About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Eastern Cape High Court, Port Elizabeth
SAFLII
>>
Databases
>>
South Africa: Eastern Cape High Court, Port Elizabeth
>>
2021
>>
[2021] ZAECPEHC 48
|
|
Grobank Limited v Georgiou (1105/2020) [2021] ZAECPEHC 48 (19 August 2021)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been redacted
from this document in compliance with the law and
SAFLII
Policy
IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE LOCAL DIVISION, PORT ELIZABETH
CASE NO.: 1105/2020
In
the matter between:
GROBANK
LIMITED APPLICANT
and
YVETTE
GEORGIOU RESPONDENT
(ID
NO.: ………….)
DATE
OF BIRTH: [………..]
REASONS
FOR JUDGMENT
GOVINDJEE
AJ
Background
[1] The applicant sought an
Order confirming the rule
nisi
issued by Gqamana J on 16 March
2021. The applicant previously launched an application, which was
opposed, for the provisional
sequestration of the respondent’s
estate. Gqamana J, having summarized the essential facts in the
matter, ordered,
inter alia
, as follows:
(a)
The
respondent’s estate was placed under provisional
sequestration in the hands of the Master of
the High Court, Port Elizabeth.
(b)
A
rule
nisi
was
issued calling upon the respondent and all other interested parties
to show cause before Tuesday 20 April 2021 why the estate
of the
respondent should not be finally sequestrated and be placed in the
hands of the Master of the High Court, Port Elizabeth.
(c)
That
the order be served by:
i.
the sheriff on any of
the employees of the respondent in terms of section 9(4A)(a)(ii) of
the Insolvency Act, 1936
[1]
(‘the Act’);
ii.
delivery thereof to the
South African Revenue Services;
iii.
one publication in
English in ‘The Herald’ and one publication in Afrikaans
in ‘Die Burger’ newspapers;
and
iv.
registered post to any
of the respondent’s creditors.
[2] The
matter was subsequently postponed and the rule
nisi
extended for receipt of the sheriff’s returns of service. The
applicant alleged that the respondent was indebted to it personally
and by way of signed suretyships in the sum of R35 391 755,49,
consisting of:
[2]
(a) Home loan agreements –
R16 703 882, 19
(b)
Lease
and instalment sale agreements – suretyships in respect of
River Street Trust (‘the Trust’)
–
R6 265 966,74
(c)
Home
loan agreements – suretyships in respect of the Trust –
R9 585 633,27; and
(d)
Art
Holdings (Pty) Ltd (‘Art Holdings’) – suretyship –
R3 320 396,88.
[3]
The respondent is also surety to Art Holdings in respect of its
liability to Absa Bank in
the amount of R4 200 000,00. Art
Holdings was wound up on 25 August 2020.
[4] The
applicant estimates the market value of the respondent’s assets
to be R25 000 000.00,
so that her liabilities exceed her
assets by an amount in excess of R14 000 000. It is alleged
that the applicant is
factually insolvent, and that creditors may
expect to receive approximately 62 cents in the rand so that there is
an advantage
to creditors.
[5] The
respondent elected not to apply to file a further affidavit, instead
relying on the answering
affidavit filed prior to the issued rule
nisi
,
as well as an argument based on submissions raised at the hearing for
the provisional sequestration of the respondent. An order
confirming
the rule
nisi
was granted on 29 July 2021. The reasons for that order follow.
Grounds
for opposition
[6] The
respondent opposed the application for sequestration on the following
grounds:
(a) The applicant
failed to comply with all the provisions of section 9 read with
section 10
of the Act.
(b) The applicant
failed to comply with section 11 of the Act, in that the provisional
order
had not been duly served in accordance with this section of the
Act.
