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[2016] ZAECPEHC 86
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Shackleton Credit Management (Pty) Ltd v Vabaza (24/2016) [2016] ZAECPEHC 86 (20 October 2016)
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IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE LOCAL DIVISION, PORT ELIZABETH
Case No.: 24/2016
Date Heard: 13
October 2016
Date Delivered: 20
October 2016
In
the matter between:
SHACKLETON
CREDIT MANAGEMENT (PTY) LTD
Applicant
and
BELINDA
LINDANA
VABAZA
Respondent
Identity
No.: [6...]
JUDGMENT
EKSTEEN
J:
[1]
The
applicant is the cessionary of the benefits flowing from a judgment
debt in the amount of R249 716,98, together with interest,
against the respondent. The judgment debt remains unpaid and
attempts to execute on the judgment yielded a
nulla
bona
return. The applicant, accordingly, brings the present
application for the provisional sequestration of the respondent.
[2]
Section 10
of the Insolvency Act, 24 of 1936 (herein referred to as the
Insolvency Act) provides
that if a court to which an application for
the sequestration of the estate of a debtor has been presented is of
the opinion that-
“
prima facie
–
(a)
the petitioning creditor has
established against the debtor a claim such as is mentioned in
subsection (1) of section
nine
;
and
(b)
the debtor has committed an act
of insolvency or is insolvent; and
(c)
there is reason to believe that
it will be to the advantage of creditors of the debtor if his estate
is sequestrated, it may make
an order sequestrating the estate to the
debtor provisionally.”
[3]
The
respondent admits her indebtedness to the applicant and admits the
nulla
bona
return.
She concedes too that she is factually insolvent, however, contends
that she has no assets at all and that there is
accordingly no
advantage to creditors if her estate were to be sequestrated.
The only issue for resolution in the present
matter is therefore
whether there is reason to believe that there will be an advantage to
creditors of the respondent if her estate
were sequestrated. In
the present instance the applicant obtained cession of the book debts
of a commercial enterprise which
included the judgment debt to which
I have referred earlier. The applicant accordingly has very
limited knowledge of the
financial affairs of the respondent and it
is not known in the present case whether the respondent has other
creditors.
[4]
The
deponent to the founding affidavit, Ms Dalene Woodgett states that
she had conducted a search on the data base of the companies
and
intellectual property commission which revealed that the respondent
is an active director of Samil Natural Fibres (Pty) Ltd
(registration
no. 1992/003060/07)(herein referred to as “Samil”).
The search revealed further that the
respondent was also an active
director of South African Mohair Industries (Pty) Ltd (registration
no.: 1963/005248/07)(herein
referred to as “South African
Mohair”). She accordingly postulated that it is highly
probable that the respondent,
in addition to being a director, also
holds shares in these companies, which shares could be sold to the
advantage of concurrent
creditors. Ms Woodgett further
contended that it would certainly be to the benefit of the general
body of the respondent’s
creditors if an enquiry into her
affairs were held by a duly appointed trustee whereupon an
opportunity for investigating her estate
to recover any assets
belonging to her could be undertaken. On the basis of these
averments she submitted that it was reasonably
foreseeable that there
would be a benefit to creditors.
[5]
This
averment the respondent denies. She states that she owns no
fixed property and that the home in which she resides together
with
her husband, to whom she is married out of community of property, is
rented by her husband. The furniture therein, she
states, is
“almost entirely” owned by her husband. The “few
items” which do not belong to her husband,
she says, belongs to
them jointly and are in the nature of small items that they have been
given as gifts by their children.
She does not believe them to
be of any significant value.
[6]
The
respondent states that she has no investments of any kind, save for
her provident and pension fund arising from the termination
of her
employment with the Eastern Cape Development Corporation in November
2013. These funds are protected and they do not
fall into her
insolvent estate. I pause to record that the respondent was the
former regional head for the Western District
of the Eastern Cape
Development Corporation.
