct was lacking in simple common sense and
devoid of logic to the extent that it is difficult to resist the conclusion that they
were improperly motivated.

[107] It is not insignificant that in the second and third opinions the prospect of
recovery from sources other than Intramed was rated as minimal. The third
opinion, which is four and a half pages long, built on the second. The reliance on
legal advice must be viewed against what is set out in the preceding paragraphs.
In my view, in respect of the claim of R325m, Nel and De Villiers did not comply
with their duties as liquidators in accordance with the standards referred to by the
authorities set out earlier in this judgment.

[108] Standard Bank’s complaint concerning the failure by Nel and De Villiers to
prove the Intramed claim of R100m in Macmed is subsumed by the complaint
concerning the R325m. If the latter claim is valid there might be justification for
set-off. But set-off only arises if the Macmed claim of R325m is valid.

[109] The failure to call the meeting of creditors relates to and impacts on the
claim of R325m. Standard Bank, having been ousted for a long time as a
participating creditor in the Intramed estate because of the expungment of its
claim, was intent on having the Macmed claim discussed and its validity debated.
The court below was correct in its conclusion concerning the decision by Nel and
De Villiers not to accede to the request for a meeting. It did not regard that fact
on its own as a basis for their removal as liquidators. In my view, the failure to
call the meeting has to be seen against the totality of the circumstances set out
above.

[110] I turn to deal with the charge of misappropriation of monies. It must be
stated at the outset that counsel on behalf of Nel and De Villiers was rightly
constrained to concede that, insofar as the use of monies for the review
application is concerned, their conduct was not beyond reproach. He submitted
that it should however be seen in context and that we should be cautious and
alive to the fact that we are now judging their conduct with the benefit of
hindsight.

[111] In 4(3) Lawsa para 236 Blackman states:
‘[A] liquidator stands in a ‘fiduciary relationship towards the company and its members and
creditors. As such, he occupies a position in some ways analogous to that of a trustee.’

[112] In Commentary on the Companies Act21 the following appears:
‘The liquidator stands in a fiduciary relationship to the company of which he is the liquidator, to
the body of its creditors as a whole, and to the body of its members as a whole.
As a fiduciary, the liquidator must at all times act openly and in good faith, and must exercise his
powers for the benefit of the company and the creditors as a whole, and not for his own benefit or
the benefit of a third party or for any other collateral purpose. He must act in the interests of the
company and all the creditors, both as individuals and as a group. He must not make a decision
which would prejudice one creditor and be of no advantage to any of the other creditors or to the
company.

21 Op cit at 14─380–14─381.

He may not act in any matter in which he has a personal interest or a duty which conflicts, or
which might possible conflict, with his duties as liquidator of the company.’

[113] It is self-evident that monies in the estate of the company being wound-up
cannot be put to private use by the liquidators. For a liquidator to act in that
fashion is the very antithesis of what should rightly be expected of a liquidator. It
is equally clear that litigation undertaken has to be in the best interest and for the
benefit of the company being wound-up.

[114] My first concern is the suggestion that the review application was seen as
a landmark case for the benefit of liquidators. The extract from Nel’s affidavit
referred to in para 71 above is instructive. It confuses or seeks to run together
the interests of the ‘insolvency profession’, the Master and creditors. Intramed’s
funds were not available for the personal benefit of Nel and De Villiers. Neither
could such monies be used to fund a test case for the liquidation industry
generally.

[115] Second, there was no specific authorisation by the creditors of Intramed in
relation to the review application and it faced opposition from the Master. As
stated by this court in relation to the review application: ‘[T]hey were acting in
their personal capacities and not in any sense in the interests of the Intramed
estate. Indeed, the appellants were ─ and still are ─ acting against the interests
of the creditors, solely for their own benefit’. 22

[116] Third, despite the judgment of the Grahamstown High Court in terms of
which Nel and De Villiers were ordered to pay the costs personally, they
nevertheless continued to use Intramed funds to pay their legal costs including
those of an appeal to this court. This was done despite the Master’s
protestations.

22 See para 52 and note 2.

[117] Fourth, despite the emphatic critical comments by this court concerning
their conduct, they failed to promptly repay the amounts they had used to fund
their personal litigation. Throughout, they demonstrated an obstinate resistance
to being held to account. At one stage, instead of dealing with Standard Bank’s
objection in principle, they sought rather to challenge its locus standi. It took
approximately 16 months after the decision of this court before all the monies
utilised were paid back.

[118] Having rightly made the concession that their conduct was not beyond
reproach counsel representing Nel and De Villiers was hard-pressed to justify or
explain their extreme tardiness in repaying the monies improperly utilised.

[119] Once again, the reliance on legal advice does not excuse the behaviour of
Nel and De Villiers. At the outset the warning lights ought to have flashed. Their
expertise and experience in matters financial ought to have made them
particularly aware that personal costs and motivations should be kept strictly
distinct from professional obligations and responsibilities and should not intrude
to contaminate the winding-up process. When two courts in succession
pronounced on their liability and responsibility they ought to have responded with
due promptitude and demonstrated appropriate contrition. The opposite
occurred. Even accepting that they had dispatched supporting vouchers to the
Master’s office the conclusion is inescapable that they demonstrated a reckless
disregard concerning the use of Intramed’s funds. Having undertaken to the
Master, when faced with his protests, to repay the legal costs if held personally
liable, one would have thought that they would have kept a separate record of
those payments, yet it appears that they did not. The question might rightly be
asked why they did not have recourse to books of account in which legal costs
would necessarily have been recorded.

[120] Months after they had been challenged on the issue they stated
unequivocally that the costs had been repaid. Years later, without the excuse of

absent vouchers, the matter remained unresolved. Had they been ordinary
litigants this would have been unacceptable. Given the high standards required
of liquidators in the winding-up of companies it is unconscionable and wholly
deplorable.

[121] We have not been supplied with the details of the policy of the Association
of Insolvency Practitioners of SA concerning fee-sharing arrangements. In his
affidavit Nel states that arrangements between liquidators, such as the one in
relation to the Macmed winding-up process, are common place.

[122] For reasons that are apparent it is not necessary to deal with every one of
Standard Bank’s complaints concerning the fee-sharing arrangements.

[123] In the present case I have a difficulty in understanding why the Macmed
liquidators had an interest in the application by Nel and De Villiers in reviewing
the Master’s ruling on their fees and why they were expected to and in fact did
contribute to the costs of that litigation. The Macmed liquidators appear to have
paid that contribution personally. That does not, however, excuse their
participation in Intramed’s affairs. The inflated fees of approximately R21m which
Nel and De Villiers consider themselves entitled to in relation to their winding-up
of Intramed would have had a serious impact on the estate. This was a matter on
which the views of the creditors ought to have been specifically sought and in
respect of which they ought to have had a say. The conflict inherent in the
situation described above was regrettably lost on Nel and De Villiers and on the
other joint liquidators of Macmed. It would be surprising if this kind of conduct
was sanctioned by their professional association.

[124] Standard Bank prays for the removal of Nel and De Villiers as liquidators
in Intramed. Section 379(2) of the Companies Act 61 of 1973 provides:
‘The Court may, on application by the Master or any interested person, remove a liquidator from
office if the Master fails to do so in any of the circumstances mentioned in subsection (1) or for
any other good cause.’

The relevant circumstances mentioned in subsec (1) are as follows:
‘(b)
that he has failed to perform satisfactorily any duty imposed upon him by this Act or to
comply with a lawful demand of the Master or a commissioner appointed by the Court under this
Act; or
…
(e)
that in his opinion the liquidator is no longer suitable to be the liquidator of the company
concerned.’

