- Senekal did most of this work while a director at Matsepes Inc, under trustee Tsiu Vincent Matsepe.
- Later, Senekal Inc invoiced the estate for this earlier work, but the Supreme Court of Appeal found Section 63(2) of the Insolvency Act barred these fees.
- Standard Bank was entitled to challenge a later account that, for the first time, made it liable for more than R1 million in contributions.
The Supreme Court of Appeal ruled that an attorney cannot avoid a statutory fee ban by leaving the trustee’s firm, opening a new practice, and billing the insolvent estate for work done at the earlier firm.
The SCA found that Senekal could not use his new firm to claim fees for insolvency work done while still a director at Matsepes Inc, run by trustee TV Matsepe.
Senekal moved firms while the work continued
The estate of JN Herselman was sequestrated in December 2013, with ER Smith and Matsepe appointed as trustees. Matsepe was a director at Matsepes Inc, where Senekal served until October 2017. Matsepes Inc handled the estate’s interrogation and recoveries, with Senekal working from November 2013 until he left in 2017.
Senekal Inc was registered in October 2017 after Senekal left Matsepes Inc. He took the files and continued the matters at his new firm. Senekal Inc later invoiced over R1.3 million for work dating to 2013. Of this, R698,000 had been paid, leaving R608,642 outstanding.
One voucher from August 2015 even showed payment to Senekal Inc, though the firm did not yet exist.
Standard Bank was later made liable
Standard Bank claimed about R7.5 million against the estate; Farmsecure Livestock, about R1.4 million. Farmsecure funded the investigation and interrogation.
In July 2014, creditors resolved that attorneys and advocates could run the investigation, specifically excluding its costs from administration costs. The trustees confirmed the work was on contingency, with Farmsecure paying the costs and taking any recoveries.
The Master later ordered these costs deducted from Farmsecure’s dividend. Yet, in June 2021, Senekal Inc’s fees were listed as administration costs. Farmsecure was allocated R894,919 and Standard Bank nothing. The Master confirmed the account in September 2021.
By then, Farmsecure was in liquidation and its contribution unrecoverable. Senekal Inc filed a contribution application in March 2022. Standard Bank was not part of those proceedings and had told the trustees it disputed liability for the fees. An October 2022 order required the trustees to recover contributions from creditors after taxation and amendment of the account.
The February 2023 amended account kept the Senekal fees, added R210,583 for the contribution application, removed the Farmsecure allocation, and placed contributions of R1,085,723 on Standard Bank and R19,799 on Wesbank.
Standard Bank challenged the new burden
Standard Bank objected under Section 111(1) of the Insolvency Act, arguing Farmsecure, not Standard Bank, had instructed the trustees and agreed to pay costs and take any benefit.
The bank also challenged vouchers, including the 2015 payment to a firm that didn’t yet exist, and invoices for work by Matsepes Inc before Senekal Inc’s founding. The Master dismissed these objections in May 2023.
Standard Bank then approached the High Court for a review under Section 111(2)(a), later dropping its demand for total exoneration and seeking only to have the Master’s decision set aside and objections upheld. The High Court agreed with the objections and ordered the account be changed. Senekal Inc appealed.
Section 63(2) blocked the old fees
The SCA held that Section 63(2) bars a trustee, partner, or certain employees from earning extra fees from an insolvent estate, except for statutory remuneration.
The court said this applied because Matsepes Inc was Matsepe’s firm and Senekal was his fellow director. Incorporation made no difference to the rule.
The court rejected the claim that the fees could be recovered after Senekal left. Rights to fees belong to the firm that did the work, and there was no evidence of any transfer from Matsepes Inc to Senekal Inc.
Even if there had been a transfer, Senekal Inc could not have greater rights than Matsepes Inc. Since Matsepes Inc could not recover the fees, it had nothing lawful to pass on. “The section takes away the temptation by removing the entitlement,” the SCA said.
The court added there was no need to prove any dishonest scheme. “The result is one that section 63(2) explicitly forbids.”
The earlier account did not protect Standard Bank
The SCA rejected any suggestion that confirming the June 2021 account prevented Standard Bank from objecting to the February 2023 account. The earlier account required no contribution from Standard Bank; the later one did, for the first time, require over R1 million.
The October 2022 consent order also did not make Standard Bank liable, as it was not part of those proceedings. “A settlement between a claimant against the estate and the trustees cannot impose liability on creditors who were not before the court,” the SCA said.
The court found that Farmsecure’s insolvency did not convert excluded interrogation costs into administration costs payable by all creditors.
Later work was not automatically prohibited
The SCA accepted that work by Senekal Inc after October 2017 could, in principle, be paid for with a valid mandate. But the invoices did not separate pre- and post-2017 work, and there was no evidence of a joint trustee mandate after incorporation.
Thus, the High Court was justified in upholding Standard Bank’s objections without trying to split the invoices. The SCA confirmed that review under Section 111(2)(a) allowed the High Court to decide the matter itself, not just refer it back to the Master.
The appeal was reinstated despite the late record, as the SCA found the explanation reasonable and no prejudice to Standard Bank. The appeal was then dismissed with costs against Senekal Inc.
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