Linde v Richard Wayne Rawlins N.O. and Others (EL 860/20) [2021] ZAECELLC 18 (15 June 2021)

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[2021] ZAECELLC 18
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Linde v Richard Wayne Rawlins N.O. and Others (EL 860/20) [2021] ZAECELLC 18 (15 June 2021)

IN THE HIGH COURT
OF SOUTH AFRICA
(EAST LONDON
CIRCUIT LOCAL DIVISION)
Case
No:EL 860/20
In
the matter between:
PIERRE
RUSSEL LINDE
Applicant
and
RICHARD
WAYNE RAWLINS N.O.
First Respondent
MARISE
MEGAN RAWLINS N.O.
Second Respondent
GARY BRIAN
KLINKRADT
As the nominee of
K A ADMINISTRATORS
(PTY)
LTD
N.O
.
Third Respondent
JUDGMENT
TOKOTA
J:
[1]
On the 1
st
of September 2020 and at the instance of
the
applicant
,
this court granted a
provisional order of sequestration against the estate of Rawlins
Trust (the Trust).
[2]
The act of insolvency relied upon by
the applicant as entitling him to the order sought is that on 28
August 2020 the Trust gave notice
in writing (the notice) to the
applicant
,
its creditor
,
that
it is unable to pay its debt, section. 8 (g) of the
Insolvency Act 24
of 1936
.
In
the notice the Trust acknowledged
its indebtedness to the applicant in the amount of R500 000. It
is this amount that
the Trust signified its inability to
pay.
[3]
The respondents are the trustees of the Rawlins trust. The Trust was
founded in August
2018 and registered as a family Trust in
or
about January 2019. The applicant
and his family are investors in the Trust. The applicant is a
practising attorney and a business
man.  He was involved in
advising the Trust about its business concern. He drew a template
memorandum of agreement, which would
be signed by the potential
investors. In the said memorandum of agreement, it is stated that the
main business of the Trust is trading,
investing and brokering in
crypto currency and similar financial products.
[4]
Pursuant to this court having granted a provisional sequestration
order, the applicant
now seeks an order confirming that order as a
final order. The application is opposed by the first and second
respondents on various
grounds. The third respondent supports the
application. There was an interlocutory application to strike out
certain paragraphs and
annexures. That application has been disposed
of and there is a pending application for leave to appeal. It was
agreed when this
main application was argued that the application for
leave to appeal must await the outcome of this application.
[5]
Besides technical objections from each side the nub of the opposition
by the first and
second respondents is that the application is
ill-conceived in that its ambit falls outside the Insolvency Act 24
of 1936 (the Act).
First, it is denied that the Trust committed any
act of insolvency or that it is factually insolvent. Second, it is in
any event
contended that the applicant has not proven that he has a
liquidated claim against the Trust. It is submitted that the notice
dated
28 August 2020 on which the applicant relies for an act of
insolvency has been secured under duress. It is further contended
that
not only is the claim not a liquidated claim as envisaged in
section 9(1) of the Act, the applicant is not a creditor.
[6]
I am of the opinion that the question of the notification has to be
resolved first as
it may dispose of the matter in so far as it
relates to insolvency. This is so because in terms of section 12 of
the Act a
final sequestration may be
granted,
“
[I]f
at the hearing pursuant to the aforesaid rule nisi the court is
satisfied that-
(a)
the petitioning creditor has established against the debtor a claim
such as is mentioned
in subsection (1) 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
.”
[7]
Section 9(1) provides “(1)
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
.”
[8]
If I find that the trust has
committed an act of insolvency then I need not investigate whether or
not it is factually insolvent in
view of the use of the preposition
“
or
”
in subsection 12(1)(b).
[9]
Before dealing with the notice it is expedient to deal with a
technical point raised
by the applicant, namely that the first and
second respondents have no
locus standi
to oppose the application. Mr
De
La Harpe SC
who together with Mr
Kotze
appeared for the applicant submitted that there is no resolution by
the trustees to oppose the application. In the absence thereof,
Mr
and Mrs Rawlins do not have
locus standi
to oppose this application.
[10]
It is correct that the Trust operates through its trustees and
therefore any decision concerning the
conduct of its affairs must be
taken by the trustees at a meeting convened for that purpose. The
procedure for taking decisions of
the Trust is contained in Clause
11.1 of the Deed of Trust, which provides that
“
a
decision of the trustees may be made by:
11.1.1 a
resolution approved at a meeting of Trustees by a majority vote....
