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[2016] ZAWCHC 23
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Standard Bank of South Africa Limited v Potgieter and Another (21284/2015) [2016] ZAWCHC 23 (9 March 2016)
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THE REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE DIVISION,
CAPE TOWN)
Case No: 21284/2015
DATE: 09 MARCH 2016
In the matter between:
THE STANDARD BANK OF SOUTH AFRICA
LIMITED
.................................................
Applicant
(Reg No: [1………….])
And
CHARLES CILLIERS
POTGIETER
....................................................................................
Defendant
(ID No: [5…………..])
Address: [5…….]
[T…….] [V……], [T…….],
Western Cape
Marital Status: Divorced
CHRISTA
POTGIETER
.............................................................................................
Intervening
Party
Coram: KOEN AJ
Heard: 3 March 2016
Delivered: 9 March 2016
JUDGMENT
KOEN AJ
[1] This is an application by the
Standard Bank of South Africa Limited (“the Bank”) for
the provisional sequestration
of the estate of the respondent, Mr
Potgieter.
[2] The application was issued on 5
November 2015 and set down for hearing on 19 November 2015. On 19
November 2015 when the matter
was called an attorney appeared on
behalf of the respondent and indicated that he opposed the
application. Accordingly, on that
date, and by agreement, an order
postponing the application for hearing until 3 March 2016 on the
semi-urgent roll, and regulating
the filing of further papers, was
made. In terms of that order the respondent was directed to file his
answering affidavits, by
17 December 2015.
[3] No answering affidavits were filed
by the due date. On 18 December 2015 and 12 January 2016 the
applicant’s attorney addressed
an electronic mail to the
respondent’s attorney in order to point out the fact that the
respondent had not complied with
his obligation to file answering
affidavits by 17 December 2015. The first communication went without
a response. The second communication,
which reminded the respondent’s
attorney that the matter was to proceed on 3 March 2016, and stated
that any application
for a postponement would be resisted, elicited a
one-word response being “Noted!”. Until the day of the
hearing that
is the last that was heard of the respondent.
[4] On the afternoon of 1 March 2016,
less than 48 hours prior to the hearing of the application, an
application for leave to intervene
in the sequestration application
and, if leave was granted, for a postponement of the application, was
delivered. The applicant
for leave to intervene is the ex-wife of the
respondent, Mrs Potgieter. She stated that she had become aware of
the sequestration
application for the first time on 26 February 2016.
Although the notice of motion filed in support of the application for
leave
to intervene did not state that Mrs Potgieter intended to
oppose the sequestration application it is evident from the content
of
her affidavit that that is her intention. The affidavit filed in
support of the application for leave to intervene does not hint
at
the reason why a postponement was sought by her. The application for
leave to intervene and for a postponement was opposed by
the Bank.
[5] In Ansari and Another v Barakat and
Other, In re: Barakat v Copper Sunset Trading 424 (Pty) Ltd and
Others (5530/2011) [2012]
ZAKZDHC 1 (16 January 2012) the test for
intervening as a party in these circumstances was expressed to be as
follows:
“[9] A party seeking to intervene
in proceedings can either do so in terms of rule 12 of the Rules of
Court, or in terms of
the common law.
[10] A party seeking leave to intervene
must prove that:
(a) he or she has a direct and
substantial interest in the subject matter of the litigation which
could be prejudiced by the judgment
of the court; and
(b) that the application is made
seriously and is not frivolous, and that the allegations made by the
applicant constitute a prima
facie defence to the relief sought in
the main application.
The test to be applied in determining
whether or not a bona fide defence to the main application has been
demonstrated is the same
as the one that applies to warding off
summary judgment.” (footnotes omitted).
[6] It was common cause between the
Bank and Mrs Potgieter that she is a creditor of the respondent, in
the amount of R 7.2 million,
in respect of the respondent’s
maintenance obligations towards her, set forth in their divorce
order. That she has a direct
and substantial interest in the
sequestration application is clear. She opposes the granting of a
provisional sequestration order
on the basis, she contends, that it
has not been shown that it would be to the advantage of creditors for
such an order to be made.
