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[2021] ZANCHC 5
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Vermeulens Verf and Gas t/a Vermeulens Build It v Van Eeden and Another (263/2020) [2021] ZANCHC 5 (15 January 2021)
IN THE HIGH COURT OF SOUTH
AFRICA
NORTHERN CAPE DIVISION,
KIMBERLEY
Case No:
263/2020
Heard on: 09/10/2020
Delivered on: 15/01/2021
In the matter between:
VERMEULENS VERF AND GAS CC t/a
VERMEULENS BUILD IT
and
APPLICANT
SEPTIMUS
BERNARD VAN EEDEN
1
ST
RESPONDENT
JAKIE
VAN EEDEN
2
ND
RESPONDENT
JUDGMENT
MAMOSEBO J
[1] The applicant,
Vermeulens Verf and Gas CC t/a Vermeulens Build IT (Vermeulens),
moved for a provisional order of sequestration against the first
respondent, Septimus Bernard Van Eeden, and the second respondent,
Jakie Van Eeden, on the grounds that they have committed an act of
insolvency as envisaged in s 8(b) of the Insolvency Act
[1]
and/or that the their estate is factually insolvent and that
the sequestration will be to the advantage of their creditors if it
were to be placed in the hands of the Master of the High Court,
Kimberley. Having confirmed in the answering affidavit that the
respondents are married out of community of property, the applicant
abandoned the relief sought against the second respondent.
The
application is consequently only opposed by the first respondent.
[2] Vermeulens is a Close
Corporation selling building materials in Kimberley and surrounding
areas. The first respondent is a sole proprietor who conducted
business initially under the name Van Eeden Kabinetmakers but is
now
conducting business under the name Koselo Basins.
[3] During or about 17
November 2003 the first respondent successfully applied for credit
at
Vermeulens. Of significance in that credit agreement is that he would
pay no interest if the outstanding balance was paid within
thirty
days from the date of the statement. In 2018 the applicant purchased
goods on credit to the amount of R64,170.68 and has
to date failed to
settle the debt despite numerous requests to do so.
[4] On 13 March 2019
Vermeulens sought and obtained judgment in the sum of R70,194.75
against the respondent in the Magistrates Court. A warrant of
execution was issued authorising the sheriff of the Magistrates
Court, Kimberley, to raise on the property of the first respondent
the sum of R70,194.75 together with the ancillary costs.
The
sheriff attended first respondent's property on 10 August 2019 and
served the warrant of execution on Mrs Jakie Van Eeden,
his wife and
former second respondent. The following appears on the return of
service:
"My return is therefor one of nulla bona. Value of
assets not sufficient to satisfy the claim or part thereof
"
The first respondent contacted Vermeulens' attorney, Ms Henn,
seemingly to make arrangements for payments. The proposed arrangement
was not acceptable to Vermeulens. On 05 December 2019 the first
respondent made a payment of R500.00. To date the judgment debt
to
which the
nulla bona
return relates to remains unpaid.
[5] The first
respondent admits being indebted to Vermeulens in the capital amount
of R64,170.68 for goods purchased, plus accrued/ancillary amounts.
The submission by Ms Neethling, on his behalf, relying on
Union
Share Agency and Investment, Ltd (in liquidation) v Madsen
[2]
,
that had he been present and the warrant was personally served on him
he would have been in a position to meet those requirements
by
identifying sufficient disposable assets; that the warrant was
defective in that the estimated value of his movable assets is
RI
35,890.00; further that he is in a position to pay off his debt in
instalments since his current business generates an income
of
R32,261.75. No proof of the first respondent's assets which he values
at RI 35,890.00 was attached.
[6] The issue that falls
for determination is whether or not the first respondent has
committed an act of insolvency as envisaged in s 8(b) of the Act,
alternatively, whether or not he is factually insolvent and that
it
will be to the advantage of the creditors to grant the provisional
sequestration order.
[7]
Section 10 of the Insolvency Act provides:
"10.
Provisional sequestration — if the court to which the petition
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 (l) 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 of the
debtor provisionally. "
[8] The first
respondent has conceded his indebtedness to Vermeulens to the
tune of
at least R64,170.68 which therefore means a claim of more than
R200.00 has been established against him in line with the
first
requirement.
