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[2019] ZAKZDHC 25
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Ex Parte: Knoop (9904/2017) [2019] ZAKZDHC 25 (31 October 2019)
IN THE HIGH COURT OF SOUTH AFRICA,
KWAZULU-NATAL LOCAL DIVISION, DURBAN
CASE NO: 9904/2017
In the ex parte
application of :
KURT ROBERT
KNOOP
Applicant
In re Insolvent Estate
and
SAGDAVA NAIDOO
Master's Reference No:
N637/2000
First Intervening Party
SIVARAJ
NAIDOO
Second Intervening Party
ORDER
1. Sagadava Naidoo is granted leave to
intervene as a party to the application brought by the applicant;
2. Sivaraj Naidoo is granted leave to
intervene in the re-consideration application brought by Sagadava
Naidoo;
3. The ex parte order granted in favour
of the applicant on 18 September 2017 against Sagadava Naidoo,
is
reconsidered and set aside;
4.
Each party is to pay its own costs.
JUDGMENT
Chetty J:
[1] The
applicant launched an urgent application, ex parte, on 18 September
2017 for an order in the following terms:
‘
3.1.
that
the Master’s insolvent file Estate: Sagadava Naidoo (‘the
insolvent’), Master’s Reference No.637/2000,
be
re-opened;
3.2.
that insofar as may be
necessary, all of the powers which the
firm,
Schoerie and Hayes, previously enjoyed qua trustees, be re-vested
in the Applicant
and the firm, Manci
Knoop Financial
Services,
including but not limited to:
3.2.1
bringing
or defending in the
name and on
behalf
of the creditors any
action or other
legal
proceeding of a civil
nature, and, subject
to the
provisions of any law relating
to criminal procedure,
any
criminal proceedings,
including any
urgent legal proceedings for the recovery of outstanding
accounts;
3.2.2
compromising
or admitting any claim
or demand against
the insolvent
estate including an unliquidated claim;
3.2.3
making
any arrangement with creditors,
including creditors
in respect of
unliquidated claims;
3.2.4
selling
any movable and immovable
property found to
be
the property of the
insolvent estate
by
public auction, public
tender or private contract and to give
delivery thereof;
3.2.5
performing
any act or exercise any power
for which I
am not
expressly required by this Act to obtain the leave of the Court;
3.2.6
engaging
the services of attorneys and
counsel in
respect of
litigation to be instituted
and
arising from
the normal management of the
estate,
to agree such fees,
agreeing such charges and
costing and make
payment in the
normal course of the litigation and that costs
thereof shall be regarded as costs in the administration;
3.2.7
authorizing
and empowering me to investigate any apparent voidable or undue
preference and/or dispositions of property and
taking
whatever steps necessary including instituting of legal action and
intervening in any pending litigation concerning assets
of the
insolvent estate and appointing attorneys and counsel, to have these
set aside or determined;
3.2.8
ratifying
any prior steps taken by the Applicant in relation to the re-vesting
of the insolvent estate in the Applicant.
4.
That the costs of the application be the costs in the sequestration.’
[2]
In
proceeding to lay a basis for the ex parte application, the applicant
(‘Knoop’) contends that inasmuch as this court
granted an
order placing the insolvent (‘Sagadava’) under
sequestration, pursuant to a ‘friendly sequestration’,
it
retained jurisdiction in matters pertaining to Sagadava’s
insolvent estate. By way of background, in 2000 Knoop was a
partner
at the firm Schoerie and Hayes. Mr Schoerie was appointed, in his
personal capacity, as the trustee in the insolvent estate
of
Sagadava. Schoerie has since passed away but Knoop contends that he
was entrusted with the administration of the estate and
had personal
knowledge of all matters relating to it. It is common cause that the
insolvent was rehabilitated on 1 November 2010
and that the Master’s
file, in respect of the insolvent estate under reference number
N637/2000, was closed. Knoop contends
that on account of fraud
committed by the insolvent, the Master’s file should be
re-opened by order of this Court and that
‘he and his firm’
