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[2015] ZAWCHC 192
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Body Corporate of Harbour View Sectional Title Scheme v Webb; Body Corporate of Harbour View Sectional Title Scheme v Webb (10619/15, 10618/15) [2015] ZAWCHC 192 (17 December 2015)
THE HIGH COURT OF SOUTH
AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case No: 10619/15
In
the matter between
THE
BODY CORPORATE OF HARBOUR VIEW SECTIONAL TITLE SCHEME
APPLICANT
and
PEDRO
WEBB
RESPONDENT
And
in the matter between
Case
No: 10618/15
THE
BODY CORPORATE OF HARBOUR VIEW SECTIONAL TITLE SCHEME
APPLICANT
and
ARLENE
WEBB
RESPONDENT
Coram
:
ROGERS J
Heard:
17 NOVEMBER 2015
Delivered:
17 DECEMBER 2015
JUDGMENT
ROGERS
J:
Introduction
[1]
These applications for
provisional sequestration were heard together. The applicant is the
Body Corporate of Harbour View located
in Woodstock. The respondents
are co-owners of Unit 62 together with a third person Charmaine Webb.
I shall refer to the co-owners
by their first names. The applicant’s
claim against the respondents is for outstanding levies in respect of
Unit 62 together
with interest thereon.
[2]
Mt van Reenen appeared
for the applicant and Mr Langenhoven for the respondents.
[3]
Pedro, Arlene and
Charmaine bought the property during May 2006 for R468 000,
initially for investment purposes. A bond of
R385 000 was
registered in favour of First National Bank (‘FNB’).
Pedro and Arlene were at that time married to
each other. Charmaine
is Pedro’s sister. Pedro and Arlene got divorced in October
2008. According to Arlene, Pedro moved
into Unit 62 during 2010 on
the basis that he would henceforth be responsible for the property
expenses.
[4]
During May 2011 the
applicant issued summons against the co-owners in the Cape Town
Magistrate’s Court for arrear levies.
There having been no
appearance to defend, the applicant on 28 July 2011 obtained default
judgment against the co-owners jointly
and severally in the amount of
R59 488,91 with interest a tempore morae and costs of R1214,67.
[5]
Following unsuccessful
discussions between Arlene’s lawyers and Pedro in the latter
part of 2012 and early 2013, Arlene instituted
proceedings in this
court (Case 4129/13) to terminate the co-ownership. On 27 June 2013
an order in her favour was granted by Mantame
J. In essence, Pedro
and Charmaine were afforded an opportunity to buy Arlene’s
share, failing which the property was to
be marketed and the net
proceeds distributed among the co-owners. For whatever reason effect
has not been given to this order and
the property remains registered
in the names of the three co-owners. There is nothing on the papers
to indicate that they co-ownership
is not in equal shares.
[6]
The present
applications were issued on 5 June 2015. The applicant alleged in the
founding papers that its claim now totalled R304 000,
being the
original judgment debt together with interest thereon and further
arrear levies. The respondents have opposed the applications,
using
of the same attorney.
[7]
On 29 July 2015, and
simultaneously with delivering her answering papers in the
sequestration application, Arlene delivered an application
in the
Cape Town Magistrate’s Court for the rescission of the default
judgment of July 2011. The present applicant, as the
plaintiff in
those proceedings, filed papers opposing the rescission. When the
sequestration applications served before me the
rescission
application had been argued and judgment was awaited. As will appear
below, judgment was subsequently granted in Arlene’s
favour.
[8]
Pedro stated in his
answering papers in the sequestration application that he intended
filing a rescission application but he has
not yet done so.
[9]
The question at this
stage is whether I am satisfied that prima facie (i) the
applicant has a claim of not less than R200;
(ii) that the
respondents have committed an act of insolvency or are insolvent;
(iii) that there is reason to believe that it will
be to the
advantage of creditors if the respondents are sequestrated.
The
Master’s certificate
[10]
The respondents contend
that the applicant has not complied with
s 9(3)(b)
of the
Insolvency Act 24 1936
because the Master’s report, which
certifies the furnishing of security and is dated 22 June 2015, was
only issued after
the founding papers were signed. This argument is
without merit.
Section 9(3)(b)
requires that the application be
accompanied by a certificate of the Master given not more than ten
days before the date of the
application. There is no requirement that
the certificate be issued before the date of the application (see
Mafikeng Creamery
(Pty) Ltd v Van Jaarsveld
1980
(2) SA 776
(NC) at 780;
De
Wet NO v
Mandelie
(Edms) Bpk
1983
(1) SA 544
(T) at 546). A certificate issued after the date of the
application meets the requirement that it should not be stale. In
this
division, at any rate, the practice is that the Master’s
report, which incorporates the certificate, is issued after the
papers have been signed and served on him.