[7]
The
respondent proceeds to state that she owns no jewellery other than
costume jewellery which she states is of no commercial value
whatsoever. She owns no motor vehicle and utilises a Volkswagen
Polo which her son is in the process of paying off.
[8]
She is the
sole director of Sebenza Enabling the Environment (Pty) Ltd which
provides assistance to small businesses to enable them
to access
finance. The company, she states, was registered in 2013 and
has struggled to become viable. In support hereof
she has
annexed the financial statements of the company for the year ending
28 February 2014 and she declares that she does not
have any
subsequent financial statements. The financial statements for
2014 reveal that the respondent has a loan account
in the company in
the amount of R133 904. The respondent does not disclose
what her present loan account in the company
is but states that “such
loan account as which I might presently have in the company” is
worthless as the company has
no money to pay for it. She
believes that the shares in the company are “probably
worthless”. The company,
she says, is presently owed
approximately R67 000 by its debtors, however, some of these
debts, she says, are old and irrecoverable
and accordingly she
estimates that, at best, probably half of them would be recovered.
[9]
The
respondent did annex to her answering affidavit the most recent
statement of an FNB account in the name of the said company
which
revealed a balance of R3 385,47 as at the end of the period.
From this amount the respondent states that she must
pay the rent and
other operating expenses of the company. When regard is had,
however, to the period covered by the bank
statement, being 17
January 2016 to 17 February 2016, it is apparent that virtually all
the expenses reflected on the bank account
are of a personal nature
and very few, if any at all, are business expenses.
Furthermore, neither the bank statement nor
the financial statements
for the year ending February 2014, reflect any rental payments.
[10]
In respect
of Samil and South African Mohair the respondent acknowledges that
she is a director of the company but denies that she
is a shareholder
in the company. To this end she has annexed a supporting
affidavit by one Joy Language. Ms Language
states that Samil
and South African Mohair are essentially one business and she refers
to them collectively as “the company”.
She is the
“support services manager” of the company and she
declares that the respondent is a non-executive director
in the
company who receives director’s emoluments of R7 500 per
board meeting and that she derives no other income from
the company.
I pause to record that the respondent’s personal bank statement
annexed to her answering affidavit reflects
a payment of R12 500
into her bank account described as “Samil Director’s
Fees”. The discrepancy is
not explained. Ms
Language further states that the respondent is not a shareholder in
the company. She does not, however,
confide in the court as to
who the current shareholders in the company are nor does she state
whether the respondent was at any
time a shareholder in the company
and, if so, when and to whom she had alienated her shares.
[11]
In reply Ms
Woodgett points out that Ms Language does not state that she has had
sight of the share allotment register nor has she
attached a
confirmatory affidavit from the company’s auditors. She
alludes to the shortcomings in Ms Language’s
affidavit which I
have recorded above and accordingly she contends that it remains
possible that the respondent was indeed allocated
a shareholding
which she then transferred to another person or entity for purposes
of avoiding attachment by creditors. This,
she contends that a
trustee ought to investigate.
[12]
In
addition, no doubt to compound this suspicion, she states that she
has learnt that the respondent’s son, a law student,
is a
trustee in two trusts. These trusts were fully dealt with in
supplementary papers filed by the respondent’s son
and it is
not in dispute that it has been comprehensively shown that they have
no bearing on the estate of the respondent.
[13]
Finally Ms
Woodgett has attached to her replying papers a number of articles
relating to the respondent’s achievements when
employed with
the Eastern Cape Development Corporation and various initiatives of
Sebenza Enabling the Environment (Pty) Ltd.
This she contends
is inconsistent with the picture which the respondent paints and
ought to be investigated by a trustee.
The respondent is a
trustee in the Eastern Cape Disability Economic Empowerment Trust and
one of the documents annexed sets out
the track record of various
trustees. In respect of the respondent it records:
“
As
Regional Head with ECDC, Belinda has built on her technical and
industrial background to assist people to build and grow their
businesses. In recognition of her abilities she has served on
many Boards, Trust and Fora in the industrial, construction
and
business sectors. One of her driving principle is the self-
empowerment of women, which earned recognition as a finalist
in the
Regional
Business Women’s
Association .”
