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[2015] ZAGPJHC 319
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Ex parte: Kachelhoffer (40832/2014, 38600/2014) [2015] ZAGPJHC 319 (23 February 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
Case
number: 40832/2014
Case
number: 38600/2014
DATE:
23 FEBRUARY 2016
In the ex
parte application of:
KACHELHOFFER, TRACY
ANDREA
.................................................................................
Applicant
JUDGMENT
SATCHWELL
J:
INTRODUCTION
1.
In the unopposed Motion
Court of Monday, the 16
th
February 2015, an ex-parte application came before me as matter
number 43 on the roll, being ex-parte, Tracy Andrea Kachelhoffer,
case number 40832/14. I heard counsel on this matter and refused the
application.
2.
By notice in terms of
Rule 49(1)(c), dated 19
th
February 2015 and stamped 20
th
February 2015, I was asked to provide written reasons for the order
which I had made on the 16
th
February. However this notice refers to case number 38600/14, also in
the matter of Tracy Andrea Kachelhoffer, applicant.
3.
Accordingly I have done
a little research. It appears that the first matter, case 38600/14
was deposed to by way of affidavit on
15
th
October last year, set down for hearing on 30
th
October (i.e. 2014) and was withdrawn before her Ladyship Mayat.
Thereafter a new application was instituted being case number
40832/14, with an affidavit signed on the 7 November 2014 and set
down for hearing on the 4
th
December 2014 when his Lordship, Mr Justice Monama, noted that
creditors were present and the matter was postponed to the 29
th
January 2015 with costs reserved.
4.
On the 29
th
January 2015 the matter came before his Lordship,
Mr Acting
Justice Madima, it was noted that ABSA was present in court. The
matter was postponed and his Lordship ordered that papers
were to be
served on creditors on or before the 16
th
February. I note that this was done because the file placed before me
contains a tear sheet from the Star newspaper and also records
that
the papers were sent by couriers to two of the debtors, Foschini and
Woolworths.
5.
On the 16
th
February 2015, case number 40832/14 came before me and I dismissed
the application.
6.
I have perused the two
separate applications and I can find minimal difference between the
applications and nothing material in
nature. I fail to comprehend why
there are two separate applications under two separate case numbers.
I note that I have been requested
to provide reasons in respect of
case 38600/14 which of course is not an application I heard. I am
acting on the assumption that
the attorney who made the request
intended that I give reasons in the matter which I did hear, namely
case 40832/14.
THE
INSOLVENCY ACT
7.
In so far as a
voluntary surrender is concerned, one must have regard to
Section 6
of the
Insolvency Act 24 of 1936
, which deals with surrender of an
estate. That section obviously requires that the debtor be insolvent.
It is the duty of the Court
to determine whether there really is
insolvency and whether or not there are other remedies than
insolvency available as well as
to insure that the surrender is of
advantage to creditors and not debtors.
8.
It is important to note
that our courts, in scrutinising insolvency applications or voluntary
surrenders, have indicated a number
of factors to which a Court
should have regard.
9.
It is trite that
neither the creditors nor the debtors nor the Court should prefer
insolvency proceedings above litigation and execution
in the ordinary
course. In
Ex-Parte
Van Den Berg
1950
(1) SA 816
(N) it was stated: “To use the machinery of
sequestration to distribute amongst these (concurrent) creditors the
small amount
which might be available from the sale of the immovable
property after paying the costs of realisation and the costs of
administration
of the estate is really to use a sledgehammer to break
a nut” and further “proceedings for voluntary surrender
should
not be used for the purpose of avoiding a debt.” In
another matter,
Gardee
v Dhanmarton Holdings
1978 (1) 1066 (N) it was stated that insolvency is “an
elaborate means of execution and because of its costs an expensive
one” and further it is “a laborious and substantially
more expensive remedy”.
10.
In scrutinising the
papers it is frequently useful to determine whether the debtor/
intending insolvent has made any attempts whatsoever
to settle
indebtedness or whether she prefers, as the first option insolvency
and therefore avoidance of all repayments.
