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2023
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[2023] ZAFSHC 63
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Smith N.O and Another v Du Preez (2734/2022) [2023] ZAFSHC 63 (3 March 2023)
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,
FREE
STATE DIVISION, BLOEMFONTEIN
Case
number: 2734/2022
REPORTABLE:
YES/NO
OF
INTEREST TO OTHER JUDGES: YES/NO
CIRCULATE
TO MAGISTRATES: YES/NO
In
the matter between:
ELRICH
RUWAYNE SMITH N.O.
First Applicant
ETHNÉ
MARY VAN WYK N.O.
Second
Applicant
(In
their capacities as joint liquidators
of
Trackstar Trading 140 (Pty) Ltd
(in
liquidation)
And
PETRONELLA
SOPHIA DU PREEZ
Respondent
(Identity
Number: 7[...])
Married
out of community of property)
HEARD
ON:
13
OCTOBER 2022
JUDGMENT
BY:
DANISO, J
DELIVERED
ON:
This judgment
was handed down electronically by circulation to the parties'
representatives by email and by release to SAFLII. The
date and time
for hand-down is deemed to be 14H00 on 03 March 2023
[1]
The applicants are the joint liquidators of T
rackstar Trading
140 (Pty) Ltd (Trackstar).
Trackstar was
liquidated on 5 December 2019. At all material times hereto,
the respondent’s husband Mr
Alexis Du
Preez to whom the respondent is married out of community of property
was
the sole director of Trackstar. The respondent, her
husband and brother in law are co-trustees of the A Du Preez Family
Trust (“the
Trust”) a sole shareholder in Trackstar.
[2]
In this application the applicants
seek an
order that
the estate of
the
respondent be placed under provisional sequestration on the grounds
of insolvency.
[3]
In
terms of
s 10
of
the
Insolvency
Act
[1]
(“The
Act’’) a creditor who seeks to sequestrate the estate of
a debtor must satisfy the court
prima
facie
,
that
it has a liquidated claim of not less than R100 which entitles it
[2]
to apply for the sequestration of the debtor who has committed an act
of insolvency or is in fact insolvent and there is reason
to believe
that it would be to the advantage of the respondent’s creditors
if the debtor’s estate is sequestrated.
The Applicant’s
claim
[4]
The
applicants’ claim arises from the respondent’s failure to
repay an amount of
R360 000.00 which the
respondent received from Trackstar and her husband respectively
during the period 2017 to 2019 in monthly
payments of
R15 000.00
for a period of 24 months. It is the applicant’s case that the
respondent was not entitled to the said
payments, she was not
even employed by Trackstar.
[5]
The applicants state that the respondent is insolvent. At the
insolvency enquiry
held on 11 March 2020 and 13 October 2022,
[3]
the respondent admitted that she received payments from
Trackstar and her husband as monthly allowances. She also confirmed
her inability to pay her debts
including
bond instalments and household expenses and that she was also not
gainfully
employed. On her own version, she was in arrears with her mortgage
bond repayments in the amount of R786 525.55,
her only source of
income was from teaching mathematics on a part time basis where she
received only R4 000.00 per month as
a result, she was dependent
on her father and her sister for financial assistance for household
expenses including the monthly
bond repayments, medical aid, water
and electricity. Her income was so meagre she has been advised to
submit nil returns to SARS.
[6]
The applicants further state that despite demand,
[4]
the respondent has failed to pay the applicant’s debt. There
is also a judgment taken against the respondent and her
co-trustees
in both their personal capacities and as trustees for the Trust by
Absa bank on 20 August 2020 and in the amount of
R889 327. 83.
The extent of the respondent’s assets is unknown except that
she owns a fully paid 1998 Toyota Corrolla
and some household
furniture. The estimation value of her immovable property by W[...]
is only R1 850 000.00 while her
liabilities including the
applicants’ debt stood at R2 035 853.38.