[14]
Two
newspaper articles are also annexed published in October and November
2014, some nine months after the year-end reflected in
the financial
statements annexed by the respondent. In an article published
in October 2014 the Eastern Cape Herald reported:
“
Vabaza, whose new consultancy
operates closely with parastatals set up to aid business growth,
called for integration between various
parastatal and private
business platforms to fast-track the growth of small, medium and
micro enterprise (SMMEs).”
[15]
This is
compatible with the report in the Dispatch Live on 7 November 2014 in
which it reported that:
‘
Key Eastern Cape political and
private sector figures have come together in a plea to government to
“change the way it thinks
about the Eastern Cape” in a
bid to reclaim the province’s former status. …
The calls were made at the second of a
series of talks organised by former Eastern Cape Development
Corporation (ECDC) regional
head Belinda Vabaza, now head of her own
consultancy called Sebenza: Enabling the Environment.’
[16]
In
consequence of these averments, which the respondent alleges were new
allegations and ought to have been included in the founding
papers an
application was initially launched to strike out these allegations.
The application was, in due course abandoned
and the respondent
obtained leave to file a supplementary affidavit in order to deal
with these allegations. Somewhat surprisingly,
the respondent
did not herself attest to a supplementary affidavit. Rather,
her son, now an article clerk at a firm of attorneys
in Port
Elizabeth, filed an affidavit in support of her contentions.
Notably, in the face of the criticisms raised in respect
of the
affidavit of Ms Language no mention is made of whether or not the
respondent previously owned shares in the companies and,
if so, what
she did with them. The criticisms of the applicant in this
regard remained unanswered.
[17]
As set out
earlier the contentions in relation to the trusts raised in the
answering affidavits have been comprehensively refuted
in the
supplementary affidavit. However, the deponent to the
supplementary affidavit Tembelani Vabaza reveals therein that
in fact
the respondent is also a beneficiary and a trustee in the Dan Qeqe
Family Trust. The respondent is the daughter of
the late Dan
Qeqe, a well-known figure in sporting activities in the Eastern
Cape. The trust is an entirely discretionary
trust and
Tembelani records that no distributions have been made from the
trust. He has annexed the trust deed which records,
inter
alia,
that:
“
No
rights or hopes of any beneficiary under this trust deed and no part
thereof shall be attachable by any creditor of any beneficiary
or
vest in his trustee insolvency …”
[18]
Tembelani,
however, states in his affidavit that the trust currently “has
assets in the form of cash amounting some R500,000.00.”
The terminology seems to be to be ambiguous and does not exclude the
possibility of assets in other forms. Tembelani does
not
declare when the trust became possessed of such a sum of money and
what the source thereof was.
[19]
Section 10
of the
Insolvency Act to
which I have referred earlier clothes the
court with a discretion whether or not to grant a provisional
sequestration order even
where the requirements set out in the
section have been met. It is not in dispute that the applicant
bears the onus to establish
that “there is reason to believe”
that the sequestration will be to the advantage of creditors.
“Reason
to believe” predicates facts which engender
belief, which must be proved by the applicant, prima facie at the
stage when
a provisional order is sought, and on a balance of
probabilities when a final order is sought. (See
London
Estates (Pty) Ltd v Nair
1957 (3) SA 591
(N) at 593;
Nedbank
Ltd v Thorpe
[2009] JOL 24292
(KZP) at para [12] and
Nedbank
Ltd v Groenewald
2013 JDR 0748 (GNP) at para [36] and [37]; and
Butterworths:
Law of Insolvency
p.
2-20 para 2.1.4.)