[125] In Hudson and others NNO v Wilkins NO and others 2003 (6) SA 234 (T)
(at para 13) the following appears:
‘[13]
A liquidator may be removed from office if there is sufficient suspicion of partiality or
conflict of interest, since a liquidator must be and appear to be independent and impartial. He or
she must be seen to be independent since his duties as liquidator may require him or her to
investigate. (See Re Giant Resources Ltd [1991] 1 Qd R 107 at 117; Re National Safety Council
of Australia (Vic Division) [1990] VR 29 ([1989] 15 ACLR 355 (SC Vic); City of Suburban Ltd v
Smith [1998] 28 ACSR 328 (FC of A) at 336.) A Court will exercise its discretion to remove a
liquidator if it appears that he or she, through some relationship, direct or indirect, with the
company or its management or any particular person concerned in its affairs, is in a position of
actual or apparent conflict of interest. In exercising that discretion Bowen LJ in Re Adam: Eyton
Ltd: Ex parte Charlesworth (1887) 36 Ch D 299 at 306 said:
“Of course fair play to the liquidator himself is not to be left out of sight, but the measure of course
is the substantial and real interest of liquidation.” ‘

[126] In Ma-Afrika Groepbelange (Pty) Ltd v Millman and Powell NNO 1997 (1)
SA 547 (C) at 561H-J the following is stated:
‘Good cause for the removal of a liquidator has also been held to have been shown where a
liquidator has not been independent. This was the ratio of the judgment in Re Sir John Moore
Gold Mining Co (1879) 12 ChD 325 (CA) at 332, where a liquidator was removed because his
“interests may conflict with his duty”. See also Re P Turner (Wilsden) Ltd (1986) 2 BCC 99, 567
(CA) at 99, 570 and Re London Flats Ltd [1969] 2 All ER 744 (Ch) at 752E-F, where it was held
that a liquidator should be “wholly independent” and that the removal of a liquidator should be “in
the interests of every one concerned in the liquidation.” ‘

[127] In 4(3) Lawsa under the titles Companies and Winding-up M S Blackman
at para 281 states the following:

‘The court will remove a liquidator if some unfitness, in the wide sense of that term, is shown in
the liquidator, whether it be from personal character or from his connection with other parties or
from circumstances in which he is involved. Thus, even though no bad faith was alleged, the
court removed a liquidator where he had become so engrossed in his own view that he was
unable to see the reasonableness of the proposals of those interested in the liquidation and threw
obstacles in their way; … where it was prima facie established that the liquidator and two
directors were liable to account to the company for certain sums and the liquidator refused to take
proceedings against the directors; …’
Further on, the following appears:
‘Although there may be no individual characteristic in itself sufficient on which to base a
conclusion that a liquidator is unfit, there may be a number of circumstances which combined
might force the court to that conclusion. Also, the court might take into account some unfitness on
the part of the liquidator together with what might be in the interests of those persons interested in
the liquidation. A relevant factor is also the costs that would be incurred if another liquidator has
to come in and complete the work that the present liquidator has already done. Thus, in the
circumstances, the court will be less likely to discharge a liquidator towards the end of the
winding-up, after he has become acquainted with the affairs of the company, than it would early in
the winding-up. Although each one of these considerations taken singly might not be sufficient to
justify the removal of the liquidator, taken together they might be.’

[128] It is clear that in respect of the claim of R325m Nel and De Villiers have
lost all objectivity and improperly preferred the Macmed claim without properly
interrogating and verifying it. The comments by Van Heerden AJA set out in para
52 above are apposite. It does not appear that in that case this court was made
aware of the fee-sharing arrangement which would have significantly ameliorated
the impact of the cost order on Nel and De Villiers personally.

[129] As stated above, counsel representing Nel and De Villiers, rightly
conceded that their behaviour in relation to the cost of the review application was
from the outset not beyond reproach. Chronologically, their behaviour in relation
to the use of Intramed’s funds became progressively worse. In addition they were
obstructive, evasive and unrepentant to the end.

[130] In relation to that aspect of the fee-sharing arrangement referred to above
Nel and De Villiers failed to appreciate the conflict in which they found
themselves and its effect on them.

[131] A precursor to the decision by the Grahamstown High Court on the
application to have Nel and De Villiers removed was a challenge by them to
Standard Bank’s locus standi. The challenge on that issue culminated in an
appeal to this court in which Standard Bank was successful. This court recorded
that Nel and De Villiers were not ‘litigation shy’.23

[132] It is a cause for concern that so much time has passed since the Macmed
group was placed in liquidation. We have been informed that much work in
relation to the Intramed estate has been done and is nearing completion. Against
that consideration is the fact that Nel and De Villiers have played a major part in
the delay by way of costly, protracted and unnecessary litigation. If the Macmed
claim is disregarded Standard Bank overwhelmingly represents the majority of
value of creditors in the Intramed estate. That it is willing to put up with a further
delay in the winding-up of the estate is not insignificant. The R325m claim is
clearly the remaining major issue and one in respect of which Nel and De Villiers
cannot bring objectivity to bear. The totality of circumstances set out above
compellingly leads to the conclusion that it is not in the best interests of the
liquidation that they continue to serve as joint liquidators of Intramed.

[133] Liquidators must realise that they perform important functions. The
Master, creditors and importantly courts rely on them. In the liquidation process
they are expected to act impeccably. The profession must be under no illusion
that courts, in appropriate circumstances, when called upon to do so will act to
ensure the integrity of the winding-up process.

23 Intramed (Pty) Ltd (in liquidation) v Standard Bank of South Africa Ltd 2008 (2) SA 466 (SCA)
at para 20.

[134] Standard Bank contends that in terms of s 384(2)24 of the CA, Nel and De
Villiers’ fee in the winding-up of Intramed should be disallowed or reduced.
Furthermore, Standard Bank submitted that Nel and De Villiers should be liable
to pay a penalty in terms of s 394(7)25 of the CA in an amount of R1 608 839,
being double the amount they used from Intramed funds to pay the costs of the
review application.

[135] Removal of a liquidator is an extreme step. It certainly impacts on his or
her reputation. It was submitted on behalf of Nel and De Villiers that we give
consideration to the fact that they are nearing the end of their careers. Moreover,
so it was submitted, they have expended effort and much hard work to the
benefit of Intramed and creditors by, for example, continuing to trade in Intramed
despite objections by BoE bank, which resulted in a significant increase in its
value, which ultimately redounded to the benefit of creditors.

[136] Bearing in mind what is set out in the preceding paragraph I am not of the
mind to impose a penalty in terms of s 394(7) of the CA. However, having regard
to the nature and gravity of the misconduct, considering the protracted, costly
and unnecessary litigation engaged in by Nel and De Villiers, and taking into
account what can rightly be demanded of liquidators, it is my view that they
should be deprived of 5 per cent of their fee. The Master was requested to
disallow or reduce their remuneration and refused to do so.

24 ‘The Master may reduce or increase such remuneration if in his opinion there is good cause for
doing so, and may disallow such remuneration either wholly or in part on account of any failure or
delay by the liquidator in the discharge of his duties.’
25 Section 394(7)(a) provides:
‘7) (a) Any liquidator who without lawful excuse, retains or knowingly permits his co-liquidator to
retain any sum of money exceeding forty rand belonging to the company concerned longer than
the earliest day after its receipt on which it was possible for him or his co-liquidator to pay the
money into the bank, or uses or knowingly permits his co-liquidator to use any assets of the
company except for its benefit, shall, in addition to any other penalty to which he may be liable,
be liable to pay to the company an amount not exceeding double the sum so retained or double
the value of the assets so used.
(b)  The amount which the liquidator is so liable to pay, may be recovered by action in any
competent court at the instance of the co-liquidator, the Master or any creditor or contributory.’

[137] Finally, there is the question of the costs of Standard Bank. Counsel
representing the bank correctly accepted that the founding affidavit was prolix. It
made trawling through the record extremely difficult. It had the unhappy
consequence of a lengthy response. Oftentimes less is more. Recently both in
respect of the record and heads of argument legal representatives have acted to
the contrary. Mindful of the unnecessary time and resources expended in the
present case I am of the view that the bank should be deprived of a third of its
costs.

[138] The following order is made:
1.
The appeal is upheld.
2.
The second and third respondents are ordered to pay two thirds of

the appellant’s costs, such costs to include those consequent upon

the employment of two counsel, to be paid by the second and third

respondents in their personal capacities jointly and severally.
3.
The order of the court below is set aside and substituted as follows:
‘1.
The third and fourth respondents are removed as joint liquidators of
Intramed (Pty) Ltd (in liquidation).
2.
The decision of the Master not to disallow or reduce the remuneration of
the third and fourth respondents as joint liquidators of Intramed (Pty) Ltd (in
liquidation) is reviewed, set aside and replaced with an order in terms whereof
the remuneration of the second and third respondents is reduced by five per
cent.
3.
The third and fourth respondents are ordered to pay the costs of the
application including the costs consequent upon the employment of two counsel
where applicable, such costs to be paid by the third and fourth respondents in
their personal capacities jointly and severally.’

_________________
M S NAVSA
JUDGE OF APPEAL

GRIESEL AJA dissenting

[139] I have read the judgment of Navsa JA, but respectfully disagree with his
conclusion that the appeal should succeed. The relevant facts have been fully
summarised in my colleague’s judgment as well as in the judgment of the court
below. It is accordingly not necessary to repeat the factual background herein,
save to the extent necessary to explain my reasoning in respect of particular
aspects.
[140] With regard to the application for removal of the joint liquidators, which
forms the backbone of the present appeal, Standard Bank relies on five main
grounds. Before dealing seriatim with the individual grounds of complaint, I wish
to make some general remarks which, in my view, militate against the removal of
the liquidators at this stage of the winding-up process.
[141] First, my colleague rightly points out26 that removal of a liquidator is ‘an
extreme step’. From the authorities cited by him,27 it further appears that removal
of a liquidator is ‘a radical form of relief which will not be granted unless the Court
is satisfied that a proper case is made out therefor’.28 For the reasons set out
below, I am not persuaded that the bank has made out a proper case for such
radical relief.
[142] Second, a court will be less inclined to remove a liquidator at a late stage
in the winding-up process than it would be to replace him or her at an early
stage.29 In the present case, the liquidators were appointed more than ten years
ago. By the time Nel deposed to his answering affidavit in these proceedings, on

26 Para 135 above.
27 Paras 124–127 above.
28 Ma-Afrika Groepbelange (Pty) Ltd v Millman and Powell NNO, para 126 above, at 566B–E.
29 Ma-Afrika Groepbelange, loc cit; Hudson NNO v Wilkins NO, para 125 above, in para 18 of the
judgment.

