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[2010] ZAWCHC 523
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Imperial Bank Ltd v Gerber NO and Another (24430/09) [2010] ZAWCHC 523 (2 November 2010)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE HIGH COURT, CAPE TOWN)
Case
no:
24430/2009
In
the matter between:
IMPERIAL
BANK BEPERK
…..........................................................................................
Applicant
v
EATON
STAPHANUS GERBER
…......................................................................
First
Respondent
CLAIRE
DENISE GERBER
….........................................................................
Second
Respondent
In
their capacity as trustees of the
Pepperwood
Estate Trust
(IT3099/2006)
JUDGMENT
HANDED DOWN ON TUESDAY, 2 NOVEMBER 2010
CLEAVER
J
[1]
On the return day of a provisional order of sequestration granted
against the Pepperwood Estate Trust ("the Trust"),
Mr E S
Gerber ("Gerber"), representing himself and his co-trustee
Ms C D Gerber appeared in person to oppose the granting
of a final
order.
[2]
Gerber had submitted full written submissions and he expanded
thereon at some length during the course of argument before
me. Much
of what he had to say concerned the history of the matter and was
not strictly speaking relevant to the application.
To start with he
contended that he had not been afforded sufficient time to address
the court when the provisional order was
granted. He explained that
due to the country-wide strikes which were on the go at the time, a
judge was not available to hear
the matter in the normal course, but
that an
"alternate"
judge
had agreed to hear the matter under trying circumstances. The judge
had indicated at the outset that 30 minutes only would
be available
for hearing the application which resulted in him being placed under
considerable pressure. He contended that in
the circumstances he had
not been able to present his case properly to the court. I indicated
to Gerber that whatever the position
might have been at the previous
hearing, precisely the same issue which was before the court on that
occasion was to be finally
adjudicated by me, the only difference
being the heavier onus resting on the applicant for the grant of a
final order. I accordingly
allowed him as much leeway as possible in
order to present his case.
[3]
Gerber made much of the fact that an application for summary
judgment had been refused in an action which the applicant as
plaintiff had instituted against the trustees of the Trust in this
court. In that action under case no 3564/2009 the applicant
as
plaintiff had sued the trustees of the Trust for payment of the sum
of R3 952 770,76 said to be the balance of the principal
debt
together with finance charges thereon owing in respect of moneys
lent and advanced by the plaintiff to the defendants pursuant
to a
mortgage bond which had been registered by the Trust in favour of
the applicant. The judgment refusing the application for
summary
judgment has not been transcribed, but Gerber submitted that the
judge refused to grant the application because the papers
before him
did not contain appropriate allegations as to the basis on which the
plaintiff had been entitled to call up the bond.
[4]
Gerber then submitted that the finding in respect of the summary
judgment application effectively meant that the applicant
had not
been able to establish its case in the application before me. As
will become apparent from this judgment however, the
applicant's
case for the sequestration of the Trust is based on the inability of
the Trust to pay its debts including the amount
admittedly owing and
due under the bond.
[5]
The facts which appear to be common cause are the following:
5.1.
The applicant advanced funds to the Trust in terms of a loan
agreement to enable the Trust to provide the services which
were to
be installed in a property development undertaken by the Trust
before the erven making up the development could be transferred.
The
initial loan agreement was replaced by later agreements.
5.2.
The amount so advanced was to be repaid to the applicant out of the
proceeds of the initial sales of erven in the development,
it being
a condition of the loan that the applicant was to be satisfied as to
the existence of an agreed number of sales ("the
pre-sales")
before it would pay out any amounts in terms of the loan. It would
appear that documentation reflecting the
sale of some 20 erven was
placed before the applicant for this purpose, thus fulfilling the
condition.
5.3.
The amount lent to the Trust was secured by the registration of what
is referred to as a development bond, but is termed
a continuing
covering bond in Deeds Office parlance. The bond secured the Trust's
liability for payment of the sum of R4.6 million
plus an additional
amount of R920 000.
