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[2016] ZAWCHC 62
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Ex parte: Connoway and Four Others (5873/2016, 6168/2016, 6167/2016, 6166/2016, 6002/2016) [2016] ZAWCHC 62 (24 May 2016)
THE
REPUBLIC OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
DATE:
24 MAY 2016
REPORTABLE
In the ex parte
applications of:
ANGELIQUE MARLENE
CONNOWAY Case No: 5873/2016
JUANITA RUITERS
Case No: 6168/2016
LEON TAYLOR &
1 OTHER Case No: 6167/2016
SA-AIT AND
NABAWEYA JOSEPH Case No: 6166/2016
PETER DAVID EDGE
Case No: 6002/2016
JUDGMENT
Before the Hon.
Mr Justice Bozalek
Hearing: 29
April 2016
Judgment
Delivered: 24 May 2016
BOZALEK J
[1] Before me are
five applications for voluntary surrender all of which were unopposed
and moved in Third Division on 29 April
2016. In four of the five
cases the applicant was represented by counsel instructed by the same
firm of attorneys as were responsible
for a batch of applications
dealt with in a judgment I handed down on 18 September 2015, Ex parte
Concato and Four others
[2015] ZAWCHC 136
(September 2015);
[2016] 2
All SA 519
(WCC).
[2] More than seven
months have passed since that judgment and since I last dealt with
the unopposed roll in Third Division. Notwithstanding
the grave
reservations I expressed in that judgment regarding applications for
voluntary surrender brought in a standardised and
batch form by that
firm, very little, it seems to me, if anything, has changed and these
applications are still being brought in
significant numbers. These
four applications appeared on a roll of only 71 matters. Assuming the
same degree of prevalence on each
day the roll is called, this amount
to some 20 matters a week or 80 a month, all brought by the same
firm. Although this figure
is obviously a very rough estimate it
affords some idea of the volume of these applications.
[3] As mentioned
little in the format has changed and each application projected a
dividend of between 16 to 18 cents in the rand.
None of them featured
any major moveable asset let alone immovable property. Rather the
estates sought to be surrendered comprises
most, if not all, of the
applicants’ worldly goods. There is one change, however;
whereas in all the matters dealt with in
Ex parte: Concato no mention
was made of the applicants’ clear intention to purchase his/her
estate back from the trustees,
(without physically surrendering
same), this intention is now made clear. As stated in Ex Parte:
Concato, I have little if any
doubt that it is the prospect of this
outcome which has motivated and given rise to these applications.
[4] The same
valuator and the same method of valuation has been utilized in each
case and more than adequate provision has been
made for the
attorneys’ fee, including minor disbursements, in amounts
ranging between R14 000.00 and R15 000.00. The portions
of the
applications dealing with the reasons for the applicant falling into
a state of insolvency are again, highly coloured and
in many instance
it strains credulity that so many misfortunes could befall one
person. No explanation is given as to how, on the
one hand the
applicants intends to purchase their estate back by way of payment by
instalments, yet on the other hand will presumably
finance the costs
and disbursements of the sequestration process upfront.
[5] All the
reservations which I expressed in Ex Parte: Concato regarding the
bona fides of these applications and in particular
whether they hold
any advantage for creditors remain valid. Again, even though the
applicants sought to surrender all their household
goods, no waiver
of their rights in terms of sec 82(6) of the Insolvency Act are
contained in the papers.
[6] Not
unexpectedly, given the production line nature and volume of these
applications by this firm of attorneys, all the technical
requirements for the voluntary surrender of an estate are met in each
case.
[7] Once again,
notwithstanding the general reservations which I have, each
application clearly falls to be considered on its merits
which I
proceed to do.
MS AM CONNOWAY –
CASE NO 5873/2016
[8] According to the
statement of affairs, the applicant’s estate comprises total
assets valued at R41 300.00 with concurrent
liabilities of R90 668.61
and the estimated dividend is 17 cents in the rand. The applicant’s
liabilities consisted of six
creditors, the largest being in an
amount of R38 153.16, a debt owed to a ‘family member’.
