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[2021] ZAGPPHC 442
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Vilcor Enterprises CC v Burnett (24222/2021) [2021] ZAGPPHC 442 (8 July 2021)
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REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
CASE
NO: 24222/2021
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
REVISED
In the
matter between:
VILCOR
ENTERPRISES
CC
Applicant
(Registration
No. 1985/005929/23)
and
KYLEE
BURNETT
Respondent
[…]
(Unmarried)
The
judgment and order are accordingly published and distributed
electronically. The date and time of hand down is deemed to be
10:00
on 8 July 2021.
TEFFO,
J
:
Introduction
[1]
This
is an urgent application for the provisional sequestration of the
estate of the respondent.
[2]
The
application is opposed.
The parties
[3]
The
applicant is Vilcor Enterprises CC and the respondent is Ms Kylee
Burnett.
Background
[4]
During
2013 the applicant instituted an action against the respondent in
this division under case number 58581/13 for payment in
terms of a
building agreement concluded between the parties for the building of
the immovable property of the respondent in the
Wild Teak
development.
[5]
The
respondent defended the action. The issues in the action were
separated in terms of Uniform Rule 33(1). The separated
issues
were heard and the court ruled in favour of the applicant. The
respondent was ordered to pay the applicant’s
costs. The
action is still pending.
[6]
Costs
were taxed in the amount of R826 331,60. The applicant managed
to collect an amount of R454 516,20 from the respondent’s
funds
which were held by her erstwhile attorneys of record, Natalie Visagie
Inc. This amount reduced the total amount taxed
of R826 331,60
to an amount of R371 815,40.
[7]
On
or about 8 December 2020 the applicant caused a writ of execution to
be issued out of this Court. The writ was re-issued on 15
February
2021 and executed on 12 April 2021.
[8]
On
12 April 2021 the applicant’s attorney, Mr Stuart, received a
telephone call from Advocate Ogunrombi who advised him that
he was
acting on behalf of a certain third party who allegedly owned the
movable properties at the respondent’s residence.
The details
of the said third party were not disclosed to Mr Stuart.
Advocate Ogunrombi requested that the movables only
be attached and
not be removed to enable him to furnish Mr Stuart with proof that
they were no longer being owned by the respondent.
Mr Stuart
did not receive the proof of payment.
[9]
On
the same day the sheriff went to the respondent’s residence and
demanded payment to satisfy the writ of execution.
The
respondent informed him that she was unable to satisfy the said
warrant or any portion thereof. The sheriff then proceeded
to
perform a diligent search of the premises, judicially attached and
removed the movable goods found at the premises.
[10]
The
attachment and removal of the movable goods were concluded on 13
April 2021 and a sale in execution was scheduled to take place
on 19
May 2021.
[11]
On
12 May 2021, Mr Yakopi of Zintle Nkhulu Inc contacted Mr Stuart
telephonically. Mr Yakopi informed Mr Stuart that he was
acting
on behalf of Mr Westernberg, a foreign national of the Netherlands.
Mr Westernberg purchased the respondent’s
immovable property
together with the movable properties contained therein. Mr Yakopi
subsequently sent Mr Stuart an email confirming
their telephone
conversation together with proof that the immovable property was
transferred into the name of Mr Westernberg on
16 April 2021.
The immovable property was sold for an amount of R1 128 000,00.
Furthermore, a copy of the deed of sale
was also attached in terms
whereof Mr Westernberg purchased the movable properties of the
respondent for the amount of R214 684,00.
[12]
Mr
Yakopi threatened the applicant with an urgent application to
interdict the sheriff from proceeding with the sale in execution
of
the movable properties under attachment and/or to claim their return.
[13]
The
sale of the properties by the respondent to Mr Westernberg prompted
the applicant to bring an urgent application for the sequestration
of
the respondent’s estate.
Urgency
[14]
The
applicant contends that it only became aware of the identity of Mr
Westernberg on 12 May 2021 when Mr Yakopi furnished Mr Stuart
with a
copy of the deed of sale. This was the first day it became aware of
the sale of the immovable property.
[15]
In
terms of
section 29(1)
of the
Insolvency Act, 24 of 1936
as amended
(“
the
Act
”),
the aforesaid dispositions of property by the respondent were done
prior to the sequestration of her estate and this may
have the effect
of preferring one of her creditors above another.
[16]
If
the dispositions had such effect and were made within six months
before the date of sequestration, and immediately after they
were
made the liabilities of the insolvent exceeded the value of her
assets, the court may set them aside.
[17]
The
disposition of the movable properties allegedly took place on 22
January 2021. Any order of sequestration granted after
21 July
2021 would deprive the trustees of the insolvent estate of the remedy
afforded to them in terms of
section 29
of the Act.