Applying the principles regarding
intervention described in Ansari it is necessary only to consider, at
this stage, whether Mrs
Potgieter has shown that there is a
reasonable possibility that the defences to the provisional
sequestration application she has
advanced may succeed. One
undertakes this analysis of the case put up by her without
investigating the defence and deciding whether
the probabilities of
success are with her or not (see Venter v Venter
1971 (3) SA 848
(NPD) at 51G).
[7] Mrs Potgieter is a creditor in a
substantial amount, and has contended that there will be no advantage
to creditors. To be granted
leave to intervene she does not have to
satisfy the Court that there will be no advantage to creditors, only
that there is a reasonable
possibility that her opposition to the
provisional order may succeed. What is in issue at this stage is
whether Mrs Potgieter has
done enough to be permitted to intervene
and be heard in regard to the main case, not whether or not her
opposition to the relief
sought in the main case is valid. Mrs
Potgieter has satisfied me that there is a reasonable possibility
that her opposition to
the granting of a provisional order of
sequestration may succeed. She is entitled to be granted leave to
intervene in this application,
and to be heard on the question
whether prima facie, there is reason to believe that it will be to
the advantage of creditors that
the respondent’s estate be
sequestrated.
[8] That leaves for consideration Mrs
Potgieter’s application that the matter be postponed. As stated
above, there is no hint
in the affidavit she made in support of her
application for leave to intervene why it is that she seeks a
postponement. In argument,
it was submitted that a postponement was
necessary in order to enable her to place all relevant facts before
the court so as to
enable it to make a decision whether or not
provisionally to sequestrate the respondent. There is nothing in the
affidavit she
deposed to which indicate what these facts might be and
why they could not have been included in the affidavit she has
already
deposed to. Refusing a postponement will not deprive Mrs
Potgieter of the opportunity to advance such further facts as may
come
to light, if there are any, and to be heard in relation to the
question whether a final sequestration order should be granted. Any
prejudice which she may suffer will, in my view, be minimal. To grant
a postponement on the vague and entirely unsubstantiated
supposition
that further relevant facts might come to light is not, in my
judgment, warranted. I therefore refused the request
for a
postponement.
[9] Next it is necessary to deal with
the position of the respondent. As indicated above, he had not
complied with the provisions
of the order made with his agreement in
terms of which answering affidavits were to be filed by 17 December
2015. A formal notice
of intention to oppose the application had not
been filed on his behalf. Nor had heads of argument been filed on his
behalf, assuming
that he thought he could oppose the application
without the necessity for filing an answering affidavit. His last
communication
with the Bank’s attorney was to the effect that
he had “noted” that the matter would proceed on 3 March
2016,
and that any attempt by him to defer the application would be
opposed by the Bank.
[10] At the commencement of the matter
I was informed by Mr Victor, an attorney of this court, who had
previously represented the
respondent and who had appeared on his
behalf in the motion court on 19 November 2015, that he was attending
the proceedings as
he held a watching brief. However, it became clear
in view of submissions he made that his position was not that of a
benign spectator.
After I made enquiries Mr Victor informed me that
he had received instructions that the respondent now wanted to oppose
the application,
and he applied for a postponement of the application
from the bar.
[11] Mr Victor advised me that his
client did not have the funds to oppose the application, and that he
had thus not been in a position
to engage legal representatives to
draft answering affidavits. Furthermore, it was submitted that the
respondent had been paralysed
by the fact that the application was
pending, and had not been able to decide what to do about it. It was
not suggested how Mr
Potgieter intended to raise funds to engage
legal representatives, which was one of the obstacles confronting
him. As will appear
from what follows, it seems highly unlikely that
he will be able to raise money for legal expenses.
[12] These are not good reasons to
postpone this application. Moreover, applications for a postponement
must be made timeously,
and not at the very last minute. The
respondent had obtained a postponement previously so as to oppose the
application, and had
failed to comply with the terms of an order
regulating the conduct of this application which he had agreed to.
If a postponement
were to be granted in these circumstances one would
be justified in thinking that postponements were to be had for the
asking.
