About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: North Gauteng High Court, Pretoria
SAFLII
>>
Databases
>>
South Africa: North Gauteng High Court, Pretoria
>>
2010
>>
[2010] ZAGPPHC 9
|
|
De Beer v Coverdale and Another (45751/2009, 47257/2009, 34375/2009, 32075/2009, 4983/2009) [2010] ZAGPPHC 9 (18 February 2010)
REPUBLIC
OF SOUTH AFRICA
NORTH
GAUTENG HIGH
COURT, PRETORIA
CASE
NO: 45751/2009
Date:18/02/2010
CAROL
PATRICIA DE BEER Applicant
and
DERICK
AUBREY COVERDALE First Respondent
NATACIA
TRACEY-ANN COVERDALE Second Respondent
CASE
NO: 47257/2009
JAN DAVID JOHANNES ELS Applicant
and
MINDY
ROSSOUE Respondent
CASE
NO: 34375/2009
JOHN FRANCIS SOMERS Applicant
and
ANDRIES
JACOBUS MOUTON First Respondent
JUDY
MOUTON Second Respondent
CASE
NO: 32075/2009
MARIUS
CILLERS Applicant
and
MARTIN
JUAN CILLIERS Respondent
CASE
NO: 4983/2009
RENE BARNARD
Applicant
and
LINDA
LOTTER Respondent
JUDGMENT
MAKGOKA.
J
:
[1]
This is a composite judgment, concerning five applications which came
Before me in the unopposed motion court. All are for compulsory
sequestration of the respondents' respective estates in terms of
section 9(1) of the insolvency Act. 24 of 1936 ("the Act").
All of them have features of a "friendly'' sequestration.
Because of the concerns I had in each one of them, i requested
counsel to submit written argument in each. I am grateful to counsel
in the respective applications for their submissions.
Friendly
sequestration or collusion?
[2]
There is a difference between a "friendly"
sequestration and collusion. My Sister Satchwell J has conveniently
compacted the general principles on this aspect in
Esterhuizen
v Swanepoel and Sixteen Other Cases
2004
(4) SA 89
(W). At 91 B-F. the following is stated:
'The
practise of the 'friendly' sequestration is not new. having been
discusses by Curiewis JP in Kerbel v Chames
1952 WLD 72
at 75-6:
'it
is said that very frequently, in this Court particularly, what are
called "friendly sequestrations" take place...
and one has
a strong suspicion that in a very large number of sequestrations in
this Court, these sequestration proceedings are
not for the benefit
of the creditors, but are entirely for the benefit of the insolvent,
and are very often instituted by a friend
to help the debtor out of
his difficulties.'
There
is not necessarily anything sinister in a 'friendly' sequestration
and an order should not be refused merely because of 'goodwill
between the parties'. (See
Beinash
& Co v Nathan (Standard Bank of South Africa Ltd Intervening)
1998
(3) SA 540
(W).)
What
is of concern is the prospect of collusion' in the sense attributed
thereto by Curiewis J in Sevan
v
Sevan and Ward
1908
TH 193
at 197:
'In
our law, ordinarily speaking, collusion is akin to connivance, and
means an agreement or mutual understanding between the parties
that
the one shall commit or pretend to commit an act in order that the
other may obtain a remedy at law as for a real injury;
and
Roper J
in
Kuhn v Karp
1984
(4) SA 825
(T) at 827:
'In
my view collusion consists in our law in an agreement between the
parties to a suit to suppress facts, or to put false evidence
before
the Court or to manufacture evidence, in order to make it appear to
the Court that one of the parties has a cause of action,
or ground of
defence, v/which in fact has not.'
[
3]
At 91G- 92D the learned Judge proceeds:
"Where
there is such collusion 'the sole object of the applicant is to
assist the debtor's' with the result that 'the only
effect of
sequestration will be to give the debtor relief against ms
creditors'.
(Wepener
v Ericson
1925
WLD 81.)
The
collusion is frequently found in the following pattern of behaviour
or
modus
operandi:
A
debtor owes money, frequently in significant amounts(s). to
creditors(s)who expect and rely upon the anticipated repayments of
this outstanding debt. The debtor cannot ma^e payment of the debt.