Acts of insolvency
[9] In as far
as the second requirement is concerned, Vermeulens has relied
on s
8(b) of the Act which stipulates:
"8.
Acts
of insolvency
. —A debtor commits
an act of insolvency —
(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.
[10] While Vermeulens
relied on the
nulla bona
return to show that the first
respondent committed an act of insolvency in terms of s 8(b) during
oral argument however, and relying
on the Zimbabwean High Court
judgment
Lorac (PVT) Ltd v Musa
[3]
,
Ms Snyders, for Vermeulens, contended that she did not place much
store on this aspect. For the sake of completeness, the following
is
indeed essential for a party to succeed on this leg as commented in
Mars
[4]
.
"4.3.1 Returns of nulla bona
An execution officer's return to a warrant which is
unsatisfied and in respect of which no attachment has been possible,
should
state inter alia (a) that he explained the nature and exigency
of the warrant ; (b) the person to whom he explained it; (c) that
he
demanded payment; (d) that the defendant failed to satisfy the
judgment; (e) that the defendant failed, upon being asked to
do so,
to indicate sufficient disposable property to satisfy it; (f) that
the execution officer has not found sufficient disposable
property to
satisfy it, despite diligent search and enquiry. " See also
Kader v Haliman
[5]
[11] If the
sheriff could not find the first respondent and was consequently
unable to demand of him to satisfy the writ or indicate sufficient
disposable property, this ought to have been reflected on the
nulla
bona
return. The sheriff's failure in those circumstances to find
sufficient disposable property would constitute the second of the two
acts of insolvency.
[12] The second
leg of the applicant's argument relating to s 8(b) is predicated
on
the phrase "if it appears from the return that the messenger or
sheriff has not found sufficient disposable property to
satisfy the
judgment." It is apparent on the face of the return that the
sheriff wrote: "Value of assets not sufficient
to satisfy the
claim or part thereof."
[13] The following remarks
by Goldstein J in
Wilken and Others NNO v Reichenberg
[6]
are relevant to this case:
"There is in my respectful view nothing in s
8(b) to justify the statement that the execution officer must enquire
from the
debtor what property he has and where it is situate. What he
has to do is to ask the debtor to indicate sufficient property to
satisfy the writ. The latter then has to point out the property or
indicate its whereabouts and describe it in order to demonstrate
its
sufficiency.”
[14] Miller J in Moodley v
Hedley
[7]
pronounced that:
"Once the respondent has emasculated the return
of nulla bona by showing that its basic premise is false in that she
was never
asked to satisfy the writ or to point out disposable
property, there is no onus upon her to prove that had she been asked
she would
have been able to indicate disposable property, despite the
messenger's inability to find it himself. I respectfully agree with
what was said by Potgieter J, as to the onus in regard to a nulla
bona return in Sussman & Co. (Pty) Ltd v Schwarzer 196
0 (3) SA 94
(O) at 96. (See also Nathan & Co v Sheonandan
1963 (1) SA 179
(N)
at 180). "
[15] Vermeulens does not
dispute that the writ was served on the first respondent's wife.
A
concession was further made that because the respondents' marriage
regime is out of community of property, there ought to have
been
personal service on the debtor. To constitute this act of insolvency
the debtor must have been personally required to satisfy
the judgment
or to indicate sufficient disposable property. A demand made to his
wife is not sufficient. See
Saber Motors (Pty) Ltd v Morophane
[8]
and Rodrew (Pty) Ltd v Rossouw
[9]
.
[16] It was neither
discernible in the papers nor was it argued on behalf of Vermeulens
that the first respondent could not be served with the writ or that
he had evaded service.
[17] The second act of
insolvency relied upon by Vermeulens is, in my view, dependent
on the
first act being implemented correctly. It is only where the first
cannot be established that the second can be committed.