be ‘revested’ with the powers and obligations of a
trustee so that he can fulfil his
obligations to creditors in the
estate. The ex parte application brought by Knoop on was granted on
18 September 2017.
[3]
The
application presently before court is an application by Sagadava in
terms of uniform rule 6(12)(
c
)
to reconsider the ex parte order. As will become apparent from what
follows below, the reconsideration application challenges
Knoop’s
authority to bring the ex parte application, as well as the authority
of the Court to grant an order appointing a
trustee to an insolvent
estate. In addition, Sagadava contends that there are no creditors in
whose interest Knoop purports to
act and that he has never liaised
with any of the original creditors in the estate prior to bringing
his application. The second
intervening party, Sivaraj Naidoo
(‘Sivaraj’) is Sagadava’s brother. It is contended
by Sagadava that Knoop is
acting with an ulterior motive to favour
the interest of Sivaraj, with whom Sagadava is embroiled in lengthy
litigation over assets
which were concealed during the insolvency
enquiry in a stratagem devised by the two brothers to the prejudice
of creditors. The
scheme entailed, on Sagadava’s version, that
certain assets would be held by Sivaraj as a nominee, thereby still
allowing
Sagadava to retain beneficial ownership. As a result of the
assets being hived off to Sivaraj, Sagadava was able to plead an
inability
to pay maintenance to his wife and children in the course
of divorce proceedings. According to him, this scheme was hatched
with
the collusion of an attorney. The plan entailed that once
Sagadava was rehabilitated, the property would be returned to him.
However, litigation between Sagadava and Sivaraj ensued when the
latter refused to return ownership of the properties to his brother
in accordance with their plan.
[4]
The scheme between the two intervening parties came to the fore when
Sagadava brought an
application against Sivaraj, under case number
1722/2013, for an interdict to restrain Sivaraj from disposing of any
member’s
interest in the close corporations being Odora Trading
CC, Multibrand Logistics CC and Acrita CC. In addition, Sagadava
sought
to interdict the transfer or hypothecation of the immovable
properties situated at 53/54 Wick Street, Verulam; Lot 12 and 13
Redcliff,
as well as the delivery of licence discs in respect of five
vehicles. Chili AJ (as he then was) delivered a judgment on 3 March
2014 dismissing the application and ordering the applicant (Sagadava)
to pay costs on an attorney and client scale. He made the
following
remarks at paragraphs 16 and 20 of his judgment:
‘
[16] I am expected to
close my eyes to the applicant’s fraudulent schemes which in
all probabilities put him in the position
in which he presently finds
himself, and treat him as an innocent litigant who approached the
court with clean hands. I am not
inclined to do that. What the
applicant did amounts, in my view, to a gross violation of the
uberrima fides
rule
which places a duty on a litigant who approaches the court in
ex
parte
applications to
disclose every circumstance which might influence the court in
deciding to grant or refuse the relief sought. Although
he also
sought to suggest that the ownership of the assets mentioned in the
relief was a matter for determination by the trial
court, he created
an impression that he was the legitimate owner of such assets, the
factor which was very influential in the court’s
decision. In
the process he deliberately withheld or suppressed extremely vital
information regarding his interrogation at an insolvency
enquiry into
his estate.
. . . .
[20] I am of the view that the
interests of justice demand that the conduct of the applicant
and his accomplices be investigated
by the relevant authorities. For
that reason, I recommend that the record of these proceedings be
forwarded to the Master of the
High Court, the trustees who handled
the applicant’s insolvent estate and the office of the Director
of Public Prosecutions.’
[5]
Undeterred by the dismissal of the application, Sagadava instituted
an
action against Sivaraj claiming the return of the movables and
immovable which he alleged were concealed during the insolvency
enquiry and which were placed with Sivaraj as a nominee owner. These
trial proceedings are currently part-heard before Steyn J in
this
division.
[6]
Sagadava then launched a further application on an urgent basis
citing
Sivaraj and a number of the close corporations as respondents.
The close corporations are those in which various immovable
properties
are registered. The ownership of these properties also
forms the basis of a dispute between Sagadava and Sivaraj. In
addition,
Knoop was cited as the ninth respondent in the application.