11.1.2 a written
resolution signed by all the Trustees, (including the duly authorised
representative of any corporate Trustee).”
[11]
It is not in dispute that there was a meeting of the Trustees on 12
October 2020. It was at that meeting
that the third respondent
refused to support a decision that the granting of final order of
sequestration be opposed. I accept the
evidence of the first and
second respondents that they resolved, to the exclusion of the third
respondent, to oppose the application.
There is however no written
resolution as provided for in the Deed of Trust. In my view, the
decision by the first and second respondents
constituted a
substantial compliance with the requirement of Clause 11. To insist
on the written resolution as envisaged in Clause
11.1.2 would be to
require form over substance. I conclude therefore that a resolution
to oppose the application was properly taken
and therefore the first
and second respondents have authority to oppose the application.
Is the applicant
a creditor and is the claim a liquidated claim?
[12]
Mr
DA Silva SC
submitted
that the applicant’s claim does not fall within the ambit of the
provisions of section 9(1) of the Act in that the applicant
is not a
creditor and the ‘purported’ claim is not a liquidated claim. For
this argument, Mr
Da Silva
relied on the case of
Kleynhans v Van
der Westhuizen NO
1970 (2) SA 742
(A) at 749D-E
where
he refers to the following:
‘
What
appears from the wording in question is that, as far as the element
of liquidity is concerned, the emphasis is on the amount
of the
claim. This is the amount of the claim that must be determined by
agreement, an order of a court or otherwise. As far as the
appellant's locus standi is concerned, it is crucial that his claim
is for an amount of at least R100. If this amount has not yet
been
determined when he submits his petition to the court, he fails to
prove that he has locus standi. See, o.m., Savoury v Bell,
1909 T.H.
130.
Neither the relevant provision of the word nor any other
provision of the 1916 Act indicates in any way that where the amount
of
the claim has been determined, as required, the applicant may
nevertheless not invoke the provisions of the Act, if it appears that
his claim is directed at the recovery of damages.
In
my opinion, 'liquidated progress' in art. 9 (1) of the 1936 Act has
the same meaning as it had in the corresponding section in
the 1916
Act, viz., A claim the amount of which was determined either by
agreement or by an order of the Court, or otherwise. The
Legislature
intended that there should be certainty as to the amount of the
claim. It follows in my view that where it appears from
the
allegations in the petition with certainty that the claim for G is a
certain amount of at least R100, the legal basis and nature
thereof
does not stand the applicant's locus to present the petition to the
Court lie, do not touch. When the Court considers a petition,
it may,
in terms of the provisions of art. 10, grant a provisional order for
sequestration if he is 'of judgment', inter alia, that
prima facie
evidence is that the applicant has a liquidated claim. On the return
date, the Court may sequestrate the debtor's estate
if he is
'convinced', inter alia, that the applicant has proved that he has a
liquidated claim against the debtor. If the Court is
not satisfied,
it may reject the application or postpone its hearing and require
'further proof of the allegations contained in the
request'. [
My
translation
]
[13]
The submission that the applicant is not a creditor has merely to be
stated to be rejected. It is common
cause that the applicant has
invested in the Trust. To quote from Mr Rawlins in his answering
affidavit he says: “
what the Applicant
does not tell the Honourable Court is that he himself was an investor
of the investments with the Rawlins Trust
and his family made
investments in the Rawlins Trust.”
Consequently,
I find that the applicant is a creditor as envisaged in the Act.
[14]
With regard to the submission that there is no liquidated claim
,
section 9(2) provides “
A liquidated
claim which has accrued but which is not yet due on the date of
hearing of the petition, shall be reckoned as a liquidated
claim for
the purposes of subsection (1
).
[15]
There was a faint argument by the respondents that the applicant’s
claim is not a liquidated
claim in that his investment is linked to
the fluctuation value of crypto currency. They assert that in terms
of the agreement the
applicant appointed the Trust to invest in and
sell or trade, dispose of funds in crypto currency and in other
similar financial
products. They maintain that the products’ value
fluctuate continuously. This argument is problematic. First, there
was an acknowledgment
of indebtedness to the amount of R500 000.
By this acknowledgement, the applicant acquired a complete cause of
action based
on the fixed amount. Therefore even if the argument was
valid ‘
when
the creditor acquires a complete cause of action for the recovery of
the debt, that is, when the entire set of facts, which the
creditor
must prove in order to succeed with his or her claim against the
debtor is in place or, in other words, when everything
has happened
which would entitle the creditor to institute action and to pursue
his or her claim '
the
claim based on the fixed amount is complete
.