The
applicant’s locus standi
[11]
The respondents allege
that any claim for arrear levies vests in Propell Sectional Title
Solution (Pty) Ltd (‘Propell’),
an entity which lent the
applicant money and took cession of the applicant’s levy claims
as security. A levy statement attached
by Pedro to his affidavit is
in the name of Propell. In argument the respondents referred me to
Picardi Hotels Ltd v
Thekweni
Properties (Pty) Ltd
[2008] ZASCA 128
;
2009
(1) SA 493
(SCA).
[12]
In reply to this
defence, the applicant’s deponent stated that during July 2008
the applicant and Propell concluded a loan
agreement and security
cessions. He alleged that in terms of clauses 6.1.9 and 9.2 of the
cessions Propell was entitled to collect
outstanding levies and other
charges in the applicant’s name. The sequestration
applications, he said, were brought by Propell
in the applicant’s
name.
[13]
The cession agreements
appear, as the applicant says, to confer on Propell the right to sue
for arrear levies in the applicant’s
name. Whether such a right
may competently be conferred is, however, open to question (see
Sentrakoop
Handelaars Bpk
v
Lourens & Another
1991
(3) SA 540
(W);
Myburgh
v Walter NO
2001
(2) SA 127
(C) at 130C-E;
LAWSA
3
rd
Ed Vol 3 para 173 fn 3). If the right to the levies vested in Propell
upon the conclusion of the loan agreement and cessions, which
seems
to be the case, the applicant would not be entitled to institute
proceedings in its own name to recover the levies unless
Propell
re-ceded them to the applicant for that purpose.
[14]
When I put these
difficulties to Mr van Reenen, he informed me (after taking
instructions) that his client would not like me finally
to decide
questions relating to the interpretation and effect of the cessions,
given their broader commercial importance to Propell.
The applicant
would accordingly rely only on the judgment debt for its locus
standi. For as long as the default judgment stood,
the applicant was
a creditor for the amount of the judgment, even if Propell rather
than the applicant should have been the party
to issue summons.
[15]
Judgment in Arlene’s
rescission application was pending when I heard argument. The
respondents’ attorney subsequently
filed an affidavit attaching
an order granted on 25 November 2015 for the rescission of the
default judgment. Subject to the next
paragraph, the limited basis
for locus standi against her has thus fallen away, which would put
paid to the application for her
sequestration.
[16]
Shortly before judgment
was to be delivered I received further supplementary affidavits by
the attorneys acting for the applicant
and Arlene respectively. The
applicant’s attorney said that his client had noted an appeal
against the order granting rescission.
Arlene’s attorney
responded that the noting of the appeal was an irregular step because
the granting by a magistrate of rescission
against a default judgment
is not appealable. The latter contention appears to be borne out by
De Vos v Cooper &
Ferreira
[1999] 4
All SA 432
(A) paras 1-2. Even if the rescission were appealable, I
would be inclined, in view of the uncertainty surrounding the status
of
the default judgment, to exercise my discretion against
sequestrating Arlene on the strength of such judgment.
[17]
The default judgment
stands as against Pedro. The applicant’s locus standi against
him is thus uncontroversial. (Since I do
not know on what grounds the
magistrate rescinded the judgment against Arlene, I cannot say
whether Pedro’s rescission application,
if he brings one, is
likely to succeed.)
[18]
For the sake of
completeness I make two observations concerning locus standi in the
present case: (i) Clauses 6.1.9 and 9.4
of the cession
contemplate that Propell might re-cede a claim to the body corporate
for purposes of taking action in the latter’s
name. However,
the applicant did not allege that it had received a re-cession of the
claim nor was it argued that there had been
a re-cession by conduct.
(ii)
Section 9(1)
of the
Insolvency Act provides
that a
sequestration application may be brought by a creditor ‘or his
agent’. Sequestration proceedings might thus
be an exception to
the usual rule that a cedent cannot enforce a claim as an agent for
the cessionary. Whether, where an agent
launches the sequestration
application, the proceedings may be brought in his name or must still
be in the name of the creditor
is unclear (contrast
Russouw
NO v Wagenaar
1923
EDL 165
at 167 and
Corder
V Hanekom
1934 CPD
46
at 48). At very least, though, the capacity of the applicant must
be clearly stated. In the present case the applicant did not allege
that it was acting as an agent for Propell. In the founding papers no
mention of Propell was made at all. In the replying papers
the
deponent said that Propell had instituted proceedings in the
applicant’s name, which is not the same thing as saying
that
the applicant brought the proceedings as Propell’s agent.