He
seeks the assistance of a third party who agrees to initiate
sequestration proceedings to
"aid
or shield [the] harassed debtor'
from
his genuine and perhaps demanding creditors(s).
(Epstein
v Epstein
1987
(4) SA 606
(C).)
A
friend or relative masquerades as a creditor' and alleges that a
(nonexistent! debt is owed by the 'debtor'. The 'creditor'
then
avers
that
the 'debtor' has not only failed or refused to repay this debt' but
has written a letter advising of his inability to pay the
debt'.
An
act of insolvency in terms of
s
8
(g) of the
Insolvency Act 24 of 1936
has now purportedly been
committed and the creditor' proceeds with sequestration proceedings
against the 'debtor'.
This
'friendly' application (or sequestration) procures an order declaring
the respondent insolvent. The respondent is then relieved
of his or
her legal, financial and
moral
obligations
to the original and genuine creditor(s)
save
to
the extent that the insolvent estate is able to satisfy such debt(s).
The balance of the genuine indebtedness remains unsatisfied
and. with
the
connivance
of
another, the insolvent has been 'enabled to escape payments of his
just debts'.
(Kerbel
ssupra).)
Co-operation
may tend
towards
collusion.
The Courts
should
be
scrupulous
in
ensuring that assistance does not conceal abuse. Several judgments
have scrutinised 'friendly' application of sequestrations
for signs
of collusion
Detweer,
applicant and respondent vis-a-vis his creditors not to advance their
interests."
Epstein
(supra)
[4]
In
Yenson
& Co v Gariick
1926
WLD 53
at 57. Tindall J said:
"Now
a friendly creditor seeing other creditors pressing the debtor and
in
that
way obtaining payment of their debts in installments, may think it
desirable to sequestrate the estate of the debtor; the fact
that one
of his motives in doing that may be to assist the debtor does not
necessarily prove that the application is collusive.
If he makes the
application not only with that object but also with the object of
coming in and sharing
pro
rate
in
any dividends which may be obtained by means of sequestration I do
not think that an application of that kind could be described
as
collusive.
Sequestration
or litigation?
[5]
I also find it necessary to set out the Courts' views on friendly
sequestrations where the alleged debt is a small amount, and
the
election of sequestration as against litigation. The Courts have in
the past emphasized that neither creditors nor debtors,
should prefer
insolvency proceedings above litigation and execution in the ordinary
course. In Ex
Parte
van den Berg
1950
(1) SA 816
(W) Ramsbottom J stated the following at 817:
"...
(T) o use the machinery of sequestration to distribute amongst these
concurrent creditors the small amount which might
be available from
the sale of immovable property after paying the costs of realization
and the costs of administration of the estate
is really to use a
sledge hammer to Break a nut".
[6]
In
Gardee
v Dhanmanta Holdings and Others
1978
(1) SA 1055
(N) at 1069H-1070A, Didcott J held that, in addition to
establishing the likelihood of a not negligible advantage to
creditors,
a single creditor who uses sequestration proceedings as a
mode of execution, must also demonstrate some reasonable expectation
that an amount recovered under 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 advantageous.
[7]
The learned Judge also rejected the notion that the creditor is
entitled to ask the court to look at the effect of sequestration
in
vacuo,
and
not against the background of competing methods of dealing with the
debtor's affairs.
At
1070 C, the learned Judge expressed himself as follows:
"(T)
he notion of advantage to creditors is a relative and not an absolute
one. Sequestration cannot be said to be to the creditors
advantage
unless it suited them better than any feasible and reasonably
available alternative course.
It
follows
that the enquiry postulates a comparison..."
[8]
As to the approach to be adopted in considering these applications.