30 August 2005, the process of winding up was at ‘a very advanced stage’. Thus
Nel stated:
‘Save for the dispute over the Macmed claims, the remaining steps are to prepare a final
liquidation and distribution account, report to the Master and pay out the remaining dividends. No
purpose would be served in replacing De Villiers and me now as liquidators, as the administration
of the Intramed estate is, for all practical purposes, almost complete. The appointment of other
liquidators would only result in incurring additional costs for the Intramed estate to the prejudice of
the other creditors.’
Since the aforesaid date the court below, during the first round of the current
proceedings, refused to expunge the Macmed claim,30 with the result that the
issue relating to that claim can no longer be said to be outstanding. It can be
accepted, therefore, that the process of winding up is by now – more than four
years later – virtually complete. To remove the liquidators at this very late stage
will, in my view, amount to a brutum fulmen.
[143] Third, a court must be satisfied that removal of the liquidator(s) will be to
the general advantage and benefit of all persons concerned or otherwise
interested in the winding-up of the company in liquidation.31 In the present
instance, 91 claims totalling R667 million (subsequently reduced to R567 million)
were proved against Intramed at the first meeting of creditors, back in May 2000.
As observed by Mr Nel, ‘(i)t is noteworthy that the applicant is not supported in
this application by any of the other proved creditors in Intramed . . .’ Not only is
the application not supported by any of the other creditors, but the bank has not
adduced any evidence – and accordingly has not discharged the onus of proving
– that removal of the joint liquidators will be to the general advantage and benefit
of all persons interested in the winding-up of Intramed.

30 Cf High Court judgment, para 31.
31 Ma-Afrika Groepbelange (Pty) Ltd v Millman and Powell NNO, para 126 above, at 566D.

[144] Fourth, in refusing to order removal of the liquidators, the court below
exercised a judicial discretion. Leaving aside the question whether this was a
‘narrow’ or a ‘wide’ discretion,32 I have not been persuaded that any grounds
exist which would entitle this court on appeal to interfere with the exercise of the
high court’s discretion.
[145] Finally, in terms of s 381 of the Companies Act, the Master has wide-
ranging powers of control over liquidators. The fact that the Master, who has not
been criticised for undue partiality towards the Intramed liquidators, has not seen
fit – with knowledge of Standard Bank’s complaints – to exercise any of his
powers in terms of s 381, is a factor entitled to considerable weight in considering
the present application.
[146] With that prelude, I now turn to deal with the merits of the individual
grounds for removal advanced on behalf of Standard Bank and do so in the
same sequence as did my colleague.
The Macmed claim

[147] Much time and paper was spent on the question of the validity of the
Macmed claim. Indeed, this was described by Standard Bank as one of the main
issues to be decided in the litigation and one of the prayers (para 1.6) contained
in the notice of motion was specifically aimed at expungement of the Macmed
claim as contained in the amended fourth liquidation and distribution account. As
mentioned earlier, Standard Bank’s claim in this regard was duly dismissed by
the court below during the first round,33 hence the court’s observation, during the
second round, that ‘(w)e do not have to consider the validity of the Macmed
claim’.34 Instead, the focus shifted to the question whether Nel and De Villiers

32 Cf Naylor v Jansen 2007 (1) SA 16 (SCA) para 14; Giddey NO v J C Barnard and Partners
2007 (5) SA 525 (CC) para 19.
33 High Court judgment para 31.
34 High Court judgment para 36.

acted inappropriately by not disputing the Macmed claim. But therein lies the rub
because, without a thorough examination of the validity of that claim (including
the intricate ‘Peregrine structure’ which underlies it), it is virtually impossible to
pass any judgment on the conduct of the liquidators in their treatment of the
claim. Yet this is precisely what Standard Bank’s complaint demands of the court:
as pointed out in its heads of argument, the bank’s central contention is a simple
one: ‘the proof of the Macmed claim ignores the Peregrine structure and in these
circumstances the Intramed liquidators (who knew the true and full facts) ought to
have recommended to the Master that he expunge it’.
[148] Without the benefit of full evidence – including cross-examination – on
this aspect, it is impossible to find, in my view, that the liquidators’ conduct in
relation to the Macmed claim fell short of the required standard and that it
justifies their removal. A careful reading of the evidence shows, in any event, that
the Intramed liquidators did not blithely accept the claim. Shortly after Macmed’s
claim was proved at the first meeting of creditors, during May 2000, Nel
forwarded a copy of the claim (together with certain other claims) to Intramed’s
attorney, Brooks, with the request, on behalf of Intramed: ‘Please review in terms
of the evidence given at the enquiry and opinions received’.
[149] A month or so later, in their report to the second meeting of creditors of
Intramed, Nel and De Villiers reported as follows:
‘The claims of the ultimate holding company Macmed Healthcare Limited and BOE Bank Limited
require investigation. There is an obvious duplication of approximately R100 million. Claims
proved at the first meeting of creditors should total approximately R567 million and not R667
million.’
[150] The record shows that Nel and De Villiers did indeed investigate the two
claims mentioned in the report and decided in due course not to challenge the
Macmed claim. This was done on the basis of legal advice received from their

attorney, Brooks, to the effect that the claim was in order. His advice, in turn, was
supported by counsel’s opinion obtained by the Macmed liquidators.
[151] The one aspect on which all parties agreed was that the Peregrine
structure was one of some complexity. In the judgment of the court below during
the first round, the court gave a brief summary of what the Peregrine structure
entailed, the correctness of which was apparently accepted by counsel on both
sides and was repeated in the second judgment.35 It was precisely because of
the complexity of the series of transactions comprising the Peregrine structure
that the Macmed liquidators found it necessary to seek counsel’s opinion.
Subsequently, a second and a third opinion was obtained. In this context, my
colleague poses the question: ‘Why was a second opinion sought by the
Macmed liquidators, with Nel and De Villiers being the driving force?’36 With
respect, the way I read the evidence, it was the Macmed liquidators, at the
behest of the bank creditors of Macmed, who obtained all three opinions. Nel
pointed out in this regard that, having obtained the first opinion, the Macmed
liquidators were instructed by the bank creditors of Macmed – including Standard
Bank – to obtain the second and third opinions from counsel:
‘The Macmed liquidators obtained the second Peregrine opinion late in August 2000 which
second opinion was also debated with the Macmed banks, including [Standard Bank].
. . . The Macmed liquidators were then instructed by the bank creditors to obtain a third opinion
relating to the Peregrine Structure which opinion the Macmed liquidators obtained in November
2000. The third opinion, after it had been obtained, was also debated with the Macmed banks at
an informal meeting of creditors. The Macmed banks instructed the Macmed liquidators not to
proceed with any action against Peregrine in regard to the Peregrine Structure and accepted the
effect of the unwinding of the Peregrine Structure and consequently the validity of the Macmed
claim against Intramed of R325 million.’

35 High Court judgment para 35.
36 Para 105 above.

[152] Both the second and third opinions reaffirmed the simulated nature of the
Peregrine structure. This construction was thereupon accepted, not only by the
liquidators of Macmed and the relevant creditors (including Standard Bank), but
also by Nel and De Villiers on behalf of Intramed. It was on this basis that the
Macmed claim was reflected in the successive liquidation and distribution
accounts of Intramed, all of which were in due course confirmed by the Master.
The first three accounts went unchallenged, whereas Standard Bank’s challenge
of the fourth account was unsuccessful, as noted earlier. In terms of s 407(4)(a)
of the Companies Act, Standard Bank had the opportunity to take the Master’s
decisions on review within fourteen days from the date on which the decisions
were made. This was not done. Moreover, pursuant to confirmation of the first
account, and on 9 March 2001, the liquidators paid a dividend of R15,6 million to
Macmed based on its claim of R225 million. Pursuant to confirmation of the
second account, and on or about 4 October 2001, the liquidators paid a further
dividend to Macmed in the amount of R6,7 million. Standard Bank did not apply
to have either the first or the second liquidation and distribution account re-
opened in terms of s 408. Instead, it launched various abortive attempts to have
the Macmed claim expunged: thus, at a general meeting of creditors of Macmed,
the bank attempted to persuade the creditors to abandon the Macmed claim
against Intramed. Not surprisingly, the bank failed to obtain any support for its
proposal. It then attempted to persuade Nel and De Villiers to convene a meeting
of the Intramed creditors to discuss expungement of the Macmed claim, but this
request was turned down. The bank did not pursue their efforts to convene a
meeting of Intramed creditors, but instead applied unsuccessfully to the court
below, in the first part of the present proceedings, to have the Macmed claim
expunged. Having been turned away at the front door, as it were, the bank now
comes to the back door, relying on the same facts and seeking a different – and
far more drastic – remedy. In my view, they should again be turned away.
[153] In the circumstances as outlined above, the Intramed liquidators were
fully entitled, in my view, to regard the said structure as a simulation which had

