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[2010] ZAGPJHC 45
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Investec Bank Limited v Singh (09/50760) [2010] ZAGPJHC 45 (18 June 2010)
REPUBLIC OF SOUTH AFRICA
SOUTH GAUTENG HIGH COURT,
JOHANNESBURG
CASE NO: 09/50760
In the matter between:
INVESTEC
BANK LIMITED
Applicant
and
SINGH
TRISHA
Respondent
J U D G M E N T
LAMONT, J:
[1] This is an application brought
by the applicant for the sequestration of the estate of the
respondent.
[2] The heading is amended by
the addition of the following words underneath the description of the
respondent:
“
The
respondent is married out of community of property to Suren Naidoo
Identity Number (...).
”
[3] The applicant claims to be a
creditor of the respondent in an amount of some R1,7 million together
with interest thereon
at an amount of 8,50% per annum calculated
daily and compounded monthly from 27 October 2009 in respect of a
limited suretyship
in respect of a loan agreement under account
number 245215/001. During November 2007 the applicant and the
respondent’s
husband concluded a loan agreement in terms
whereof the applicant agreed to lend and advance the sum of R1.7
million to him on
certain terms and conditions. In particular
it was a term that a first covering mortgage bond registered over
certain immovable
property owned by the respondent and her husband in
equal undivided shares and a requirement that the respondent sign a
deed of
suretyship binding her as a surety for the debt of her
husband to the applicant limited to an amount of R1.7 million plus
certain
other amounts.
[4]
On 18 December 2007 the respondent signed a deed of suretyship
binding herself as surety and co-principal debtor
with her husband in
favour of the applicant for an amount limited to R1.7 million.
Notwithstanding that the suretyship was
signed during December 2007
and the loan agreement was concluded with the respondent’s
husband only, the respondent and her
husband signed an authority
authorising the applicant to pay the loan on 23 November 2007 in
terms of which their account at Nedbank
would be credited with the
amount of the loan outstanding and due to Nedbank.
[5] On 23
November 2007 the respondent and her husband’s duly authorised
representative signed a mortgage bond which
was registered in
the Deeds Office on 19 December 2007 as ST205095/07. The bond was in
favour of the applicant. It appears from
the bond that the respondent
and her husband signed a power of attorney authorising the
conveyancer on 23 November 2007 and it
further appears that the
respondent and her husband as the mortgagor
“
do hereby
declare the mortgagor to be indebted to Investec Bank Ltd whether
such indebtedness be a direct or indirect liability
incurred by the
mortgagor individually or jointly with others, and whether such
indebtedness arises from monies lent and advanced
… and any
payment made by the bank pursuant to this bond including future debts
generally from whatsoever cause arising,
up to, but not exceeding the
sum of R1.8 million
”.
[6] On 5
November 2007 a statement of assets and liabilities of the respondent
and her husband was prepared. The respondent’s
and her
husband’s assets comprised immovable property with a value of
R1.1 million; a BMW X5 valued at R725 000, 00, with
no amount
outstanding and a BMW Z4 valued at R315 000,00 furniture and fittings
valued at R400 000,00; The liabilities comprised
a debt due to
banks in an amount of approximately R100 000,00. The income and
expenditure statement reflected the income of the
respondent (R22
000, 00) and her husband (R41 666,00) totalling of some R63
000,00. The total deductions from the salaries
were some R14 000, 00.
The other monthly payments included motor vehicles some R14 500,00
(hence the claim by the respondent that
there was no amount due in
respect of the vehicle was questionable), the bond instalment some
R11 000,00; expenses at department
stores totalled R2 700,00, credit
card expenses were R3 500,00, sundry other expenses totalled some R6
000,00. Including the amount
due to the applicant as and by way of a
bond payment there was an excess totalling R12 400,00 “
in
the family income
”. The “family”
had nett assets totalling R2.4 million less the amount of the bond
namely R1,3 million more than
the debt.
[7] It is apparent from the manner
in which the loan transaction was structured that it could not
succeed unless the respondent
undertook liability as she was a 50%
joint owner in the immovable property and no bond could be registered
without her consent
and without her incurring a liability. The
respondent in fact admitted indebtedness in the bond as appears from
what is said
supra.
[8] It is apparent further
that the immovable property in question is a home which was to be
occupied and which had been
occupied by the respondent and her
husband. The transaction appears to have been entered into with a
view to finalising an indebtedness
to the previous bondholder and
consolidating the debt in the hands of the applicant.