No proof of this debt is
furnished. The applicant states that she
approached a debt counsellor but they advised that her surplus funds,
R3 000.00 per month,
were too small to justify using the National
Credit Act’s remedies. This does not strike me as credible or
correct advice.
The movable assets which the applicant seeks to
surrender (and then buy back) comprise electronic goods and
furniture. In his report
the Master states he cannot comment on the
stated values of the assets as the trustees still have to do their
own valuations of
the items listed. He draws the Court’s
attention to its powers in terms of sec 3(3) of the Insolvency Act to
examine the
petitioner or the petitioner’s attorneys and refers
to Ex Parte: Crafford and Ex Parte: Napier (reported on SAFLII as
Crafford
v Crafford and another (19421/13, 19422/13
[2014] ZAWCHC 14
(13 February 2014).
[9] In argument
counsel submitted that it lies within the Court’s discretion to
order that the goods to be surrendered be
sold by way of auction and
the monies placed in a fund for the benefit of creditors. I have
reservations about issuing such an
order, however, where the
applicant has brought the application without a waiver in terms of
sec 82(6) and on the clear understanding
that she hopes to repurchase
her assets by way of payments in instalments. If the assets are sold
for much less than the forced
sale valuation, probably in itself
optimistic, the applicant will have the worst of both worlds.
MS J RUITERS –
CASE NO 6168/2016
[10] According to
the applicant’s statement of affairs her movable assets have a
forced sale value of R62 000.00 whilst her
liabilities amount to R188
709.24, leaving a deficit of R126 709.24. The dividend to creditors
is projected at 18 cents in the
rand. The Master states that he
really does not know whether the acceptance of this application would
be an advantage to creditors.
Given that the applicant also expresses
the hope that she will be able to purchase her goods back from the
trustee, presumably
by way of instalments, I share the Master’s
evident doubts as to whether there will be any real advantage to
creditors. Even
if a dividend in this amount is notionally achievable
since it will only trickle through to any proved creditors over a
period
of years. The applicant advises that her monthly income
exceeds her expenses by R1 931.38. Leaving aside the costs of the
sequestration,
in itself amounting to some R27 000.00, applying the
full surplus to this debt each month will take her approximately
three years
to purchase her estate back at the forced sale value.
[11] The applicant’s
liabilities comprises the outstanding balance on loans from some 28
commercial lenders. Her explanation
for how she fell into insolvency
is a tale of nine years of borrowing money from Peter to pay Paul.
The ‘household items’,
being the estate which she seeks
to surrender, comprises furniture and approximately 20 electronic
appliances. These include four
television sets, one hi-fi, two cell
phones, two computers, a tablet and an iPad. This array of luxury
items is difficult to square
with the heart-rending story of
privation and financial misfortune over a nine year period recounted
by the applicant. On the terms
of the financial arrangements which
she envisages reaching with the trustee the applicant will retain all
these goods in return
for a monthly instalment and be entirely
divested of her creditors.
[12] As in the case
of other applicants the applicant states that she is convinced that
her creditors will give effect to threats
to take legal action
against her but obviously none of them has yet done so, otherwise
proof thereof would have been furnished.
The applicant makes fleeting
mention of contacting a debt counsellor only to be advised that her
salary was hopelessly too little
to utilise the remedies available to
her in terms of the National Credit Act. This hardly seems credible
since here salary is almost
R13 000.00 per month and her surplus
funds nearly R2 000.00 per month.
MR L TAYLOR AND MRS
A TAYLOR: CASE NO 6167/2016
[13] The applicants
are married in community of property and seek to surrender their
estate, household effects with a forced sale
valuation of R70 000.00.
Their liabilities amount to R249 922.30, leaving a deficit of R179
922.30. The dividend projected for
creditors is 16 cents in the rand.
The total sequestration costs are estimated at no less than R28
525.98 with the attorneys costs,
including minor disbursements,
amounting to R14 819.00.
[14] The applicants’
assets comprise household furniture, appliances and electronic
equipment, the latter including two television
sets, one home theatre
system, one hi-fi system, two refrigerators, two freezers and an
array of cell phones, laptops and tablets.