‘unwound’ upon the winding up of Macmed. As Nel summed up the position in his
answering affidavit: ‘We always believed the transaction to have unwound, as is
borne out by the subsequent conduct of all parties concerned’.
[154] Nel’s reliance on the subsequent conduct of the parties and their
understanding of the effect of the series of agreements finds support in the
judgment of this court in Aussenkehr Farms (Pty) Ltd v Trio Transport CC,37
where the question for decision was posed as follows:
‘Where the parties to a contract are agreed on its meaning, is it open to a third party to contend
for a different meaning even if that does accord with the apparent meaning of the written
document reflecting the agreement?’38
Lewis AJA answered the question as follows:
‘Where the parties dispute the meaning of a term then a court must necessarily look to the
wording of the provision itself to determine its correct construction. But where they agree on its
meaning, even though the provision appears objectively to reflect a different understanding, it
would be absurd to insist on binding them to a term upon which neither agrees only because of a
third party’s insistence on reliance on the apparent meaning of the provision.’39
[155] Applied to the facts of the present case, it appears from the evidence that
the parties to the Peregrine structure regarded the agreements to have
‘unwound’ upon liquidation of Macmed and its subsidiaries. This is borne out by
the fact that Peregrine never proved a claim against Intramed because, as Nel
put it, ‘(i)t clearly never was the intention that Peregrine would ever have a claim
against Intramed’. In these circumstances, it would indeed be ‘absurd’, as
suggested in Aussenkehr, supra, to disregard the understanding and attitude of
the parties and to look, instead, through a magnifying glass at the abstract
meaning to be gleaned from the battery of 21 agreements comprising the

37 2002 (4) SA 483 (SCA).
38 Para 23.
39 Para 25.

elaborate Peregrine structure in order to attribute a different meaning to those
agreements as the one accepted by the parties.
[156] In Caldeira v The Master40 the duties of a trustee (or liquidator) in terms
of s 45(3) of the Insolvency Act were stated as follows by Levinsohn J:
‘This section enjoins the trustee, if he disputes the claim, to report to the Master his reasons for
doing so. It seems to me that if a trustee disputes the claim he must have a reasonable belief
based on facts ascertained by him that the insolvent estate is not in fact indebted to the creditor
concerned. Mere suspicion about the claim would not be sufficient. This belief would, I think,
generally arise after the examination of the Company’s records and the conclusion derived from
the records that the indebtedness does not exist or has been extinguished. Of course, the facts
giving rise to the belief may not necessarily be derived from the company’s records, they could
arise, for example, from the records of an interrogation conducted at the meeting of creditors.’
[157] Having regard to this test and to the evidence of Nel and De Villiers, it is
clear to me that they did not have a reasonable belief that Intramed is not in fact
indebted to Macmed.
[158] However, as far as Nel and De Villiers are concerned, the matter did not
end there. As explained by Nel:
‘After we came under pressure from the applicant to expunge the Macmed claim we again
obtained advice. We were again advised that our approach was proper and appropriate and that
we ought not to succumb to the pressure being exerted by the applicant.’
[159] I do not regard it necessary to go into greater detail regarding either the
validity of the Macmed claim or the Peregrine structure. Suffice it to state that I
am unable to fault the liquidators for having decided, on legal advice, to disregard
as a simulation the convoluted series of transactions between Macmed, the
Peregrine Group and Intramed and to accept, instead, the simple commercial

40 1996 (1) SA 868 (N) at 874D–E, quoted with approval in the High Court judgment, para 37.

reality of the transaction as an inter-company loan from Macmed to Intramed in
an amount of R325 million. That amount was reduced by R100 million as a result
of recognition of BOE’s claim in that amount for which Intramed was held liable.41
[160] For these reasons, I am, with respect, unable to share my colleague’s
conclusion42 that in relation to the Macmed claim Nel and De Villiers did not
properly comply with their duties as liquidators; far less that their conduct justifies
the ultimate penalty of removal.
‘Misappropriation’ of Intramed’s funds

[161] With regard to this complaint, Standard Bank in its affidavits and in
argument before us persistently likened the liquidators’ position with that of an
attorney misappropriating trust money for his or her own purposes. Reliance was
placed in this context, by way of example, on Law Society of the Cape of Good
Hope v Budricks.43 In my opinion, however, this analogy is wholly inapposite. In
that case it was held that Budricks had ‘misappropriated trust money and
administered trust funds in a reckless and cavalier manner without any regard for
his duties as an attorney’.44 It was further found that Budricks had methodically
misappropriated large sums of money over a substantial period of time.45
[162] This differs totally from the present situation, where Nel and De Villiers
acted on responsible legal advice to the effect that the application for review of
the Master’s decision regarding their fees ought to be brought in their official
capacity as part of the administration of the estate. Nel explains:
‘In bringing the review application, we were assisted and advised by Tabacks Attorneys (Mr
Brooks) and senior and junior counsel (J Eksteen SC and P Daniels). They advised us that the

41 2004 (3) SA 1 (SCA).
42 Para 107 above.
43 2003 (2) SA 11 (SCA).
44 Para 7.
45 Para 11.

application ought to be brought in our official capacity. We are not lawyers, and had no reason
not to accept their advice. After the judgment in the First Court had been delivered, we again
sought advice. We separately obtained advice from three eminent silks (Slomowitz SC,
Terblanche SC and Trengove SC). The weight of advice, which we received, was that an appeal
ought to be lodged and that it had good prospects of success. It was implicit in the advice that it
was not wrong for us to have brought the review in our official capacities. Again, we had no
reason not to accept it.’
[163] With the benefit of hindsight, Nel added:
‘. . . (W)e respectfully point out that where our advice initially received from our attorneys and
counsel could have been wrong, such advice was sought and received on a bona fide basis by us
and whilst our advice has proved to have been wrong, we respectfully point out that such advice
could have been given reasonably in the light of the judgment in Collie NO v The Master 1972 (3)
SA 623 (A).’
[164] In response, Faul on behalf of Standard Bank stated that ‘no reasonable
lawyer could bona fide have given the advice to which Mr Nel testifies; and no
reasonable person could have accepted and acted upon it’. I find this an
astonishing proposition: not only did Nel and De Villiers choose to consult several
experienced and eminent legal practitioners; but two experienced and learned
judges in the court below did not uphold the bank’s criticism of the liquidators’
conduct in this regard.
[165] Be that as it may, the complaint regarding the alleged ‘misappropriation’
of Intramed’s funds has been fully dealt with and rejected by the court below.46 I
associate myself with its reasoning as well as the conclusion reached and do not
find it necessary to add anything further in that regard.

46 High Court judgment, paras 12–30.

The fee-sharing arrangement

[166] The essential features of the fee-sharing arrangement have been alluded
to above.47 It is important to note that it is only the fee-sharing arrangement
between the six Macmed liquidators that is being frowned upon by Standard
Bank. Its deponent, Faul, stated unequivocally in his replying affidavit that he has
no quibble with the fee-sharing between Nel and De Villiers in their capacities as
joint liquidators of Intramed, nor does he object to Nel’s fee-sharing arrangement
with his erstwhile employer, PriceWaterhouseCoopers. What he objects to is the
fee-sharing arrangement that prevails among the six Macmed liquidators, ie
‘cross-company fee-sharing’, as he calls it. It is clear, therefore, that this
particular complaint cannot support an application for De Villiers’ removal as he
was not a party to that arrangement.
[167] As for Nel, he answers this complaint in the passage quoted by my
colleague.48 Mr Brian Cooper, one of the other Macmed liquidators and a
practising attorney with 47 years experience of insolvency matters, testified to the
same effect, describing the fee-sharing arrangement as ‘a standard practice
amongst liquidators’ where a group of companies are being wound up.
[168] In these circumstances, I am unable to find, as contended for by
Standard Bank, that the fee-sharing agreement per se is improper to the extent
that it justifies the removal of a liquidator. Not only is the basis of the bank’s
complaint questionable; the bank’s attitude also appears to be highly selective: if
the bank is correct that Nel acted improperly by entering into the fee-sharing
arrangement with his co-liquidators in Macmed, then it must necessarily follow
that each of the other five Macmed liquidators is equally guilty of impropriety; yet
the bank has not sought the removal of any of those co-liquidators. Similarly, on