(c)
The
applicant did not satisfy the requirements for sequestration on a
balance of probabilities.
a)
Sections 9 and 10 of
the Act
[7] The
respondent submitted that the applicant failed to show on a balance
of probabilities that it
had the necessary
locus
standi
to launch
the application for sequestration. This is based on the applicant
having entered into agreements with the South African
Bank of Athens,
as opposed to the applicant. The respondent suggests that the
applicant failed to comply with section 54 of the
Banks Act, 1990
(‘the Banks Act’) and should have made averments in
respect of the Minister of Finance’s consent
to a transfer of
assets of a bank in terms of that legislation.
b)
Section 11 of the
Act
[8] The
respondent argued that the provisional order of sequestration was not
served in accordance
with section 11 of the Act and that she only
became aware of the provisional order of sequestration when an estate
agent visited
one of her properties. Notice ought to have been given
to the respondent personally and, furthermore, no notice was given to
any
of the respondent’s employees. In addition, the Practice
Directives for the Division require an explanation on affidavit in
the event of delayed service of a provisional order.
[3]
c)
Respondent’s
insolvency
[
9] The
respondent denies having committed any act of insolvency, or that her
liabilities exceed her
assets. This argument is premised on the
respondent counting her assets together with that of the Trust, on
the basis that the
assets and liabilities within the Georgiou group
of companies are closely linked to the respondent so that they should
be regarded
as a composite.
[10] The respondent
also argues that it would not be to the advantage of the general body
of creditors for the
respondent’s estate to be sequestrated. No
other creditor had taken any legal action for purposes of enforcing
any claim
against the respondent, and the applicant could have
executed its claim against the respondent without reverting to an
application
for sequestration. Furthermore, so the argument goes, the
applicant refused to allow the respondent to sell immovable
properties
which served as security for the applicant’s claim,
when this would have reduced any amount due and payable to the
applicant.
Finally, it is suggested that the applicant obtained
judgment against the respondent without her being given notice in
accordance
with the provisions of the
National Credit Act, 2005
,
[4]
and / or without her being given any reasonable opportunity to
convince the court not to grant judgment, so that the balance of
probabilities favour the respondent.
Analysis
[11] The legal
position in respect of the granting of a final sequestration order is
well known. A court may grant
such an order on the return day of the
rule
nisi
if
satisfied that:
[5]
(a)
The
sequestrating creditor has established against the debtor a claim
entitling it to apply for the sequestration of the debtor’s
estate; and
(b)
Either
the debtor has committed an act of insolvency, or the debtor is
insolvent; and
(c) There is
reason to believe that it will be to the advantage of creditors if
the debtor’s estate
be sequestrated.
[12] The onus rests
on the sequestrating creditor to prove the satisfaction of these
requirements on a balance
of probabilities. Even if the court is
satisfied that a proper case has been made out, it still has a
discretion either to grant
or refuse a final sequestration order. The
mere fact that the court granting a provisional order has already
held that an act of
insolvency was
prima
facie
committed by
the respondent, or that the respondent was
prima
facie
actually
insolvent does not absolve the court on the return day to satisfy
that these requirements have in fact been established
on a balance of
probabilities, before a final order may be granted.
[6]
Locus
standi
[13] The applicant
bears the duty to establish its
locus
standi
to launch
the application. The respondent admits that the applicant is a public
company duly registered and incorporated with limited
liability,
trading
inter alia
as bankers and
credit providers in terms of the provisions of the Banks Act, 1990
[7]
and
National Credit Act, 2005
.
[8]
The founding affidavit confirms that the applicant was formally known
as The South African Bank of Athens Limited.
[9]
The applicant’s name was changed on 29 March 2019 and it
carries on business as a commercial Bank.
[10]
[14] Importantly, a
Certificate of Change of Name is attached to the founding affidavit
(and marked as Annexure
‘JV1’), dated 29 March 2019. That
Certificate (numbered LB0014) contains the stamp and signature of the
Chief Executive
Officer of the South African Reserve Bank Prudential
Authority. It certifies that ‘The South African Bank of Athens
Limited
has, in terms of section 56(5) of the Banks Act 94 of 1990,
changed its name to GroBank Limited and that the new name has been
entered in the register of banks’.
