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[2018] ZAWCHC 50
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Treif Distributors (Pty) Ltd t/a Sacks Butchery v Benade and Another (5797/17) [2018] ZAWCHC 50 (20 April 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
WESTERN CAPE DIVISION, CAPE TOWN
REPORTABLE
CASE
NO: 5797/17
In
the matter between:
TREIF
DISTRIBUTORS (PTY) LTD
t/a
SACKS
BUTCHERY
Applicant
and
LOUIS
LE ROUX
BENADE
First Respondent
JACOBA
SOPHIA
BENADE
Second Respondent
JUDGMENT
DELIVERED ON FRIDAY 20 APRIL 2018
GAMBLE,
J:
INTRODUCTION
[1]
The first respondent, an attorney who
previously practiced in Worcester, left the profession a number of
years ago to run a number
of restaurants through various corporate
entities. The applicant butchery supplied meat to certain of those
restaurants from time
to time. One of the companies utilised by the
first respondent in this business venture was Coral Reef Hospitality
(Pty) Ltd (“
Coral Reef”
).
[2]
During 2009 Coral Reef experienced cash
flow problems and the butchery became concerned about its
creditworthiness. It accordingly
required of the first respondent
that he execute an acknowledgement of debt (“
an
AOD”
) on behalf of Coral Reef in
favour of the butchery. The first respondent begrudgingly obliged and
signed the necessary documentation
on 16 October 2009. Thereafter
Coral Reef was wound up and the butchery sought to prove a claim in
liquidation. Eventually, in
January 2015, it recovered an amount of
R10 213,89, which left a substantial balance due under the AOD.
[3]
In 2010 the butchery issued summons out of
the Heidelberg Magistrates’ Court against the first respondent
for payment of his
obligations under the AOD. That action was
resolutely defended but ultimately the butchery’s claim was
upheld by the magistrate
in the amount of R180 486,29 plus
interest and costs. Undeterred, the first respondent soldiered on. He
noted an appeal to
this court which was dismissed on 25 April 2016
and thereafter sought leave to appeal further from the Supreme Court
of Appeal,
which application was dismissed on the turn on 15 August
2016. Accordingly, after more than 6 years of litigation aimed at
avoiding
his contractual liabilities to the butchery, the first
respondent was liable to it for the payment of capital, interest and
the
various costs orders incurred in three courts.
[4]
Bills
of costs were prepared in respect of the litigation in all three
courts and after taxation the total thereof amounted to R120 408,81.
Thereupon, the applicant issued various writs of execution out of the
Heidelberg Magistrates’ Court for service on the first
respondent at his residence in nearby Witsand, a holiday resort at
the mouth of the Breede River, where he and his wife, the second
respondent, have retired
[1]
.
They live in a house owned by the Sonja Benade Trust (“
the
Trust”
)
an entity which bears the name of the second respondent.
[5]
I shall return to the steps taken by the
Sheriff for Riversdale (and who covers the Heidelberg district)
later. Suffice it to mention
at this stage that returns of
nulla
bona
were issued by the Sheriff. Armed
with such returns of service, the applicant approached this court on
30 March 2017 for a provisional
order of sequestration of the first
respondent; the second respondent (to whom the first respondent is
married out of community
of property) having been cited nominally by
virtue of her marital status.
THE
SEQUESTRATION APPLICATION
[6]
In its founding papers the applicant,
relying on the
nulla bona
returns
of service, alleged an act of insolvency on the part of the first
respondent in terms of
s8(b)
of the
Insolvency Act, 24 of 1936
. The
first respondent filed an opposing affidavit (termed a “Replying
Affidavit”) in which a plethora of technical
points was raised.
The matter eventually came before Burger AJ on 22 June 2017 who
refused a last-minute application for a postponement
and issued a
provisional order of sequestration returnable on 2 August 2017.
[7]
In his judgment, Burger AJ noted that the
only issue before him was whether there would be any advantage to
creditors in the event
of sequestration taking place. The Learned
Acting Judge was satisfied that the applicant had established a
prima
facie
case and granted the provisional
order on this basis.
[8]
On 2
nd
August 2017, the matter came before Papier AJ on the return day of
the provisional order when the first respondent put up a further
answering affidavit in which more points were raised. In the result
the matter was postponed for hearing on the semi-urgent roll
on 7
November 2017, with the parties being given leave to file
supplementary affidavits and with further directions as to the filing
of heads of argument. In the result the matter did not proceed on
that day for reasons which are not material at this stage and
eventually came before this court on 8 March 2018.