47 Paras 77–78 above.
48 Para 78 above.

the bank’s reasoning, Nel’s conduct is equally improper in each of the 45 other
Macmed subsidiaries in which he has been appointed as liquidator, where the
same fee-sharing arrangement prevails; yet his removal has not been sought in
any of those companies. The inference is irresistible that this complaint by the
bank, far from being a substantive ground for removal, is a mere makeweight in
an effort to bolster the bank’s case against Nel. This tends to lend credence to
Nel’s assertion that the bank ‘appears to be motivated by a personal vendetta
against the liquidators of Intramed’.
[169] With regard to the fourth and fifth complaints, namely the failure by the
liquidators to prove a claim for R100 million against Macmed and their failure to
convene a meeting of Intramed creditors at the request of the bank these
complaints, as rightly pointed out by Navsa JA,49 are intimately interlinked with
the validity of the Macmed claim. In the light of my conclusion regarding the
Macmed claim, it follows that these two grounds of complaint likewise cannot
sustain an application for removal of the liquidators.50
[170] To sum up, for the reasons set out above, I am of the view that the bank
has failed to make out a sufficient case for the removal of Nel and De Villiers as
liquidators of Intramed.
Reduction of the fees

[171] One of the further forms of relief claimed (and granted by my
colleague),51 was the claim for a reduction of the fees of the liquidators in terms
of s 384(2) of the Companies Act.

49 Paras 108–109 above.
50 See also the High Court judgment, paras 63–80.
51 Para 136 above.

[172] Again, I find myself in agreement with the high court’s reasoning
regarding this claim.52 I am accordingly of the view that this claim was likewise
rightly dismissed by the high court.
[173] In all the circumstances, I would have dismissed the appeal with costs,
including the costs of two counsel.

___________________
B M GRIESEL
Acting Judge of Appeal
PONNAN JA

[174] I have had the benefit of reading the judgments of my colleagues Navsa
and Griesel. At the outset I should perhaps state that I take a dimmer view of the
liquidators’ conduct than my learned colleagues. I accordingly am unable to
agree with the conclusion reached by Griesel AJA that the appeal ought to fail. In
my view, like Caesar’s wife, liquidators should be beyond reproach. In this case
their counsel conceded before us that their conduct was not. It ought to have
been, given the fiduciary position occupied by them. What remains therefore is to
determine whether they have conducted themselves such as to warrant their
removal from office. Navsa JA has concluded that they have and should be
removed as liquidators. I agree. The cumulative effect of the various factors
alluded to by Navsa JA, in my view, compel that conclusion. I nonetheless deem
it necessary, because my criticism of the conduct of the liquidators is more
strident, to write a separate judgment. In doing so I shall not cover terrain already
traversed by my learned colleagues, but shall restrict myself to a consideration of
those aspects that point irresistibly to the conclusion that the joint liquidators are
unsuitable to continue to occupy that office in the Intramed estate in liquidation.

52 High Court judgment paras 87–94.

[175] It is so that more than 10 years have elapsed since the liquidators were
first appointed. But that hardly counts in the liquidators favour. If anything that
protracted period redounds to their discredit. Much of the blame for the delay in
finalizing the process must be laid squarely at the door of the liquidators
themselves. After all they embarked upon litigation on a scale that I can only
describe as unprecedented for liquidators. I accept that the length of time is an
important consideration. As is the stage that the liquidation process has reached.
But that can hardly trump the necessity for a court to ensure that the standard of
performance of officers such as liquidators shall be as high as is practicably
possible. It may well be that the liquidation process has reached a fairly
advanced stage. But that no doubt is only on the supposition that the Macmed
claim of R325m is a good one. If that claim is revisitedthen the current liquidation
and distribution account may well become obsolete. In that event the liquidators’
removal from office, with the consequence that those who succeed them may in
due course consider afresh a fairly substantial claim in the estate in liquidation, in
and of itself, puts paid to the notion that their removal would amount to a brutum
fulmen. If on the other hand, after proper scrutiny the Macmed claim is allowed,
there ought to be no tangible disruption to the liquidation process by the
introduction of new liquidators – the new liquidators could simply continue from
where their predecessors left off. It would be unpalatable to countenance the
notion that liquidators who have made themselves guilty of serious misconduct
should not be removed from office simply because it is late in the liquidation
process.

[176] Standard Bank is a substantial creditor of Macmed and many of its
subsidiaries including Intramed. Very early in the administration of Intramed,
claims of inter alia R190m, R100m and R325m were proved against it by
Standard Bank, Boe Bank and Macmed, respectively. Shortly thereafter the
liquidators recommended to the Master that the claims by the banks should be
expunged. A far more charitable stance was adopted by the liquidators in respect

of the Macmed claim. After protracted and expensive litigation, the banks’ claims,
albeit in a lesser amount in the sum of R107m in the case of Standard Bank,
were restored. From the time of expungement until restoration of their claims, the
banks lost their status as proved creditors in Intramed. They thus lost their right
to vote at meetings of creditors. Standard Bank, not without some justification,
has formed the view that the liquidators have unreasonably become so
engrossed in their own view as to the validity of the Macmed claim in the
Intramed estate, that they are incapable of subjecting that claim to the scrutiny
that it reasonably requires. In those circumstances, so it contends, the only
remedy available to it is to seek the removal of the liquidators. It is so that they
are not supported by other creditors, but given the value of its claim in the
Intramed estate, that is of little moment. After all, s 379(2) of the CA entitles it to
approach the court for the removal of the liquidators.

[177] Section 45 of the IA casts a duty upon the liquidators to examine every
claim and to satisfy themselves that the estate is indeed indebted to the creditor.
Given the contradictory statements advanced in support of the claim, it would
appear that the liquidators failed in the discharge of that duty. It is thus, on the
view that I take of the matter, against the interests of the liquidation that they
remain in office. On behalf of the liquidators it was submitted that the debate as
to the validity of the Macmed claim is a difficult one, and turns in part on the
correct legal treatment of the Peregrine structure – which the parties were agreed
was a transaction of some complexity. That being so, one would expect a natural
reticence on the part of the liquidators to admit the Macmed claim as readily as
they have done. Somewhat surprisingly the liquidators have been far less vigilant
in their scrutiny of the Macmed claim than they were in respect of the Standard
Bank and BoE claims. In respect of the former they had greater cause for
scepticism. That lack of consistency evokes strong feelings of disquiet. It is so
that the threshold for the admission of claims at a meeting of creditors is
relatively low. All that is required is that prima facie proof of a claim should be
produced. That is understandable in the context of an insolvent estate. The claim

admitted to proof at the meeting of creditors is a provisional one.  Only thereafter
does the liquidator acquire the duty set forth in s 45 of the IA to examine ‘all
available books and documents’ to ensure that the claim in fact exists.

[178] The claim for R325m (although in fact R 324 880 000) was proved by
Macmed as one for moneys lent and advanced. Nel admits that ‘there is no
reference to the Peregrine structure in the affidavit in support of the Macmed
claim’. In fact, Pereira, one of the joint liquidators of Macmed, who deposed to an
affidavit in support of its claim, stated:
‘On 18 June 1999 Macmed lent and advanced the sum of R325 million to Intramed to enable
Intramed to pay the purchase consideration of R325 million to Aspen for the Intramed division as
referred to above’.
That clearly contemplates a payment by Macmed to Intramed. Such a claim one
would imagine would be easy enough to formulate and equally simple to prove.
But that is not the case here. Nel in his answering affidavit states:
‘I admit that, as the books had not been completely written up to record all transactions as at date
of liquidation , the books of Intramed, prior to its winding up, do not disclose . . . the existence of
the loan of R325 million owing by Intramed to Macmed prior to liquidation on 29 November 1999.’
And yet in response to the criticism that they had not properly examined the
Macmed claim in terms of s 45 of the Act, Nel states:
‘As I have already explained we examined the claim and satisfied ourselves as to the validity of
Macmed’s claim and decided not to dispute the claim, particularly in that it agreed with the books
and records of Intramed as at date of liquidation i.e. 29 November 1999 as audited by Deloitte &
Touche. . . .’