Nicholas J (as he then was) stated the approach in
Klemrock
(Pty) Ltd v De Klerk And Another
1973
(3) SA
S25
(W) at 927A. to be as follows:
"Where
proceedings for compulsory sequestration are by way of a friendly
application, it is not a statutory requirement that
the provisions of
sec
4
should
be complied with, and in consequence there
is
a
possibility
that
the
interests Of creditors may be prejudiced. For that reason, the Court
shouid scrutinise such applications witn particular care
"
[9]
There is always a lurking possibility that the process of
sequestration is abused, in this regard Leveson J said the following
in Ex
Parte
Sieenkamp and Related Cases
1996
(3) SA 822
(W) at 827 l-J:
"It
seems to me that the time has certainly come for further words on the
subject. According to the Master of the Supreme Court,
it has become
a rare thing for the sequestrating creditor to prove his own claim at
the first meeting of creditors or at all. I
can readily apprehend the
reason. He is invariably the sequestrating creditor in a "friendly"
application. He knows,
in advance, that there are no assets in the
estate
or,
being
a close friend or relative
of
the
debtor, he has simply lent his name for the purpose of the
application. The mission is accomplished. The debtor is relieved
of
his misery and may safely cock a snook at his creditors"
[10]
What is stated by Leveson J, above is supported by my own experience
in this Division. For example, on 3 December 2009. sitting
in the
unopposed motion court, an application for rehabilitation of M C
Bekker,
Case
No
55320/2009
came
before me. The applicant had been sequestrated in February 2009,
pursuant to a "friendly sequestration. The application
for
rehabilitation was launched in August 2009, six months after the
sequestration order was granted. Since no claim had been proved
against his estate, he was able to bring the application in terms
section 124
(3) (b) of the Act. The sequestrating creditor did not
lodge a claim. which he. a mere six months earlier, pursued with much
vigour.
This points to an abuse of the process of this court. The
debtor is now relieved of his misery and may safety "cock a
snook
at his creditors" - Ex
Parte
Steenkamp. (supra).
[11]
It is with the views expressed above that I set out to consider the
individual applications herein.
CP
de Beer v DA Coverdale and Another
[12]
The application for the sequestration of the respondents' estate is
brought by the applicant who alleges that the respondents
owe her a
fairly small amount of R1600.00. The respondents' total debts amount
to R412 442.60. in the list of creditors, there
is a debt of R20
000.00 allegedly owed to a certain T. Matroos. No further details
were provided in the supporting affidavit concerning
this deb:.
[13]
At the hearing, I requested a supplementary affidavit by one of the
respondents, clarifying the following about the debt: the
reason for
the loan: the manner of transmission of the money from the creditor
to the respondents, and the purpose of the loan.
The first respondent
accordingly deposed to a supplementary affidavit, and stated the
following with regard to the loan:
"I
humbly
submit that the creditor in question is Tammy Matrocs, my s:s:e' who
had borrowed me the amount of R20 000.00.
I
made
a loan from my sister when
I
had
lost my employment so that
I
could
pay for our living expenses'
[14]
It
is instructive that the first respondent did not deal with how the
money was received by him from his sister. I pointed
to
counsel
during argument that, the probability of such a fairly substantial
sum of money being given to the respondent in cash was
but almost
non-existent. It is also improbable that the parties would not have
signed any form of acknowledgement of receipt or
indebtedness. given
the substantial amount of the lean.
[15]
Mr.
Koize,
who
appeared for the applicant, conceded that the
bona
fides
of
the Matroos debt were questionable. However, he argued that the said
debt represented approximately only
5%
of
the total debts. Even if the debt is excluded from the list of
creditors, the respondent would still be hopelessly insolvent.
The
application, so goes the argument, is not dependent on the said debt,
but on another debt, distinct from the Matroos one.
[16]
I cannot fault counsel's submission in this regard. It does however,
overlook an important aspect: in applications of this
nature, where
the applicant and the respondents are family members, the parties
must be candid to the Court in every material respect.
The
respondents have, on the probabilities, contrived this debt. This
casts a huge doubt on their credibility and
bona
fides.
For
the application to be considered
bona
fide,
nothing
should emerge from any aspect thereof, suggestive of dishonesty.
Given these considerations. I would refuse the application
for the
sequestration of the respondents' estate.
[17]
The applicant alleges that he lent an amount of R10 000.00 to the
respondent, which the latter had failed to repay. In response
to my
query regarding the source of the money, and its transmission from
the applicant to the respondent, the applicant stated
in his
supplementary affidavit that he had won the money at gambling and
gave it to the respondent in cash. No acknowledgement
of receipt,
noram agreement regarding repayment details were provided. On the
facts. I am persuaded that this debt too. was contrived
by the
parties for the purposes of this application. The application would
therefore be refused.
