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[2022] ZAGPPHC 106
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Boast v Nedbank Limited and Another (46844/20) [2022] ZAGPPHC 106 (18 February 2022)

IN THE HIGH COURT OF SOUTH
AFRICA
GAUTENG DIVISION, PRETORIA
CASE NUMBER:  46844/20
DATE:     18
February 2022
CHESTER
STORMER
BOAST
Applicant
V
NEDBANK LIMITED
First Intervening Party
THE STANDARD BANK OF SOUTH
AFRICA LIMITED
Second Intervening Party
JUDGMENT
KOOVERJIE
AJ
:
BACKGROUND
[1]
This is an application for voluntary surrender of the applicant’s
estate in terms
of section 4 of the Insolvency Act 24 of 1936 (“the
Act”).  Such application has been opposed by Nedbank and
Standard Bank,
the first and second intervening parties respectively.
[2]
The issue for consideration is whether the applicant has satisfied
the substantive requirements
in terms of section 4 of the Act.
The core contentions were that the dividend calculated and
purportedly to the advantage
of the creditors, remains
unsubstantiated hence the application is not in the interest of
creditors.  Moreover, the sequestration
application was aimed to
delay the sale in execution of the immovable properties and thus
constituted an abuse of the court process.
[3]
Initially the late filing of the applicant’s answering affidavit
was an issue.
The applicant sought condonation in that regard.
However at the hearing of the matter, the intervening parties did not
oppose
the condonation sought.  I have considered the
submissions proffered by the applicant and find that good cause has
been shown.
In light thereof condonation is granted for the
late filing of the applicant’s answering affidavit to the
intervention application.
[4]
This matter was initially placed on the roll for hearing on 1
December 2020, whereafter
the matter was postponed to 24 March 2021
making provision for the intervening parties, Nedbank Limited
(“
Nedbank
”) and the Standard Bank of South Africa Limited
(“
Standard Bank”
) to intervene.
[5]
On 24 March 2021 the matter was postponed once more to 15 July 2021
to permitting the
applicant’s creditors to file their intervention
applications.
[6]
On 19 April 2021 Nedbank instituted an application for leave to
intervene and opposed
the applicant’s surrender application.
On 23 April 2021 Standard Bank instituted an application for leave to
intervene in
terms of which it also opposed the relief sought by the
applicant.
[7]
On 2 June 2021 the applicant delivered his respective replying
affidavits to Nedbank’s
and Standard Bank’s applications for
leave to intervene.
[8]
Both Nedbank and Standard Bank are secured creditors of the applicant
and accordingly
they have the necessary standing to oppose the relief
sought by the applicant.  Moreover as creditors, they could
intervene
at any stage of the proceedings.
THE APPLICANT’S CASE
[9]
The applicant submitted that it would be in the best interest of his
creditors if his
estate is sequestrated. He alleged that there are
enough assets in his estate, after provision is made for the
sequestration costs,
to achieve the required dividend for the benefit
of the respective creditors.
[10]
It would further be in the best interests of his creditors if a
curator be appointed to manage
his estate in order to acquire a fair
and reasonable dividend between the creditors.  The acceptance
of the surrender of his
estate will prevent one creditor from being
favored above the other.
[11]
The applicant substantiates his case for sequestration on the
following, namely:
(i)
He is married out of community of property with two minor children to
care for.
His wife, despite various attempts to seek
employment, remains still unemployed;
(ii)
During 2016 after having sold his business he invested in the
property market with
the aim to generate income by renting the
premises;
(iii)
However and even before Covid-19, his company struggled to make ends
meet due to the lessees
defaulting in their obligations. The
applicant eventually managed to sell the building during 2020;
(iv)
He is currently not in a position to honour his monthly obligations
towards his creditors
as he does not have any income;
(v)
His two vehicles have already been repossessed and there was a
massive shortfall on
each of the vehicles after it was sold on
auction.
(vi)
He has judgment against him for his non-payment of bond installments
and an auction was scheduled
for 15 October 2020.
