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[2010] ZAECPEHC 60
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Standard Bank of SA Ltd v Memoak No 6 CC, Stanard Bank of SA Ltd v Memoak No 7 CC, Stanard Bank of SA Ltd v Wright, Stanard Bank of SA Ltd v Wright (138/2010, 139/2010, 140/2010, 141/2010) [2010] ZAECPEHC 60 (21 September 2010)
NOT
REPORTABLE
IN THE HIGH COURT OF SOUTH AFRICA
(EASTERN CAPE, PORT ELIZABETH)
In the matters between:
Case No: 138/2010
139/2010
140/2010
141/2010
STANDARD BANK OF SOUTH AFRICA
LIMITED
….....................
Applicant
And
MEMOAK NO 6 CC (Case No. 138/2010)
…....................................
Respondent
MEMOAK NO 7 CC (Case No. 139/2010)
…....................................
Respondent
SHERYL JEANETTE WRIGHT (Case No.
140/2010)
…..................
Respondent
SHERYL JEANETTE WRIGHT N.O (Case
No. 141/2010)
…...........
Respondent
Coram:
Chetty, J
Date Heard:
16 September 2010
Date Delivered:
21 September 2010
Summary:
Credit
Agreement – debt reinforcement – Whether application for
sequestration/liquidation amounting to debt enforcement
–
Whether sequestration/liquidation precluded by s 66 of Act –
Provisional orders for sequestration/liquidation confirmed
________________________________________________________________
JUDGMENT
________________________________________________________________
Chetty, J
[1] The applicant
seeks confirmation of provisional orders of liquidation granted in
respect of two close corporations, Memoak 6
and Memoak 7, in case
numbers 138/2010 and 139/2010 respectively and provisional orders of
sequestration against
Sheryl
Jeanette Wright
(Mrs.
Wright
)
in her personal capacity in case number 140/2010 and in her
representative capacity as sole trustee of the Capricorn Trust in
case number 141/2010. The four matters came before Kroon, J, who
after hearing argument from the applicant’s counsel, and,
in
the exercise of his discretion, from Mrs.
Wright
personally and on
behalf of the close corporation, granted the relief sought by the
applicant. The aforestated provisional orders
followed upon a
composite judgment (the judgment) by the learned judge concerning all
four matters and this judgment follows suit.
For the sake of
convenience I shall refer to the respondents collectively as the
respondents.
[2] The court’s
powers on the return day of provisional orders of sequestration and
liquidation are trite. The standard of
proof required for a final
order of sequestration is governed by s 12 of the
Insolvency
Act
(the
Act)
1
which permits a
court to grant a final sequestration order upon satisfaction of the
three requisites viz, that the insolvent had
committed an act of
insolvency or is actually insolvent and there is reason to believe
that it will be in the interests of the
debtor if his/her estate is
sequestrated. As far as a final winding-up order is concerned the
standard of proof is upon a clear
balance of probabilities.
[3] In the opposing
affidavit and brief heads of argument filed by Mrs.
Wright
the opposition to
confirmation of the provisional orders is predicated upon the alleged
failure by the learned judge to properly
consider the respondents’
defence to the various applications based on the
National
Credit Act
2
(the
NCA
)
and in particular s 66 of the
NCA
.
Although in argument Mrs. Wright initially expressly abandoned her
argument raised before Kroon J concerning the competency of
sequestration proceedings against a person under debt review and
submitted that she relied solely on s 66 of the
NCA
,
as the submissions unfolded, it became clear that the entire edifice
of her resistance to the grant of a final order remains the
NCA
.
There is no substance to the argument advanced on behalf of the
respondents.
[4] Reliance on the provisions of s 66
(a) and (d) of the
NCA
is entirely misplaced. Neither the
sequestration nor liquidation proceedings either:-
[doja34y2005s66]
“
discriminate
directly or indirectly against the consumer, compared to the credit
provider's treatment of any other consumer who
has not exercised,
asserted or sought to uphold such a right;
or can be said to constitute
proceedings to:-
“
take
any action to accelerate, enforce, suspend or terminate a credit
agreement with the consumer.”