J
F Sommers v A J Mouton
[18]
It is alleged that an amount of R10 000.00 was loaned to the
respondents on 3 March 2009, in cash, from the applicant's savings.
No proof of the transaction or transfer and receipt of funds was
provided, nor is proof of the applicant's withdrawal of such money
from his savings account is furnished. On 3 June 2009 the respondents
wrote to the applicant, advising him of their inability to
repay the
loan. On the same considerations as above, I would similarly refuse
the application.
Barnard
v
Lotter
and
Ciliiers v Cilliers
[19]
Both these applications were before me on the return day of
provisional orders granted by my Brothers Ledwaba J and Msimeki
J on
22 and 30 September 2009. respectively. The applicants seek
confirmation of the provisional orders.
[20]
Section 12
(2) of the Act provides, among others that, if at the
hearing for the confirmation of a provisional order, the Court is not
satisfied,
among others, that there is reason to believe that it will
be to the advantage of creditors of the debtor if his estate is
sequestrated,
it shall dismiss the petition for the sequestration of
the estate of the debto
r
and set aside the order of provisional sequestration. The court
therefore has a discretion on the return day of the rule nisi whether
or not to grant a final order. See
Esterhuizen.
supra
at 95 D-H. In any event, this court has an inherent power to regulate
its procedure and prevent an abuse of its process. See
Potchestroom
Town Council v Botha
1939
TPD 4:
Moulded
Components and Rotomoulding South Africa (Pty) Ltd v Courourakis
1979
(2) SA 457
(W) at 453 A-B:
Universal
City Studios Inc and Others v Network Video
(Pty)
Ltd
1985 (2) SA 734
(A) at 754G and
Hurter
v Hough
1989
(3) SA545 (C) at C-5
[21]
In Ciiiers v Ciliiers. the respondent allegedly borrowed an amount of
R20 000.00 to the applicant on 3 October 2008, due and
payroll at the
end of December 2008. The applicant alleges that he gave the amount
of R20 000.00 in cash. In this case too. no
record of transmission,
no acknowledgement of debt, or of receipt, is alleged or attached.
The applicant discloses no basis on
which it can be inferred that he
has the capacity to make a loan of R20 000.00. I would set aside the
provisional order.
[22]
In Barnard
v
Lotter
the
applicant alleges that he lent the respondent an amount of R2 000.00
in June 2008, which was given to the respondent in cash.
The
applicant alleges the following with regard to the debt:
"Op
ongeveer Junie 2008 net ek h bedrag van R 2 0000.00 aan die
respondent geleen Ek het die geide (sic) kontant aan die Respondent
betaal Ek het terugbetaiing van die bedrag soos ooreengekom. van die
Respondent versoek maar caar is geheel en al nie aan die my
versoek
om betaling voldoen nie. Op sterkte hiervan het ek h gelikwideerde
vordering van meer as R100.00 (een hondered rand) teen
die
Respondent."
[23]
It is alleged that respondent's assets consist of three vehicles, one
of which is a luxury Toyota RAV4, valued at R250 000.00.
It is
alleged that the respondent owns no other movable property, she has
no investments, or insurance polices.
[24]
Her liabilities amount to R482 758.20. The sequestration
;
on
costs are estimated at R11 555.20. She has R68 000.00 available for
payment of sequestration costs and distributions amongst
her
creditors. Ar amount of R55 444.80 would remain after payment of
sequestration costs, which amount is to be distributed amongst
the
creditors to the tune of R482 785.80, resulting in a supposed
dividend of 12 cents in a rand
[25]
The applicant reiies. for the respondent's alleged act of insolvency,
on a letter dated 10 December 2008. The affidavit in
support of this
application was signed in June 2008. six months before the alleged
lean was even incurred.
[26]
Mr.
Voster.
for
the applicant submitted that the applicant had satisfied the
requirements of the Act, namely establishment of a debt over R100.00;
an act of insolvency and advantage to creditors. On the face of it
this is correct, insofar as the first two requirements are concerned.