(vii)
The applicant foresees that he will not be able to pay his debts in
the future.
[12]
The applicant contends that his total income at this stage is zero
and his total debt amounts to
R8,158,911.91 and that currently his
family members are assisting him financially.  With no income,
he is unable to service
his total debt, leaving him with a deficit of
R115,241.08.
[13]
There are two immovable properties in terms of which Standard Bank
and Nedbank respectively are
bondholders (i.e. secured creditors).
The applicant relied on a valuator’s valuation of the property
submitting that such valuation
is based on a market approach of
comparable sales and took into account the forced sale values.
He further contended that the
valuator appointed by Nedbank
undervalued the properties.
[14]
He indicated that there is definite equity in the properties if he
deducts the outstanding bond
amounts from the value of such
properties.  There is benefit for the creditors should the
estate be surrendered.  The available
dividend for distribution
would be 21 cents in the Rand.
STANDARD BANK’S CASE
[15]
Standard Bank is a judgment and execution creditor of the applicant
in the aggregate sum of R5,934,342.66
(as per certificate of
balance).  A court order was granted by this court on 19
February 2020 in this regard.
[16]
The court order relates to foreclosure proceedings instituted by
Standard Bank against the applicant
under case number 20789/2019 in
relation to the Vlakfontein Property, over which Standard Bank holds
a mortgage bond.
[17]
As at 22 April 2021, the applicant was indebted to Standard Bank
under the aforesaid court order
in the aggregate sum of
R5,934,342.66.  Standard Bank is a substantial creditor of the
applicant.
[18]
The applicant operated a home loan facility with Standard Bank under
bank account number 21380097.
On 16 July 2014, the parties concluded
a home loan agreement in terms of which Standard Bank would loan and
advance to the applicant
the aggregate sum of 1.3 million (in
addition to the 3.2 million already loaned to the applicant under the
same home loan facility).
[19]
The combined loan was repayable by the applicant over a period of 240
months in initial monthly
instalments of approximately R42,000.00 and
was secured by three continuing covering instalments registered over
the applicant’s
immovable property  (Vlakfontein property).
[20]
In breach of the home loan agreement, and from approximately August
2017, the applicant failed
to pay his monthly instalments,
alternatively made sporadic payments. As at May 2019, the applicant
was indebted to Standard bank
in the aggregate amount of R4.9
million, with arrears of approximately R600,000.00.
[21]
As a result of the aforesaid breach Standard Bank instituted
foreclosure proceedings against the
applicant. The applicant opposed
the foreclosure proceedings.  However Standard Bank succeeded in
the foreclosure application.
[22]
A writ of execution was subsequently issued on 5 March 2020 and
served on 12 March 2020.
The Vlakfontein property was
subsequently attached on 19 March 2020. A first sale in execution of
the Vlakfontein property was thereafter
scheduled for 15 October
2020. The applicant was made aware of this sale in execution between
27 and 31 August 2020.
[23]
It was submitted by Standard Bank that the purpose of the applicant’s
surrender application is
merely to delay the sale in execution.
[24]
In fact, the applicant instituted his surrender application as a last
resort to avoid execution
of the Vlakfontein property. The surrender
application was instituted on the eve of the scheduled sale in
execution.  This step
was to delay the eventual and inevitable
execution of Standard Bank’s judgment.
[25]
Furthermore the surrender application contradicts the applicant’s
stance when he filed his answering
affidavit in the foreclosure
proceedings.  Therein the applicant undertook to repay arrears
after the ‘commercial property’
was sold.  In this instance
there is no benefit to creditors.
NEDBANK’S CASE
[26]
During 2007 and at Boksburg, the Nedbank granted a loan to the
applicant secured by a mortgage bond in the amount of R700 000.00
over
the immovable property (together with an additional amount as
security for the payment of the capital amount, interest, and costs).
During 2010 and at Boksburg, Nedbank granted a further loan to the
applicant secured by a mortgage bond in favour of Nedbank in the
amount of R585 107.00 over the immovable property (together with an
additional amount as security for the payment of the capital
amount,
interest, and costs).