According to the
applicants’ statement of their affairs their monthly expenses
outweigh their monthly income by only R427.86
but an amount of R7 000
will be available if the applicants stop making monthly payments to
their debt counsellor. In this latter
regard the applicants state
that notwithstanding paying approximately R7 000.00 per month since
October 2013 the amount that they
owe is higher than their
liabilities at the commencement of the debt arrangement scheme. No
explanation is provided for this paradox
nor is any documentation
furnished relating to their debt review or restructuring.
[15] The applicants’
liabilities consist in the main in the outstanding balances of monies
loaned from institutions, totalling
just less than R250 000.00.
Notwithstanding this parlous state of affairs the applicants state
that they propose to purchase their
estate back from the trustee with
the support of family, friends and employers. No details are
furnished of precisely who will
furnish this support, in what form or
why this support cannot rather be used to reach an accommodation with
their creditors.
[16] The Master
again recommends that resort be had to the provisions of sec 3(3) of
the Insolvency Act, no 24 of 1936 (as amended)
which provides that
the Court may direct the petitioner or any other person to appear and
be examined before it declines the surrender.
I take this to be an
expression of scepticism on the part of the Master as to the bona
fides and/or merits of their application,
more particularly as to
whether it holds any advantage to creditors.
MR S JOSEPH AND MRS
N JOSEPH: CASE NO 6166/2016
[17] The applicants
are married in community of property and seek to surrender an estate
comprising of only movable assets with
a forced sale valuation of R55
000.00 against liabilities totalling R157 575.14. This leaves a
deficit of R102 575.14 and the projected
dividend to creditors is 17
cents in the rand. The Master expresses scepticism that the
acceptance of the application would furnish
an advantage to
creditors.
[18] The applicants
lay claim to a total income in the form of their respective pensions
in the amount of R2 820.00. Yet they state
that their expenses amount
to no more than R1 500.00 per month, being only groceries and
transport, leaving them with a monthly
surplus of R1 320.00. Even
though the applicants state that they enjoy assistance from their
children, I find these unsubstantiated
figures very difficult to
credit. The main liabilities which the applicants have amount to
approximately to R150 000.00 worth of
outstanding loans to two banks.
The estimated costs of the sequestration amounts to R26 779.48,
including attorney’s fees
in the amount of R14 430.00. The
applicants’ assets comprise household furniture, appliances and
electronic items including
two television sets, and four sewing
machines valued at nearly R10 000.00. They state that with the help
of their family members
and friends they intend to purchase their
assets back from their trustee. No details of this promised support
are given nor why
it cannot be utilised to reach an accommodation
with their three creditors. They advise further that they approached
a debt counsellor
but according to him a debt review or
reconstructing could not assist them. No further explanation for this
advice is given.
[19] The Master
states that he ‘really (does) not know’ whether
acceptance of the application would be of advantage
to the creditors.
GENERAL
[20] Although the
Master recommends, in several of these matters, that the Court
utilise its powers in terms of
sec 3(3)
of the
Insolvency Act, he
does not state what the purpose or focus of such examination would
be. In requesting the Court to examine some petitioners in terms
of
sec 3(3)
of the Act the Master referred to Ex parte: Crafford &
Ex parte: Napier (reported on SAFLII as Crafford v Crafford and
Another
(19421/13, 19422/13)
[2014] ZAWCHC 14
(13 February 2014) and
Ex Parte: Bezuidenhout and Ex Parte: Pieterse (1858/2014, 1859/2014
[2014] ZAECPEHC 60 (19 August 2014.