11.
We are always to bear
in mind that insolvency proceedings do not exist for the benefit of
distressed or harassed debtors. In
Mayet
v Pillay
1955 (2)
SA 309
(N) it was stated, “the machinery of voluntary surrender
was primarily designed for the benefit of creditors and not for the
relief of harassed debtors”. In
Hillhouse
v Stott
1990 (4) SA
580
(W) reference was made to respondents who were “anxious to
be sequestrated to obtain welcome relief from misery”. Finally
in
Ex-Parte,
Steenkamp and related cases
1996 (3) SA 822
(W) there was reference to an application for
sequestration and accomplishment for what the Court called “The
Mission”
because “the debtor is relieved of his misery
and may safely cock a snook at his creditor”.
12.
The applicant should
demonstrate some reasonable expectation that a sequestration will
exceed the likely proceeds of ordinary execution
“unless he
does that the laborious and substantially more expensive remedy of
sequestration can hardly be thought to be advantages”
(
Mamacos
v Davids
1976 (1)
SA 19
(C) it is 20C;
Gardee
supra
at 1070 A).
Advantage
to Creditors
13.
Section 6(1)
requires a
Court to be “satisfied ... that it will be to the advantage of
creditors of the debtor if his estate is sequestrated.”
14.
In the present
instance, I have been informed that this debtor, this applicant, has
already had action instituted against her by
one of her creditors. It
appears from the notes on the two court files that creditors have
indeed shown an interest in this matter,
at least one creditor was
present in court on one or more occasions, and the Court ordered that
notice be given to all relevant
parties.
15.
The authorities to
which I have referred are a timely reminder that insolvency
proceedings have at the heart, advantage of creditors
and not
advantage of the insolvent. Sufficient facts must be furnished to
this Court in order for it to be able to come to a rational
or a
reasonable belief that the sequestration will be to the advantage of
creditors. In
Hillhouse
,
to which I have already referred numerous authorities are cited.
16.
As to what is the
advantage to creditors, we have much guidance. In a broad sense, the
court should find that the sequestration
“would secure some
useful purpose” (see
Hillhouse
supra
at 585E). An
act of insolvency is an insufficient reason on its own for the belief
that sequestration of an estate will be to the
advantage of creditors
(see
Gardee supra
at 1070G).
17.
The notion of advantage
to creditors is a relative and not an absolute one. Sequestration
cannot be said to be to the creditor’s
advantage unless it
suits them better than any feasible and reasonable alternative
course. (See
O’
Flaherty & Co v Meiklejohn
1940 NPD 371at
p371;
Gardee
supra
at 1070C).
18.
There is of course also
the possibility that through the Act’s machinery “impeachable
transactions, the concealment
of assets and other irregularities are
detected, exposed and remedied with the result that the single
creditor eventually recovers
more than ordinary execution would have
yielded” (See
Gardee
supra
at 1069A) and
of course the applicant could indicate in the papers why this is
thought to be a possible outcome.
19.
Where the only question
is that of financial advantage, then there should be a “not
negligible pecuniary benefit” or
“not negligible
dividend” (See
Gardee
supra
;
London
Estates Pty Ltd v
Nair
1957 (3) 591 N;
Trust
Wholesalers and Woollens (Pty) Ltd v Mackan
1954 (2) 109 N; and
Ex-Parte
Kelly
2008 (4) SA
615
(T)).
COSTS
20.
In her founding
affidavit the applicant states that she estimates the costs of the
proposed voluntary surrender of her estate to
be in the region of the
sum of R160 000 (one hundred and sixty thousand rand).
Regrettably, these are not the costs which
were subsequently
calculated in the papers attached to her affidavit. At page 104 of
the papers it appears that the total costs
of this surrender,
valuations, auctioneering and the application etcetera will amount to
the total sum of R358 975 (three
hundred and fifty eight
thousand nine hundred and seventy five rand).