5.4.
According to the applicant, the amount of the envisaged loan was
decreased due to an insufficient number of pre-sales.
5.5.
The agreement of loan provided that the amount lent to the Trust was
to be repaid by not later than six months from the date
of
registration of the covering bond referred to. Registration was
effected on 7 November 2007.
5.6.
Funds were duly advanced by the applicant to the Trust in terms of
the loan agreement, but at least 15 of the pre-sales were
cancelled
by the proposed purchasers, due, it would seem, to the delay
experienced by the applicant in finalising the installation
of
services in the township and/or failing to comply timeously with the
requirements of the local authority.
5.7.
The Trust having failed to repay the amount advanced to it under the
bond within the time stipulated, summons was issued
by the applicant
as plaintiff against the trustees as indicated in para [3] above.
5.8.
In his affidavit filed in opposition to the application for summary
judgment, Gerber recorded
inter
alia
that
the applicant had made payments totalling some R3,9 million to the
Trust in accordance with the loan; that pre-sales which
were a
precondition for the granting of the loan had been cancelled and
that the Trust has not made payment of any amount to
the applicant
as no transfers of erven had taken place.
[6]
In response to the applicant's demand for payment, made prior to the
issue of summons, Gerber addressed a letter to the applicant
on 10
February 2009 which is crucial to the applicant's case. The initial
portion of the letter reads as follows:
"Met
verwysing tot ons telefoongesprek vanmiddag, die volgende:-
1.
Ek neem kennis daarvan dat u Imperial Bank se regsai'deling nou gaan
opdrag gee om met 'n invorderingsaksie teen Pepperwood
Estate te
begin om die ontwikkelingslening op te eis.
2.
Graag wil ek dit noem dat Jul takbestuurder in George vir my in
Oktober 2009 meegedeel het dat Imperial Bank my nog tot 28
Februarie
2009 kans sal gee om die lening terug te betaal - of met h
alternatiewe oplossing voorendag te kom - en dat die bank
daarna
regsaksie gaan neem. Dit is vandag die 10de Februarie 2009.
3.
U het dit oor die telefoon aan my gestel dat al manier hoe hierdie
regsaksie nie sal voortgaan nie, is indien ek die rente
op die
lening maandeliks kan diens. Ek het geantwoord dat al manier wat ek
hierdie rente oor 'n lang periode kan diens, is indien
ek die rente
kan verdiskonteer teen erwe wat ek kan verkoop. U het aan my
verduidelik dat dit nie moontlik is nie - aangesien
die erwe dien as
die bank se sekuriteit - en elke keer wanneer nog 'n en' verkoop
word, sal die bank al meer van sy sekuriteit
verloor.
Pepperwood
Estate is in 'n finansiele verknorsing as gevolg van buitegewone
verloop van omstandighede. On is 'n rat voor die oe
gedraai deur die
Propco groep wat 15 erwe gekoop het - met wie ons prokureurs op 'n
gereelde basis in verbinding was. Ons het
in die laaste drie dae
voor die kansellasie nog by drie geleenthede e-poste van hul
prokureurs ontvang. Ingeslote is 'n afskrif
wat ons nog 14 dae voor
kansellasie ontvang het. Die feit dat
alle
partye
egter
van die 2-jaar kansellasieklosule 'vergeet' het, is uiters
toevallig. Vertragings met hersonehngs- en onderverdelings is
baie
algemeen. Die munisipaliteit het by drie geleenthede my uitlegplanne
verlore laat raak. Die plaaslike landmeter het sewe
maande geneem on
die Landmeter-Generaal se handtekening op die onderverdelingsplan te
kry -
nadat
die erwe reeds oppemeet was
.