[11]
[15] The respondent
states in her answering affidavit that ‘The South African Bank
of Athens was purchased
by Gro Capital Holding Limited, of which the
name was changed to Grobank Ltd during April 2019…Basically,
Applicant became
a vehicle for Afgri Group Holdings, which was
focussed on the agricultural sector and as a result Applicant turned
from the traditional
business to the agricultural sector, which of
course did not correspond (to) the interests of the Georgiou
Group…’.
[12]
The respondent further admits the contents of the relevant paragraphs
of the applicant’s founding affidavit, but denies ‘…
that applicant is entitled to claim in terms of any of the agreements
concluded with South African Bank of Athens Limited’.
[13]
The respondent also comments in her answering affidavit on the
lateness of the publication of the applicant’s financial
results and indicates that ‘it is incredibly difficult to form
a view on the capital stability of the bank…’
[16] Without seeking
leave to file a supplementary affidavit, the respondent filed a
‘supplementary note’
regarding this issue, attaching
copious sections of the Banks Act, 1990. This note clarifies that the
locus standi
issue is based on the applicant’s purchase of Bank of Athens.
Relying on section 54 of the Banks Act, the respondent now
suggests
that the applicant was obliged to have averred that ministerial
consent had been obtained, failing which the only inference
to be
drawn is that consent was not obtained. The respondent’s heads
of argument and argument in court centred on this suggestion.
[17] This argument
cannot be accepted. Section 56(4) of the Banks Act provides that ‘A
bank shall within
21 days of the registration by the Commissioner
of…a change of its name, furnish the Authority with a
certified copy of
the special resolution which sets out the…change
of name.’ Upon receipt, and following payment by the bank
concerned
of the prescribed fee, ‘…the Authority shall …
in the case of a special resolution relating to a change of name,
change the name of the bank concerned in the register of banks, and
issue to the bank concerned a certificate of such change of
name.’
[14]
[18] The applicant
has succeeded in establishing its standing and the production of the
Certificate of Change of
Name, incorporating reference to section
56(5) of the Banks Act, confirms the validity of the name change and
entry of the new
name in the register of banks, replacing ‘The
South African Bank of Athens Ltd’. This suffices for purposes
of establishing
the applicant’s entitlement to claim in terms
of agreements concluded by ‘The South African Bank of Athens’
with
the respondent. There is no legal basis, either on the papers or
by virtue of any cited authority, for the suggestion that the
applicant was required to do more in respect of proving aspects of a
suggested ‘amalgamation’ or ‘merger’
or
‘arrangement’ referred to in chapter 5 of the
Companies
Act, 2008
[15]
and involving a bank as one of the principal parties.
[16]
Service
[19] Section 11(2)
of the Act provides for court direction in the event that a debtor
has been absent during a
period of time from his or her usual place
of residence and business. The court may direct that it is sufficient
service of the
rule if a copy is affixed to an outer door of the
court building, and published in the Gazette, or may direct some
other mode of
service. The clear suggestion is that personal service
on the debtor is typically required.
[17]
[20] The purpose
behind this requirement is to ensure, as far as possible, that a
respondent receives notice of
the proceedings against her.
[18]
In this case the respondent filed a notice of opposition on 31 July
2020 and substituted her attorneys of record on 21 September
2020,
choosing her attorney’s address for purposes of service.
[19]
Opposing papers were filed and counsel briefed to argue the
application for provisional sequestration and the proceedings on the
return dates.
[20]
It is clear that the respondent was aware of the rule
nisi
that was issued, having served and filed a ‘Request for
Reasons’ on 13 April 2021.
[21]
While the rule was not served on the respondent, it was certainly
brought to her notice.
[22]
Failure to apply the strict letter of the law has caused no
prejudice
[23]
and good cause has been shown for non-compliance, justifying
condonation.
[24]
[21] In
terms of section 11(2A) of the Act:
‘
A copy of the rule
nisi
must be served on –
a)
any
trade union referred to in subsection (4);
b)
the
debtor’s employees by affixing a copy of the petition to any
notice board to which the employees have access inside the
debtor’s
premises, or if there is no access to the premises by the employees,
by affixing a copy to the front gate, where
applicable, failing which
to the front door of the premises from which the debtor conducted any
business at the time of the presentation
of the petition; and
c)
the
South African Revenue Service.