21.
It is of some concern
to this Court that the applicant seeks to surrender her estate at a
cost of general administration and implementation
of this surrender
on close on R360 000 (three hundred and sixty thousand rand)
when one evaluates the amount which will be
available to the
creditors in her estate.
22.
At page 105 of the
papers, there is an indication that there will be a sum of R371 503
(three hundred and seventy one thousand
five hundred and three rand)
available “as total free residue after secured claims”.
Immediately thereafter is indication
that the total costs of
R358 975.80 (three hundred and fifty eight thousand nine hundred
and seventy five rand and eighty
cents) are to be deducted leaving a
“total amount available” for division of R12 527.20
(twelve thousand five
hundred and twenty seven rand and twenty
cents). This would suggest at page 105 of the papers that this Court
is asked to sanction
administration and other costs of R358 975
(three hundred and fifty eight thousand nine hundred and seventy five
rand) in
order to free up R12 527 (twelve thousand five hundred
and twenty seven rand) for distribution amongst creditors.
23.
There is some confusion
at page 105 of the papers, because under a subheading “advantage
to creditors” it is noted that
there is an amount of R934 000
(nine hundred and thirty four thousand rand) divided by concurrent
liabilities expressed as
a percentage amounts to 30% payment. The
document concludes, proudly announcing that there will be a dividend
of “R0.70”
(seventy cents) in the rand. I do not
understand these calculations, I do not understand how the total
amount available for division
of R12 000 (twelve thousand)
suddenly makes available R0.70 (seventy cents) in the rand as a
dividend; however I will deal
with that later.
24.
At this stage I am
simply commenting that I find it unconscionable that nearly R360 000
(three hundred and sixty thousand rand)
will be spent on costs
instead of paying creditors.
25.
I cannot find that
expenditure of costs in this amount can be to the advantage of
secured or concurrent creditors when so little
is available for
division amongst the creditors.
ASSETS
26.
There are two immovable
properties. The first is apparently the former matrimonial home
situate at Erf 49 Kelland Township, and
is known as the Shashi
property. The second is a piece of immovable property (apparently a
vacant stand) in Leisure Bay.
27.
In so far as the Shashi
property is concerned the documentation in this surrender application
states the value to be R1 200 000
(one million and two hundred
thousand rand). That is based on a very detailed valuation prepared
at the instance of the attorney
in this matter. The Municipal
valuation is more than twice that amount at R3 020 000
(three million and twenty thousand
rand).
28.
The Leisure Bay
property is valued at R100 000 (one hundred thousand rand) and
again the valuation prepared for purposes of
this application is
extremely detailed.
29.
I note that the Leisure
Bay property is owned as to a half share by this applicant and that
she owns the Shashi property in its
entirety.
30.
Essentially the
arithmetic adds up as follows: The two properties are worth R1.3
million (R1 300 000) rand at an unknown
date. At a date
prior to deposing to this affidavit launching this particular
application November 2014, there were two bonds,
one to First
National Bank of R252 000 (two hundred and fifty two thousand
rand) and one to ABSA in an amount of R3.2 million
(R3 020 000).
The total bonds are claimed to be in the amount of R3.4 million
(R3 400 000).
31.
Since I do not know the
dates at which these calculations were done, I must briefly express
my concern. The affidavit before me
is dated the 7
th
November 2014 (that is under case number 40832). However an earlier
affidavit of 15
th
October 2014 sets out that the mortgage bonds are in exactly the same
amount. No allowance was made at the time of deposing to
these
affidavits for the monthly increases in the value of the bond.
Perhaps that concern is explained by the deponent’s
affidavit
where she indicates, that she is paying a bond on a monthly basis. At
page 102 of her papers she indicates that she is
paying the ABSA bond
of R25 531.80 (twenty five thousand five hundred and thirty one
rand and eighty cents) per month.
Shashi
Property and Divorce
32.