Ons was almal oortuig daarvan dat die sekuriteit wat Imperial Bank
vir hul lening verlang het, voldoende sou wees om die projek
sonder
enige skuld te laat na registrasie. Ek is met vele ontwikkelaars en
ander instansie besig om 'n oplossing vir die probleem
te vind - tot
dusver sonder sukses - hoofsaaklik omdat die banke tans feitlik geen
lenings wil toestaan nie."
Then
follows a proposal as to the initial sale of two erven and a
procedure for the application of the proceeds following sales,
the
letter concluding with the following:
"Imperial
Bank se samewerking sal baie hoog op prys gestel word om 'n
oplossing te vind vir hierdie onnodige finansiele verknorsing
waarin
Pepperwood Estate tans verkeer. Ons hoor graag dhngend van u. Sodra
ek weet wat Impehal Bank as n delgingspaket sal aanvaar
om hierdie
lening so spoedig moontlik terug te betaal, kan ek pro-aktief optree
om die probleem op te los."
[7]
On the strength of the admissions made by Gerber in the affidavit
filed in opposition to the summary judgment application
and the
letter to the applicant of 10 February 2009 counsel for the
applicant contends that it is clearly apparent
that
the Trust is unable to repay the loan and unable even to pay the
interest thereon. In the result it contends that the letter
constitutes an act of insolvency within the meaning of
section 8(g)
of the
Insolvency Act No 24 of 1936
. There can be no doubt that this
is so.
[8]
The defences put up by the respondents, which are to my mind no
defences, are the following:
Firstly,
the defence raised in the summary judgment application, namely that
the papers in the action did not spell out in detail
the terms of
the loan on which the applicant had relied to call up the bond.
Clearly this is no defence to the Trust's admitted
inability to pay
the amount within the time stipulated in the loan agreement.
The
applicant should not have proceeded with the loans when final
approval for the development was delayed.
The
applicant should not have accepted pre-sale agreements which
provided the purchasers with the right to cancel the agreement
in
the event of the sellers not being able to effect transfer
timeously.
Once
it became apparent that the respondents would not be able to remit
payment in terms of the loan agreement timeously since
the pre-sales
had been cancelled, the applicant ought to have agreed to an
addendum to the loan agreement so as to accommodate
the respondents.
The
fact that the applicant reduced the amount of the loan by
approximately R1 million. The respondents contend that this was
effected unilaterally, but in fact the reduction was permissible in
terms of the contractualarrangements and was recorded in
an
agreement signed on behalf of the Trust.
The
applicant repudiated the agreement by failing to pay the claims of
contractors employed by the Trust out of the proceeds of
the loan
agreement. The applicant points out that this was due to the fact
that when payment was sought, the amount due to the
Trust in terms
of the loan agreement had been fully drawn by the Trust.
The
respondents also disputed a number of allegations in the papers
which are not relevant to the basis on which the liquidation
is
sought. The final contention made by the respondents is that the
applicant acted recklessly or at least negligently and is
itself
responsible for the unsatisfactory position in which the respondents
find themselves.
[9]
All these defences clearly have no application to the facts on which
the applicant relies, namely the undisputed inability
of the
respondents to pay amounts advanced to the Trust in terms of the
bond.
[10]
Gerber also contends that the value of the property bonded to the
applicant far exceeds the amount of the applicant's claim
and that
consequently the Trust is not insolvent. Unfortunately for the Trust
though, since the applicant relies on an act of
insolvency, the
factual solvency of the Trust need not be considered as the court is
entitled to order the sequestration of the
Trust, even if its assets
(fairly valued) exceed its liabilities.
1
[11]
The respondents also resist the grant of the final order on the
basis that the Trust has a counter-claim against the applicant,
the
amount of which is far in excess of the amount owing to the
applicant. The counter-claim is recorded in the action to which
I
have already referred and comprises a main claim and an alternative
claim. The main claim is for R10 million said to be for
financial
and emotional damage brought about by the applicant to the trustees
of the Trust in their personal capacities, as well
as damage to
their development project
("aan
hulle ontwikkelingsprojek in sy geheel")
by
the reckless and unprofessional manner in which the applicant is
said to have dealt with the loan agreement and to have repudiated
it. The main grounds relied on are similar to those advanced in
opposition to the application, namely:
The
applicant should never have granted the loan having regard to the
faulty security which was offered.