The explanation tendered by Sagadava for so doing is that he assumed
that Knoop was a trustee of his insolvent estate.
[7]
It appears from the judgment of Nkosi J, delivered on 18 July 2014
(also under case number
1722/2013) that the purpose of the
application was to protect certain property, which formed part of the
stratagem of concealment
between Sagadava and his brother, from being
disposed. The court pointed out that the application was based on
substantially the
same set of facts, and for the identical relief as
that which was brought before Chilli AJ, and against which, leave to
appeal
had been granted.
[8]
Nkosi J had the following to say regarding the application in para
23:
‘
[23] The applicant by his
own admission gave conflicting versions regarding these assets under
oath. By his own account, he previously
stated in the sequestration
proceedings as well as in the Rule 43 application relating to his
divorce that the assets which he
now claims belong to him, were not
his. The extracts from those proceedings show that he did so
repetitively. Although now recanted,
the correct and honest version
of the applicant cannot be determined on the applicant’s own
affidavit. I am not persuaded
by the presence of his erstwhile
attorney, Mr Maniklall’s supporting affidavit regarding the
existence of the division agreement
that he has now been purged of a
lie. The determination of the truth of one version and the discarding
of another version can only
be determined at trial. The applicant
seems to lie when it suits him. Before the actual and accurate
version of the applicant is
established the applicant, in my view,
cannot claim to have established a prima facie right, not even open
to some doubt. That
reason alone suffices to dismiss the
application.’
The court accordingly dismissed the application with costs.
[9]
It follows therefore that on two occasions prior to the present
application,
Sagadava failed to convince the court that he had made
out a case for the relief which he sought, particularly against the
backdrop
that he admitted to engaging in a stratagem with his brother
to shield assets from his wife, with whom he was embroiled in a
divorce.
In short, Sagadava gave false evidence and perjured himself
at the insolvency enquiry. Knoop contends that in light of him having
been cited as a respondent in the application which served before
Nkosi J, he was obliged to engage counsel to appear on his behalf.
Although those papers were not placed before me, what does appear
from the judgment of Nkosi J is that no relief was sought against
Knoop. Nkosi J stated in his introductory paragraph that ‘the
second to fifteenth respondents are cited purely in the various
specified interests in the matter and no relief is sought from them.’
Notwithstanding, Knoop sought to participate in the
proceedings.
[10]
The issue which is pivotal in this application is the interest, if
any, that Knoop had
in bringing the application for him to be
re-vested with the powers of a trustee in the insolvent estate of
Sagadava. In light
of his involvement in the third interdictory
application by Sagadava, Knoop approached the Master of the High
Court on 14 June
2017 with the request that the file at the Master’s
office be reopened on the basis that, in terms of section 129(1)(
b
)
of the Insolvency Act 24 of 1936 (‘the Act’), where an
insolvent has committed fraud, his debts in the insolvent estate
are
not discharged.
[11]
Knoop contends that it was in the interest of the creditors that he
be allowed to
‘commence to recover all of the hidden
assets’
[1]
.
According to him, the Master provisionally approved of his
appointment but indicated that only the court could order the
re-opening
of the insolvent estate and re-vest him with the powers of
a trustee. That the insolvent acted in a manner to defraud and
conceal
assets from his creditors during the course of his insolvency
is a matter which the insolvent himself concedes. This conduct would
have included the transfer of properties to his brother, which would
fall under the category of a disposition without value or
collusive
dealing. According to Knoop he was advised by the Master’s
office, represented by a Mrs Padayachee, to launch the
ex parte
application. However, a perusal of the Master’s report, dated
11 September 2017, does not quite
support the contention
by Knoop. The Master says the following:
‘
5.
My advice to the applicant to
approach this court is based on
Section 112(a)
of the
Insolvency Act
24/1936,
albeit
it
refers to confirmation of the account but the effect thereto is that
once the Master has confirmed the account it shall be regarded
as
final and the Master shall have no authority to re-open it.
6.
Similarly in this case I do not
believe I have the authority to re-vest the powers to the trustee.
7.
I know of no facts which would
justify the court in postponing or dismissing this matter.
8.
I abide by this Honourable
court[’s] decision.’