The Shashi immovable
property is registered only in the name of this applicant, Tracy
Andrea Kachelhoffer. The property is therefore
hers to deal with and
to dispose of as she chooses.
33.
The facts before me are
that she is paying some R25 000 (twenty five thousand rand) per
month in respect of the ABSA bond.
She is also paying rent for a
property in Parkwood in an amount of R7 800 (seven thousand
eight hundred rand) per month. The
mind boggles. Why is she paying
such a large amount in respect of the bond and a not insignificant
amount in respect of rental?
This is certainly a duplication of
expenses.
34.
The applicant and her
former husband, Mr Kachelhoffer entered into an agreement of
settlement which was made an order of Court when
they became
divorced. The relevant portions of the agreement of settlement are
found at pages 28 and 29 of these sequestration
proceedings. It is
recorded that Ms Kachelhoffer (who was the plaintiff in the divorce
action) is the 100% owner of the immovable
property. It is recorded
that the immovable property will remain registered in her name. What
is then recorded is “the defendant
is currently residing in the
property and shall vacate the premises upon such date as the divorce
order is granted or as agreed
in terms of a written rental agreement
that the parties at their election may agree to”.
35.
According to page 17 of
these papers the decree of divorce was granted on the 30
th
August 2013. The upshot is that either Ms Kachelhoffer (the
applicant) should be living in the property or she could have placed
tenants in the property who would give her a monthly rental, thereby
assisting her to pay off the bond or she could, of course,
have
attempted to sell the property.
36.
Instead her former
husband, Dawie Kachelhoffer, is apparently living in the property for
free.
37.
At page 96 onwards of
the papers appear some photographs taken by the valuer. It appears
that Dawie lives like “a pig”.
The rear of the house has
a lot of debris lying around and his clothes are hanging on the line.
However in the main room of the
house there is equipment, clothing,
furniture, rubbish and files laying higgledy piggledy all over the
floor of this living room.
It is not possible to use the room for any
useful purpose. At page 98 one sees that the bathroom is
virtually destroyed.
38.
Essentially Dawie
Kachelhoffer is living for free in this property, apparently doing
nothing to maintain it or doing nothing to
ensure that it is kept in
a reasonable condition. This is totally contrary to the agreement of
settlement which was made an order
of Court. Why he lives there
for free I cannot imagine.
39.
The applicant in this
matter has a remedy available to her which will greatly assist with
her present financial predicament. First,
she could live in the
house, pay the bond and therefore save herself monthly rental of
R7 800 (seven thousand eight hundred
rand) per month. Secondly,
she could evict Dawie, her former husband and place tenants in this
property who at least will make
a contribution towards the monthly
bond repayments to ABSA which she apparently currently bears alone.
That would certainly assist
not only her but would also assist all
her various creditors who if this surrender application had been
successful would have received
very little by way of funds.
AVAILABLE
RESIDUE
40.
I have indicated that,
according to this application, the applicant’s total assets are
in the region of R1.3 million (R1 300 000)
whilst her
mortgage bonds total in the region of R3.5 – 4 million
(R3 500 000 – 4 000 000). She
calculates
that once the secured creditors have been paid (namely FNB and ABSA)
there will be a balance outstanding to them in
the region of the sum
of R2 million (R2 000 000), which will fall into the
concurrent liabilities.
41.
On her calculations she
estimates that the total liabilities will then be R2.7 million
(R2 700 000), that the free residue
is the sum R371 000
(three hundred and seventy one thousand rand) and she then claims
that there will be a dividend of some
R0.70 (seventy cents) in the
rand.
42.
I find this very
difficult to comprehend. After all her own papers as I have already
indicated refer to “an amount available”
of R934 000
(nine hundred and thirty four thousand rand).
43.
In short the arithmetic
is not entirely convincing that there would indeed be, from an
available residue a dividend payable of R0.70
(seventy cents) in the
rand.
EXPENSES
44.