Alternatively,
the applicant should have secured the loan properly before payment
was made to the Trust.
The
applicant should not have granted the final loan facility as it was
aware of the cancellation clauses in 15 of the pre-sales
which could
be invoked in six months.
The
applicant repudiated the loan agreement six months before the
expected completion of the installation of services by reducing
the
loan by R1 million.
The
applicant repudiated the loan agreement by refusing to pay the last
creditors.
The
applicant repudiated the loan agreement by refusing to allow the
respondents to continue to sell individual erven after the
pre-sales
fell through.
The
alternative claim is said to be for R40 million which will apply in
the event of the applicant attempting to sell the mortgage
property
by means of a judicial sale.
[12]
Since it has been established that the Trust is unable to pay its
debts and that a final order of sequestration should normally
ensue,
the onus rests on the respondents to satisfy me on a balance of
probabilities that its counter-claim may succeed. To start
with, the
claim is clearly unliquidated and it is doubtful whether as
presently framed it will withstand the test of an exception.
Furthermore, it ignores the fact that all the steps taken which
culminated in the arrangement which the Trust made with the
applicant to secure the loan, including the provision of succeeding
loan agreements, occurred with the consent and cooperation
of the
trustees. Most, if not all of the averments upon which the trustees
rely have no legal basis and are in effect contentions
to the effect
that since the applicant was aware of the difficulties being
experienced by the trustees and in particular the
cancellation of
the pre-sales, there was a duty of some form on the applicant to
relinquish its rights and to adjust its arrangements
in order to
suit the Trust.
[13]
I am mindful of the fact that the Trust may well own property whose
value, once sales of the serviced erven can be effected,
can exceed
the amount due to the applicant, but the fact is that as matters
stand, the Trust is unable to pay the amount owing
in terms of the
bond and such proposals as Gerber has made tothe applicant with a
view to future sales have not been acceptable
to the applicant.
[14]
As far as the alleged counter-claim is concerned, I am not persuaded
that this is a matter where
viva
voce
examination
and cross-examination will disturb the balance of probability which
is clearly in the applicant's favour.
2
That there will be an advantage to creditors in the event of the
Trust's Estate being sequestrated is clear. It is not in dispute
that the Trust is the owner of a valuable property which a trustee
will no doubt be able to dispose of to the benefit of the
creditors
of the Trust.
[15]
In all the circumstances I consider that the applicant has satisfied
the three essential elements for the grant of a final
order of
sequestration, namely:
15.1.
The undisputed amount of its claim against the Trust.
15.2.
That the Trust is unable to pay its debts.
15.3.
That it will be in the interest of creditors if a final order of
sequestration is granted.
It
is of course so that even though a proper case has been made out, I
still have a discretion to decline to make a final order.
In order
to do so, the respondents must satisfy me that there are special
circumstances present which justify the withholding
of the final
order. For the reasons which I have set out above, that is not a
finding which I can make.
[16]
In the result the following order is granted:
16.1.
The provisional order of sequestration granted on 18 August 2008 is
confirmed and the estate of the Pepperwood Estate Trust
is finally
sequestrated and placed in the hands of the Master of this Court.
16.2.
The costs of the application will be costs in the sequestration.
CLEAVER, R
1
DPDu
Plessis Prokureurs v Van Aarde
1999
(4) SA 1333
(T) at 1335F-G.
De
Villiers NO v Maursen Properties (Pty) Ltd
1983
(4) SA 670
(T) at 676E.
2
Mohamed
v Malk
1930
TPD;
Priest
v Collett
1930
CPD.