[9]
On that day the applicant was represented
by Adv D. Goldberg and the first respondent by Adv C.W.Kruger. The
second respondent did
not participate in the proceedings given that
no relief was sought against her. The Court is indebted to counsel
for their helpful
heads of argument and submissions at the hearing.
[10]
Notwithstanding a host of points, both
technical and otherwise, taken in the opposing papers by the first
respondent, Mr. Kruger
focused his argument solely on the issue of
whether a final order of sequestration would be in the interests of
the general body
of creditors. Mr. Goldberg joined issue on this
point and it is to that point which I now turn.
INTEREST
TO CREDITORS
[11]
Mr.
Goldberg mounted his argument on the basis of the well-known decision
in
Meskin
[2]
in which Roper J set out the position thus;
“…
.
The facts before the Court must satisfy it that there is a reasonable
prospect - not necessarily likelihood, but a prospect which
is not
too remote - that some pecuniary benefit will result to creditors. It
is not necessary to prove that the insolvent has any
assets. Even if
there are none at all, but there are reasons for thinking that as a
result of enquiry under the Act some may be
revealed or recovered for
the benefit of creditors, that is sufficient.”
[12]
In
Hawker
Air
[3]
Cameron
JA confirmed that approach :
“
[29] The
question is whether the Commissioner has established that
sequestration would render any benefit to creditors, given that
the
partnership is now defunct. The answer seems to lie in those
decisions that have held that a Court need not be satisfied that
there will be advantage to creditors in the sense of immediate
financial benefit. The Court need be satisfied only that there is
reason to believe - not necessarily a likelihood, but a prospect not
too remote - that as a result of the investigation and enquiry
assets
might be unearthed that will benefit creditors.”
[13]
Mr. Goldberg submitted that the facts
establish that the extent of the first respondent’s liability
to the butchery is of
the order of R 481 000 being the sum of
the capital ordered to be paid by the Magistrate, together with
interest thereon and
the various taxed bills of costs. I did not
understand Mr. Kruger to take issue with this calculation. In
addition there was said
to be a credit card debt of R18691. In the
result, said Mr. Goldberg, if the applicant could show that there
assets of the order
of R50 000 which could be found through an
insolvency enquiry, this would render a dividend of about 10c in the
Rand which
would constitute sufficient interest for the first
respondent’s creditors. In the answering affidavit the first
respondent
mentions the applicant as his “
only
statutorily relevant creditor”
(whatever
that phrase may mean) and points to SARS and ABSA Bank (in respect of
the credit card debt) as “
two
other creditors”.
[14]
The
only assets of any value found at the first respondent’s home
were said to be 2 motor vehicles - a Mercedes-Benz sedan
and a
Chrysler Grand Cherokee SUV. If the combined value of these
vehicles was of the order of R 50,000, a dividend of 10c
in the Rand
could be attained, said Mr. Goldberg.
[4]
But it appears as if the vehicles belong to the Trust and, in any
event, the first respondent’s ownership of these vehicles
is
inconsistent with the
nulla
bona
return.
Accordingly, while Burger AJ considered that these assets may afford
some benefit to creditors, this now appears no longer
to be the case.
[15]
The contents of the
nulla
bona
return are confirmed in the
answering affidavit by the first respondent who says that he has no
assets of any consequence. He goes
on to claim that his sequestration
will not be of any benefit to the applicant. In any event, says the
first respondent, the butchery
should invoke the provisions of
s65A(1) of the Magistrates’ Court Act, 32 of 1944 and conduct
an enquiry in the local debtors’
court. But, said Mr. Goldberg,
there is the Witsand house owned by the Trust. And, while there
is no attack by the applicant
on the way in which the Trust has been
run, or that it is the
alter ego
of
the first respondent, counsel suggested that there may be an
impeachable transaction between the first respondent and the Trust
which warrants investigation and which may thereby produce an
advantage for the applicant. The provisions of s65A do not afford
a
creditor the opportunity to attack an impeachable transaction and it
is therefore claimed that this procedure does not present
the
applicant creditor with any realistic prospect of financial reward.
POTENTIALLY
IMPEACHABLE TRANSACTION
[16]
The facts before the court show that the
first respondent previously owned a property in Worcester which was
sold in 2015 for R640 000.
This occurred while he was in the
midst of the litigation relating to the AOD but it is not in dispute
that it was an arm’s
length transaction. The net proceeds of
that transaction, says the first respondent, amounted to R340 207,28.
While it is
common cause that part of this amount was paid into the
bank account of the Trust, the first respondent does not disclose
what
the amount in fact was. But, as Mr. Goldberg pointed out, the
provisions of
s 26(1)(b)
of the
Insolvency Act are
applicable to that
transaction.