It can
therefore not be argued that prima facie on demand by the sheriff the
first respondent has failed to satisfy the judgment
or to indicate
sufficient disposable property to satisfy it. Besides, from the
wording of the Act, there is a difference on how
the requirement is
couched in the Act and how the sheriff has couched it on the
nulla
bona
return. Whereas the Act requires that the following phrase
required:
"that the execution officer has not found
sufficient disposable property to satisfy it, despite diligent search
and enquiry
", the sheriff's returns merely stated the
following:
"Value of Assets not sufficient to satisfy the claim or part
thereof”
Factual insolvency
[18] Ms Snyders referred to
the financial position of the first respondent along these
lines:
18.1 The first respondent made an
offer of arrangement to pay in monthly instalments to Vermeulens'
attorney, Ms Henn, but has only paid an amount of R500.00 on 05
December 2019;
18.2 Secondly, he has failed to
give proof of his component of assets which he puts at R 135,890.00.
He has further not attached any proof of his holding the assets which
he claims far exceeds what he owes other than his mere say
so;
18.3 Thirdly, he maintains that
his current business generates a monthly income of R32,261.75
which
is less than half of what he owes Vermeulens;
18.4 Fourthly, reasons for his
failure to liquidate his indebtedness in full is not discernible
on
the papers.
[19] The fact that the first respondent made
an offer to pay off the debt in instalments is suggestive
of his
inability to satisfy the judgment. The following responses appear
from the first respondent's answering affidavit:
"4.8.1 ...I
confirm that my estate is far from insolvent and that I have been
trading as sole
proprietor of Koselo Basins, which generates a
monthly income for me.
4.8.2
My average monthly income is estimated at R32
261.75.
4.8.3
I also have movable assets, which value
exceeds my liabilities.
4.8.4
I am definitely in a position to pay off my
debt in instalments. "
Sec 8(e) of the Insolvency Act stipulates:
"A debtor commits an act of insolvency
...if he makes or offers to make any arrangement with
any of his creditors for releasing him wholly or partially from his
debts.
"
[20] The credit arrangement was for the credit to be
settled within the 30 days to avoid interest on the balance. No
mention was made for payment in instalments which Vermeulens rejected
out of hand in any event. The oft-quoted words of Innes CJ
in
De
Waardt v Andrew & Thienhaus Ltd
[10]
are worth repeating:
"Now, when a man commits an act of insolvency he
must expect his estate to be sequestrated. The matter is not sprung
upon him
..... Of course, the Court has a large discretion in regard
to making the rule absolute; and in exercising that discretion the
condition of a man's assets and his general financial position will
be important elements to be considered. 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.”
I therefore have no doubt in my mind that the first respondent is
unable to pay Vermeulens. I am satisfied that Vermeulens has
shown
that the first respondent is, at least, factually insolvent.
Advantage to creditors
[21] It was submitted on
behalf of Vermeulens that it will be in the interests of the
creditors to grant the sequestration, an assertion denied by the
first respondent. In
Stratford and Others v Investec Bank Ltd and
Others
[11]
the Constitutional Court said the following:
"[45] The
correct approach in evaluating advantage to creditors is for a court
to
exercise its discretion guided by the dicta
outlined in Friedman
[12]
.”
Roper J said the following in
Friedman
[13]
"In my opinion, the facts put before 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. It is not
necessary to prove
that the insolvent has any assets. Even if there
are none at all, but there are reasons for thinking that as a result
of enquiry
under the Act some may be revealed or recovered for the
benefit of creditors, that is sufficient.”
[22] It was argued on
behalf of Vermeulens that the first respondent will hide the assets
in order to evade creditors. To substantiate this aspect, a concern
was expressed that the first respondent has changed its name
without
providing any explanation and without furnishing any exposition of
what became of the assets of the previous business.
Ms Neethling
submitted that the first respondent has not changed his business name
but merely opened a new business.
[23] Of particular concern
to me, relying on
Stratford
,
[14]
is that Vermeulens is silent in the application with regards to
serving notice on the first respondent's employees. In his answering
affidavit the first respondent confirms that he has four employees
who are not members of organised labour (not members of a trade
union). Leeuw AJ, writing for the unanimous court, made the following
remarks in
Stratford
[15]
"[33] The
parties agree that where s 38(1) of the Insolvency Act refers to
'employees',
it envisages all employees, including domestic
employees. Thus the section suspends the employment contracts of all
employees upon
a provisional sequestration order being granted. This
means that the contracts of domestic employees are effectively
suspended
without notice while their business counterparts who could
conceivably be doing the same kind of work in the insolvent employer
's business will receive notice.