[7]
The applicants contend that there is no alternative remedy except to
seek
the sequestration of the respondent’s estate. A
trustee will be able to unearth all the respondent’s assets
which
can be distributed amongst the creditors and investigate her
previous income that she earned as a school teacher and also her
involvement
with the Trust and Trackstar.
[8]
It is undisputed that during the period 2017 to 2019 the respondent
received various
payments from Trackstar and her husband. The exact
amount that the respondent received and the circumstances under which
the payments
were made to her is in dispute.
[9]
The application is opposed on the grounds that the applicants have
failed to prove the debt relied upon
and that the respondent is
insolvent. The respondent contends that if there is any debt due by
her, the applicants should have
issued summons instead of
sequestration proceedings. She did not receive the letter of demand
as it was sent back by the post office
otherwise, she would have
responded to it. In any event the applicants’ claim has
prescribed.
[10]
According to the respondent, the only payment she received during
this period was
the total amount of R305 335.00 of which
R125 000.00 was from
Trackstar
and
the rest from
her
husband.
[5]
The payments were from the income generated by Trackstar and paid to
her as a beneficiary of the Trust which is the sole shareholder
in
Trackstar.
[11]
The
respondent further states that she is not insolvent, the applicants
have simply relied on outdated information namely, her testimony
relayed at the insolvency enquiry which took place two years ago. Her
financial situation has improved since then and at that time
her
inability to pay her debts was attributable to the effects of
Covid-19 pandemic lockdown on business operations. Her income
has now
increased, she earns between R56 000.00 to R61 000.00 per
month from various streams of income including providing
Mathematics
lessons, home schooling and extra classes while her monthly expenses
amount to R49 556.00
[6]
as
a result, she has managed to bring her debts up to date and her home
loan is no longer in arrears.
[12]
The default judgment alluded to by the applicants was not granted
against her in
her personal capacity but in her capacity as a trustee
of the Trust. With regard to her assets, the estimated value of her
vehicle
is R30 000.00 and her immovable property has been
evaluated at the amount of R2 500 000.00 by Messrs Johan
Broderyk
Properties on 3 August 2022.
[13]
I am in agreement with the applicant’s replication that proof
of dispatch of
the
letter of demand by registered mail to the respondent’s address
constitutes sufficient proof of service irrespective of
whether the
respondent received it or not. It is also important to note that on
her own submission, the post office had returned
the mail back to the
sender. The respondent conveniently avoids adding that the reason the
mail was sent back to sender is because
it was unclaimed. It has been
held that registered mail is more is more reliable means of postage
and no harm can come to either
party’s interests when this mode
of service is utilized.
[7]
[14]
There is also no merit to the respondent’s unsubstantiated
contention that
the applicants’ claim has prescribed. On the
facts germane to this matter it is indisputable that during the
period
from
2017 to 2019 the respondent received payments in the aggregate amount
of at least R305 335.00 from Trackstar and her husband
respectively.
Trackstar
was only liquidated in the year 2019, within the three-year period of
prescription of debts as contemplated in s11 of
the Prescription
Act.
[8]
[15]
On the papers, the respondent’s averment with regard to what
led to the payment
is implausible and gainsaid by the indisputable
evidence that approximately a year before the payments were made to
her in 2016,
Trackstar was already in financial dire straits. There
was no income generated that would have retained dividends for the
Trust
hence the respondent’s version is not even supported by
any evidence namely, the Trust’s financial statements for that
period and a resolution authorising the distribution of the payments
to the beneficiaries. The averments are also not verified
by the
co-trustees’ confirmatory affidavits.
[16]
For the above-mentioned reasons, I am not persuaded that the
applicants’ debt
is
is
disputed on
bona
fide
and
reasonable grounds.
I am satisfied that
the
applicants have established a liquidated claim against the respondent
as provided for in s 9(1) of the Act.