[21] I have
considered these judgments which deal with questionable practices on
the part of an attorney and a valuator in voluntary
surrender
applications. Neither of those parties are involved in the present
matters. The examinations brought to light a series
of irregularities
and led, in the case of the particular attorney involved, to
disciplinary action against him. On balance, I have
decided, at this
stage, not to invoke the procedure in sec 3(3) of the Act. As
mentioned by counsel, the Master has not specified
in what respect he
believes the petitioner/s (or the petitioners’ attorney) should
be examined and, secondly, although the
applications may have no
merit, there are only limited indications of questionable practices
being adopted. It is worth noting,
however, that in Ex parte:
Bezuidenhout it was brought to light that the applicants in both
those matters found themselves in the
hands of their attorney after
conducting an internet based search and coming across an entity
called Green Debt which promised
a debt free resolution of their
financial problems. In essence it offered sequestration by way of
voluntary surrender as a solution
to their problems. The applicants
made telephonic contact with the offices of Green Debt and, after
being encouraged to fill in
an application for assistance, paid a fee
to Green Debt and were informed that an attorney would contact them
in due course.
[22] Significantly
one of the creditors in the present Taylor matter is Green Debt, in
the amount of R1 770.00 for services rendered.
On the probabilities
the Taylors found themselves in the hands of their attorneys, Messrs
Etienne Genis and Company, using the
same route. This adds another
undesirable feature to one (or perhaps more) of these voluntary
surrender applications viz that there
is a ‘middle man’
earning fees through referring persons in financial straits to
attorneys who ‘specialise’
in these applications. In Ex
Parte: Bezuidenhout Goosen J stated as follows regarding this aspect:
‘Before
turning to the merits of the application it is appropriate to comment
on the circumstances in which these cases came
to be brought and the
manner in which they were conducted. The applicants in these two
matters were clearly desperate people heavily
burdened by debt and
desperate to resolve their situation. These are precisely the sort of
people for whom the machinery created
by the National Credit Act
exists. Their desperation led them to a web based entity which, it
appears, is not a registered debt
counsellor in terms of the
provisions of the National Credit Act. They were made to pay a fee,
R6800 in the one case and R7200
in the other, in order to “resolve”
their financial difficulties. The result was an application for
voluntary surrender
initiated via a complex web of relationships in
which dubious evidence is placed before a court in order to persuade
that court
to grant the relief. Provision is made in the calculation
of the possible dividend payable to creditors for the payment of the
attorney’s fees out of the
estate. The result
in effect is a further depletion of the financial resources available
to creditors.’
[23] In my view the
above sentiments regarding an intermediary apply to the Taylors’
application whilst Goosen J’s views
regarding the applicability
of the National Credit Act apply to all the matters under
consideration.
CONCLUSION
[24] In my view, for
the same general reasons as I set out in Ex Parte: Concato, these
applications are fatally flawed. Even if
I am wrong in this general
conclusion, for the various specific reasons set out above in
relation to each case, I consider that
the applicants have failed to
demonstrate that their applications are bona fide, that they have
made full disclosure and, most
importantly, that the voluntary
surrender of their estates will produce an advantage to creditors.
[25] In the result
all four applications are dismissed.
PETER DAVID EDGE:
CASE NO 6002/2016
[26] This
application for voluntary surrender, in which the applicant is
represented by different attorneys, stands somewhat apart
from the
applications with which I have just dealt.
[27] He seeks to
surrender an estate comprising assets which he values at R65 800.00
and liabilities amounting to R225 000.00, leaving
a deficit of R159
150.00. After making provision for the total costs of sequestration
in the amount of R30 000.00, the applicant
projects a possible
dividend of 15 cents in the rand.
[28] The application
has procedural or technical flaws. In the first place the applicant’s
notice of voluntary surrender appeared
both in the Government Gazette
and in a newspaper on 11 March 2016. This date was approximately 31
court days, or approximately
60 ordinary days, before the application
was set down for hearing in Court. Subsection 4(1) of the
Insolvency
Act requires
the notices to be published not more than 30 days and
not less than 14 days before the date stated in the notice of
surrender.
It is common cause that the reckoning of days is not to be
computed with reference to court days and therefore the notices were
served well outside of the time period of between 14 and 30 days.
[29] According to
the commentary in Meskin’s Insolvency Law (Butterworth) (3-8
issue 44), this irregularity amounts to a formal
defect and as such
can be condoned. In this determination the first question is whether
the defect has caused or may have caused
prejudice, presumably to
creditors. I should imagine that the prejudice in such a instance is
that, given such lengthy notice,
creditors may have forgotten or lost
interest in presenting themselves at court to oppose the application
for surrender. In the
present matter there is no indication of any
such prejudice having been suffered but there again, given its
nature, there seldom,
if ever, will be.