That is not the position in our law. Prejudice to the Bank,
which has incurred costs, the convenience of the court, the avoidance
of unnecessary delay in the administration of justice and the
interest of all in the finality of litigation motivated me to refuse
the application for a postponement.
[13] To turn, now, to the merits of the
Bank’s application for the provisional sequestration of Mr
Potgieter. Only one of
the requirements for the grant of a
provisional sequestration order set forth in
section 10
of the
Insolvency Act 24 of 1936
is in contention. That is the question
whether the bank has established, prima facie, that there is reason
to believe that it will
be to the advantage of creditors of the
respondent if his estate is sequestrated.
[14] The respondent’s financial
position, it is common cause, is parlous and there is no dispute that
he is insolvent. He
has no movable assets. He is indebted to Mrs
Potgieter in the sum of R7.2 million. In a replying affidavit filed
in the application
for leave to intervene it is stated that the
respondent is also indebted to Mrs Potgieter in a further amount of R
20 million,
apparently due in terms of the divorce order. He is in
arrears with his maintenance obligations towards her and has not been
able
to meet his full maintenance obligation to his children. He owes
the Bank approximately R 1.9 million. Mrs Potgieter annexed to
her
affidavit a copy of a letter addressed to the respondent during
February 2015 from which it appears that Investec Bank Ltd
were owed
an aggregate of approximately R37 million by the respondent, although
it is not possible to discern from the papers before
me what the
status of that claim presently is.
[15] The respondent is a director of
five companies. According to Mrs Potgieter the respondent told her
that three of the five companies
in question were dormant. The
respondent also told her about the Money Maker Trust which holds the
shares in the remaining two
companies which were not said to be
dormant. Who the trustees and beneficiaries of the trust are is not
disclosed by Mrs Potgieter.
Nor is the financial position of the
companies and the respondent’s stake in them, disclosed. These
are issues, so the Bank
contends, which call for investigation.
[16] The respondent owns three
immovable properties. Two appear to be residential properties with a
combined estimated market value
of R3.89 million. These properties
are bonded to ABSA Bank in the aggregate amount of R 3.34 million.
This leaves an estimated
equity in the two residential properties of
R0.55 million.
[17] The third immovable property owned
by the respondent, a farm, was recently sold for an amount of R 3.51
million. The farm was
purchased for an amount in excess of R10
million in 2005. The farm is presently bonded to ABSA Bank for an
amount of R 10.26 million.
The Bank contends that the disparity
between the amount for which the farm was purchased over ten years
ago and the amount for
which it has been recently sold cries out for
investigation by a trustee.
[18] Can it be said from the above
summary of the respondent’s financial position that the Bank
has satisfied the Court that
prima facie there is reason to believe
that it will be to the advantage of creditors of the respondent if
his estate is sequestrated?
It is helpful at the outset to make some
observations about the concept of “advantage to creditors”.
[19] Firstly, it is not incumbent on
the Bank to establish an actual advantage to creditors, but only that
there is reason to believe
that sequestration will bring about such
an advantage.
[20] Secondly, as is stated in Meskin
et al, Insolvency Law, service issue 45 at 2-21, “the concept
of ‘advantage’
to creditors is a broad one (demonstrated
by, for example, a not negligible pecuniary benefit to creditors, or
that advantage is
to be gained through an enquiry into the debtor’s
financial affairs), but in essence there must be some useful
purpose.”
[21] In Stratford and Others v Investec
Bank and Others
2015 (3) SA 1
(CC) Leeuw AJ, writing for the Court,
observed at para [44] that “The meaning of the term ‘advantage’
is broad
and should not be rigidified. This includes the nebulous
‘not-negligible’ pecuniary benefit on which the
appellants
rely. To my mind, specifying the cents in the rand or
‘not-negligible’ benefit in the context of a hostile
sequestration
where there could be many creditors is unhelpful.”