“
S26
Disposition without value
(1)
Every disposition of property not
made for value may be set aside by the court if such disposition was
made by an insolvent -
(a)…..
(b)
within two years of the
sequestration of his estate, and the person claiming under or
benefited by the disposition is unable to
prove that, immediately
after the disposition was made, the assets of the insolvent exceeded
his liabilities:
Provided that if
it is proved that the liabilities of the insolvent at any time after
the making of the disposition exceeded his
assets by less than the
value of the property disposed of, it may be set aside only to the
extent of such excess.”
Counsel
further submitted that because the alleged payment to the Trust (at
the earliest at the end of 2015
[5]
)
falls within the two-year period contemplated under that section
[6]
,
the first respondent has the onus of establishing that the
transaction is not impeachable.
[17]
At
this stage the first respondent has not set out a legal basis for the
payment to the Trust. He certainly does not suggest that
it was in
settlement of an
extant
liability.
Rather it appears to have been a neatly “ring-fenced” sum
of money to provide a source for the respondents’
future living
expenses.
[7]
Whether that amount has now been used up is neither here nor there.
If the applicant can establish through an insolvency enquiry
that the
transaction was impeachable, the Trust will be required to repay the
amount in question to the first respondent’s
trustee. And that,
says counsel for the butchery, is where the potential advantage to
creditors lies. For example, the Trust could
sell the vehicles or
dispose of equity in the house to settle any liability found to exist
under
s26.
[18]
In the circumstances I am satisfied that
there is a reasonable prospect, (and one which is certainly not too
remote) that the sequestration
of the first respondent could lead to
an enquiry that might establish sufficient assets to settle the
applicant’s claim,
at least a part thereof. Accordingly, in the
exercise of my discretion I consider that it is appropriate to grant
a final order
of sequestration in this matter.
THE
NULLA BONA RETURNS OF SERVICE
[19]
In his answering affidavit of 11 May 2017 the first respondent took
issue with the circumstances under which the Sheriff served
the writs
of execution and filed his
nulla bona
return, claiming that –
“
Neither,
The (sic) Sheriff, Mr. Gavin Michaels, nor any of his duly authorised
representative/s, agent/s or assistant/s have at
any material time
performed, what could reasonably be described as a ‘diligent
search’, of….my wife’s.…home
and
premises..[at]..Witsand, which constitutes her, my and Louis Jnr’s
primary residence; as he and his assistant have only
ever been in one
room of the house, namely the open plan living-room on the first
story level…”
The
first respondent went on to allege that the return was impeachable
and could not be relied upon by the applicant for purposes
of
sequestration.
[20]
As part of the applicant’s replying papers filed on 31 May 2017
an affidavit deposed to by the said Sheriff, Mr. Michaels,
was
attached. This had been drafted by the applicant’s attorney,
Mr. Kudo, after telephonic discussions with the Sheriff
and faxed to
him for signature. In the affidavit Mr. Michaels positively asserted
and attested to the circumstances surrounding
service of the writ by
him at the first respondent’s home in Witsand.
[21]
The first respondent filed a supplementary answering affidavit on 15
June 2017. In it he dealt, inter alia, with the affidavit
by Mr.
Michaels and pointed out that he was concerned with the accuracy
thereof. The first respondent related how he and his son
had visited
Mr. Michaels at his offices in Riversdale on 9 June 2017 to establish
whether Mr. Michaels was actually the person
who had visited his
house in Witsand. A discussion ensued during which Mr. Michaels
confessed to the first respondent that it was
not he but “
his
assistant, Claradene, and Adrian or Norman (who subsequently left his
service) [who] had indeed attended to all the services
which (sic)
was alleged he had done personally.”
It was said that Mr.
Michaels had not properly applied his mind to the affidavit sent to
him by Mr. Kudo for signature.
[22]
This development elicited a response from Mr. Kudo’s candidate
attorney, Mr. Kushner, who explained how the initial affidavit
had
been prepared and sent through to Mr. Michaels for signature. Mr.
Kushner went on to point out that on 9 June 2017 he received
an email
from Mr. Michaels in which the latter had stated that he had not
personally effected service of the writs on the first
respondent.
“
Waarde
Heer
Dit is moontlik dat die Beendigde
(sic) Verklaring wat u aan my gestuur het moontlik misleidend mag
wees aangesien ek net geteken
en nie gelees het (sic) en dat my twee
adjunkte wel dokumente op verweerders beteken het m.a.w die werk was
korrek gedoen. Ek besef
dat ek ‘n bona fide fout gemaak het.
Aangegeheg (sic) is beedigde (sic)
verklarings deur my adjunkte.