[20]
It has been
held that there is reason to believe that the sequestration will be
to the advantage of creditors if the applicant satisfies
the court
that “there is a reasonable prospect – not necessarily a
likelihood, but a prospect which is not too remote,
that some
pecuniary benefit will result to creditors”. (See
Meskin
& Co. v Friedman
1948 (2) SA 555
(W) at 559.) It would be sufficient therefore
for an applicant to show that there are reasonable grounds to
conclude that
upon a proper investigation of the debtor’s
affairs, or otherwise, a trustee may discover or recover assets for
disposal
for the benefit of creditors. (See
Dunlop
Tyres (Pty) Ltd v Brewitt
1999 (2) SA 580
(W) at 583.) This, it seems to me, accords with
the finding in
London
Estates (Pty) Ltd
supra
that “if no substantial estate is shown to exist, circumstances
may yet establish a reasonable prospect, a prospect not too
remote,
that concealed assets will be found or others recovered. The
mere fact that sequestration enables investigation of
the insolvent’s
affairs is not sufficient: there must be additional facts
establishing that not too remote possibility.
This is the
approach in
Meskin’s
case, which … should be followed.”
[21]
In the
present case it has been established that the respondent held a loan
account in Sebenza Enabling and Environment in an amount
of
approximately R130 000 in 2014. The respondent does not
confide in the court as to what her current loan account
in the
company is and states merely, without the benefit of any financial
statements, that the loan account is worthless as the
company has no
money. On her own version the company has debtors in the amount
of R67 000. Some of these debtors,
she states, without any
further elaboration, are old and irrecoverable. Other than to
state that they are “old”
she makes no mention as to the
age thereof. It is significant, however, that the company was,
on her own admission, registered
in 2013. It appears therefore
improbable that many debts would have prescribed. At worst 50%
thereof could be recovered
on her own estimate. In addition she
owns all the shares in the company which must be realisable.
Respondent states
boldly that they are worthless, however, no
financial facts are disclosed in support of this averment.
[22]
It has
certainly been established on the papers that the respondent is a
director of Samil and South African Mohair. It is
not uncommon
for directors to be issued with shares. This was the
proposition made on behalf of the applicant. The
high-water
mark of the respondent’s response thereto is that she does not
currently own shares. In the face of the
express response
relating to her silence as to whether she previously owned shares and
how she has disposed of them the respondent
is silent. In these
circumstances there is a prospect not too remote, that a trustee may
recover such shareholding.
[23]
She did not
disclose the existence of the Dan Qeqe Family Trust in her answering
papers and there is some ambiguity in the supplementary
papers as to
precisely what assets the trust may own and what the origin thereof
was or when it was acquired. While it may
be speculative to
assume that there may be a loan account in the trust, when regard is
had to the vague averments made by the respondent
on a number of
issues and her total silence relating to the existence of the trust.
I think that it is a factor which must
be weighed together with the
other issues set out above.
[24]
For these
reasons I consider that there is a reasonable prospect, not
necessarily a likelihood, but a prospect which is not too
remote,
that some pecuniary benefit will result to creditors.
[25]
In the
circumstances, I make the following order:
1.
The estate
of the respondent is provisionally sequestrated in the hands of the
Master of the High Court, Port Elizabeth.
2.
The
respondent and all other interested parties are called upon to show
cause before this Honourable Court on 1 December 2016 at
09h30, or as
soon thereafter as the matter may be heard, why the estate of the
respondent should not be finally sequestrated in
the hands of the
Master of the High Court, Port Elizabeth.
3.
This order
is to be served:
(i)
By the sheriff on any employees of respondent in terms of section
9(4A)(a)(ii)
of the Insolvency Act, 24 of 1936.
(ii)
By delivery thereof to the South African Revenue Service.
(iii)
By one publication in English in “The Herald” and
one publication in
Afrikaans in “Die Burger”.
4.
The costs
of the application will be costs in the administration of the
insolvent estate.
J
W EKSTEEN
JUDGE
OF THE HIGH COURT
Appearances
:
For
Applicant:
Adv K Williams instructed by Lynn & Main Incorporated
c/o Smith
Tabata Incorporated, Port Elizabeth
For
Respondent: Adv T Rossi instructed by
BLC Attorneys, Port Elizabeth