[22] Section 11(4)
of the Act provides that ‘For the purposes of serving the rule
nisi
in terms of subsection (2A), the sheriff must establish whether the
employees are represented by a registered trade union and determine
whether there is a notice board inside the employer’s premises
to which the employees have access.’
[23] It is apparent
that service on the respondent’s employees was effected by the
sheriff on 8 April 2021,
by affixing to the outer door of the place
of business.
[25]
The sheriff noted that he was unable to find any employees of the
respondent. This accords with the applicant’s unanswered
averment that it has no knowledge of the respondent having any
employees at all.
[26]
It must therefore be accepted that there is no representative
registered trade union involved. As such, there has been substantive
compliance with the section 11 service requirements in respect of the
respondent’s employees.
[24] Insofar as
non-compliance with Practice Directive 13(b) is concerned, an
affidavit from a correspondent attorney
for the applicant was
submitted, seeking condonation for non-compliance. The deponent
confirms that service and publication of
the provisional
sequestration order was attended to during the period 30 March 2021
and 9 April 2021.
[27]
In fact, service and publication of the provisional sequestration
order should have taken place on or before 31 March 2021. The
reasons
advanced for condonation are that the attorney was not notified that
the provisional sequestration order was to be handed
down on 16 March
2021. The court order was only uplifted by the firm’s messenger
on 23 March 2021 and the attorney erroneously
assumed that service
and publication had to take place within 10 days of receipt of the
order. There can be no prejudice to the
respondent in condoning the
minimal delay in effecting service and publication of the provisional
order. The affidavit submitted
satisfies the requirement of Practice
Directive 13(b) and I am satisfied that good cause has been
demonstrated for non-compliance
with the stipulated timeframe to be
condoned.
Respondent’s
insolvency
[25] The respondent
concluded various home loan agreements with the South African Bank of
Athens Limited between
2015 and 2019, in terms of which different
sums of money were loaned and advanced to the respondent. The
respondent also signed
deeds of suretyship binding herself as surety
and co-principal with the Trust and Art Holdings International. The
terms and conditions
of the relevant agreements included an
obligation to pay monthly instalments to the applicant.
[28]
In the event of default, the applicant had an option to either claim
immediate repayment of the full outstanding balance, or to
terminate
the agreement(s). In that event, all amounts owing to the applicant
became payable in full. Following default on the
part of the
respondent, the Trust and Art Holdings, the Applicant gave notice in
terms of
section 129
of the
National Credit Act, 2005
. The agreements
were cancelled when the arrears were not paid.
[26] The respondent
is personally, and by virtue of the signed suretyships, jointly and
severally liable with the
Trust and Art Holdings for the debt owed to
the applicant.
[29]
All the credit agreements concluded by the respondent personally or
as co-principal debtor contain provisions that a certificate
of
balance shall serve as proof of the balance owing and that it is due
and payable, unless the contrary is proved. The amounts
that the
applicant contends are due and payable by the respondent personally
and by virtue of signed suretyships have been verified
by
certificates of balance. I am satisfied on a balance of probabilities
that the applicant has succeeded in demonstrating due
and payable
liquidated claims against the respondent.
[27] It is also
readily apparent from the papers that the applicant has succeeded in
demonstrating that the respondent’s
liabilities exceed her
assets, so that she is factually insolvent, thereby complying with
the second requirement for final sequestration.
[30]
The schedule provided by the respondent seeking to refute this
[31]
does so by including the assets and liabilities of the Trust. The
invitation to view the respondent’s financial position
together
with the Georgiou group of companies, and the Trust in particular, to
avoid sequestration, must be refused, being devoid
of a legal
underpinning.
[28] I am also
satisfied that the applicant has succeeded in demonstrating that
there is reason to believe that
it will be to the advantage of
creditors of the respondent if her estate is sequestrated. The
evidence establishes, on a balance
of probabilities, that the
respondent owns substantial assets.
