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[2022] ZAGPJHC 199
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Mercantile Bank Limited v MMR (MBR intervening) (2020/19791) [2022] ZAGPJHC 199 (5 April 2022)

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Certain
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IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG LOCAL
DIVISION, JOHANNESBURG
CASE
NO:
2020/19791
Reportable: No
Of interest to other
Judges: No
Revised: No
Date :5/04/2022
In the intervening
application between:
M[....]
B[....]
R[....]
Intervening Party
In re:
MERCANTILE
BANK LIMITED
Applicant
and
M[....]2
M[....]3
R[....]
Respondent
J
U D G M E N T
MAIER-FRAWLEY
J:
1.
In this application, the intervening party,
who is the ex-wife of the respondent, seeks leave to intervene in the
main sequestration
application brought by the applicant against the
respondent, in order to oppose the grant of a final order.
2.
On
13 August 2021, the respondent’s estate was provisionally
sequestrated by order of court, per the judgment of Weiner J.
[1]
The learned Judge found, amongst others, that that the applicant had
prima
facie
proven
the requirements for the grant of a provisional sequestration order,
inter
alia,
the indebtedness owed to it by the respondent; the act of insolvency
committed by the respondent; and the requirement of advantage
to
creditors, such as to justify the grant of a provisional order. A
rule nisi was granted, returnable on a specified date, for
a hearing
to determine whether a final order should be granted.
3.
In the main application, as is apparent
from the judgment of Weiner J, the applicant relies on the fact that
the respondent committed
an act of insolvency in terms of s 8(c) of
the Insolvency Act, in that he disposed of his immovable property
(referred to in the
papers as ‘the Gallo Manor property’)
to the prejudice of his creditors, at a time when he was insolvent.
The applicant
has also alleged that the respondent is factually
insolvent.
4.
It is not in dispute that the Gallo Manor
property was transferred by the respondent to his then wife (the
intervening creditor)
in settlement of the latter’s claim for
maintenance, including a proprietary claim in terms of s7(3) of the
Divorce Act,
pursuant to an action for divorce between the respondent
and his then wife, instituted on 11 November 2019. On 22 January
2020,
the court granted a decree of divorce incorporating the
settlement agreement concluded between such parties,
inter
alia
, pertaining to such claims.
Pursuant to that order, on 19 March 2020, transfer of the Gallo manor
property was registered in the
name of the present intervening
creditor.
5.
The disposal of the Gallo Manor property
(hereinafter referred to as ‘the property’) is dealt with
in paragraphs 22
to 27 of the judgment of Weiner J. The judgment
records, in paragraph 22(g) thereof that the applicant contended that
the divorce
between the respondent and his wife was one of
convenience, with the main purpose of disposing of an unencumbered
immovable property
to prevent creditors from laying claim to it. In
paragraph 27 of the judgment, the learned judge concluded that the
‘disposition
of the property obviously caused prejudice to the
respondent’s creditors, because it resulted in the respondent’s
financial
position deteriorating, and rendering him insolvent. This
directly affects the creditors and the applicant’s prospects of

recovering the debt due to it appear minimal.’
6.
A party seeking to intervene in proceedings
can either do so in terms of rule 12 of the Uniform Rules of Court,
or in terms of the
common law. The applicant referred to cases
relating to Rule 12 applications that state that 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)
the application is made seriously and is not frivolous, and that the
allegations made by the applicants
constitute a prima facie defence
to the relief sought in the main application.
[2]
.
7.
In
that context, a 'direct and substantial interest' means a legal
interest in the subject-matter of the action which could be
prejudicially affected by the judgment of the court. A mere financial
interest is only an indirect interest in such litigation and
is
insufficient.
[3]
8.
An
intervening creditor may be given leave to intervene at any stage,
either to oppose a sequestration or to have a rule nisi
discharged.
[4]
A creditor may
also intervene when an applicant for a sequestration order does not
proceed with his application or does not succeed
therein. The court
takes a practical view in these matters and also bears in mind the
interests of the general body of creditors.
[5]
9.
The
practice in insolvencies is unique, however, as it is neither a pure
intervention nor a substitution and is
sui
generis
from a procedural point of view.
[6]
10.
One
of the issues the court hearing the application for a final
sequestration order will be required to consider, is whether or
not
the respondent committed an act of insolvency in terms of s 8(c)
[7]
of the Insolvency Act when he caused the property to be transferred
to the intervening party in terms of a valid court order.
[8]
The applicant alleged in its founding papers that the property was
not
bona
fide
disposed of but that it was the result of collusive dealings by the
respondent and the intervening creditor (his then wife) to
prejudice
the applicant in pursuing its claim; that the purpose of the divorce
was to commit a voidable disposition
[9]
of the immovable property to the prejudice of the applicant and other
creditors; that the divorce between the respondent and the