The order
of Mantame J
[19]
Arlene submitted that
her co-ownership was terminated by Mantame J’s order of 27 June
2013. I do not regard this as a tenable
interpretation of the order.
Para 1 of the order, containing the statement that the co-ownership
was terminated, must be read in
the light of the rest of the order.
When that is done, it is clear that Arlene’s co-ownership would
in law only terminate
once her share, or the property as a whole, was
sold and transferred. That has not happened. She is still registered
as a co-owner.
[20]
The ‘net
proceeds’ which were to be distributed in terms of para 9 of
the order must mean the sale proceeds after deducting
the amount
owing to FNB and to the applicant/Propell in respect of levies. The
registered co-owners would continue to be responsible
for the levies
until the property was transferred out of their names.
[21]
This is, however, by
the way because the applicant does not have locus standi to
sequestrate Arlene.
The full
extent of the levies claim
[22]
The extent of the claim
for arrear levies and interest (whether it vests in the applicant or
Propell) is relevant to the question
of insolvency and benefit to
creditors.
[23]
In the founding papers
the applicant was somewhat cavalier. The deponent said that, apart
from the default judgment of R59 488,91,
further levies and mora
interest totalling approximately R244 000 had accrued since July
2011, bringing the applicant’s
total claim to about R304 000.
In their answering papers the respondents complained that the
applicant had provided no proof
or substantiation of the further
liability and the applicant was put to the proof thereof. Pedro
claimed that he had made payments
to Propell which were not reflected
on the levies statement (he did not finish particulars). He also
alleged that, pursuant to
the default judgment, the applicant had
sold his movable assets in execution but that the proceeds were not
reflected on the levies
statement.
[24]
In reply the applicant
attached a spreadsheet detailing, on a monthly basis running from
November 2006 to August 2015, the ordinary
levies,
backdated/increased levies, parking levies, backdated/increased
parking levies, insurance recovery, special levies, remote
control
and access tag, monthly interest, administration fees, payments and
legal monitoring fees. The deponent said that the net
proceeds of the
movable property sold in execution were indeed credited to the
account. I gather that this is the amount of R1304,51
reflected as a
payment against the date 13 April 2012.
[25]
The spreadsheet
reflects that the co-owners were in arrears as at November 2006 and
made no payments until September 2007. The arrears
were cleared in
May 2008 by way of a payment of R12 000. The co-owners again
fell into arrears in September 2008 and made
no payments until June
2011, when a sum of R12 000 was again paid. There were three
random payments in August/September 2011,
whereafter no amounts
whatsoever have been paid in respect of levies except for the
execution proceeds of R1304,51 previously mentioned.
[26]
The spreadsheet
reflects that as at 5 June 2015, when the present applications were
issued, the total indebtedness was R260 182
and that by 21
August 2015 it was R288 553. On my reading of the spreadsheet,
this includes the amount of the arrear levies
for which default
judgment was given. (The amount of the default judgment seems to
represent the amount owing as at May 2011 when
the summons was
issued. According to the spreadsheet, the amount outstanding had been
reduced slightly by the time default judgment
was given.) The
applicant’s deponent thus overstated the position when he
alleged in the founding papers that the full indebtedness
as at June
2015 was about R304 000.
[27]
The replying papers
were served on 20 October 2015. Pedro has not sought an opportunity
to deal with the spreadsheet in a supplementary
affidavit. If Pedro
could refute its contents I would have expected him to do so.
[28]
An in duplum point was
raised in the answering papers. No attempt was made to show me the
impact which the in duplum rule would
have. If one were to apportion
all payments in the spreadsheet (totalling R48 704) to interest
(totalling R193 876),
the claim of R288 552 as at August
2015 would comprise R145 172 interest and R143 380 capital.
This is a very modest
excess above the
in
duplum
limit. And in
Pedro’s case (against whom the default judgment stands),
interest would run afresh on the full amount of the
judgment so that
the in duplum limit in his case would not be breached.
[29]
I thus proceed on the
basis that as at June 2015 the respondents were indebted to the
applicant/Propell in the amount of about R260 000
and that this
amount has escalated since then as a result of continued non-payment.