[27]
The immovable property would therefore secure the applicant’s
indebtedness to the intervening
creditor under the mortgage bonds,
and the intervening creditor would be secured up to R1 285 107.00
plus the additional amount.
[28]
According to the applicant Nedbank is a secured creditor in the
amount of R1,285,044.92 which was
the full outstanding amount owing
to Nedbank as at 2 October 2020.
[29]
In terms of the written contract between Nedbank and the applicant,
the certificate of balance
constitutes proof of the amount owing.  As
at 11 January 2021, the full outstanding balance owing, with regard
to the immovable
property, by the applicant to the intervening
creditor, was R1 317 858.28 together with interest at a rate of 5.03%
per annum, compounded
daily and capitalised monthly.
[30]
The whole outstanding amount subsequently forms part of the Nedbank’s
secured claim against the
applicants. As at 11 March 2021 the full
outstanding balance owing escalated to R1 336 839.56.
[31]
Nedbank has an unchallenged real and substantial interest in the
subject matter of the application.
[32]
In
Ex parte
Ogunlaja & Others,
[2011] JOL
27029
(GNP), at Para 9
, the court directed that a true
advantage to creditors should be a minimum of 20 cents to the Rand.
In this instance the advantage
to creditors at 21c per Rand.
It is noted that this calculation was effected on or about 2
October 2020 when the founding affidavit
was commissioned.
[33]
It is Nedbank’s case that the applicants have over valued their
immovable property to arrive
at the abovementioned dividend in the
Rand.
[34]
It was further pointed out that the applicant failed to address the
option of debt counselling
in terms of the provisions of the
National
Credit Act, No. 34 of 2005
.  This mitigating step could very
well be to the advantage of all creditors in the estate of the
debtor.
[35]
The valuation presented by the applicant fell short of accurate and
fundamental requirements.
The immovable property was valued at
R1,300,000.00 and no provision was made for a “market” value.  No
“comparable”
sales were listed in such valuation.
[36]
It was further argued that the valuation reports lacked logical and
substantial reasoning.
It was pointed out that the formula
applied was not identified and explained in detail, and no basis was
provided for the formula
used.
[37]
Furthermore, the valuation report lacked a proper analysis of the
condition of the property.
There appeared no explanation
concerning the location of the property, the extent of demand for
property in the area, the access
the public might have to and from
the property and no identification of any local agents with whom
discussions were held regarding
the probable price the properties
would fetch upon auction.
[38]
In the
Ogunlaja
matter at para 14 the court emphasized that
expert evidence must comply with strict requirements in order to be
acceptable and stated
further that:
“
A valuator’s services are
required in matters of this nature in order to provide independent
expert advice to the court of a probable
price that an immovable or
movable asset forming part of an insolvent estate will realise when
offered for sale during the liquidation
process undertaken by the
trustee who is appointed by the Master once the surrender is
accepted.”
[39]
It was argued that there was no substantial proof that the
liquidation of the assets of the applicant’s
estate would render an
advantage to creditors.
[40]
Nedbank obtained another valuation from WAMPACH.  The valuator’s
report indicated that the
immovable property has a forced sale value
of only R750 000.00, with an average market value of R1275 000.00.
The municipal value
is R1 700 000.00, and the valuer confirmed that
the immovable property is a vacant land.
[41]
It was argued that should the court accept the forced sale values
indicated by WAMPACH as the correct
forced sale values of the
immovable properties, and should the advantage for creditors be
recalculated accordingly, then there would
be no advantage for
creditors.
[42]
More specifically Nedbank submitted that should the Nedbank’s
valuation of the immovable property
be accepted as the correct forced
sale value of the immovable property, then and in such event there
will be no dividend in the rand
available for distribution amongst
the concurrent creditors.
[43]
In such circumstances the amount available for distribution after
deduction of costs of the sequestration
would be depleted. There
would not be enough assets in the estate to cover the costs of
sequestration and there would be no assets
available for distribution
after the costs of sequestration is deducted.