[12] In addition to the fraud
committed during insolvency, Knoop alludes to other unlawful
and
fraudulent conduct of the insolvent, who he ascertained had failed to
disclose an amount of over R1,5 million in gold shares
in the year
2000, when he was sequestrated. As stated earlier, the insolvent
failed to disclose his allocation of shares into property
owning
companies, namely RGN Farms (Pty) Ltd and Rockhill Investments (Pty)
Ltd.
[13]
In light of this background, Knoop approached court ex parte, on an
urgent basis, on the
grounds that Sagadava was in the process of
dissipating his assets and that he engaged in an elaborate scheme to
defraud his creditors
including the South African Revenue Service
(‘SARS’). As the trial between Sagadava and Sivaraj was
set down for hearing
in November 2017, Knoop brought the application
in September 2017 to enable him to intervene in those proceedings. On
these grounds
it was submitted that substantial redress would not be
achieved at the hearing of the matter in due course, and Knoop
sought, as
a matter of urgency, to be furnished with all such
necessary extended powers to enable him to intervene in the trial.
[14] In summary, Knoop contends
that Sagadava proceeded to apply for his sequestration knowing
that
he was not in fact insolvent and that he had sufficient hidden assets
which could have been used to satisfy the claims of
his creditors.
Knoop submits that the ‘re-vesting of [his] powers’ is
necessary to unravel the unlawfulness of the
insolvent’s
fraudulent conduct, and that the interests of justice would be best
served by his re-appointment.
[15] Sagadava brought an
application to re-consider the grant of the ex parte order as he
contends that he has a direct interest inasmuch as the relief that
Knoop secured results in a reversion of his status from that
of a
rehabilitated insolvent. He describes Knoop’s obtaining of the
ex parte order as an ‘ambush tactic’
[2]
as no notice was given to him despite the basis of the application
being based on irregularities in the granting of the order for
his
sequestration. I am satisfied that Sagadava is entitled in terms of
uniform rule 6(12)(
c
) to approach this court for a
reconsideration as the relief obtained by Knoop directly affects him
and his estate. Both Knoop and
Sivaraj (who also intervened in the
proceedings) are in tandem that there is no basis for the ex parte
order to be set aside.
[16]
Mr
Harpur SC
, who appeared for Sagadava, contended that Knoop
was embarking on a frolic of his own in circumstances where out of
the five proved
creditors in his insolvent estate, four, including
his ex-wife and three children, have indicated in writing, the waiver
of their
claims. Whatever may have brought about that position is not
relevant to these proceedings. There is nothing before me to gainsay
that version. That leaves SARS as the only remaining creditor in the
insolvent estate. According to Sagadava, SARS originally proved
a
claim of R372 508.23 against his estate, of which a dividend of R19
558.46 was paid. Counsel submitted that Sagadava is not liable
for
any amounts to SARS and they do not consider him to have any
outstanding liability to it. In this regard I was referred to
a
letter from SARS dated 19 January 2018 bearing the name of ‘S
Naidoo 0576884266’ confirming that on the basis of
the
information available to it, the taxpayer has complied with all the
requirements as set out in the
Tax Administration Act 28 of 2011
.
[17]
Mr
Redman SC
who appeared for Knoop, submitted that the
document relied on by Sagadava should be treated with caution as, he
submitted, Sagadava
approached SARS to register as a new taxpayer in
2018 and was issued with what appears to be a ‘clean slate’
in respect
of his tax affairs. Much was made of the difference in the
tax reference numbers pertaining to Sagadava’s insolvent estate
and that which features on the letter from SARS extinguishing all
liabilities to it. The nub of the issue, as Mr
Harpur
submitted,
is that in the absence of any interest by creditors, in whose
interest can Knoop claim to be acting in bringing the ex
parte
application? In the reconsideration application, Knoop bears the onus
of proof and where there is a dispute of fact, on the
basis of the
rule in
Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A), the matter must be decided on the version of
Sagadava.