[179] But as Navsa JA makes plain, up until the end of October 1999, some
three-and-a-half months after the Peregrine structure came into effect, the
financial records of neither Macmed nor Intramed reflected a loan of R325m. It
was only after the provisional liquidation of Intramed and the liquidators had
taken charge of Intramed’s books of account that an entry reflecting a loan was
made for the first time in Intramed’s books. In a note to the financial statement
the loan is described as a ‘long term loan that arose on the acquisition of the net
assets, trade marks and goodwill as at 1 March 1999. The loan is unsecured and

interest free. The terms of repayment have not been specified’. As is once again
evident from the judgment of Navsa JA, Deloitte and Touche stated that they
‘were unable to confirm the amount owing to Macmed as at 28 November 1999’.
In fact on 24 November 1999, Millison of Deloitte and Touche wrote in reference
to the Macmed loan: ‘this matter is yet to be resolved’.  Dealing with the Deloitte
and Touche qualification, Nel states:
‘However, it appears that the only reason the auditors qualified their report is because of them not
receiving any supporting documentation i.e. the Peregrine Agreements, to confirm their
conclusion that there was a loan of R225 million owing to Macmed by Intramed’.
If that is indeed so, the obvious question that it prompts is: What information did
the auditors rely upon in concluding that there was in fact a loan owing by
Intramed to Macmed? Nel suggests in answer to that question:
‘This [the existence of the loan] appears to have been based on the information received during
their discussions with Viljoen and Muller, resulting in the entries they instructed Intramed to pass
in its books’.

[180] In sum therefore to once again borrow from Nel:
‘Deloitte & Touche’s interpretation of the information and discussions with Viljoen and Muller
resulted in the raising of a Macmed loan account in Intramed’s books in the amount of R325
million’.
If what Nel says is to be taken at face value, the auditors had not had sight of the
Peregrine Agreements. No other documents in support of the existence of a loan
are to be found in the record of some 1400 pages. It is unclear what other
information – none in the fairly voluminous record has been specified – had to be
interpreted. The high water mark therefore appears to be the rather speculative
hypothesis that discussions with Viljoen and Muller yielded sufficient proof in
support of the existence of a loan. Although details of those discussions have not
been divulged and whilst whatever was said did not appear to satisfactorily
resolve the issue for the auditors, particularly Millison, it somewhat surprisingly
appears to have persuaded the liquidators.

[181] To use, as the liquidators do, the ex post facto entry that had been
generated in the books of Intramed after its provisional liquidation and whilst the
books were already in their custody as proof of the existence of the loan is
nothing short of disingenuous. To say under oath as Nel does that they had
decided not to dispute the claim because it agreed with the books and records of
Intramed as at the date of liquidation may well be patently dishonest. But it may
not be necessary to go that far. That attitude is also difficult to reconcile with Nel
asserting:
‘It is surprising that [Standard Bank] would place reliance on the accounting records of Intramed
or Macmed or any of the companies in the Macmed group’.
And yet, it would seem, that is precisely what Nel himself purports to do.

[182] It, to my mind, is difficult to discern precisely why in the face of the
Peregrine Agreements, the liquidators have admitted the Macmed claim as
blithely as they did.  The reason appears to be that the liquidators dispute the
validity of the Peregrine Agreement. In that regard Nel states:
‘The whole dispute between the parties relating to [the Peregrine] agreement stems from the fact
that the applicant, and more particularly the deponent to [Standard Bank’s] founding affidavit, . . .
persistently refuses to accept that the Peregrine Structure was a simulated transaction and that a
Court will give effect to the real intention, which differs from the simulated transaction and that,
even if the Peregrine Structure was not a simulated transaction, the whole structure unwound on
the default by either party which occurred with the liquidation of Macmed’.
Nel further states:
‘I deny that the Peregrine structure was fully implemented and confirm that it unwound on the
liquidation of Macmed on 15 October 1999. This is confirmed and accepted by Viljoen of
Peregrine, the liquidators of Macmed and De Villiers and myself in our capacity as liquidators of
Intramed. Proof of acceptance of the Macmed claim confirms this’.
It is difficult to reconcile those emphatic assertions with the evidence of Hanson,
a Macmed director, or Viljoen, who represented Peregrine at the time that the
Peregrine structure was put in place and that it was not a simulated transaction.
As is evident from the judgment of Navsa JA, both Hanson and Viljoen stated
under oath that the agreements were genuine. It needs be added that when
Viljoen testified at the Macmed enquiry, it was never put to him that the Peregrine

structure was a sham. Moreover, Nel’s statements disregard the legal opinions to
the contrary that the transaction was not simulated and that ‘the companies
intended to achieve precisely that which the primary purpose of the financing
structure was aimed at’. Whether the Peregrine structure was fully implemented
or unwound on the liquidation of Macmed are matters that the liquidators of
Macmed and Intramed could not possibly have personal knowledge about. That
being so, Nel must know that his confirmation of that state of affairs, without
divulging the source of his information, is of little value. It also stretches credulity
that Nel could invoke their acceptance of the Macmed claim as a factor in
support of the suggestion that the Peregrine agreement was not fully
implemented or unwound.

[183] Standard Bank contends that there is no evidence of payment of a loan by
Macmed to Intramed. Nel’s response is:
‘I admit that the amount of R325 million was received by Intramed on 18 June 1999 from Pregrine
Finance, a subsidiary of the Peregrine Group, which received the funds from Macmed and round-
tripped it back to Macmed through Intramed, in the course of the implementation of the Peregrine
Structure’.
This is reiterated by Nel when he states:
‘I admit that Intramed received R325 million from Peregrine Finance on 18 June 1999 and on the
same day transmitted the sum of R325 million to Macmed’.
But Nel himself later puts it somewhat differently, when he states:
‘There was no need for Intramed to finance the acquisition of its business from Macmed by way
of a loan from Peregrine Finance in terms of the Peregrine Structure. Macmed had already
acquired and funded the acquisitions and placed the business in Intramed with effect from 1
March 1999, culminating in an inter-company loan for R325 million.’
All of that being so, to simply characterise the Macmed claim as a loan - more so
a loan by it to Intramed - as the liquidators have done, is untenable, more
especially as Nel’s description is not only in itself contradictory but also at odds
with Pereira’s, particularly with reference to the date of the alleged loan. Nel
seeks to explain these apparent contradictions as follows:
‘The Peregrine structure was no more than a simulated transaction for tax efficiency purposes.
The loan of Macmed to Intramed of R 325 million arose on the acquisition of the Pharmacare

Intramed business and assets by Macmed and transferred to Intramed with effect from 1 March
1999. The flow of funds and the date, 18 June 1999, thereof do not indicate the date of
acquisition and corresponding debt. The intended transaction was the placing of the Intramed
business into Intramed (Pty) Ltd culminating in a loan of R325 million owing by Intramed to
Macmed at 1 March 1999’.

[184] Nel dismisses Standard Bank’s concerns in these terms:
‘[Standard Bank] completely disregards the true nature of the transaction and the real intention of
the parties thereto. It appears that [Standard Bank] has become bogged down by irrelevant detail
and that it cannot “see the wood for the trees”’.
Far from allaying Standard Banks’s fears, it regrettably is precisely that attitude
on the part of the liquidators that has contributed to the prevailing atmosphere of
distrust. On the one hand Nel is quite adamant in asserting that a valid loan was
advanced by Macmed to its subsidiary Intramed. On the other he states: ‘The
Macmed group during the years 1998 and 1999 was no more than “an empire of smoke and
mirrors”. . . ’.
In those circumstances, Standard Bank’s central contention is simple, namely
that, admitting the Macmed claim not only ignores the Peregrine Agreement, but
also the reality that the Macmed group was in fact an empire of smoke and
mirrors. Accordingly, so the contention proceeds, the Intramed liquidators, who
were alive to the true facts, ought to have recommended to the Master that he
expunge it.

[185] Like Navsa JA, I too am of the view that the reliance by the liquidators on
legal advice as a justification for their conduct is glib. At no stage, as Navsa JA
points out, was a legal opinion sought and obtained on behalf Intramed in respect
of the Macmed claim. Furthermore, it is not without significance that the attorney
concerned, after some 6 years of advising the liquidators to the group of
companies, withdrew as attorney in the matter because of a conflict of interest.
Why it took that long for the realization to dawn that it is wholly improper for an
attorney to dispense legal advice to both debtor and creditor in respect of the
same claim has not been explained. It can hardly be justified on the basis that
both the debtor and creditor were companies in liquidation from the same stable,

especially since the claim in question was from the outset a contentious one,
whose validity was in dispute. The withdrawal of the attorney because of a
conflict appears not to have provoked any anxiety in the liquidators about their
own position and the potential conflict that they found themselves in. Nor did it
prompt them to solicit an opinion on behalf of Intramed as to the validity of the
Macmed loan.