ANALYSIS
[44]
It is trite that an applicant is required to comply with certain
procedural and substantive requirements.
The procedural
requirements are set out in section 4 of the Insolvency Act, 24 of
1936 (“the Act”) while the substantive requirements
are found in
section 6 of the Act.
[45]
For the purposes of judgment the procedural requirements have not
been challenged.  It is
the substantive requirements that are in
issue.
[46]
The substantive requirements that have to be satisfied are that the
estate of the applicant is insolvent;
the applicant owns realizable
property of a sufficient value to defray all costs of the
sequestration which will in terms of the
Act be payable out of the
residue of his estate; and will be to the advantage of the
applicant’s creditors if his estate is sequestrated.
[47]
The test to establish that it is to the advantage of creditors of the
estate to be sequestrated
is more stringent in cases of voluntary
surrender than in sequestration applications.
[48]
In terms of section 6 of the Act, the court must be satisfied that it
will be to the advantage
of creditors that the estate is
sequestrated.  By virtue of sections 10 and 12, a court may make
an order sequestrating the
estate of the debtor provisionally if it
is
prima facie
of the opinion that there is reason to believe
that it will be to the advantage of creditors if the estate is
sequestrated and in
the case of final sequestration if the court is
satisfied that there is reason to believe that it will be to the
advantage of creditors
on a balance of probabilities.
[49]
There is an
indisputable duty on every
applicant to be transparent and honest to the court in every
respect.  Our courts have time and again
pronounced on the
importance of transparency and stated in
Ex
parte Arntzen
2013 (1) SA 49
(KZP):
“
5.
Courts have long required an applicant in voluntary surrender
applications to make a
full and frank disclosure. This arises at
least in part from the stringent test referred to above. It is quite
clear that without
a full and frank disclosure, the court cannot be
‘satisfied’ as to the above two criteria in particular. The
required high level
of disclosure is also affected, in no small
measure, by the fact that the application is ordinarily brought on an
ex parte basis
as is the present one. There is ample authority that
applications brought on that basis require the utmost good faith. The
principles
were succinctly stated by Le Roux J in Schlesinger v
Schlesinger in a rescission application as follows:
‘
1.
in ex parte applications all material facts must be disclosed which
might influence a Court in coming to a decision;
2.
the non-disclosure or suppression of facts need not be wilful or mala
fide to incur the penalty of rescission; and
3.
the court, apprised of the true facts, has a discretion to set aside
the formal order or to preserve it.
…”
[50]
Further in
Ex Parte Cloete
,
case no 1097/2013
[2013] ZAFSHC 45
, 5 April 2013, the court emphasised that valuators
are obliged to act conscientiously when furnishing their expert
opinion of the
value of assets that fall into an estate that is ought
to be surrendered voluntarily.  The court cited with approval
authorities
to that effect and made reference to:
“
[18]
In
Ex
Parte
Anthony
en ‘n Ander en 6 soortelyke aansoeke
2000
(4) SA 116
(C)
Blignaut J dealt with seven separate applications for voluntary
surrender. In all seven cases each estate consisted of one mortgaged
immovable property and a few movables. The court’s main concern was
the advantage to creditors and Blignaut J, writing for the
full
bench, found that notwithstanding valuations obtained by the
applicants in each case, they failed to prove that the valuations
would be achieved in the event of forced sales. The court relied on
the judgment of Leveson J in
Nel
v Lubbe
1999
(3) SA 109
(W)
where the learned Judge was also confronted with a valuation which
was nothing more but “a bold assertion of value”.
[19]
In
Nel v Lubbe
loc cit, Leveson J made it clear that a
court will look to the guidance of an expert when it is satisfied
that it is incapable of
forming an opinion without it, but that the
court is not a rubber stamp for the acceptance of the expert’s
opinion. It is important
that evidence must be placed before the
court of the facts relied upon by the expert for his opinion as well
as the reasons upon
which it is based. The learned Judge went
further:
“
The
court will not blindly accept the assertion of the expert without
full explanation. If it does so its function will have been
usurped.”