intervening creditor was one of convenience with the main purpose of
disposing of an unencumbered immovable property to prevent
creditors
from laying claim to it; and that the advantage to creditors in
sequestrating the respondent’s estate lies in the
fact that it
will enable the appointed trustee to recover disposed of assets to
the benefit of creditors, including that the appointed
trustee would
have greater flexibility in disposing of assets which may be found
and/or recovered at the best value obtainable.
11.
The intervening party seeks to protect her
interest in the property and to rebut obviously prejudicial
allegations pertaining to
the alleged collusion between herself and
the respondent in ‘orchestrating a divorce of convenience’,
with the alleged
main purpose of disposing of the property to prevent
the respondent’s creditors from laying claim to it, or with the
purpose
of committing a voidable disposition of the property to the
prejudice of the applicant and any other creditors.
12.
The
papers reveal that the intervening party is and will remain a
creditor in the estate of the respondent vis-a vis her ongoing
claim
for maintenance, not only in so far as the respondent’s
obligation for payment of the monthly monetary component of

R10,000.00 is concerned, but also in relation to the monetary
shortfall that could not be met by the respondent at the time,
[10]
the value of which - computed over the lifetime of the claimant, -
was covered, together with the accrual/redistribution claim,
by the
value of the property that was transferred to her pursuant to the
divorce, i.e., the property was transferred in lieu of
a monetary
payment of the shortfall apropos her maintenance claim, and in
satisfaction of her patrimonial claim. In her capacity
as creditor,
the intervening party has locus standi to intervene in the
sequestration application and need not establish an additional
legal
or other interest.
[11]
As
pointed out in
Levay
at para 15:
“
Over
the years it has been accepted without argument in a number of cases
and textbooks that creditors have a right to intervene
in
sequestration or winding-up applications in order to oppose the
application.
[12]
Catherine
Smith expressed the opinion that creditors in insolvency proceedings
may be added to joint owners, joint contractors
and partners as
parties who are allowed as of right to intervene in proceedings.
[13]
”
13.
The
applicant opposed the intervention application based on applicable
principles governing applications under Rule 12. The applicant

submits that
that
any appointed trustee will investigate and decide whether he will
apply to set aside the transfer of the property to the intervening