[18] On 18 September 2017, on the
basis of the ex parte application, the court appointed Knoop
as a
trustee to the re-opened insolvent estate of Sagadava. It gave to
Knoop all the powers which the firm Schoerie and Hayes previously
enjoyed as trustees. The order served to vest in Knoop and his firm
Manci Knoop Financial Services the role played formerly by
Schoerie
and Hayes. Mr
Harpur
submitted that the court has no power to
appoint a trustee since this power is, in terms of
s 18
of the
Insolvency Act, vested
solely in the Master. In support of this
submission the decision in
The Master of the High Court (North
Gauteng High Court, Pretoria) v Motala NO & others
2012
(3) SA 325
(SCA) which affirms
Ex parte The
Master of the High Court South Africa (North Gauteng)
2011 (5) SA
311
(GNP), para 11, where the court clearly stated that s 18 of the
Act provides that the Master appoints provisional trustees and
trustees to insolvent estates of individuals. As part of the rule
nisi
which was issued by Bertelsmann J in
Ex parte the
Master
, interested parties were called upon to show cause why a
declarator should not be issued stating that the Master of the High
Court
of South Africa is the only official authorised to appoint
trustees and provisional trustees of sequestrated and provisionally
sequestrated estates, and more importantly, as it pertains to the ex
parte order of 18 September 2017, that:
‘
no
judge of the High Court of South Africa has authority or jurisdiction
to effect any appointment of any person to any of the positions
referred to in par 1, nor to make any recommendations to the master
in respect of any appointment to any of these positions.’
[3]
The court’s ruling was informed by its reasoning that the
Master’s office, rather than the court, is possessed of:
‘
.
. . the institutional knowledge and expertise to apply policy, and to
assess the ability and integrity of trustees and liquidators,
and is
therefore able to judge whether or not individuals are duly qualified
to be appointed, either at all or to a specific estate.’
[4]
The court
also reasoned that:
‘
The master’s office
is also more likely to be aware of any potential or actual conflict
of interest a candidate might have
in a particular instance that
would prevent her or his appointment.’
[5]
The court concluded that:
‘
It
must therefore be held that, as a matter of law, the master is the
only functionary entitled to appoint provisional trustees,
liquidators and judicial managers and, taking into account creditors'
directives, trustees, liquidators and judicial managers.’
[6]
[19] More recently in
City
Capital SA Property Holdings Ltd v Chavonnes Badenhorst St Clair
Cooper & others
2018 (4) SA 71
(SCA), para 32, the Supreme
Court of Appeal pointed out the following in relation to the
appointment of liquidators, which I am
of the view is equally
apposite to the appointment of trustees to insolvent estates:
‘
.
. . s 367 of the 1973 Act makes it clear that the Master appoints
liquidators for the purpose of conducting the winding-up of
a
company. The Master’s office, which controls every stage of the
administration of companies under winding-up, from the
launching of
liquidation applications to the deregistration of companies, has the
institutional knowledge and
expertise
to apply policy and assess the ability and integrity of liquidators
who may wish to be appointed. Although the South African
insolvency
system is creditor-driven and the majority of creditors have the
right to elect liquidators, their choice of liquidator
is subject to
the Master’s approval and the performance of the functions of
liquidators is subject to the Master’s
control.’
[20] On this basis it was
submitted by Mr
Harpur
that the Court had no authority to
appoint Knoop a trustee, and consequently such appointment is a
nullity and of no force and effect.
This much was emphasised in
The
Master of the High Court (North Gauteng High Court, Pretoria) v
Motala NO
(supra) where the court at para 14 said: ‘
In
my view, as I have demonstrated, Kruger AJ was not empowered to
issue, and therefore it was incompetent for him to have issued,
the
order that he did. The learned judge had usurped for himself a power
that he did not have. That power had been expressly left
to the
Master
by the Act. His
order was therefore a nullity. In acting as he did, Kruger AJ served
to defeat the provisions of a statutory enactment.
It is after all a
fundamental principle of our law that a thing done contrary to a
direct prohibition of the law is void and of
no force and effect
(Schierhout v Minister
of Justice
1926
AD 99
at
109). Being a nullity a pronouncement to that effect was
unnecessary.’
