THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

Reportable

CASE  NO: 344/2002

In the matter between :

NEDCOR INVESTMENT BANK
Appellant

and

PRETORIA BELGRAVE HOTEL (PTY) LTD
Respondent

___________________________________________________________________________
Before:
VIVIER, LEWIS JJA & SHONGWE AJA
Heard:
2 MAY 2003
Delivered:
27 MAY 2003

Summary:
Effect of insolvency on executory contract where seller had
performed in full and immovable property registered in company's
name before liquidation.
___________________________________________________________________________

J U D G M E N T
___________________________________________________________________________

VIVIER  JA

entered into a written agreement with Waterton Lakes Manufacturing (Pty)
Ltd ('the company') in terms of which Belgrave sold to the company its hotel
business, inclusive of its immovable property known as the remaining extent
of Erf 3178 Pretoria, all movables and the hotel liquor licence as a going
concern for the amount of R1 450 000,00. The purchase price was payable by
a deposit of R1 050 000,00 secured by a first bond on the immovable property
in favour of Syfrets Bank Limited and the balance of R400 000,00 on 31
December 1999 secured by a second bond in favour of Belgrave.
[2] Pursuant to the sale the deposit was paid, the movables were delivered
and the immovable property was registered in the name of the company on 6
July 1998. The two bonds were registered and the company was given
possession of the business.

for the winding-up of the company with the Registrar of the Court a quo.  On
1 March 2000 the company was placed under final liquidation. At the first
meeting of creditors held on 2 June 2000 Belgrave submitted a claim for the
amount of R415 737,70 in respect of the outstanding balance of the purchase
price and interest.  The claim was duly admitted. In a letter dated 5 June 2000
the liquidator notified creditors that the assets vesting in the insolvent estate
would be sold by public auction. In the event the whole property was sold for
the amount of R450 000,00 plus R15 000,00 for the liquor licence.
[4] Belgrave subsequently brought an application in the Transvaal
Provincial Division against the liquidator as first respondent, the Master as
second respondent and Nedcor as third respondent for an order that its claim
for the balance of the purchase price be paid as part of the costs of

to be costs in the administration. Nedcor was subsequently granted leave to
appeal to this Court. The liquidator and the Master have taken no part in this
appeal and abide the Court's judgment.
[5] The issue in the appeal is accordingly whether Belgrave's claim for the
balance of the purchase price lies against the liquidator as an expense incurred
in the estate's administration or whether Belgrave is to be regarded as a
secured creditor ranking after Nedcor's first mortgage bond.
[6] The legal principles applicable to the effect of insolvency on executory
contracts such as the present, that is those in which one or the other, or all the
obligations undertaken remain unfulfilled, are clear and appear from decisions
such as Bryant and Flanagan (Pty) Ltd v Muller and Another NNO 1977 (1)
SA 800 (N) at 804F-805G, which was confirmed on appeal in Muller and

insolvency, and thus a liquidator of a company in liquidation, is invested with
a discretion whether to abide by or terminate an executory contract not
specifically provided for in the Insolvency Act which had been concluded by
the company in liquidation before its liquidation. Such an agreement does not
terminate automatically on the company being placed in liquidation.  The
liquidator must make his election within a reasonable time.  Should he elect to
abide by the agreement the liquidator steps into the shoes of the company in
liquidation and is obliged to the other party to the agreement to whatever
counter-prestation is required of the company in terms of the agreement. Once
the liquidator has accepted the benefits of the contract, he cannot limit the
other party to a concurrent claim against the free residue of the estate for
anything reciprocally due to it. The other party's claim then lies against the

administration of the estate.
[7] In the present case the liquidator's position as at the institution of
concursus creditorum when the application for the winding-up of the
company was presented to the Court, was essentially different from that faced
by a liquidator in the usual kind of executory contracts, such as building
contracts, where the liquidator has an election whether to continue to demand
future performance or to terminate the contract. In the present case the
immovable property had been registered in the company's name and the
movables delivered to the company prior to the concursus. The property had
vested in the company before the concursus. It had become part of the
insolvent estate and had to be dealt with accordingly. The liquor licence was
incidental to, and followed the fate of the other assets. There was no further

argued that the passing of the second bond constituted full performance of its
obligations but it is not necessary to decide this point. In any event the
delivery and transfer of the merx was not, in terms of the contract of sale,
dependent on any reciprocal obligation on the part of the company to pay the
outstanding balance of the purchase price. It was thus not necessary for the
liquidator to pay such balance before selling the property. The balance of the
purchase price was not yet due at the time of the concursus and no right to
cancel had accrued at concursus. The liquidator could clearly not cancel the
sale and insist on returning the merx and refuse to admit Belgrave as a
creditor (cf Ex parte Liquidators of Parity Insurance Co Ltd 1966 (1) SA 463
(W) at 471 E-F). It was her duty as liquidator to realize the assets in the estate

[8] It follows that the claim in respect of the balance of the purchase price
was not an expense in the administration.
[9] In the result the appeal succeeds with cost. The order of the Court a quo
is replaced with an order dismissing the application with costs.

________________
VIVIER JA

LEWIS JA)
SHONGWE AJA)
CONCUR