[27]
However, in order to ensure that the process of this court is not
abused. I must still exercise a judicious discretion. My
view is that
the respondent has not made a full and frank disclosure of her
financial affairs and movable assets. I find it extremely
difficult
to accept that the applicant does not own any TV set. household
appliances, furniture etc. She does not disclose the
source of the
amount of R68 000.00 she has made available for the purposes of this
application. She does not disclose whether she
has any monthly income
or not. How is she able to maintain the three vehicles? Has she made
arrangements to return any or all the
vehicles under the
National
Credit Act, 34 of 2005
?
[28]
In her list of creditors totalling R482 785.20. R401 353.35 is
towards vehicle finance. There are five financial institutions
she
owes for vehicle finance. Yet in her list of her assets, she mentions
only three vehicles. Applicants who bring "friendly''
sequestration applications before court are to ensure that all
information relevant to the debtor's financial affairs and assets
is
obtained and placed before Court. See
Hillhouse
v Sioti; Freban Investments (Pty) Ltd v Itzkin; Botha v Botha
1990
(4) SA 580
(W) at 584H. in this instance I do not have such
information, and I am not prepared to speculate about these aspects.
[29]
Regard being had to the concerns raised above. I have come to the
conclusion that the provisional order be set aside.
[30]
The applications in Cilliers v Ciliiers and Somers v Mouton. emanate
from the same firm of attorneys. It is worth noting that
the letters
indicating inability to pay, are striking identical - the grammar,
the wording and phrases used, and even the font
type. This is
disquieting in view of the fact that the letter constituting an act
of insolvency, is supposed to be "a spontaneous
act and not a
collusive act".
Esterhuizen
(supra),
at
96 D-E. The fact that the letter constituting an act of insolvency
appears to emanate from the applicants' attorney's office,
is
disturbing.
[31]
In conclusion, I am of the view that it would be useful, if the
following information, in addition to other requirements, appears
from the affidavit in support of an application for a friendly
sequestration:
(a) Full
nature and details of the transaction which resulted in the debt:
(b) Proof
of the transaction forming the basis of the debt: e.g. copy of
bank
statement disclosing bank transfer from an account in the
name of the
creditor to one in the name of the debtor:
(C)
The relationship, if any. between the debtor and the creditor:
(d)
Full disclosure of the respondent's past and present financial
activities,
employment details, income and expenditure, as well as
assets and
liabilities:
(e) A
statement why under the circumstances, sequestration is best suited
in
comparison
to litigation and execution. This is especially in instances where
the debt is small.
[32]
In general, practitioners are encouraged to revisit the generality of
views expressed by Leveson J both in
Hillhouse
and
Ex
Parte Steenkamp (supra)
and
by Satchwel! J
in
Ex Parte Esterhuizen {supra)
[33]
Given the above considerations. I make the following orders:
1.
In
De Beer v Coverdale & Another. Case No: 45751/09: Els v
Rossouw
Case No: 47257/2009: Somers v Mouton & Another Case
No:
34375/2009:
The
applications for sequestration are refused.
in
Barnard v Letter, Case No: 4983/2009; the provisional order
granted
by Ledwaba J on 22 September 2009 is discharged.
3.
in Cilliers v Ciliiers. Case No: 32075/2009: the provisional order
granted by Msimeki J on 30 September 2009 is discharged
T
M MAKGOKA
JUDGE
OF THE HIGH COURT
MATTERS
HEARD ON : 8 OCTOBER 2009, 22 OCTOBER AND
10
DECEMBER 2009
JUDGEMENT
DELIVERED: 18 FEBRUARY 2010
DE
BEER V COVERDALE
FOR
THE APPLICANT ADV D J KOTZE
INSTRUCTED
BY :
RIAAN
MEYER ATTORNEYS,
PRETORIA
BARNAD
V LOTTER
FOR
THE APPLICANT : ADV J VORSTER
INSTRUCTED
BY :
SCHABORT
INC.
PRETORIA
ELS
V ROSSOUW
FOR
THE APPLICANT : ADV L LEBALLO
INSTRUCTED
BY :
STIAAN
BEKKER ATTORNEYS,
PRETORIA
CILLIERS
V CILLIERS
FOR
THE PLAINTIFF : ADV L SWART
INSTRUCTED
BY
CREMER
& STRYDOM,
PRETORIA
SOMERS
v
MOUTON
FOR
THE APPLICANT ADV L SWART
INSTRUCTED
BY
CREMER
& STRYDOM,
PRETORIA