party on the basis that it amounts to a voidable disposition. Thus,
so it was submitted, even if the intervening party’s
evidence
were to be accepted, it would not serve to affect the outcome of the
main application which can still be pursued on the
ground of actual
insolvency of the respondent.
The
applicant submits that the case of
Maritz,
[14]
which is relied on by the intervening creditor, is distinguishable on
its facts, does not constitute binding precedent and should
therefore
not be followed.
14.
The applicant further submits that the
court hearing the sequestration application will not be required to
decide whether or not
the transfer of the property to the
respondent’s ex-wife is liable to be set aside, and no such
relief is being sought in
the main application. Should the appointed
trustee decide to apply to court in due course under the relevant
provisions in the
Insolvency Act, the intervening party would have
the opportunity to oppose such application at that juncture. Finally,
the applicant
submits that the intervening party has failed to
demonstrate that she has a legal interest to protect, which is not
just a financial
interest in the matter, and that the legal interest
is material enough to affect the outcome of the winding-up
application. She
lacks a legal interest in the subject matter of the
proceedings and her opposition at this stage is premature. I
disagree, not
only because the intervening party is by virtue of her
status, as creditor, entitled to intervene, but, even were that not
the
position, because I align myself with the views of Mac William AJ
in Maritz that ‘
that it can hardly
be said that the intervening respondent does not have an interest in
the present litigation where the expressly
stated purpose of the
litigation is to have a trustee appointed so that he can set aside
the transaction which the intervening
respondent seeks to protect’
,
given the same or similar purpose revealed in the main application.
15.
In any event, the fact remains that the
applicant persists with its reliance on s8(c) of the Insolvency Act
for the act of insolvency
allegedly committed by the respondent. The
allegations made directly adversely involve and implicate the
intervening party. A failure
to give her an opportunity to rebut the
obviously prejudicial allegations, which require proof on a balance
of probabilities on
the return date, would mean that her property
would remain at risk based on
prima
facie
conclusions reached by a Judge
and which, in the absence of controverting evidence, would result in
conclusive proof. In that sense
she has a material interest in the
subject matter of the litigation and any judgment that the court
hearing the main application
will be tasked to give. It is not for
this court to pre-empt what evidence may still be provided by the
respondent in the main
application in opposition to the relief sought
by the applicant therein on the return day.
16.
It
is apposite to quote the arguments proffered in
Maritz:
[15]
“
Both
the applicant and the intervening creditor submitted that the
intervening respondent did not have
locus
standi
to intervene in the proceedings.
They
argued that the farm purchased by the intervening respondent does not
form the subject-matter of the present applications and
that the
intervening respondent's interest is a financial interest which was
only an indirect interest in the present litigation
where the
respondents' sequestration was sought. Moreover, the applicant
disputed that the intervening respondent was a creditor
of the
respondents. Accordingly they alleged that the intervening respondent
did not have a direct and substantial interest in
the subject-matter
before the Court (cf
Amalgamated
Engineering Union v Minister of Labour
1949
(3) SA 637
(A)
at 657) and that its interest was only an indirect
financial interest in the litigation (cf
Henri
Viljoen (Pty) Ltd v Awerbuch Brothers
1953
(2) SA 151
(O)
at 169).”
The
court dealt with such arguments as follows:
[16]
“
Moreover,
as pointed out by Catherine Smith in
The
Law of Insolvency
3rd ed at 79, there
is nothing in the Insolvency Act which in any way limits the
common-law powers of the Courts in respect of
intervention in
sequestration proceedings. See also Meskin
Insolvency
Law
at 2-37 para 2.1.11
In these circumstances
I
am of the opinion that it can hardly be said that the intervening
respondent does not have an interest in the present litigation
where
the expressly stated purpose of the litigation is to have a trustee
appointed so that he can set aside the transaction which
the
intervening respondent seeks to protect
.
While
this may be correct, the fact is that the Court has a discretion to
allow the intervention of a party on the grounds of convenience
and
in my opinion this is clearly a matter in which I should exercise
such a discretion in the intervening respondent's favour
and allow
him to join in the proceedings
notwithstanding
the defects in the formulation of this claim. See
Ex
parte Pearson and Hutton NNO
1967
(1) SA 103
(E)
at 106H - 108H;
Rabinowitz
and Another NNO v Ned-Equity Insurance Co Ltd and Another
1980 (3) SA 415
(W) at 419D - F;
Hetz
v Empire Auctioneers & Estate Agents
1962
(1) SA 558
(T)
;
Holzman
NO and Another v Knights Engineering and Precision Works (Pty) Ltd
1979
(2) SA 784
(W)
at 796H.” (emphasis added)
17.
Albeit
that the facts in
Martiz
are not exactly the same as in
casu
,
[17]
the fact remains that the court in that case dealt with a similar
argument to that proffered by the applicant in the present
application.
In paragraphs 44 and 45 of the Maritz judgment, the
argument was recapped and dealt with as follows:
“…
Indeed
it is the applicant's and the intervening creditor's argument that it
is only upon the appointment of a trustee that the
trustee will
investigate and decide whether he will apply to set aside the sale in
execution.
Moreover,
the intervening respondent when seeking to intervene need provide no
more than
prima
facie
proof of his interest, albeit in a sale which may be set aside, and
his right to intervene, which in my opinion the intervening

respondent has done
.
See
Elliott
v Bax
1923 WLD 228
;
Ex
parte Marshall: In re Insolvent Estate Brown
1951
(2) SA 129 (N)
.” (emphasis added)
18.
For all the reasons given, I am inclined to
exercise my discretion in favour of the intervening party. The
general rule is that
costs follow the result. I see no reason to
depart therefrom. In her notice of motion, the intervening party gave
notice that she
would seek costs against any party who opposed the
intervention application.
19.
Accordingly, the following order is
granted:
ORDER:
1.
M[....] B[....] R[....] (the intervening
party) is granted leave to intervene in the application brought by
Mercantile Bank Limited
against Michael M[....]3 R[....] under case
no. 19791/20 (the main application) and to join the main application
as the second
respondent.
2.
The applicant is ordered to pay the costs
of the intervening party in the application for intervention.
_________________
AVRILLE
MAIER-FRAWLEY
JUDGE
OF THE HIGH COURT,
GAUTENG
DIVISION, JOHANNESBURG
Date
of hearing:

14 March 2022
Judgment
delivered

5 April 2022
This
judgment was handed down electronically by circulation to the
parties’ legal representatives by email, publication on

Caselines and release to SAFLII. The date and time for hand-down is
deemed to be have been at 10h00 on 5 April 2022.
APPEARANCES:
Counsel
for Plaintiff:

Ms I. Oshman
Attorneys
for Plaintiff:

Taners and Associates
Counsel
for First Defendant:
Ms M. Naidoo
Attorneys
for First Defendant:
Bezuidenhout Van Zyl &
Associates Inc
Counsel
for Second Defendant:
No appearance
Attorneys
for Second Defendant:        No
appearance
[1]
The
order is to be found in the judgment of Weiner J in
Mercantile
Bank (A Division of Capitec Bank Limited) v Ross
(2020/19791)
[2021] ZAGPJHC 149 (13 August 2021) (‘Mercantile Bank’).
The court also found that the respondent had
failed to demonstrate
that he was factually solvent, having failed to deal with his
financial position to demonstrate that his
assets exceeded his
liabilities, and that thus, ‘the position of factual solvency
has also been established.’
[2]
These
included:
SA
Riding for the Disabled Association v Regional Land Claims
Commissioner
2017
(5) SA 1
(CC);
Peermont
Global (KZN) (Pty) Ltd v Afrisun KZN (Pty) Ltd t/a Sibaya Casino and
Entertainment Kingdom
[2020]
2 All SA 226
(KZP];
Ex
Parte Moosa: In re Hassim v Harrop-Allin
1974
(4) SA 412
(T). See too:
Minister
of Local Government and Land Tenure and Another v Sizwe Development
and Others: In re Sizwe Development v Flagstaff Municipality
1991 (1) SA 677
(Tk);
Ansari
v Barakat
[2012] ZAKZDHC 1, paras 9 and 10, and the authorities cited therein.
[3]
Henri
Viljoen (Pty) Ltd v Awerbuch Brothers
1953 (2) SA 151
(O) at 177 and
169H; Minister of Local Government and Land Tenure and Another v
Sizwe Development and Others: In re Sizwe Development
v Flagstaff
Municipality
1991 (1) SA 677
(Tk) at 679.
[4]
Uys
and Another v Du Plessis (Ferreira Intervening)
2001 (3) SA 250
(C) at 252;
Fullard
v Fullard
1979 (1) SA 368
(T) at 371F – 372G. See also:
Maritz
t/a Maritz & Kie Rekenmeester v Walters and Others
2002 (1) SA 689
(C) where it was accepted that the intervening party
would have locus standi to oppose the sequestration if it could be
found
that he was a creditor.
[5]
Fullard
supra
,
at 372B;
Jhatam
and Others v Jhatam
1958 (4) SA 36 (N).
[6]
Levay
and another vVan Den Heever and Others NNo
2018
(4) SA 473
GJ, par 11;
Fullard
supra
at 372B
[7]
In
terms of s 8 (c), a debtor commits an act of insolvency’ if he
makes or attempts to make any disposition of any of his
property,
which has or would have the effect of prejudicing his creditors or
of preferring one creditor above another.’
The applicant
relies, amongst others, on such requirement, which it will be
required to establish on a balance of probabilities
on the return
date. (See Mercantile Bank
supra
(cited
in fn 1
)
par 41 and the authority there cited. On the return date, the
respondent may well tender additional evidence to oppose the grant

of a final order. One cannot therefore preempt the outcome of the
main application at this stage.
[8]
It
is worth mentioning that t
he
definition of ‘disposition’ in s 2 of the Insolvency act
is the following: “
'disposition'
means any transfer or abandonment of rights to property and includes
a sale, lease, mortgage, pledge, delivery,
payment, release,
compromise, donation or any contract therefor,
but
does not include a disposition in compliance with an order of the
court;
and 'dispose' has a corresponding meaning;” (own emphasis)
[9]
Section
29 of the Insolvency Act regulates ‘voidable dispositions’,
where an insolvent disposes of any property in
his estate less than
6 months before his sequestration
which
has the effect of preferring one of his creditors over another
.
A voidable disposition can be set aside by the court if the debtor’s
liabilities exceeded the value of his assets immediately
after the
disposition, unless the person who received the disposition is able
to prove that the disposition was made in the ordinary
course of
business and was not intended to prefer one creditor over another
.
Implicit
in the allegations made in the main application concerning the
commission of a ‘voidable disposition’, is
an
acknowledgment by the applicant that the respondent’s ex-wife
(the intervening party herein) is a creditor in the estate
of the
respondent.
[10]
The
shortfall amounting to approximately
R10,000.00
per month.
[11]
Levay
and another vVan Den Heever and Others NNo
2018
(4) SA 473
GJ, par 28.
I
agree with the reasoning of Van der Bergh AJ by reference to several
cases in
Levay,
in
concluding that
a
creditor does have locus standi to intervene in a liquidation
application without having to prove an additional legal or other