[5] Although there
is no specific reference to s 66 of the
NCA
in the judgment,
its omission is hardly surprising. In the opposing affidavits filed
in each of the matters the respondents sought
to rely on various
provisions of the
NCA
which Mrs.
Wright
contended precluded
an application for provisional liquidation or sequestration. She
specifically referred to the judgment of Trengrove
AJ in
Investec
Bank Ltd and Another v Mutemeri and Another
3
which she implied
was incorrectly decided. In the judgment the learned judge considered
the judgment in
Mutemeri
and, no doubt
persuaded by the cogency and persuasiveness of the reasoning therein,
held that the respondents’ reliance on
the
NCA
was entirely
misplaced.
Mutemeri
decided that an
application for sequestration is not a legal proceeding to enforce an
agreement. The consumer’s defence based
on the provisions of s
129 (1) and 130 (1) (b), 130 (3) and 88 (3) failed. The correctness
of the decision on
Mutemeri
was confirmed in
the Supreme Court of Appeal by Cachalia, JA, in
Naidoo
v Absa Bank Ltd
4
where the learned
judge stated the following
5
:-
“
[4] Mr
Reddy’s submission, as I understand it, implicitly contains a
concession that sequestration proceedings are not in
and of
themselves ‘legal proceedings’ to enforce the agreement’
within the meaning of s 129 (1) (b). That his
concession is correct
is clear from the recent judgment in Investec Bank Ltd and Another v
Mutemeri and Another, where Trengrove
AJ concluded that an order for
sequestration of a debtor’s estate is not an order for the
enforcement of the sequestrating
creditor’s claim, and
sequestration is thus not a legal proceeding to enforce an agreement.
He did so after carefully considering
authorities which have held –
‘sequestration proceedings are instituted by a creditor against
a debtor not for the
purpose of claiming something from the latter,
but for the purpose of setting the machinery of the law in motion to
have the debtor
declared insolvent’ – they are not
proceedings ‘for the recovery of a debt’. The learned
judge’s
reasoning accords with the court’s description of
a sequestration order as a species of execution, affecting not only
the
rights of the two litigants, but also of third parties, and
involves the distribution of the insolvent’s property to
various
creditors, while restricting those creditor’s ordinary
remedies and imposing disabilities on the insolvent – it is not
an ordinary judgment entitling a creditor to execute against a
debtor.”
[6] The respondents’
dissatisfaction at what she perceived to be unlawful conduct on the
part of Chevron SA (Pty) Ltd (Chevron)
and her submission that the
leaned judge’s omission to consider its conduct in adjudicating
the matter is a spurious argument.
The fact of the matter was that
the applicant had alleged, as it was entitled to do, that the
respondents had committed an act
of insolvency in as much as Chevron
had obtained judgment against the two close corporations in a
substantial amount. In any event,
it is clear from the learned
judge’s judgment that it played no role in the decision to
grant the provisional orders.
[7] The further submissions advanced
on behalf of the respondents in resisting confirmation of the
provisional orders were all characterised
by repetitive arguments
entirely irrelevant to the real issues which fall for determination.
I am satisfied upon a consideration
of the affidavits filed of record
that the applicants in the sequestration proceedings have established
the elements of its case,
and in respect of the liquidation
proceedings, satisfied the requirement of proof upon a clear balance
of probability. In the result
the following order will issue:
In each of the matters, 138/2010,
139/2010, 140/2010 and 141/2010 the rule is confirmed.
_________________________
D. CHETTY
JUDGE OF THE HIGH COURT
Obo
the Applicant: Adv Buchanan SC
Instructed
by Pagdens Stulting
18
Castle Hill
Central
Port
Elizabeth
Ref:
F Vienings
Tel:
(041) 5852141
On
behalf of the Respondents: Mrs. Wright
In
her personal and representative capacity
80
Wellington Street
Colchester
Tel:
(041) 4681902
1
Act
No, 24 of 1936
2
Act
No 34 of 2005
3
2010
(1) SA 265
(GJS)
4
2010
(4) SA 597
(SCA)
5
At
600 para [4]