Groete
G. Michaels”
[23]
Attached to that email were affidavits by Ms. Claradene Pietersen and
Mr. Adriaan Albertyn, who were both deputies to Mr. Michaels
at the
time. They confirmed that they were responsible for service of
various writs on the first respondent at Witsand and described
therein how they had gone about their business there on 17 January
and 16 February 2017. They both stated that the first respondent
had
informed them on each occasion that none of the assets at the
residence belonged to him and they claimed that the
nulla bona
returns relied upon by the applicant are therefore factually
correct.
[24]
In addition to the affidavit by Mr. Kushner the applicant also filed
further affidavits by Ms. Pietersen and Mr. Albertyn,
which amplified
the affidavits attached to the email of Mr. Michaels. In a separate
affidavit Mr. Michaels had the following to
say in an endeavour to
correct certain aspects of his earlier affidavit.
“
6. As
Sheriff for my jurisdiction it is my duty to be accountable and take
responsibility for the actions of my deputy Sheriffs.
When I deposed
to my earlier affidavit I was labouring under the bona fide but
mistaken belief that this duty required me to state
that I had
personally effected service, when in fact the service had been
performed by my deputies.
7. I have come
to understand that this is not correct and since it was certainly
never my intention to mislead this Honourable Court
I wish to make it
clear that the founding papers in this application and prior to that,
the warrant of execution in respect of
case number 463/2016 in the
Supreme Court of Appeal (“the SCA Warrant”) and the
warrant of execution against property
issued in respect of case
number 212/2010 in the Magistrates’ Court for the District of
Heidelberg, Held at Heidelberg (”the
Magistrates’ Court
Warrant”), were served by my head deputy Sheriff Ms. Claradene
Pietersen (“Ms. Pietersen”)
assisted by deputy Sheriff
Mr. Adriaan Albertyn (“Mr. Albertyn”).
8. The events
depicted by me in my earlier affidavit were relayed to me by Ms.
Pietersen and confirmed by Mr. Albertyn. I verily
believe them to be
true and correct. Therefore, I maintain, that I, through my deputy
Sheriffs acting in my stead, complied fully
with my duties and the
content of my returns of service are properly set out.”
[25]
The first respondent did not persist in argument with his attack on
the
nulla bona
returns, and Mr. Kruger accepted that the first
respondent is factually insolvent. That notwithstanding, it is
necessary to deal
with the conduct of Mr. Michaels and his deputies.
[26]
The office of the Sheriff is a vital cog in the machinery of the
justice system. It requires absolute honesty and integrity
on the
part of the officers in question whose
ipse
dixit
in regard to returns of service is implicitly relied upon by the
courts day in and day out.
[8]
The duties and functions of a Sheriff are circumscribed in the
Sheriffs Act, 90 of 1986 and Chapter IV of that act specifically
deals with improper conduct. In terms of s43(1)(b) thereof the making
of a false return is designated as improper conduct on the
part of a
sheriff.
[27]
In light of the allegations made under oath by Messers Michaels and
Albertyn and Ms. Pietersen in this matter, it is necessary
that the
matter be brought to the attention of the South African Board for
Sheriffs for its consideration.
ORDER
OF COURT:
A.
The rule
nisi
is confirmed and there shall be a final
order of sequestration against the first defendant.
B.
The Registrar of this court is directed to
forward a copy of this judgment to the South African Board for
Sheriffs.
__________________
GAMBLE,
J
[1]
The first respondent is now 84 years old and his wife 64.
[2]
Meskin & Co v Friedman
1948(2) SA 555 (W) at 559
[3]
Commissioner, South African
Revenue Services v Hawker Air Services (Pty) Ltd
[2006] ZASCA 51
;
2006
(4) SA 292
(SCA) at
[29]
[4]
In his supplementary answering affidavit the first respondent
suggests that the Mercedes is worth about R85 000 and the
Chrysler about R40 000.
[5]
A bank document attached to the answering affidavit demonstrates
that an electronic funds transfer in the sum of R340 207,28
was
made by the conveyancing attorneys to the first respondent on 15
December 2015. The payment by him to the Trust accordingly
post-dates that transaction.
[6]
The sequestration application was launched on 30 March 2017.
[7]
The first respondent says in the initial answering affidavit that
“
(t)his amount became
a financial life-line for myself and my two sons who were living and
working with me, from our home office;
and sustained many of my
family's immediate expenses, including my wife's, and Louis Le Roux
Benade Attorneys’ (as my firm
was registered then) overheads;
including legal fees and other business expenses, in the ordinary
course of business."
(The
first respondent had recommenced his legal practice which he was
running from home.)
[8]
LAWSA
2
nd
ed Vol 25 Part 1 para 28
et
seq.