At page 102 of the
papers, the applicant sets out her various living expenses. I have
already referred to the fact that she is paying
both a monthly rental
for a property in Parkwood as well as a monthly bond instalment. The
two cannot continue. She must either
live in the house or she must
have a tenant in the house, but she cannot pay both rental and not
live in the house but expect her
various creditors to be prejudiced
as a result.
45.
There are in addition
certain other monthly payments. There is a retirement annuity, there
is a gym payment, there is cosmetics,
spending money, petrol, and
maintenance. I suspect that all of these could be reduced. I do not
know why she is spending R7 800
(seven thousand eight hundred rand)
on renting in Parkwood when in fact there are (to my personal
knowledge) townhouses available
in at least one complex (Doorset
Place) in Parkwood available at a rent of R5 000 (five thousand)
per month.
46.
The school fees for her
daughter are claimed to be R3 716 (three thousand seven hundred
and sixteen rand) per month, I do not
know what school her daughter
attends. Clearly it is a private and rather expensive school. I doubt
very much that the employees
of her creditors (whom she proposes will
not be paid in full) can afford to send their children to a school
costing R3 716
(three thousand seven hundred and sixteen rand)
per month.
47.
I am very well aware
that when Woolworths, Foschini’s, Vodacom, Banks, Gyms and
other business enterprises have bad debts
which are not going to be
paid because of the sequestration of debtors that employees are
retrenched because such businesses have
to downsize. Accordingly this
kind of school expense seems to me hardly to be one that will assist
or be to the advantage of creditors.
48.
What does cause me some
concern are the monthly expenses as I see them set out in the
applicants banking account at pages 58 onwards
of the papers. This is
her cheque account statement for the month of June 2014. Presumably
this was the most recent cheque statement
available at the time she
deposed to her first affidavit.
49.
In one month this
applicant made purchases at the Full Stop Café, the Trieste
Café, Simply Asia, Steers Steakhouse,
Fournos Bakery, Pizza
Express, Coffee Care, The Whippet, Yume, and the Jolly Rodger Bar.
Some of these were visited more than once.
Over and above such
expenses, or luxuries, she made purchases at Video Spot, Toys R US,
and she had her nails done and her hair
done. Lifestyle expenses were
repeated more than once.
50.
Some of these
liabilities which appear in these papers are not banking liabilities
they are liabilities to Foschini, DSTV, Woolworths,
and Vodacom.
51.
If the applicant had
indeed taken steps to reduce her monthly expenses (particularly the
luxuries) and increase her monthly income
(by renting out this house)
she might already have paid off her Foschini, her Woolworths, her
DSTV and her Vodacom indebtedness.
52.
Instead she chose to
become sequestrated and to “seek relief from her misery”
(
Hillhouse supra
).
CONCLUSION
53.
I am not satisfied that
an advantage to creditors has been proven. I am not satisfied that
steps have been taken to prefer other
action above insolvency
proceedings. I am not satisfied that this sequestration application
is launched with the benefit of creditors
rather than the relief of
the applicant in mind.
54.
It was for these
reasons that I refused to make an order for sequestration.
55.
The applicant was
represented by counsel in court.
56.
We did not discuss the
issue of costs. I note however that on the 4
th
December 2014 costs were reserved by Judge Monama, creditors being
present. I note that on the 29
th
January 2015 a postponement was granted by Acting Judge Madima and
costs were ordered on an attorney and own client scale, creditors
being present.
57.
I can see no reason why
the reserved costs and the costs on the attorney and own client scale
should not fall within the order that
I have made. Since the
voluntary surrender is refused, these costs are not paid out of an
insolvent estate but, of course, will
be paid by the applicant
herself.
58.
In the result I confirm
the order that I made on the 16
th
February 2015.
DATED
AT JOHANNESBURG 23
rd
FEBRUARY 2015
SATCHWELL J
Attorneys
for Applicant: Frese, Moll & Partners
Dates
of hearing: 16
th
February 2015
Date
of judgment: 23
rd
February 2015