[18]
The
applicant is not able to approach the court in the normal cause as no
motion court dates are available before 21 July 2021.
[19]
There
is also an urgent need to stop the respondent from disposing any
other properties.
[20]
The
court is also requested to adjudicate the matter on an urgent basis
to prevent the
concursus
creditorum
from suffering any further prejudice.
[21]
The
respondent denies that the application is urgent. She claims that
where the court finds that there is urgency, the urgency is
self-created. It was submitted that the applicant was aware
that the movable properties were sold and owned by someone else
as
early as 12 April 2021. The applicant did nothing until on 17
May 2021 when it launched the application. The applicant
has not
explained why it took 34 days to launch this application when it had
knowledge that the movable properties had been disposed
of.
[22]
The
applicant conceded that its attorney received information about the
sale of the movable properties that belonged to the respondent
on 12
April 2021. However, the details as to who purchased or owned
the movable properties and/or the person’s attorneys
of record
at the time, were not disclosed to its attorney, Mr Stuart. It
was only on 12 May 2021 that full details about
the sale and the
ownership of the movable properties were provided to its attorney.
The information also included the fact that
the immovable property
was also sold to Mr Westernberg. It could not have approached
the court for relief with sketchy information.
[23]
I
accordingly ruled that the matter was urgent.
Applicable legal
principles
[24]
An
application in an application for the provisional sequestration of a
respondent needs to satisfy the court on a
prima
facie
basis that:
24.1
It has a claim against the respondent;
24.2
The respondent has committed an act of insolvency or is in fact
insolvent; and
24.3
There is reason to believe that it will be to the advantage of the
creditors if the estate of the respondent
is sequestrated
[1]
.
[25]
De
Waal AJ in
Standard
Bank of South Africa Ltd v Sauer and Another
[2]
,
remarked as follows:
“
4.
Given that sequestration applications deal with the status of a
person, the bar for
obtaining a provisional order is set somewhat
higher than that which applies in applications for interim
interdictory relief.
The question of whether the requirements
are met on a prima facie basis is determined by assessing whether the
balance of probabilities
on the affidavits favour the applicant’s
case
[3]
.
The test can be traced back to the well-known judgment of Corbett JA
(as he then was) in Kalil v Decotex (Pty) Ltd &
Another
1988 (1)
SA 943
(A). In that matter, Corbett JA held that a court can hardly
decide an application for provisional winding up of a company without
reference to the respondent’s rebutting evidence. Corbett
JA then explained that the term ‘prima facie case’
means
that the balance of probabilities on all the affidavits should favour
the granting of the application for provisional liquidation
(or
sequestration)
[4]
.
Applications
for the referral of the matter to oral evidence will only be granted
in exceptional circumstances in these applications
because the
granting of the relief does no lasting injustice to the respondent as
she will on the return day generally be given
an opportunity to
present oral evidence on disputes issues
[5]
.
5.
As far as the first requirement is concerned, i.e. whether the
applicant has
a claim against the respondent, the SCA added in Kalil
that an application for liquidation should not be resorted to in an
attempt
to enforce a claim which is bona fide disputed. In respect of
this requirement, the onus on the respondent is not to show that she
is not indebted to the applicant but she must merely show that the
indebtedness is disputed on bona fide and reasonable grounds
[6]
.
This is known as the Badenhorst rule
[7]
.
In short, an application for provisional sequestration should not be
used as a means of putting pressure on the respondent
to pay a debt
which is bona fide disputed.
”
The applicant’s
claim
[26]
Two
questions arise. The first is whether the applicant has established
its claim on a
prima
facie
basis, i.e. whether the balance of probability on the affidavits is
in its favour. Should this question be answered in the
affirmative, the second question is whether the applicant’s
claim has been shown by the respondent to be
bona
fide
disputed on reasonable grounds, in which case sequestration
proceedings would be regarded as inappropriate
[8]
.
[27]
The
applicant alleges that the respondent is indebted to it in the sum of
R371 815,40 excluding additional costs of the writ and
the sheriff.
The respondent contends that amount allegedly being owed by her to
the applicant is vague. It does not sufficiently
inform her how much
she owes to the applicant. She claims that the fact that the
applicant has attached, removed and sold the movable
properties from
her house at an auction on 19 May 2021 raises questions that pertain
to the amount allegedly owed to the applicant.
It is submitted
that the amount realised at an auction cannot be validly set off
against the amount of the debt that the applicant
holds against her.