[32]
This should be sufficient to ensure that it will be advantageous to
the general body of creditors to sequestrate the respondent
to obtain
some pecuniary benefit to the creditors as a body. The applicant
therefore succeeds in establishing the third requirement
for final
sequestration on a balance of probabilities.
[29] Finally, the vague suggestions
that this enquiry is somehow impacted by the inaction of other
creditors, or
that the applicant could have proceeded differently in
accommodating the respondent, appear to me to be unmerited, as are
the submissions
related to the
National Credit Act, 2005
and the
events prior to the granting of default judgment. I am satisfied that
the applicant has met the requirements of section
12(1) of the Act
and that a discretion should be exercised to order the confirmation
of the rule
nisi
, so that the respondent’s estate is
sequestrated.
Order
[30]
It is ordered:
1.
That
the rule
nisi
be and is hereby confirmed.
______________________________
A GOVINDJEE
ACTING JUDGE OF
THE HIGH COURT
APPEARANCES:
For the Applicant
:
Adv K D
Williams
Instructed
by
:
K G Tserkezis Inc
For the
Respondent
:
Adv J T
Benade
instructed
by
: Jacques
van Niekerk Attorneys
Heard on
: 29 July
2021
Order
issued
: 29 July
2021
Reasons delivered
on :
19
August 2021
[1]
Act 24 of 1936.
[2]
Par 684 of the founding affidavit,
et
seq
.
[3]
Rule 13(b) of the Joint Rules of Practice for the
High Courts of the Eastern Cape Province provides that provisional
sequestration
orders should be served and published in an
appropriate newspaper within 10 court days of it being granted. In
the event of such
order not having been served or published within
that time, an explanation on affidavit for the delay is required.
[4]
Act 34 of 2005.
[5]
Section 12(1) of the Act.
[6]
See E Bertelsmann
et
al
Mars:
The law of insolvency in South Africa
(10
th
Ed) (2019) p148.
[7]
Act 94 of 1990.
[8]
Act 34 of 2005.
[9]
Para 5 of the Founding Affidavit.
[10]
Para 6 of the Founding Affidavit.
[11]
P 175 of the indexed record (‘the Index’).
[12]
Paras 14 and 15 of the Answering Affidavit.
[13]
Paras 50, 50.1 of the Answering Affidavit.
[14]
Section 56(5)(a) of the Banks Act.
[15]
Act 71 of 2008.
[16]
In terms of s 54 of the Banks Act. The comments
of Gqamana J in this regard may also be noted, in particular that
the matter has
been raised in an obscure manner without appearing in
the answering affidavit, and that the argument is disingenuous if
one has
regard to all the facts and evidence herein: at paras 10, 11
of the provisional sequestration judgment.
[17]
Bertelsmann at p139.
[18]
Bertelsmann at p 139, 140.
[19]
Index pp 1324-1325; 1352-1353.
[20]
The matter was postponed on the original return
date on 28 April 2021.
[21]
Index pp 1743-1744.
[22]
See
Skordis v
Nissiotis
1955 (1) SA 395
(N) at 396H.
[23]
Bertelsmann at p 141.
[24]
Rule 27(3) of the Uniform Rules of Court.
[25]
Index p 1750.
[26]
Para 719.2 of the Founding Affidavit.
[27]
Index p 1747-1749.
[28]
The standing of the applicant to claim against
the respondent based on these agreements has already been addressed.
[29]
It might be added that court orders, now subject
to a pending application for leave to appeal, were granted by Goosen
J against
the respondent and the Trust in terms of which they were
ordered to pay the amounts due in terms of the relevant credit
agreements.
[30]
See
Index pp 153-170, 1476-1479, and 1572-1575.
[31]
Paras 151, 152.2 of the Answering Affidavit read
with annexure ‘YG22’ at pp 1528-1532 of the Index. In
other instances,
the respondent furnishes a denial to the
applicant’s averments without furnishing sufficient details to
substantiate the
response: see, for example, para 157.1 of the
Answering Affidavit.
[32]
Para 678-680 of the Founding Affidavit read with para 152.1 of the
Answering Affidavit.