[186] As Navsa JA records, the parties were agreed that we cannot reach any
definitive conclusions about the Peregrine agreement or the effect of liquidation
on it. Nor is it necessary at this stage do to so. It suffices for present purposes to
record, as Navsa JA has done (para 99) that there is much in the evidence that
points to a genuine intent on the part of the parties to conclude a binding
agreement and a serious endeavour on their part to implement its terms. Indeed
as Navsa JA demonstrates all of the parties to the contract went some way in
implementing its terms. In those circumstances it hardly seems appropriate for
the liquidators ex post facto and in the absence of all of the parties to the contract
to adopt a contrary stance in respect of its enforceability. It follows that the
assertion of a loan by Macmed is deserving of scrupulous interrogation by the
liquidators. That, the liquidators have steadfastly refused to do. In that, they have
failed in their duty. I have set out what Nel himself says about the Macmed claim
in greater detail than is absolutely necessary because it illustrates, I daresay, that
on the face of it the Macmed claim appears to be a dubious one. On the view that
I take of the matter, a reasonable liquidator in the diligent discharge of his duty
would have subjected that claim to a more thoroughgoing and searching scrutiny.
Moreover, they would not simply have ignored or disregarded the many contrary
indicators alluded to by Navsa JA. Instead the stance adopted by the liquidators
manifests a closed mindset in relation to that claim and a desire either wittingly or
unwittingly to advance the interests of Macmed at the expense of Intramed. All of
those factors, in my view, may well in the ordinary course be sufficient to
disqualify a liquidator from continuing to act as such. But here, there is an
additional factor, a telling one – namely the alleged misappropriation - one that at

the same time tips the scales against the liquidators and disabuses my mind of
the personal anguish and reticence that it has suffered in supporting so drastic a
step as their removal from office.

[187] It can hardly be in dispute that a liquidator must hold the funds under his
trusteeship separately from his own, preserve those funds with a degree of
diligence beyond that which he applies to his own funds and above all else never
use funds under his trusteeship for his own personal purposes. The liquidators
repeatedly deny that the use of Intramed’s funds to pay for the fee review
application amounts to misappropriation. Their failure, even after the criticism of
their conduct by this court, to acknowledge their wrongdoing and to show
appropriate contrition for their conduct is in and of itself a matter for grave
concern.

[188] When the fee review application was launched during December 2001 the
liquidators did not seek the leave of the court to have the costs paid out of
Intramed’s funds. They merely sought an order that the Master pay the costs if
he opposed the application. The Master contended from the outset that they
were not entitled to approach the court nomine officio but ought to have done so
in their personal capacities. On 31 October 2002 the high court dismissed the fee
review application and ordered the liquidators to pay the costs, including those of
intervention by 5 banks, personally. By then an amount of R689 747.91 had been
paid out of Intramed’s funds. From then until the exchange of heads of argument
in the SCA, a further R114 761.59 of Intramed’s funds were utilized. The total
thus stood at R804 419.50. The Master, after perusal of the first draft of the
fourth liquidation and distribution lodged during August 2003, enquired why the
liquidators were ‘of the opinion that these costs should be reflected in the estate
account and secondly why were estate funds used to pay these items’. In
response De Villiers sought return of ‘all vouchers in respect of legal costs’ to
‘separate the costs pertaining to the fees review application from other legal
costs’. He added that to the best of his recollection no legal costs relating to the

fee review application had been paid out of Intramed’s bank account subsequent
to the judgment of the high court. That as we well know was untrue. Some eight
and a half months later and presumably after sufficient time had elapsed for him
to have ascertained what the true position was, that assertion was repeated in a
further letter to the Master. Responding to the allegation that De Villiers had
misled the Master, Nel suggests that: ‘This did not purport to be an exhaustive answer to
the Master’s query. . . ’.
That response, in my view, is disingenuous and lacking in candour.
[189] Section 393 (1) of the Companies Act provides:
‘Immediately after his appointment a liquidator shall open a book or other record wherein he shall
enter from time to time a statement of all moneys, goods, books, accounts and other documents
received by him on behalf of the company’.
Had the liquidators complied with the obligation imposed upon them by the
section, it would not have been necessary for them to have sought and obtained
return of the vouchers from the Master in order to answer the Master’s query or
to resort to the qualifier ‘to the best of his recollection’. Moreover, it would seem
that the vouchers were sought for the limited purpose of identifying and
separating the liquidator’s personal costs from Intramed’s legal costs. That, as
well, only in respect of the 4th Liquidation and Distribution Account. Tellingly,
Standard Bank later ascertained that further costs had been included in earlier
liquidation and distribution accounts. Of this, Nel states:
‘At the time, it did not occur to De Villiers or I that some of the review costs might already have
been expensed in earlier accounts. … After [Standard Bank] made that allegation, De Villiers
uplifted all the vouchers in respect of legal costs in the 2nd and 3rd Accounts from the Master, in
order to investigate the matter. His investigation showed that legal costs relating to the review
application had been expensed in the 2nd Account to the extent of R43,822.49 and in the 3rd
Account to the extent of R232,424.13’.

[190] The judgment of the SCA was handed down on 1 April 2004. The SCA
held that the application should obviously have been brought by the liquidators in
their personal capacity and not in their capacity as joint liquidators. Of the SCA
judgment, Nel states: ‘We accept that the Supreme Court of Appeal determined that the
application for review ought not to have been brought in that manner, and that we ought to bear

the costs personally. We have, to the best of our ability, investigated, reconciled and audited all of
the legal costs pertaining not only to the review proceedings, but also to our challenges to the
Master with which everything started. We have repaid all of the review legal costs to the estate,
including interest’.
Once again one is confronted by a qualifier. In this instance it is ‘to the best of
our ability’. Elsewhere Nel states:
‘The reconciliation has been prepared by De Villiers and audited by me and we verily believe it to
be correct in all respects. We believe that each and every cent that was paid by Intramed has
been repaid with interest. Should it, however, appear that we missed any amount (which we
seriously doubt) we shall immediately attend to the repayment of such amount together with
interest thereon at the applicable rate. We never intended to act to the detriment of the estate and
we still do not intend to do so’.
Here too, the language employed is deliberately coy and cagey. Thus they
‘believe’ the reconciliation to be correct in all respects. Similarly, they ‘believe’
that every single cent has been repaid. Not content with those hollow assertions,
they add, should it ‘appear’ – to whom is not disclosed (is it expected that
someone else should perform a further auditing function) - that they ‘missed’ any
amount, and then for good measure a further qualifier ‘which we seriously doubt’
is added.  Syntactically, it is as if they have suddenly chosen to talk in tongues.
Plainly, such obfuscatory language is not what a court is entitled to expect from
experienced chartered accountants, auditors and liquidators such as these.

[191] In response to the allegation that there was an inordinate delay in effecting
repayment, Nel says:
‘The sum of R507,492.02 was duly refunded in June and August 2004 … I deny that this
constituted an unreasonable delay. We first had to consider and obtain advice on the effect of the
judgment, and then to make the appropriate arrangements for the repayment of the review legal
costs. In my case that required obtaining the money from PWC and arranging with the other
Macmed liquidators for repayment of their contributions to the review legal costs. . . . ’
That as we well know is simply untrue. Repayment in fact occurred at irregular
intervals and in varying amounts over the period 7 June 2004 to 25 August 2005.
In all some 16 months were to elapse from the date of dismissal of the appeal by
this court, before the full amount was repaid. Thus by the time the application,

the subject of the present appeal, was launched in the court below an amount of
R43 822.49 remained outstanding. The final payment was only effected on 25
August 2005, three days before the liquidators delivered their answering
affidavits in the matter. Standard Bank suggests that such conduct is manifestly
cynical and calculated, as it enabled the liquidators to proclaim in their answering
affidavit that all moneys had been repaid. It is difficult not to agree with that
submission.

[192] Notwithstanding the fact that the liability to repay was the joint and several
obligation of the two of them, Nel endeavours to explain the delay in effecting
repayment promptly thus:
‘In fact, the Macmed Joint liquidators had a group fee sharing agreement, and they in turn,
agreed to share my review legal cost in the same proportion as the fee sharing agreement. The
collection of these pro rata costs (for me) from the Macmed Joint liquidators caused the delay and
PWC on receipt of these payments, immediately paid the funds to Intramed’.
It is unclear to me why any private fee sharing arrangement can be invoked as
justification for the delay. Simply put, the liquidators who were held by this court
to be personally liable for those costs, had an obligation to promptly repay it to
Intramed. If they had a right of recourse in terms of some private treaty to others,
and there was some delay in recovering, that delay ought to have been for their
account and not that of Intramed. Instead, they conducted themselves as if their
own obligation to Intramed extended no further than the repayment of their share
in terms of their private fee sharing agreement.