Pedro’s
factual insolvency
[30]
The applicant attached
to its founding papers a Windeed automated valuation report which
concluded that the value of Unit 62 ranged
from a low of R570 000
to a high of R700 000 with an estimated value of R610 000.
[31]
The respondents did not
in their opposing papers disclose the amount owing to FNB. I afforded
them an opportunity of providing this
information which they did in a
supplementary affidavit dated 20 November 2015 to which was attached
the most recent bond statement.
This shows that as at November 2015
the bond debt was R312 391.
[32]
Pedro states that he
has no assets of value, ie over and above his co-ownership of Unit
62. He says the value of the close corporation
of which he is the
member and which conducts business under the name Phoenix Fire
Services is negligible. He denies that the business
is profitable.
[33]
Whether Pedro has
creditors apart from FNB and the applicant/Propell is unclear. The
applicant does not have knowledge of other
creditors and Pedro has
not alleged any other debts.
[34]
If Pedro’s only
debts are to the applicant/Propell and the bank, and if he is jointly
and severally liable with his co-owners
for these debts, his
liabilities total about R600 000 (R288 552 + R312 391).
In regard to the bond liability, it
may be more realistic to view
each co-owner as liable for one-third of the debt, since the bank
would look to the value of the
property as a whole as its security.
There is in any event no evidence that the bond liability is joint
and several. Pedro’s
share of the bond liability is thus
R104 130.
[35]
There is also no
satisfactory evidence that the co-owners’ liability to the
applicant for levies is joint and several rather
than joint. The
applicant said in its replying affidavit that it would make a copy of
its management rules available to the court
but did not do so.
However it appears from Arlene’s affidavit that Pedro is, as
between himself and the other co-owners,
liable for the property
expenses from the time he moved into the unit in 2010. If the other
co-owners were called upon to make
payment of the levies (whether on
the basis of joint or joint and several liability), they would have a
claim for recovery against
Pedro except perhaps for their share of
the arrear levies as at 2010. On this basis, Pedro has a liability
for levies of about
R255 000.
[1]
[36]
Pedro’s total
liabilities can thus be taken as being about R359 000 for
purposes of the present proceedings, of which
R104 130 is
secured by the mortgage bond.
[37]
According to the
applicant, the median value of the property is R610 000. The
respondents appear to think that the property
is worth less. They
allege that the applicant attempted to sell the property in execution
during August 2014 and that the maximum
bid was R60 000. Neither
side suggests that the question of factual solvency should be
determined with reference to the high-end
valuation of R700 000.
[38]
The Windeed valuation
is not a sworn valuation but the result of a statistical calculation
of values from various sources. The report
reflects a ‘safety
score’, an ‘accuracy score’ and a ‘confidence
level’ in relation to the
estimated value, presumably based on
the quality of the data used to generate the valuation. In the
present case the ‘safety’
and ‘accuracy’
scores were 90% and the ‘confidence’ level ‘high’.
This is not surprising since
the 20 sales listed on page 2 of the
report, which constitute the comparable data, are all sales of units
in Harbour View over
the period 2013-2014. They are thus highly
comparable transactions.
[39]
When one bears in mind
that the Webbs bought the property in May 2006 for R468 000, I
consider that R610 000 can be taken
as a fair indication of the
property’s current value. On this basis, Pedro’s
one-third interest in the property is
worth about R203 300.
[40]
Prima facie, therefore,
Pedro is factually insolvent.
Act of
insolvency
[41]
The applicant also
relies on an alleged act of insolvency in terms of
s 8(g)
of the
Insolvency Act. On
4 October 2012 Pedro wrote to the applicant’s
attorneys as follows:
‘
I
… hereby take full responsibility for the levies due at
Harbour View where I am currently residing.
I am waiting for payment from
PWD Eastern Cape Health Department the amount owed to me from them is
over a million, they have yet
to pay and haven’t made payment
for over eleven months now. I… and Arlene Web divorced and
Arlene has recused herself
from the flat. My sister Charmaine Webb
hasn’t been resident in South Africa for over four years. As
soon as funds are available
I will make payment.
My sincere apologies for any
inconvenience.’
[42]
The context of this
letter, it should be remembered, was a default judgment obtained
against all three co-owners during July 2011.
It appears that Arlene
had probably complained to Pedro that he was failing to meet the
property expenses and that this prompted
his letter. Shortly
thereafter, on 24 October 2012, attorneys acting on Arlene’s
behalf began corresponding with Pedro, and
this led to the
application in Case 4129/13.