[21] The subsequent appointment
by the Master in the Certificate of Appointment of 17 October
2017 is
not saved either, and is itself a no force and effect as it flowed
from the ex parte order of 18 September 2017, which
as explained
above, was a nullity. Neither Mr
Redman SC
nor Mr
Solomon
SC
, who appeared with Ms
MacManus
for Sivaraj, sought to
disagree with these contentions. On that score alone, the order of
the court appointing Knoop as a trustee
cannot stand.
[22] There is a further reason
why Knoop’s appointment is tenuous. It was contended by
Mr
Redman
that Knoop’s deceased partner, Mr Schoerie, was
appointed
de jure
the trustee of Sagadava’s insolvent
estate, but Knoop was the person who was
de facto
the trustee.
In support of the argument that Knoop’s appointment should
stand, it was submitted that it was Sagadava who joined
Knoop in the
various applications, and even from his own understanding, considered
or believed that Knoop was the trustee of his
insolvent estate. The
fact of the matter is that the trustee was Mr Schoerie, not his firm
nor his partner, Knoop. An error on
the part of Sagadava or his
attorneys does not rescue the situation for Knoop, nor can it serve
to clothe him with a mantle that
was never bestowed on him. Mr
Harpur
submitted that a corporate body, in terms of Section 55(
h
)
of the Act, is precluded from acting as a trustee. On that basis, it
was not possible to re-vest Knoop and his firm with powers
that
Schoerie and Hayes purportedly held. The late Mr Schoerie was
appointed trustee, not his firm. Where the sole trustee has
died, as
Mr Schorie did in March 2013, the procedure would have been for the
Master, in terms of section 62(2) of the Act, to convene
a meeting of
creditors to elect a new trustee. This was never complied with. For
this reason as well I am satisfied that the order
appointing Knoop or
his firm as trustees, cannot stand.
[23]
Sagadava’s next challenge against the ex parte order is that a
consequence of rehabilitation
was to put an end to his sequestration,
particularly as the creditors in the insolvent estate were paid a
dividend. As I understand
the provisions of s 112 of the Act, where a
dividend has been paid (in this case to SARS), and confirmed in the
final liquidation
and distribution account, that is the end of the
matter and it is not permissible to re-open the account.
Consequently, upon the
effluxion of the 10 years after his
estate was sequestrated, Sagadava’s
estate
re-vested in him. It was
submitted that it is only if he wilfully concealed assets from the
reach
of the insolvency enquiry that an aggrieved creditor whose
claim was
not settled
in terms of a dividend would have locus
standi to bring an application against the insolvent.
[24] Where an application has
been brought ex parte, the applicant is under a duty to the court
to
show the utmost good faith. A failure to disclose fully and fairly
all material facts known to the applicant may lead, in the
exercise
of the court's discretion, to the dismissal of the application on
that ground alone.
[7]
An applicant who approaches the court ex parte must disclose all
facts known to him or her, however prejudicial they may be to
the
applicant's case.
[25]
Against this backdrop it was submitted that the application brought
by Knoop was intended
to bolster the pending trial between Sagadava
and Sivaraj, with the allegation being that Knoop was doing the
latter’s bidding.
It was also contended that Knoop has refused
to disclose on the papers who has funded the ex parte application. It
is clear that
none of the original creditors authorised Knoop to
bring the application nor has he set out any wider or public purpose
in doing
so. In my view Knoop has no reason to resist disclosure as
to the funding of the present litigation, particularly as the
application
has not been brought at the instance of any of the
creditors of the insolvent estate, nor at the instance of SARS. He
was not originally
appointed as the trustee to the insolvent estate
of Sagadava, even though he may have been familiar with the affairs
of the insolvent.
Against this backdrop, his locus standi and motive
for bringing the application then become questionable. The same
concerns appear
to have occupied the attention of Bertelsmann J in
Ex
parte The Master of the High Court South Africa (North Gauteng)
2011
(5) SA 311
(GNP) in deciding that the Master rather than the court
would be best placed to appoint an individual as a trustee based on
that
persons integrity and honesty.