[1]
[16]
Furthermore Mr Rawlins having acknowledged that the Trust owes the
applicant a sum of R500 000
and that it is not in a position to
pay him that money, he cannot be allowed to turn around and say there
is no liquidated claim..'
(N)o
person can be allowed to take up two positions inconsistent with one
another, or as is commonly expressed to blow hot and cold,
to
approbate and reprobate
.'
[2]
[17]
The only complaint raised by Mr
Rawlins is that the applicant should follow a certain procedure
contained in the memorandum of agreement
in order to be paid. It is
contended that in terms thereof the Trust had five days to transfer
the money from Binance account to
Standard Bank account. However,
this argument flies in the face that no such agreement was signed by
the applicant. In my view, the
respondents cannot approbate and
reprobate. I therefore conclude that the claim against the Trust is a
liquidated claim. Even if
I am wrong in this regard, the notice
signed by the Trustees is sufficient proof that the claim is liquid.
Was the notice
concerning an act of insolvency signed under duress?
[18]
The court must always be vigilant to ensure that its process is not
being abused and is obliged to exercise
its discretion to ensure that
the alleged act of insolvency has not been designed or manipulated or
used for some ulterior purpose
other than genuine notification of an
inability to pay a debt. In the event this is discovered, the court
will exercise its discretion
against an applicant or proceedings
constituting abuse of the process of the court.
[19]
The first and second respondents contend that the notice is invalid
in that it was obtained under duress.
The basis of the duress is
premised on the contention that the notification letter was obtained
in circumstances where the first
and second respondents did not
realise its consequences. Mr Rawlins stated that on 28 August 2020 he
was called to a meeting, which
was attended by the applicant, his
attorney Mr Pringle, the third respondent’s partner Mr Erasmus and
two unknown men. It was at
that meeting that he and his wife were
requested to sign the notice. When they signed the notification
letter, they were intimidated
by the group of men who were present at
the meeting.
[20]
It was at the meeting alluded to above that, the applicant asked him
if his (applicant’s) R500 000
investments could be paid
immediately and he confirmed that it could be paid immediately. Mr
Rawlins states that he asked for the
purpose of signing the notice
and applicant explained that if he was not able to pay all investors
immediately then he had to sign
it.  He states that the five men
in the meeting were aggressive throughout and kept on saying that the
third respondent had
already signed. He disputes authenticity of the
document saying the applicant was not entitled to immediate payment
on demand. Consequently,
so the argument runs, the document does not
constitute a notice in writing as envisaged in sec. 8(g) of the Act
as it was obtained
under duress.
[21]
Mr Rawlins in his answering affidavit states
:
“I point out to the Honourable Court that there were five men
sitting in the room. I had not been introduced to the other two
men,
I was intimidated by the discussion and I was concerned about my
wife. They were aggressive throughout the entire meeting and
they
kept on saying that the Third Respondent had already signed the
document. After they pointed this out for the second time, I
signed
Annexure “PRL3” and told my wife to sign it as well. I wish to
state that Annexure “PRL3” was signed under duress.
Annexure PRL3
is factually incorrect, in that the Applicant was not entitled to
payment on demand, the Rawlins Trust is in a position
to pay the
Applicant’s claim and it is in a position to pay creditors’
claims as and when they arise.”
[22]
Clause 11.2 of the Trust Deed
provides that “
any agreement or legal
document signed by all Trustees of the Trust at the material time
shall be deemed to be a written resolution
regulating the subject
matter of such document or agreement, including the authorisation of
the Trustees to act for that specific
purpose and related purposes,
done in terms of Clause 11.1.1
”
[23]
Clause 11.2 of the Trust Deed
provides that “
any agreement or legal
document signed by all Trustees of the Trust at the material time
shall be deemed to be a written resolution
regulating the subject
matter of such document or agreement, including the authorisation of
the Trustees to act for that specific
purpose and related purposes,
done in terms of Clause 11.1.1
”
[24]
It is trite that the validity of a contract concluded under duress
may be vitiated by such duress
(metus), the
raison
d'etre
being that intimidation or improper pressure renders the consent of
the party subjected to duress no true consent.
[3]
Fear must be reasonable and well-grounded apprehension of some great
evil, such as death or mayhem, and not arising out of mere timidity,
but such as might fall upon a man of courage.
[25]
In
Arend v Astra Furnishers (Pty) Ltd
1974 (1) SA 298
(C) at
311A-B,
it was stated:
“
Duress
may take the form of inflicting physical violence upon the person of
a contracting party or of inducing in him a fear by means
of threats.