[30] The second
defect in the papers is that the assets comprising the applicant’s
estate have not been properly valued. In
Nel v Lubbe
1999 (3) SA 109
W Levenson J held, in the context of a sworn valuation of immovable
property by an estate agent, that testimony must be placed
before the
court of the facts relied upon by the expert for his opinion, as well
as the reasons upon which it is based.
[31] It goes without
saying that the qualification of the valuator who expressed an expert
opinion must be established. Something
more than a ‘bold
assertion of value’ is necessary. In Ex Parte: Ogunlaja and
Others
[2011] JOL 27029
(GNP), Bertelsman J endorsed the approach by
Levenson J in Nel v Lubbe and stated further:
‘It is
necessary to add that the nature of the valuation report is such
that, in the absence of a reliable method of calculation
of the value
of the immovable properties, the Court is left with the uncomfortable
impression that the valuator and the applicant
or the applicant’s
legal representatives, are too close to one another to allow the
preparation of an independent expert’s
report. The thought is
difficult to dismiss in these applications, and in many others the
court has seen over the past two to three
years, that the valuator is
fully aware of the value that needs to be certified for assets in
every individual insolvent estate
to ensure that the papers reflect a
conclusion that an advantage to creditors is assured if the surrender
is accepted…’
[32] In the present
matter all that there is in support of the valuation is a list of the
assets, very briefly described, with a
monetary value attributed to
them. This list then bears the stamp of LF Schneider t/a JJ Reitstein
and an address in Woodstock.
In manuscript is written ‘I have
examined the contents of his house and agree that this is a fair
valuation of these assets’
followed by a signature. Mr LF
Schneider, or whoever made the valuation, does not state what his/her
qualifications are, what experience
he/she has had in the valuation
of movable property and nor does he/she furnish any further details
relating to the valuation such
as the condition of the goods or
his/her reasons for arriving at the valuation. I should mention also
that these assets comprise
a wide variety of goods including sports
equipment, computers and office furniture, various artworks, tools,
equipment and other
furniture.
[33] It is not even
stated whether these goods are valued on a forced sale basis. Neither
the applicant’s affidavit nor the
statement of affairs which he
lodged sheds any further light on these questions.
[34] A further
defect in the application is that provision for the costs of the
sequestration amounts to an estimate in the form
of a globular sum
with no breakdown into attorney’s fees or disbursements at the
various statutory tariffs which apply. It
is thus not possible to
evaluate this estimate or the allegation that these costs will not
exceed R30 000.00.
[35] Based on the
valuation provided, inadequate as it is, the applicant’s estate
is a very limited one and will be depleted,
if the valuation of
assets is realised, by approximately 50% to pay for the costs of the
voluntary surrender application and the
administration of the
insolvent estate. The projected dividend, which obviously is based
upon the already questionable valuation
being reasonably accurate, is
only 15 cents. I have grave doubt whether even this dividend will
ever be achieved.
[36] Finally, for
good measure the applicant has failed to even raise the question of
whether he had utilised or considered utilising
the procedures in the
National Credit Act, namely, that of debt review and debt
restructuring, with a view to resolving the financial
difficulties in
which he finds himself.
[37] The Master
appears to express doubt that the projected dividend will be
advantageous to creditors and recommends that the applicant
be
examined in terms of
sec 3(3)
of the
Insolvency Act, but
once again
without an indication of what point would be served by such an
exercise. [38] Taking into
account the
various shortcomings which I have referred and to the extremely
limited prospect that there will be an advantage to
creditors, I
consider that the application for voluntary surrender cannot succeed.
[39] The application
is accordingly dismissed.
BOZALEK J
APPEARANCES
For the Applicants in Cases
5873/2016;
6168/2016; 6167/2016; 6166/2016 Ms J
Foster
Instructed by: Ettiene Genis &
Kie
For the Applicant in Case 6002/2016
Mr D Rabie
Instructed by: VGV Inc