The movable properties which were sold at an auction did not belong
to her. They were unlawfully seized
and sold. The owner
of the properties has sued the applicant for the recovery of the
amount for the value of the goods which
was R214 684,00. Should
the amount realised at the auction for the sale of the movable
properties be set off against the
debt of the applicant, how much is
it, and how was it calculated considering the other costs attendant
thereto.
[28]
The
respondent asserts that the applicant has launched this application
to put pressure on her to pay a debt which is
bona
fide
and reasonably disputed. The applicant pretends to be acting in
the interest of the
concursus
creditorum
while in actual fact it is interested in debt collection for itself.
[29]
The
above allegations are denied by the applicant in the replying
affidavit. It is asserted that a taxed bill of costs represents
a
liquidated claim that has been fixed. It was submitted that the
respondent does not seriously dispute the amount owing.
She merely
claims that she is not certain as to whether the amount realised at
the auction on 19 May 2021 ought to be deducted
from the amount owing
by her. Despite this uncertainty the amount owing is capable of easy
and speedy proof. Should the movable
properties not belong to her,
the amount due and owing to the applicant remains R371 815,40.
Should the goods have belonged
to her, the amount due and owing to
the applicant is R365 793,84 (R371 815,40 – R6 021,56).
[30]
The
applicant has attached the judgment in its favour against the
respondent to its founding papers, the taxed bill of costs together
with proof of payment from the respondent’s erstwhile
attorneys, Natalie Visagie Inc in the amount of R454 516,20 which
reduced the taxed amount to the amount of R371 875,40. I agree
with the applicant that a taxed bill of costs represents a
liquidated
claim that has been fixed.
[31]
The
applicant’s attorney of record, Mr Stuart filed a supplementary
affidavit, to which the sheriff’s return was attached,
explaining what happened to the proceeds of the sale of the movable
goods attached, and removed from the respondent’s residence
on
12 April 2021.
[32]
It
was submitted in the respondent’s heads of argument that there
is no explanation why the attorney could supplement an affidavit
of a
litigant. The supplementary affidavit should not be admitted. I
do not agree. The applicant’s attorney has
been
instructed to represent the applicant in the matter. He has personal
knowledge of what happened to the proceeds of the sale
as advised by
the sheriff. All what the affidavit seeks to do is to attach
the sheriff’s return to confirm what has
already been averred
in the replying affidavit. There is no prejudice to the
respondent. I admitted the supplementary affidavit
in the interests
of justice.
[33]
Whether
or not the movable goods will be set off against the debt of the
applicant, is immaterial. There is not much difference
in terms
of the amounts. The fact of the matter is that this does not
extinguish the debt due and payable to the applicant.
The debt
exceeds an amount R100,00 as envisaged in
section 9(1)
of the Act.
[34]
In
my view, on a balance of probabilities, the applicant has established
its claim against the respondent and the respondent has
not
demonstrated a
bona
fide
dispute on reasonable grounds.
Insolvency
[35]
The
applicant alleges that the respondent committed acts of insolvency as
contemplated in
section 8(b)
of the Act when (a) she informed the
sheriff that she was unable to satisfy the applicant’s warrant
and (b) the sheriff was
unable to find movable properties to satisfy
the warrant. Furthermore, as contemplated in
section 8(c)
of the Act
when she disposed of her property which has and could have the effect
of prejudicing her creditors or of preferring
one creditor above
another. It is averred that the respondent is deemed to be
unable to pay her debts and is therefore liable
to be sequestrated.
The applicant contends that the value of the movable properties
allegedly sold to Mr Westernberg is not
sufficient to satisfy its
claim against the respondent. It denies that the alleged sale of the
movable properties between the respondent
and Mr Westernberg took
place, alternatively, that their market value was as stated in the
deed of sale.
[36]
With
regard to factual insolvency, the applicant contends that the
respondent does no longer own any immovable, movable or disposable
property. Since January 2021, the respondent claims to have
received the amount of R1 342 684,00 from Mr Westernberg.
However, she does not have any money to pay its debt.
[37]
The
respondent denies the allegations. She claims that she can pay her
debts as and when they fall due. She blames her erstwhile
legal
representative for not communicating the legal process leading up to
judgment to her. The last she knew of the matter
was that there
was an application for leave to appeal the judgment against her.
From there she never heard from her erstwhile
attorney until the
sheriff attended to her residence with a writ of execution to attach
and remove the movable properties. She
has not received a proper
notice of taxation and/or a notice to execute the movable properties.
[38]
She
asserts that she is employed and earns a salary of R54 500,00 per
month and has two other creditors with whom she is in good
standing.