[34]
Notice prevents a situation where employees would
show up at work and suddenly find out that they can no longer render
their services
or receive remuneration.
Notice
at an earlier stage, before a provisional sequestration order
,
will not only warn an employee of the tumultuous financial state of
the employer, but also meaningfully enable employees to find
alternative jobs or make alternative arrangements. These are the
virtues of being informed of the possibility of a sequestration.
Notice, ultimately, signifies respect for the human dignity of
employees.
[35]
The
interconnection between the right to dignity and work has long been
articulated by this court. In affordable Medicines it held:
'One 's work is part of one's
identity and is constitutive of one 's dignity.
And there is a relationship
between work and the human personality as a whole. "it is a
relationship that shapes and completes
the individual over a lifetime
of devoted activity; it is the foundation of the person 's existence
" '
The impact of a narrow reading of employees ' on
their right to dignity, so illustrated, tilts the interpretive
balance decisively
in favour of a wider reading. And this is indeed
required by s 39(2) of the Bill of Rights. "
[24] The Constitutional
Court continued instructively at para 42:
"[42]
Failure to furnish the employees with the petition may not be relied
upon by the
debtor for opposing sequestration when the question to be
decided is whether sequestration is to the advantage of creditors. In
EB Steam the Supreme Court of Appeal stated that the purpose is not
to provide a 'technical defence to the employer, invoked to
avoid or
postpone the evil hour when a winding —up or sequestration
order is made'. I agree. There may be instances where
a provisional
order should be granted to avoid the concealing of assets or for
other urgent reasons in circumstances where a delay
would
substantially prejudice the creditors. Thus, non-compliance will not
always render the granting of an order fatal, but this
should be only
in exceptional circumstances.
Discretion
of the Court
[25] The courts have a
discretion, to be exercised judiciously, in applications of this
nature whether to grant or refuse the application for a provisional
sequestration. Regard being had to the three requirements that
must
be met, namely, (i) that the debtor owes a liquidated claim of not
less than R200.00; (ii) the debtor has committed an act
of insolvency
or is insolvent; and (iii) the applicant has reason to believe that
it will be to the advantage of creditors of the
debtor if the estate
is sequestrated. In the circumstances I come to the conclusion that I
am not persuaded:
25.1 Firstly,
about the process not being served personally on the first
respondent. As stated earlier, and at the risk of repetition, there
was nothing in the papers that indicated that he had evaded
service
or could not be served;
25.2
Secondly, even if the applicant wanted to rely on the second leg
of s
8(b) the wording in the return is inadequate to comply with the Act;
25.3
Thirdly, the petition was not served on the four employees to
afford
them an opportunity timeously to consider their appropriate option
before the provisional order is granted.
[26]
I
am of the view that the applicant is not entitled to the order sought
and its application stands to be dismissed. There is no
reason why
costs should not follow the result.
ORDER
[27] In the result the
following order is made: The application is dismissed with costs.
MAMOSEBO J
NORTHERN CAPE HIGH COURT
For the
applicant:
Ms J Snyders
Instructed by:
Engelsman
Magabane Inc
For the
respondent:
Ms L Neethling
Instructed by:
Elliot Maris
Wilmans & Hay
[1]
24 of 1936 which stipulates: 8. Acts of insolvency. — A debtor
commits an act of insolvency —
(b) if a court has given
judgment against him and he fails, upon the 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;
[2]
1927 NPD 439
[3]
[1991]
3
All SA 475 (ZH)
[4]
Mars: The Law of Insolvency in South Africa 9
th
edition
at page 86 para 4.3.1
[5]
1958 (4) SA 31
(N) at 32G
[6]
1999 (1) SA 852
(WLD) at 858C
[7]
1963 (3) SA 453
(N) at 455F -H
[8]
1961 (1) SA 759 (W)
[9]
1975 (3) SA 137 (O)
[10]
1907 TS 727
at 733
[11]
2015 (3) SA 1
CC at 19F (para 45)
[12]
Meskin & co v Friedman
1948 (2) SA 555
(W) at 559
[13]
Fn 12 Ibid
[14]
Fn 11 above
[15]
At paras 33, 34 and 35