[193] Nel illustrates alarmingly poor judgment and introspection when he states:
‘Intramed, as a result of interest being paid on the review costs paid by Intramed, has suffered no
loss and therefore any allegation of tardiness is irrelevant’.
Later, Nel states:
‘We are . . . criticized for our initial failure to pay interest when we refunded the review legal costs
to Intramed. Shortly after the decision of the Supreme Court of Appeal, I considered the issue of
payment of interest and formed the view that we ought to pay the interest when called upon to do
so by the Master, which the master has not done to date. . . . However, we took advice, firstly
from Brooks, and then from counsel. After we were advised that interest ought to be paid, we set

about determining the appropriate amount. We have paid the review legal costs and the interest
thereon. I deny that we acted improperly in this regard’.
First, it reflects poorly on Nel that he believed that their obligation to pay interest
only arose if called upon by the Master to do so. They had used Intramed’s funds
to advance their personal interest as this court had already emphatically told
them. In those circumstances there ought to have been no doubt that the highest
degree of promptitude was required in restoring Intramed to the position it would
have been in, but for the ill advised use of its funds. The unauthorized use of
Intramed’s funds, once frowned upon by this court, demanded nothing less.
Sheer embarrassment ought to have compelled return of Intramed’s funds
together with interest, not a demand from the Master. Further, Nel’s statement is
revealing for what it does not divulge. It does not tell us when the advice was
obtained and more importantly when in relation to that advice the interest was
paid to Intramed. Attorney Brooks in his affidavit, states:
‘. . . I advised the Intramed liquidators that they should repay to the Intramed estate all the costs,
and interest thereon . . . I cannot recall the exact date on which I advised the Intramed liquidators.
I am advised that the Intramed liquidators, within a reasonable time, repaid the costs and interest
to the Intramed estate’.
What the reconciliation statement does show, however, is that interest was not
paid until after the launch of the present application in the high court, suggesting
that Brooks may have been misled by his clients as to when payment was
effected by them.

[194] None of this merited the consideration of the high court. The high court put
it thus (paragraphs 28 and 29 of its judgment):
‘The Supreme Court of Appeal handed down its judgment on 1 April 2004. The capital was
refunded in June and August of that year. Apart from the delay occasioned by identifying what
had to be repaid, the delay was also occasioned by Nel and de Villiers taking legal advice, by the
time it took Nel to collect contributions from the Macmed liquidators as part of the fee sharing
agreement and because of the time taken to rectify certain mistakes that had been made. The
bank attempts to make much of this delay but, once Nel and de Villiers had committed
themselves to pay interest, there was no prejudice caused to Intramed by a delay of a few
months. . . .’

With the greatest respect to the high court, it appears to have been uncritical in
its acceptance of the version advanced by the liquidators. It is unclear what legal
advice was sought after the SCA judgment or why that would necessarily have
contributed to the delay. What is clear is that the liquidators acted for the most
part in flagrant disregard of the judgment of this court. I have already dealt with
the liquidators awaiting contributions from the Macmed liquidators and why that
ought not to avail them. I, unlike the high court, would hesitate to characterize
their conduct as a commitment to pay interest. As I have sought to show, initially,
and for some time thereafter, they demonstrated a marked reticence to pay
interest. The real and substantive criticism of the high court judgment though is
its finding that ‘the capital was refunded in June and August’ 2004. That with
respect to the high court is wrong in fact. The same can be said of its conclusion
that no prejudice was caused to Intramed ‘by a delay of a few months’. These
findings are plainly unsustainable. It follows therefore that the high court ought to
have reached a contrary conclusion to that reached by it on this aspect of the
case.

[195] Ultimately, even Nel was constrained to concede: ‘De Villiers and I
acknowledge that certain overlapping and technically incorrect charging has taken place.
However, in the context of the group, I believe this is acceptable’.
That damning concession, which did not even merit mention in the judgment of
the high court, illustrates that they failed in the discharge of a most rudimentary
function for liquidators, namely the keeping of proper books of account. Given the
obligation imposed upon them to do so, that dereliction should not be
countenanced.

[196] Nel asserts:
‘I deny that De Villiers and I placed our own interests above those of Intramed and point out that
we acted on legal advice at all times.’
The refrain on the part of the liquidators, namely that they acted on legal advice,
does not avail them in respect of their conduct in relation to repayment of
Intramed’s funds. After the judgment of this court, there is simply no evidence of

them having acted on legal advice in taking all of 16 months to repay those
moneys. Nor, given the authority of this court, could I imagine, that such advice
would have been given. If anything, properly analysed, the evidence suggests
that in taking as long as they did in effecting payment of all of the capital plus
interest, they may actually have acted contrary to legal advice.

[197] It follows, in my view, that the appeal must succeed and I accordingly
concur in the order proposed by Navsa JA.

_________________
V M PONNAN
JUDGE OF APPEAL

APPEARANCES:

For Appellant:
J Suttner SC

R Hutton SC

Instructed by

Werksmans Sandton

Symington & De Kok Bloemfontein

For Respondent:
C E Watt-Pringle SC

G Girdwood

Instructed by

Deneys Reitz Johannesburg

Matsepes Attorneys Bloemfontein
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:
19 February 2010
Status:
Immediate
Please note that the media summary is intended for the benefit of the
media and does not form part of the judgment of the Supreme Court of
Appeal

On 19 February 2010 the Supreme Court of Appeal handed down judgment in The
Standard Bank of South Africa v The Master of the High Court and others in terms of
which it upheld an appeal against a decision of the Grahamstown High Court, which
had refused to remove the second and third respondents, Basil Brian Nel and
Michael Leo De Villiers as joint liquidators of Intramed (Pty) Ltd (in liquidation) and
furthermore had refused to overturn the Master’s decision not to reduce their
remuneration as liquidators.

Intramed, it will be recalled, was a wholly-owned subsidiary of Macmed Healthcare
Limited (Macmed). The commercial collapse of the Macmed group of companies
was widely regarded as the biggest commercial collapse in the history of South
Africa. The winding up of Macmed and its 45 subsidiaries began slightly more than a
decade ago. On 31 May 2000 Nel and De Villiers were appointed as joint final
liquidators of Intramed.  Nel was not only appointed a joint liquidator of Macmed and
of Intramed but of each of the other subsidiaries as well. He was an influential figure
in the liquidation process.

The liquidations of Macmed and Intramed have significant financial importance.
According to the first liquidation account Intramed has assets exceeding R170 m.
According to the amended fourth liquidation account it has liabilities exceeding R230
m. Standard Bank is a judgment creditor of Intramed in the amount of R107 728
463.64. Standard Bank is also a major creditor of Macmed and a number of its other
subsidiaries.

Standard Bank contended that Nel and De Villiers, instead of viewing the winding-up
of Intramed as a distinct process, saw it as part of the winding-up of the entire group
and improperly deferred to Macmed and its creditors. Standard Bank accused Nel
and De Villiers of both using, and failing to use, established mechanisms for
ensuring the proper administration of estates in liquidation. It alleged that they acted
in a manner favouring Macmed and prejudicing Intramed. This, in the main, relates
to the admission of a claim by Macmed in Intramed in the amount of R325m.

Standard bank also accused Nel and De Villiers of misappropriating Intramed’s
funds. They were accused of improperly using Intramed’s monies to pay costs which
a court in prior litigation, in relation to an application to review the Master’s decision
to reduce their fees, had ordered them to pay personally. Standard Bank alleged that
Nel and De Villiers had only repaid the monies with interest, after this fact had been
uncovered by Standard Bank, and after it persisted in holding them to account.

The SCA considered the voluminous case record and concluded that Standard
Bank’s complaints were in the main justified. It noted that in the winding-up of
companies liquidators occupy a position of trust, not only towards creditors but also
the companies in liquidation whose assets vests in them. Liquidators are required to
act in the best interests of creditors. A liquidator should be wholly independent,
should regard equally the interests of all creditors, and should carry out his or her
duties without fear, favour or prejudice. The majority of the court (Navsa, Ponnan,
Maya and Snyders JJA) held that the liquidators had acted in a manner falling short
of this standard and that they should be removed as liquidators. The SCA rejected
as too glib the reliance by Nel and De Villiers on legal advice. It noted with
disapproval that they had ignored prior criticisms by this court and found that they
had demonstrated ‘an obstinate resistance’ to being held to account.

The SCA considered that so much time had passed since the Macmed group had
been placed under liquidation and that the liquidation process was nearing
completion. It took into account that Nel and De Villiers played a major part in the
delay by way of costly protracted and unnecessary litigation but decided
nevertheless to take the extreme step of removing them as liquidators. This court
said the following:
‘Liquidators must realise that they perform important functions. The Master, creditors and importantly
courts rely on them. In the liquidation process they are expected to act impeccably. The profession
must be under no illusion that courts, in appropriate circumstances, when called upon to do so will act
to ensure the integrity of the winding-up process.’

The SCA concluded that Nel and De Villiers’ fees should be reduced by five per
cent.

In a dissenting judgment Griesel AJA took the view that Standard Bank had failed to
make out a sufficient case for the removal of Nel and De Villiers as liquidators of
Intramed or for the reduction of the fees of liquidators. In the view of Griesel AJA the
appeal should have been dismissed with costs.

In a separate concurring judgment Ponnan JA stated that he took an even dimmer
view of the liquidators’ conduct but agreed that they should be removed and that
their fees should be reduced by five per cent.

Because Standard Bank’s papers filed of record were held to be unnecessary prolix
and burdensome Nel and De Villiers were ordered to pay only two thirds of Standard
Bank’s costs, including the costs attendant upon the employment of two counsel.