One of her creditors, Nedbank, has offered her more credit. She
contends that she would be able to negotiate
an adequate amount of
instalments to liquidate the capital debt owed to the applicant. The
applicant refuses to engage her on making
arrangements for the proper
satisfaction of the debt due (even though it remains vague to her).
She claims that if the applicant
was open to arranging a liquidated
amount of instalment payment, she would be able to pay her debts as
and when they fall due.
She denies having received the amount
for the sale of the immovable property from Mr Westernberg. She
contends that the amount
was received in trust by the transferring
attorney.
[39]
In
its replying affidavit, the applicant denies that the respondent is
solvent. It is contended that the respondent’s salary
is not
sufficient to pay the total debt in a single payment. She has not
settled its claim nor attempted to do so. She has
admitted that
she cannot pay the applicant’s claim or any portion thereof and
that she does not own any assets.
[40]
In
De
Waard v Andrew and Thienaus Ltd
[9]
,
Innes CJ remarked as follows:
“…
Speaking
for myself, I always look with great suspicion upon, and examine very
narrowly, the position of a debtor who says, ‘I
am sorry that I
cannot pay my creditor, but my assets far exceed my liabilities’.
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.
”
[41]
Section
8
of the Act reads as follows:
“
Acts
of insolvency
A
debtor commits an act of insolvency –
(a)
…
(b)
If
a court has given judgment against him and he fails, upon the demand
of the officer whose duty it is to execute that judgment,
to satisfy
it or to indicate to that officer disposable property sufficient to
satisfy it or if it appears from the return made
by that officer that
he has not found sufficient disposable property to satisfy the
judgment.
(c)
If
he makes or attempts to make any disposition of any of his property
which has or would have the effect of prejudicing his creditors
or
preferring one creditor above another.
”
[42]
The
respondent could not satisfy the amount that was demanded from her
when the sheriff executed the writ at her residence. She
disposed of
her property which has or could have the effect of prejudicing her
creditors or of preferring one creditor above another.
I am
satisfied under the circumstances that the respondent has committed
acts of insolvency as envisaged in
section 8(b)
and (c) of the Act.
Advantage to creditors
[43]
The
applicant contends that upon the order for the sequestration of the
respondent being made, the affairs of the respondent can
be
investigated by a trustee to establish what assets, voidable
preferences or dispositions without value exist to the advantage
of
creditors. Further that should the sale of the respondent’s
immovable property be set aside, that will be to the benefit
of the
concursus
creditorum
.
[44]
The
applicant has attached a valuation report which shows that there is
equity in the immovable property as the property has a municipal
valuation of R2 000 000,00. It is submitted that this amount
far exceeds the amount previously due to the respondent’s
bondholder and a trustee will be able to ensure that the respondent’s
property is realised for its true value, and that the
proceeds are
distributed
pro
rata
amongst the respondent’s creditors.
[45]
It
is submitted that the trustee can also investigate the circumstances
giving rise to the alleged sale of the respondent’s
movable
goods and determine whether monies were actually exchanged or, as the
applicant suspects, the sale was merely a simulated
transaction to
avoid execution proceedings taking place. Furthermore, the
trustee will be able to investigate what happened
to the balance of
the amount of R1 342 684,00 allegedly received from Mr Westernberg
after the bondholder had been paid, alternatively,
whether further
amounts changed hands between the respondent and Mr Westernberg.
[46]
The
applicant asserts that despite having liquidated her assets, the
respondent does not intend to pay her creditors. It is
only
through the sequestration of her estate that her
concursus
creditorum
can expect to obtain redress.
[47]
The
respondent reiterates that besides the applicant, she has other two
creditors with whom she is in good standing. She will remain
in good
standing with them as she has the ability and will to make payments
as and when they fall due. She claims that the
respondent
refuses to engage in a proper and mature fashion with a view to
liquidate the debt in monthly instalments until final
payment.
[48]
She
denies that the sequestration of her estate will be to the advantage
of creditors. It is submitted that the sequestration of
the
respondent’s estate will only benefit the applicant.
[49]
The
onus
of establishing advantage to creditors remains on the sequestrating
creditor throughout, even where it is clear that the debtor
has
committed an act of insolvency
[10]
.
In certain earlier cases (e.g.
Wilkins
v Pieterse
),
the view was taken that once an act of insolvency (i.e. any act) is
proved, the court will require convincing reasons to persuade
it that
sequestration will not be to the advantage of creditors. However,
more recently, the courts have held that the commission
of an act of
insolvency is not necessarily material to the question of advantage
to creditors. Certain acts of insolvency
by their nature, tend
to indicate advantage to creditors – for instance, a
disposition of property which prejudices or prefers
one creditor
above another – but other acts, e.g., a
nulla
bona
return, do not (see, e.g.