Insolvency
[17]
The respondent has provided no cogent reasons for not paying the
applicants’
debt or at least the amount
R125 000.00
which
is
undisputed. There is also a judgment debt obtained against the
respondent as co-trustee and surety for the unpaid debts of the
Trust. An inability to pay a debt and a failure to pay a debt to the
extent that a judgment is taken by the creditor are both clear
and
persuasive
indicators
of
insolvency. In
De
Waard v Andrews & Thienhans Ltd
[9]
Innes
CJ stated that:
“
To
my mind the best proof of solvency is that a man should pay his
debts; and therefore I always examine in a critical spirit the
case
of a man who does not pay what he owes.”
[18]
It is trite that the inability to pay debts must be considered
cumulatively with
the extent of the respondents’ assets and
liabilities. On its own, the respondent’s inability to pay her
debts does
not constitute actual insolvency but merely a strong
suspicion that her estate might be insolvent.
[19]
In the founding affidavit, the applicants conceded that the extent of
the respondent’s
liabilities and assets have not been
established. The applicants simply placed an unsworn appraisement of
an amount of R1 850 000.00
as the value of the respondent’s
immovable property while the respondent countered by attaching a
letter from Messrs
Johan Broderyk Properties dated 3 August
2022 stating that:
“
This serves to
confirm that I the undersigned visited and inspected the
abovementioned property. Market related value that can be
linked to
the property is:
R2 500 000.00
(Two Million Five Hundred Thousand Rand)
For any queries please
contact me.”
[20]
As correctly pointed out by the applicants, expert evaluation of the
immovable property
is required under these circumstances.
[10]
Inexplicably, the applicants have not attached a covering affidavit
by their valuator. The same deficiencies hold good in respect
of the
respondent’s evaluation nonetheless; the onus is on the
applicants to establish
prima
facie
that
the respondents’ liabilities exceed the total of her assets.
See
Mackay
at
199H and 200A-F.
[21]
In the absence of credible, independent and sworn valuation of the
respondent’s assets
I am unable to determine that the
respondent’s assets are exceeded by her liabilities and to also
assess whether there is
a reasonable prospect that the sequestration
will benefit the creditors.
[22]
Taking into consideration all facts of this
matter, I am not convinced that a case has been made out for an order
to place the respondent’s estate under provisional
sequestration. The costs are to follow the result.
[23]
In the premises,
I make the following order:
(1)
The application is dismissed with costs.
N.S.
DANISO, J
APPEARANCES:
Counsel on behalf
of Applicant:
Mr. E. Visser
Instructed by:
Ettiene Visser
Attorneys
BLOEMFONTEIN
Counsel on behalf
of Respondent:
Adv. F.F. Jacobs
Instructed by:
Callis Attorneys
BLOEMFONTEIN
[1]
Act No, 24 of 1936.
[2]
In
terms of section 9(1) of the Act “A creditor (or his agent)
who has a liquidated claim for not less than fifty pounds,
or two or
more creditors (or their agent) who in the aggregate have liquidated
claims for not less than one hundred pounds against
a debtor who has
committed an act of insolvency, or is insolvent, may petition the
Court for the sequestration of the estate
of the debtor.”
[3]
The record of the proceedings of Insolvency Enquiry are attached to
the applicants’ founding affidavit as Annexures “D1.1”
to “D1.2”, “D2.1” to “D2.7” and
“D3.1” to “D3.10.”
[4]
Annexure “B” is the copy of the registered letter of
demand dated 28 October 2021.
[5]
Annexure “OA3” of the respondent’s answering
affidavit.
[6]
Annexures “OA1” and “OA2” are bank
statements for the period May to July 2022.
[7]
Rossouw
and Another v Firstrand Bank Ltd
2010
(6) SA 439
(SCA).
[8]
Act No, 68 of 1969.
[9]
1907
TS 727
at
733;
Mackay
v Cahi
1962
(4) SA 193
(O)
at 204F-G.
[10]
Nel
v Lubbe
1999
(3) SA 109
(W).