[43]
I do not think, in the
circumstances, that Pedro’s letter can be read as anything
other than an acknowledgment that he owed
money to the applicant in
respect of levies and that he could not currently pay the debt.
Although the act of insolvency occurred
two years and eight months
before the application was brought, all indications are that
his financial position has not improved
and that he is in fact
insolvent. He has made no payments on account of levies subsequent to
his act of insolvency.
Benefit to
creditors
[44]
Pedro denied that his
sequestration would be to the benefit of creditors. Part of his
complaint is that the property may be worth
far less than what the
applicant alleges. Even if this were so, the property is unlikely to
have such a low value as to leave nothing
meaningful for the
concurrent claim of the applicant/Propell. With a bond liability of
R312 000 and sequestration costs of
R25 000, the property
would only need to fetch about R540 000 to generate a concurrent
dividend of 20 cents in the rand
in Pedro’s estate.
[2]
This is well beneath the low-end Windeed valuation of R570 000.
[45]
There is the further
advantage that a trustee will be able to investigate whether, as
Pedro claims, his business has no value.
[46]
The respondents
contended that the presence of Charmaine as a third co-owner is
likely to bedevil the sale of the property at a
fair price. This is
true but the same problem would exist if the applicant/Propell
obtained judgment and executed in the ordinary
way. If necessary,
Pedro’s share in the ownership of Unit 62 will have to be sold
separately. However, I would expect Arlene
and Charmaine to
appreciate that their own interests will be best served by
cooperating with the trustee in the sale of the whole
of the
ownership to best advantage. A trustee is likely to be better able to
achieve this cooperation than the sheriff in a forced
sale.
Conclusion
[47]
In the circumstances
the application for Arlene’s sequestration must be dismissed
but a provisional order will be granted
against Pedro.
[48]
If the default judgment
against Arlene had not been rescinded, the application for her
provisional sequestration may well have succeeded
on the basis that
she is factually insolvent.
[3]
Since the judgment had not been rescinded when the application for
provisional sequestration was launched or argued, and since
it was by
no means self-evident that the rescission application was bound to
succeed, I think the parties in the application for
Arlene’s
sequestration should bear their own costs. In Pedro’s case, the
usual provision will be made for costs. For
the guidance of the
taxing master, I think it fair that the costs of the appearance be
divided equally between the two matters.
[49]
I make the following
order in Case 10618 (where the respondent is Arlene Webb): The
application is dismissed with no order as to
costs.
[50]
I make the following
order in Case 10619 (where the respondent is Pedro James Webb):
(a) The respondent’s estate is placed under
provisional sequestration in the hands of the Master.
(b) A rule nisi is issued calling upon all
interested parties to show cause on Friday 29 January 2016:
(i) why the respondent’s estate should not be
placed under final sequestration;
(ii) the costs of the application, on the attorney
and client scale, should not be costs of administration in the
sequestration.
(c) Service of this order shall be effected in the
following manner:
(i) on the respondent;
(ii) on the South African Revenue Service at Hans
Strydom Avenue, Cape Town;
(iii) on the Master of this Court at Cape Town;
(iv) on the respondent’s employees, if any,
by the Sheriff;
(v) by publication in the
Cape
Times
and
Burger
newspapers.
______________________
ROGERS
J
APPEARANCES
For
applicant in both cases:
Mr
D van Reenen
Instructed
by
Biccari
Bollo Mariano
Inc
5
Leeuwen Street
Cape
Town
For
Respondents in both cases
Mr
G Langenhoven
42
Tennant Road
Kenilworth
[1]
If one assumes that the three co-owners are
liable for one-third each of the arrears of about R50 000 owing
at the end of
2010, Pedro's share would be R16 600. He would be
solely liable (as between himself and the co-owners) for the balance
of
the arrear levies of R238 552 (R288 552 –
R50 000), bringing his total liability for levies to R255 152.
[2]
R540 000 – R312 000 = R228 000
of which Pedro’s one-third is R76 000. R76 000 –
R25 000
(sequestration costs) = R51 000, yielding a
concurrent dividend of 20 cents/rand on Pedro’s levy liability
of R255 000.
[3]
This is on the basis that her liabilities total
about R240 000 (
R104 130 in
respect of the bond, R59 488 in respect of the default judgment
and R76 354 as her one-third share
of the rest of the levies
[R288 552 – R59 488] and that her sole asset is a
one-third interest in the property
(worth R203 000). (The value
of her right of recourse against Pedro in respect of the levies is
doubtful.)