Where a person seeks to set aside a contract, or resist the
enforcement of a contract, on the ground of duress based
upon fear,
the following
[4]
elements must be established:
(i)
The fear must be a reasonable one.
(ii)
It must be caused by the threat of some considerable evil to the
person concerned or
his family.
(iii)
It must be the threat of an imminent or inevitable evil.
(iv)
The threat or intimidation must be unlawful or contra bonos mores.
(v)
The moral pressure used must have caused damage.”
[26]
None of the above requirements have been met by the Rawlins. No
threats of any nature have been alleged.
Duress or intimidation
cannot be established by a mere say so. Something more is required.
[27]
The defence raised seems to me to be contrived. To borrow from
Plascon-Evans
[5]
,
the allegations of the respondent are so far-fetched or clearly
untenable that a court would be justified in rejecting them merely
on
the papers. After all,
'a
person who signs a contractual document thereby signifies assent to
the contents of the document, and if these subsequently turn
out
unfavourably there is no one to blame but him- or herself'
[6]
.
The applicant is the only person who spoke about the money owed in
the meeting. The presence of other men did not make any difference.
In my view, there is no evidence that the Rawlins were subjected to
any pressure when they signed the notice. The only thing that
was
said was that the third respondent had already signed the document.
That is surely not a threat of any nature but it is a statement
of
fact.
Consequently,
I find that there was no duress when the notice was signed.
Consequently, the notice constituted an act of insolvency.
Alleged dispute
of fact.
[28]
Mr
Da Silva
submitted that there is a dispute of fact in the matter and therefore
final order cannot be made. As I understand the papers, the
dispute
relates to the actual insolvency. There are contradicting financial
statements and the amounts, which the Trust actually
has in the
investment. In my view that dispute cannot be resolved in these
papers. However, in light of the view I take of the matter
it is not
necessary to resolve it. Suffice it to say that I have found that
there was an act of insolvency which satisfies the requirement
of
section 12(1)(b) of the Act.. Accordingly, the question of dispute of
fact need not be entertained.
Advantages to
creditors
[29]
The point of departure in this regard is section 12(1)(c) of the Act.
In terms of this section a court
hearing the application for a final
order of sequestration must be satisfied that there is reason to
believe that it will be to the
advantage of creditors of the debtor
if the estate is sequestrated. Once that is satisfied the court has
discretion to sequestrate
the estate of the debtor.
[30]
With regard to the question whether applicant has satisfied the court
that there is reason to believe
that the sequestration will be to the
advantage of creditors, the meaning of the phrase 'advantage of
creditors' has been discussed
in numerous cases and the following
considerations seem in the instant case to be relevant to the
question at issue.
(a) Creditors
acquire a right of control of the sequestrated estate;
(b) Creditors can
investigate certain dispositions by the debt aimed at preferring
other creditors;
(c)
Simulated transactions can be unveiled and reversed for the benefit
of all creditors
[31]
More than 80 years ago in
Stainer v Estate Bukes,
1933 OPD
86
at p. 90
, DE VILLIERS, J.P., stated:
'There are, of
course, other advantages and factors which the Court will take into
consideration, besides the direct financial advantages;
such as the
superior legal machinery which the creditors acquire by
sequestration, their rights of control and investigation, etc.;
but
again these are to be regarded from the point of view of individual
creditors who may be adversely affected. The Court should,
I would
venture to suggest, have regard to the balance of advantage (as well
the direct financial advantage as the other indirect
advantages
mentioned) of the creditors taken as a single entity, and, if the
balance is in favour of sequestrating, then the sequestration
will be
'to the advantage of creditors', within the meaning of the
Insolvency
Act.'
That
the
advantage is not to be limited to direct financial advantage further
appears from Awerbuch, Brown &Co. (Pty.) Ltd v le Grange,
1939
OPD 20
at pp. 23 and 25, where FISCHER, J., stated
'The Court can at
most decide that there is a reasonable prospect of the discovery of
assets, but will certainly not ignore the fact
that the insolvents'
transactions require investigation apart from the material gain to
the creditors.’ and VAN DEN HEEVER, J.,
stated:
'Advantage is a
wide term, and that a right of inquisition itself has a value in
certain circumstances was recognised as early as
the times of Labeo
(Dig., 9.2.23.4).