[22] Sight should not be lost of the
fact that the purpose and effect of a sequestration order, even at
the provisional stage, is
“to bring about a convergence of the
claims in an insolvent estate to ensure that it is wound up in an
orderly fashion and
that creditors are treated equally” (see
Investec Bank Ltd v Mutemeri
2010 (1) SA 265
(GSJ) at 275 H). Where
the respondent is plainly insolvent but possessed of assets another
inherent advantage to sequestration
is “the superior legal
machinery which creditors acquire by sequestration, the right to
control the collection, custody and
disposal of all the assets
through their nominee, the trustee, the right to control similarly
the sale of the assets, the certainty
that the insolvent cannot
contract further debts and diminish the estate, and the assurance
that all creditors will be accorded
the treatment prescribed by law
in the division of the proceeds” (see Chenille Industries v
Vorster
1953 (2) SA 691
(OPD) at 699 F – H.
[23] What is significant in this case,
in my opinion, is that it is quite clear that the respondent’s
position will go from
bad to worse unless something is done to stop
his financial demise. It is evident from the papers that his income,
if any, is limited.
Interest on the debts he has incurred continues
to run up. Unless a line is drawn in the sand the prospect of
obtaining some form
of dividend to creditors becomes ever more
diminished.
[24] Drawing a line in the sand will
have, as I see it, a number of other potential advantages. Firstly, a
provisional order will
afford all of the respondent’s
creditors, and not only the Bank and Mrs Potgieter, the opportunity
to participate in the
decision whether or not a final sequestration
order should be made. Secondly, the concursus brought about by a
provisional order
will prevent one creditor from stealing a march on
the others and obtaining payment preferentially. Thirdly, a
provisional sequestration
will set in motion the machinery which will
allow for the investigation of the sale of the farm for what, on the
face of it, is
a worryingly low amount. And a provisional trustee
will also be able to investigate the financial position of the
companies in
which the respondent holds directorships, as well as the
extent to which the respondent may derive benefit from those
companies
and the Money Maker Trust. And finally, the respondent’s
estate will not be further decimated by mounting interest or other
debt, and the likelihood of an even lesser dividend accruing to
creditors in the fullness of time will be moderated.
[25] For these reasons, I am of the
opinion that the bank has shown, prima facie, that there is reason to
believe that it will be
to the advantage of creditors if the
respondent’s estate is sequestrated.
[26] I therefore make the following
order:
1. The intervening creditor’s
application for leave to intervene is granted and her application for
a postponement refused;
2. The respondent’s application
for a postponement is refused;
3. The estate of the respondent is
placed under provisional sequestration in the hands of the Master of
the High Court;
4. A rule nisi is issued calling upon
the respondent and all interested persons to show cause, if any, to
this Court on Tuesday,
26 April 2016, at 10:00 or so soon thereafter
as counsel may be heard;
4.1. why the estate of the respondent
should not be placed under final sequestration; and,
4.2. why the costs of this application
should not be costs in the administration of the respondent’s
insolvent estate.
5. Service of this order must be
effected:
5.1. By the Sheriff, on the respondent
at [5……] [T…….] [V……],
[V…….], [T…….],
Western Cape;
5.2. By the Sheriff, on the respondent
at Itakane Trading 291 (Pty) Ltd, [T……] chambers,
[Block …….],
[W…….] [S…..]
[D…….], [B……], Western Cape;
5.3. By the Sheriff, on the South
African Revenue Services at [2…..] [H……] [S……]
[A……],
Cape Town;
5.4. By the Sheriff, on the employees
of the respondents, if any;
5.5. By the Sheriff, on any registered
trade union representing the employees of the respondent, if any,
and;
5.6. By the Sheriff, together with
copies of the papers filed in this application, on ABSA Bank Limited
and Investec Bank Limited,
at their principal place of business in
Cape Town. The affidavit of service to be filed prior to the return
day must indicate that
the place at which service on ABSA Bank
Limited and Investec Bank Limited is affected is the principal place
of business of those
banks in Cape Town, and that this application
has come to the attention of the persons dealing with the
respondent’s accounts
at those banks.
KOEN AJ
APPEARANCES
For the Applicant : Mr S Fergus
As Instructed by : ENS Africa
For the Respondent : Mr J Victor
As Instructed by : Johan Victor
Attorneys
For the Intervening Party : Mr Z
Joubert
As Instructed by : Thomson Wilks