[9] On the face of it the
respondent participated in and had full knowledge of all facets of
the transactions. Information which
is furnished in relation to the
respondent and her husband in the statement of assets and liabilities
and income and expenditure
must have emanated from both her and her
husband. Monies were advanced to the respondent by way of
monies being paid to the
respondent’s and her husband’s
account at Nedbank at the instance of both respondent and her
husband.. Subsequently
further monies were advanced. The
respondent claims that certain of these monies were advanced against
her will.
[10] Under and in terms of the
Insolvency Act No. 24 of 1936 (the Act) the applicant is required to
establish that it is a creditor.
If it is a contingent creditor
this is sufficient.
[11] On the face of it the applicant
is a creditor of the respondent.
[12] Respondent admits factual
insolvency and has set out facts demonstrating that she is preferring
creditors and that she is
paying certain creditors and not paying
others. In addition in the affidavit the respondent has indicated in
writing that she is
unable to pay the debt.
[13] On the face of it the
respondent is factually insolvent and has committed the acts of
insolvency contemplated in section
8(c) and 8(g) of the Act.
[14] This aspect of the case was not
seriously contested by the respondent.
[1 5]
The applicant has established on the face of it that there will be a
benefit to creditors. The respondent in paragraph
87 of the answering
affidavit stated that all her concurrent creditors were being paid.
These transactions on the face of
it are impeachable. In addition on
the face of it the respondent is the 50% owner of a property of
significant value. The
exact value was disputed and a value
somewhere between R1 million and R1.,3 million was suggested.
On any valuation the apparent
value is less than the amount of the
indebtedness. The respondent and her husband own other assets
including cars and furniture
which they value at approximately R1.5
million. On the face of it as the applicant is a preferrent
creditor the value in
the property will accrue only to the applicant
and to no other person unless the value of the other assets is also,
as it should
be, included in the calculation.
[17] It was submitted that in these
circumstances there is no benefit to creditors meaning the general
body of creditors.
[18] It is apparent from the facts
and matters set out before me that the applicant foresaw significant
difficulties in obtaining
relief by way of instituting action against
the respondent. The attempt made by the applicant to proceed by way
of action resulted
eventually in the applicant withdrawing the
action. The anticipated difficulties relate to defences the
respondent sought to raise
concerning the
National Credit Act No 34
of 2005
as also the delay in getting to trial.
[19] In my view the general body of
creditors benefits if the applicant is compelled to realise her
assets to meet the liabilities
to creditors as soon as possible.
The current position is that the applicant resides in the immovable
property funded by
the loan and makes no payment in respect of the
indebtedness due to the applicant who holds the covering bond. The
property as
to 50% is an asset in the respondent’s estate.
Whilst this asset exists in her estate she is able to reflect it as
such and
is able to transact business on the basis of such
ownership. The respondent’s and her husband’s
vehicles of significant
value and other assets show a significant
value. The respondent’s husband’
s 50%
share in the
immovable property and his assets will fall into the estate.
This being so there will be sufficient monies available
on the face
of it to meet debt due to the applicant and other creditors. The
trustees will be able to recover the monies due to
the estate
pursuant to impeachable transactions being impeached.
[20] In my view the applicant has
established all the necessary elements required to be established by
the
Insolvency Act pursuant
to which in the ordinary course a
provisional sequestration order would issue.
[21] The
respondent submitted that the National Credit Act No. 34 of 2005 (the
Credit Act) impacted upon the rights of the applicant
to obtain
relief. The applicant did not comply with provisions of that Act
which are required to be taken in the event that a credit
granter
seeks to enforce a credit agreement. Those steps do not have to
be taken in sequestration proceedings as sequestration
proceedings do
not enforce a credit agreement. Trengove AJ in
Investec
Bank Ltd v Mutemeri
2010 (1) SA 265
at
275 held that the purpose and effect of a sequestration is to bring
about a convergence of claims in an insolvent estate and
to ensure
that it is wound up in an orderly fashion and that creditors are
treated equally (p 275H-I). See also
Naidoo
v Absa
[2010] ZASCA 72.
[22] The submission was made that
reckless credit had been granted either to the respondent’s
husband at the time the loan
agreement was concluded or to the
respondent at the time the suretyship agreement in that the credit
provider failed to conduct
an assessment as required by section 81(2)
of the Credit Act. The consequence so it was submitted is that in
terms of section 83
of the Credit Act it is open to this Court to
make an order setting aside all or so much of the consumer’s
rights and obligations
under the agreement as the court determines
just and reasonable in the circumstances or to suspend the force and
effect of the
credit agreement.