Lotzof
v Raubenheimer
[11]
).
[50]
Sequestration
will only be to the advantage of creditors if it will result in a
greater dividend to them than would otherwise be
the case –
e.g., through the setting aside of impeachable transactions, or the
exposure of concealed assets – or if
it will prevent an unfair
division of the proceeds of the assets or some creditors being
preferred to others
[12]
.
[51]
In
Gardee
v Dhanmanta Holdings & Others
[13]
,
a debtor’s only creditor applied to sequestrate his estate on
the basis of a
nulla
bona
return. The court held that the creditor had to satisfy it that there
was reason to believe that, after the costs of sequestration
had been
paid, he would recover an amount that was not negligible.
Furthermore, he had to demonstrate some reasonable expectation
that
the amount would exceed the likely proceeds of ordinary execution. As
he had given no information other than that he had obtained
a
nulla
bona
return, he had failed to show that sequestration would be to his
advantage (see also
Mamacos
v Davids
[14]
).
[52]
The
court does not have to be satisfied that sequestration will benefit
creditors financially, merely that there is reason to believe
that it
will:
“
The
facts put before the court must satisfy it 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
[15]
.
”
[53]
The
respondent claims that she does not longer own any movable or
immovable property. It was not disputed that the sale of
her
immovable property had the effect of settling the amount due to her
previous bondholder. From her own version, the respondent
contended that she pays her other creditors while she failed and/or
neglected to pay the applicant’s debt.
[54]
The
applicant’s evidence relating to the valuation of the immovable
property has not been rebutted. The applicant submits
that should the
sale of the respondent’s immovable property be set aside, that
will be to the advantage of creditors as the
municipal valuation of
R2 000 000,00 exceeds the value of the bond previously registered
over the property which was R1 304 000,00.
Furthermore, that
the sequestration of the respondent’s estate will ensure that
the immovable property and any other movable
property she may
possess, is realised for its true value and the proceeds thereof are
distributed
pro
rata
amongst the respondent’s creditors.
[55]
In
my view, the acts of insolvency committed by the respondent indicate
an advantage to creditors. I am satisfied that there
is a
reasonable prospect that some pecuniary benefit will result to the
creditors. Under the circumstances, the applicant has discharged
its
onus
of establishing that the sequestration of the respondent’s
estate will be to the benefit of the creditors.
Conclusion
[56]
It
therefore follows that a proper case has been made out for a
provisional order of sequestration.
Costs
[57]
The
respondent sought costs
de
bonis propriis
against the applicant’s attorney of record for launching the
application.
[58]
Mr
J Vorster made submissions against the costs order sought against the
applicant’s attorney by the respondent.
[59]
I
have found in favour of the applicant in this application. The
issue of the
de
bonis propriis
costs order against the applicant’s attorney sought by the
respondent does not arise. I am therefore not inclined to
grant
further costs in this application save for the costs in the
sequestration.
[60]
Consequently,
an order is made in terms of the draft order marked “X”.
M J
TEFFO
JUDGE
OF THE HIGH COURT
GAUTENG
DIVISION, PRETORIA
Appearances
For the
applicant
C Richard
Instructed
by
E Y Stuart Inc
For the
respondent
N T Jongwana
Instructed
by
Laäs Döman Inc
Heard
on
2 June 2021
Handed down
on
8 July 2021
[1]
Section
10
of the
Insolvency Act 24 of 1936
[2]
Case
No. 18273/2018 unreported (Judgment handed down on 12 March 2019 in
the WC division)
[3]
Investec
Bank Ltd v Hugo Amos Lambrechts N.O. & Others
Case
Number 6570/2014 (unreported judgment handed down on 27 November
2014)
[4]
Kalil
at 979A
[5]
Kalil
at 979B
[6]
Kalil
at 980B-D
[7]
With
reference to the decision in
Badenhorst
v Northern Construction Enterprises (Pty) Ltd
1956 (2) SA 346
(T) at 347H-348B
[8]
See,
for example,
Hülse-Reutter
& Another v HEG Consulting Enterprises (Pty) Ltd (Lane & Fey
NNO Intervening)
1998 (2) SA 220
(C) at 218D-219H
[9]
1907
(TS) 727 at 736
[10]
Wilkins
v Pieterse
1937 CPD 165
[11]
1959
(1) SA 90 (O) 94
[12]
Gardee
v Dhanmanta Holdings & Others
1978 (1) SA 1066
(N) 1068-70
[13]
Supra
[14]
1976
(1) SA 19 (C)
[15]
Meskin
& Co v Friedman
1948 (2) SA 555
(W) 558