interest, notwithstanding a contrary conclusion arrived at by
Vally
J in
Absa
Bank Ltd v Africa's Best Minerals 146 Ltd; In re Sekhukhune NO v
Absa Bank Ltd
[2015]
2 All SA 8
(GJ) par 17, a decision in this division.
See
too:
Fullard v Fullard
1979 (1) SA 368T
at 372C-E, where the
following caution was sounded: “Omrede hy skuldeiser is, het
hy
locus standi
om aangehoor te word in 'n
concursus
creditorum
wat
reeds bestaan
en die sogenaamde verlof om
tussenbeide te tree is eintlik 'n formaliteit. 'n Mens moet dus
versigtig wees om, by die beoordeling
van die problem
in casu
,
nie oorwegings wat geld in 'n konvensionele proses klakkeloos toe te
pas nie.”
[12]
For
example:
F
& C Building Construction Co (Pty) Ltd v Macsheil Investments
(Pty) Ltd
1959
(3) SA 841
(N);
Gilliatt
v Sassin
1954 (2) SA 278
(C) at 280;
Ex
parte Arntzen (Nedbank Ltd as Intervening Creditor)
2013 (1) SA 49
(KZP) para 1;
Ex
parte Clifford Homes Construction (Pty) Ltd
1989
(4) SA 610
(W) at 612D – F; Bertelsmann et al Mars: Law of
Insolvency in South Africa 9 ed paras 5.26 and 5.27, p 129 –
30;
and earlier editions.
[13]
Catherine
Smith Law of Insolvency 3 ed p 79.
[14]
Id
Maritz,
(
c
ited
in fn 4 above). There, an application was brought for the
sequestration of the respondents who were married in community
of
property. An immovable property owned by them had been attached and
sold to the intervening respondent who had purchased same
at a sale
in execution.
The
application was made by their accountant, who alleged that the
respondents had committed an act of insolvency as intended
in
s 8
(g)
of the
Insolvency Act 24 of 1936
by informing him in a letter that
they were unable to pay their account. The applicant alleged that
the respondents were in fact
insolvent and that it would be to the
advantage of their creditors if their estate were to be
sequestrated. The respondents were
the owners of a farm which had
been sold at a sale in execution to one ‘S’ (the
intervening respondent) at a price
that was, according to the
applicant, well below its market value. S applied to intervene in
the sequestration application, alleging
that he had a direct
interest in the sequestration proceedings because he had purchased
the respondents' farm at the sale in
execution, which interest he
intended to protect by opposing the application for sequestration on
the ground that it amounted
to a 'friendly sequestration' ‘F
Bank’ also sought to intervene in the sequestration
proceedings as intervening creditor,
averring that most of the first
respondent's debt to it (some R396,000.00) was secured by a second
mortgage bond over the farm
and that the farm had been declared
specially executable. The applicant and the bank in turn contended
that S did not have
locus
standi
to intervene in the proceedings because he was not a creditor of the
respondents and thus lacked a direct and substantial interest
in the
subject-matter before the Court.
The
court held that
that
it was the respondents' rights of ownership in the farm which S
wished to have transferred to him. While the sale had taken
place at
the instance of the execution creditor, the rights to be transferred
to S pursuant thereto were those of the respondents
themselves, and
in this respect, S had a direct claim against the respondents. On
that basis, it was held that S's right to transfer
of the farm was
not a derivative right but one in which the respondents' rights of
ownership was to be transferred directly to
the intervening
respondent. There was, moreover, nothing in the
Insolvency Act which
in any way limited the common-law powers of the Courts in respect of
intervention in sequestration proceedings. The court stated,
at para
31, that it could hardly be said that S lacked an interest in the
litigation in circumstances in which the expressly
stated purpose
thereof was to have a trustee appointed so that he might be able to
set aside the transaction which S sought to
protect. Having found
that there was nothing in the
Insolvency Act which
in any way
limited the common-law powers of the Courts in respect of
intervention in sequestration proceedings, the Court exercised
its
discretion to allow a party to intervene on grounds of convenience
in favour of S so as to allow him to join the proceedings.
[15]
Maritz,
paras 21 & 22.
[16]
Maritz,
paras
27, 31 and 35.
[17]
In
Maritz,
the property that was purchased by the intervening respondent had
not yet been transferred to him at the time the sequestration

proceedings were pending, as opposed to the present matter where the
property had been transferred to the intervening creditor
some 6
months prior to the launch of the sequestration application.
Further, in
Maritz,
the status of the intervening respondent as creditor was disputed.
Moreover, the intervening applications were considered by
the same
court hearing the sequestration application, which took place in one
composite hearing. Although the intervention application
succeeded,
ultimately a sequestration order was granted.