[23] The submission of the
respondent was founded upon the fact that the respondent had tersely
alleged in paragraph 53 that the
applicant had failed to conduct an
assessment as required in respect of the credit agreement concluded
between it and the respondent’s
husband and had also failed to
conduct such an assessment in respect of the credit agreement
concluded between the applicant and
herself. The applicant when
it had dealt with that paragraph had so it was submitted not dealt
with the matter issuably but
had merely stated that this was not a
reckless credit loan and that even if it was such that that would be
no defence to a sequestration
application coupled with a statement
that a schedule attached would illustrate that numerous payments had
been made by the respondent
and her husband after the loan had been
advanced. .
[24] The
respondent attached no affidavit from her husband. The respondent’s
knowledge of what happened
vis-à-vis
her husband would on the face of it be limited and hearsay.
[25] On the face of it the
respondent has made a statement concerning herself. The applicant
disputes this statement and refers
to a schedule of payments. The
fact of payment would corroborate the applicant’s statement
that there was no recklessness.
There is however an additional
document contained within the affidavits. That is the statement of
assets and liabilities and income
and expenditure to which I have
referred earlier from which it clearly appears that the financial
status of both the respondent
and her husband was investigated prior
to the granting of credit. Subsequent to the granting of credit for
an extended period (in
excess of twelve months) the respondent and
her husband paid the debt due to the applicant. It is apparent from
this on the face
of it that the respondent and her husband were
correctly assessed as being able to pay the debt. They in fact
did so. There
is no better proof of ability to pay than the fact
of payment. The facts do not demonstrate a reckless amount of
money
being advanced by the applicant to the respondent’s
husband.
[26] Even if the contracts referred
to above were recklessly concluded on the face of it, it would not be
just and reasonable
to set aside the entirety of the consumer’s
rights and obligations. If the entirety of the rights and
obligations of
it to be set aside as to the agreement of loan then
the respondent and her husband would receive, an asset worth at least
R1 million
in equal undivided shares. If the effect of the suretyship
were set aside in its entirety and, assuming that the bond does not
contain an admission (which on the face of it does) the applicant
would lose 50% of the security it had for the loan. The effect
of
this in my view is on the face of it neither just nor reasonable.
[27] Even accordingly were there on
the face of it to be some adjustment for the non-compliance of the
applicant with the Credit
Act such adjustment would not result in the
applicant not being a creditor as contemplated by section 9(1) i.e.
for an amount of
some R200,00.
[28] In my view the attack under the
Credit Act fails.
[29] All the formalities have been
complied with. On the face of it the respondent’s estate falls
to be sequestrated. Inasmuch
as I expect that further affidavits will
be filed as will reports by provisional trustees I have determined a
longer than usual
return date.
[30] During the hearing the
parties agreed that the question of whether or not the joinder
application of the respondent’s
husband should succeed could
stand to be decided in the application itself. This procedure
which on the face of it is unusual
as there is no certainty as to who
the parties are prior to the matter being heard resulted in the
matter being able to proceed
and the issue of joinder only becoming
necessary to be decided if a decision was made affecting the contract
between the respondent’s
husband and the applicant. As
appears from what I have said above I do not believe that on the face
of it the contract falls,
on these proceedings, to be tampered with.
On the face of it, it appears to me that the joinder application and
counter-application
seeking a change to the principal debt in
accordance with the
National Credit Act falls
to be dismissed.
[31 ] The
test at present is however whether or not on the face of it the
applicant has made out a case. The test on the return
day is
different. It may be that when the different test is applied that a
different result to the result which I have found appropriate
eventuates. For this reason I am of the view that I should not
presently dismiss the application for joinder or
counter-application.
I should not decide them and should rather
postpone them to be heard on the return day.
[32] I accordingly make the
following order:
The respondent’s estate is
provisionally sequestrated. The return date is 25 July 2010. The
question of joinder and the counter
application are postponed to 25
July 2010.
C G LAMONT
JUDGE OF THE SOUTH GAUTENG
HIGH COURT, JOHANNESBURG
Counsel
for Applicant
Adv. S Weiner SC
Adv. A. Faber
Instructed by
Farber Sabelo Edelstein
Counsel fro Respondent
Adv. N.P.G. Redman
Instructed by
Naiker-Mahlangu Attorneys
Date of hearing
3 June 2010
Date of Judgment
18 June 2010