I think that a
petitioner discharges the onus of showing that 'there is reason to
believe that it will be to the advantage of creditors
of the debtor
if his estate is sequestrated' if he shows that there are
transactions of the debtor which require investigation, and
it is not
necessary (as it will frequently be impossible) for him to prove that
the estate will pay a dividend.'
These
are full Bench decisions of the High courts and are persuasive.
[32]
Concerning the present matter there was a suggestion that the Trust
may have been created as a platform
for a fraudulent Ponzi scheme in
which the investors’ money would be paid to cover losses, as profit
on investments when in fact
no profits were earned. It has been
suggested that Mr Rawlins had paid himself amounts of money out of
the investors’ money claiming
the same to be the commission on
profits. This cannot be resolved in papers. Mr Rawlins disputes these
allegations.
[33]
When the estate is placed in the hands of sequestration trustees the
investors will be at an advantage
in that any moneys that have been
unduly paid to the Rawlins by fraudulent means would be revealed
during the investigation. The
investigation automatically follows the
final sequestration. There is reason to suspect the genuineness of
the establishment of the
Trust. Since its inception no meetings of
the Trustees were ever convened until the meeting of the 27
th
of August 2020. This begs a question as to how the profit moneys were
disbursed if no meetings were held to authorise such disbursements.
I
refrain from debating this aspect any further but I am putting it no
higher than a mere suspicion.
[34]
The right to investigation, it seems to me, is not only an advantage
in itself, but is a possible means
of securing ultimate material
benefit for the creditors in the form, for example, of the recovery
of property disposed of by the
insolvent, or the disallowance of
doubtful or collusive claims. In my opinion, on the facts put before
the court there is a reasonable
prospect that some pecuniary benefit
will result to creditors.
[35]
In
Hillhouse v Stott; Freban Investments (Pty) Ltd v Itzkin; Botha
v Botha
1990 (4) SA 580
(W)
following was said (at 585C-F):
'.
. . the
Court need not be satisfied that
there will be advantage to creditors, only that there is reason to
believe that that will be so.
That in turn, in my opinion, leads to
the conclusion that the expression ''reason to believe'' means ''good
reason to believe''.
The belief itself must be rational or reasonable
and, in my opinion, to come to such a belief the Court must be
furnished with sufficient
facts to support it. In a broad sense it
seems proper to say, on the basis of the cases, that ''advantage to
creditors'' ought to
have some bearing on the question as to whether
the granting of the application would secure some useful purpose. I
express it thus
because as Roper J has shown in the Meskin case,
there need not always be immediate financial benefit. It is
sufficient if it be
shown that investigation and enquiry under the
relevant provisions of the Act might unearth assets thereby
benefiting creditors.
'
[36]
In my view, this court has good reason to believe, on the basis of
the facts of this case, that assets
are likely to come to light when
a proper interrogation is conducted under the provisions of the Act.
I consider therefore that for
present purposes advantage to creditors
under s 12(1)(c) of the Act has been shown and accordingly I must
confirm the rule previously
granted by Mbenenge JP on 1 September
2020.
[37]
Mr
De La Harpe
has submitted that the first and second respondents should be ordered
to pay costs of opposition. In light of my finding that the
Rawlins
were acting as trustees of the Trust I see no reason why they should
be mulcted with costs.
[38]
In the result I make the following order:
1.
Final sequestration order is granted and the costs of this
application will be
costs in the sequestration such costs to include
costs of two Counsel.
B
RTOKOTA
JUDGE OF THE HIGH
COURT
Appearances:
For the
Applicant:

C Da Silva SC
Instructed by
Schumann
van Den Heever
&Slabbert Inc
For the
Respondent:
D H De La Harpe SC
C
D Kotze
Instructed by
Drake
Flemmer &
Orsmond Inc
Date of
Hearing:
13 April
2021
Date
delivered:
15 June 2021.
[1]
Truter
and another v Deysel
[2006] ZASCA 16
;
2006 (4) SA 168
(SCA) ([2006] ZASCA 16)
para 16.
[2]
Hlatshwayo
v Mare and Deas
1912 AD 242
at 259; Sager Motors (Pvt) Ltd v
Patel
1968 (4) SA 98
(RA) at 101F.
[3]
Broodryk
v Smuts NO
1942 TPD 47
at p.53; Steiger v Union Government,
1919 NPD
75
at p. 79
[4]
See
also Visser and Another v Kotze (519/2011)
[2012] ZASCA 73
(25 May
2012)
[5]
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A)
at 634-635.
[6]
GB
Bradfield Christie's Law of Contract in South Africa 7 ed (2016) at
205.