(at 111G).
”
[20]
In
Ex parte
Ogunlaja and others
…
the court endorsed the approach by Levenson J in
Nel v Lubbe
and went further to explain the applicable requirements
regarding expert testimony in paras [15] and [16].  It is
apposite to
emphasise the following warnings in paras [35] to [39]:
[35]
It is necessary to add that the nature of
the valuation report is such that, in the absence of a reliable
method of calculation of the value of the immovable properties, the
court is left with the uncomfortable impression that the valuator
and
the applicants, or the applicants’ legal representatives, are too
close to one another to allow the preparation of an independent
expert’s report. The thought is difficult to dismiss in these
applications, and in many others the court has seen over the past
two
to three years, that the valuator is fully aware of the value that
needs to be certified for assets in every individual insolvent
estate
to ensure that the papers reflect the conclusion that an advantage to
creditors is assured if the surrender is accepted …
[37]
If the suggestion is allowed to take hold that certain valuators
manipulate the true value of assets
upward to persuade the court to
accept applications such as the matters under consideration, the
result must be a deep suspicion
on the part of the court of any
valuation report prepared by the valuators concerned.
[38]
To prevent such an uncomfortable situation
from arising, valuators should certify under oath that they
prepared
every valuation without any knowledge of the facts of the relevant
application. In addition, proof of physical inspections
of immovable
properties ought to be provided by way of photographs and a detailed
description of the physical condition in which
each property was
found, as well as the effect that the physical appearance of the
property has upon the valuation thereof.
[39]
The applicants themselves and the attorney
acting for them should likewise confirm that the valuator
was not
made privy to the value that the assets in the estate must realise in
order to constitute an advantage to creditors.”
[51]
Having considered the papers and the argument before me, I am not
satisfied that there would be
sufficient value to defray all costs of
sequestration and that there would be an advantage to the applicant’s
creditors if his
estate is sequestrated.
[52]
In my view, the applicant has failed to proffer evidence challenging
the intervening parties’
contentions.  It is noted that the
applicant argued that Nedbank undervalued the properties.  He
does so without any substantiation.
He specifically fails to
address why reliance should be placed on his valuator’s report.
[53]
In reply he merely submits that there is an advantage to creditors
and it would be in the best
interest of his estate to be
surrendered.  In my view, the valuation report relied upon by
the applicant, does not meet the
jurisdictional requirements as
explained above.  The report specifically falls short of
demonstrating an acceptable measure
of expertise, and consequently
that no proof was provided that liquidation of the assets of the
applicant’s estate would render
an advantage to creditors.
[54]
The formula applied or followed in the process of investigation,
inspection and assessment was
not identified and explained in detail
and no reason was provided for the choice of the formula under the
given circumstances.
[55]
As pointed out by Nedbank, the valuation report should have addressed
the issues relating to the
condition of the property, the location of
the property, the demand for property in the area, the access the
public might have to
and from the property and further it does not
identify any local agents with whom discussions were held regarding
the probable price
the properties would fetch upon auction.
[56]
Moreover it cannot be ignored that the application was instituted on
the eve before the sale in
execution was to take place.  The
applicant was well aware of this fact.  It was an opportunistic
move on the applicant’s
part to deter the sale in execution.
[57]
Consequently, the following order is made:
1.
The application is dismissed;
2.
The applicant is ordered to pay the costs of the first and
second intervening parties on a scale as between party and party.
H
KOOVERJIE
Acting
Judge of the High Court
Gauteng
Division, Pretoria
Appearances
:
Counsel
for the
applicant
:

Adv I Kruger
Instructed
by:
Erasmus
Attorneys
Counsel
for the first intervening party:
Adv B Lee
Instructed
by:

Van Hulsteyns Attorneys
Counsel
for the second intervening party:
Adv L. VR van Tonder
Instructed
by:
Jason
Michael Smith Incorporated Attorneys
Date
heard:
20
October
20
21
Date
of Judgment:
18
February 202
2