[26] The high-water mark of the
purpose of Knoop’s application is to be found in a letter
from
SARS to Knoop’s attorney dated 8 January 2018 in which the
author of the letter says:
‘
The
South African Revenue Services confirm our concurrence with your
client’s approach in the matter of Sagadava Naidoo.
South African Revenue Service,
herewith, requests that should there be any legal costs involved that
would be payable by SARS, written
authority must be obtained first
before the costs are incurred
.’
[8]
[27] The court was not privy to
the letter written by Knoop’s attorney which generated
the
above response from SARS. In the circumstances, the letter referred
to does not assist Knoop in so far as explaining the basis
on which
he brought the application for ex parte relief or whether SARS still
has a claim against Sagadava. The failure of Knoop
to explain the
basis on which he brought the application, or whether he did so in
some wider public interest, raises questions
as to his intentions. If
so, this was a further ground that would disqualify him to be
appointed as a trustee.
[28] What is clear from the
papers is that the letter addressed to Knoop’s attorney from
SARS bears the tax reference number 3541779207. When Sagadava went to
the SARS offices on 18 January 2018 he was issued with an
‘acknowledgement of service’ reflecting the same tax
number but, but with the words ‘insolvent’ written
in
manuscript on the document. The following day when he visited the
offices of SARS it would appear that the tax reference number
3541779207 was deleted and a new number of 0576884266 was generated.
The court cannot speculate as to the reason for the new tax
number,
save to record that as at 19 January 2018, Sagadava is recorded as
being a taxpayer of ‘good standing’
[9]
with SARS.
[29]
Mr
Solomon SC
submitted that the purpose for Sivaraj’s
intervention in this matter is the suggestion by Sagadava that Knoop
brought the
ex parte application to bolster Sivaraj’s case in
the pending trial before Steyn J. Precisely what interests Knoop
would
have sought to advance is unclear. Counsel’s further task
was to ensure that this court did not make any adverse findings
against Sivaraj, to the extent (I assume) that this would be brought
to the attention of the trial court. It is not necessary for
the
purpose of this application to make any finding on the dispute in
which the two intervening parties are engaged. That is a
matter for
the trial court to unravel, after hearing the evidence of both
parties. What is apparent from the affidavit of Sivaraj,
however, is
that he aligns himself with the stance taken by Knoop in resisting
the reconsideration application and setting aside
the ex parte order.
In the main, Sivaraj disputes allegations that he engaged in a
stratagem with Sagadava to conceal assets during
the latter’s
divorce proceedings and from the insolvency enquiry. It is common
cause that Knoop has also brought an application
to be joined in the
action between the intervening parties. Much was made of a draft
consent order in case number 1722/2013 in
which Sagadava appears to
recognise Knoop as being the ‘former trustee’ of his
insolvent estate. As a matter of law
and fact, that concession was
improperly made. In any event, the draft consent order cannot be
equated to an order of this court.
It remains just that – a
draft. Nothing further can be sourced from this draft and I am not in
agreement with the contention
that the draft order evidences prima
facie Knoop’s interest in the matter. The contentions advanced
by Knoop regarding the
assets concealed by Sagadava during the
insolvency enquiry will no doubt assist Sivaraj in defending the
action brought by Sagadava
seeking a return of these properties. This
is apparent from the submission on behalf of Sivaraj that he wishes
‘to avoid
at all costs a situation whereby the reconsideration
application succeeds and the Trustee is left powerless to act prior
to the
recommencement of the Trial proceedings. . .’
[10]
.
It is therefore not surprising that Sivaraj has thrown his
weight behind Knoop’s appointment pursuant to the ex parte
order.
[30]
Mr
Redman
submitted that the ex parte order of 18 September
2017 did not appoint Knoop as a trustee, and that the court only
ordered the ‘re-opening’
of the insolvent file. The
appointment of the trustee, so the argument went, was by the Master
on 17 October 2017. This, with respect,
is an overly simplistic
approach to what transpired on 18 September 2017. In the ex parte
application, Knoop sought an order to
re-open Sagadava’s
insolvent file. He then sought that the powers which were previously
vested in the former trustee be ‘revested’
in him and his
firm Manci Knoop Financial Services, and to be given all of the
powers that would ordinarily be granted to a trustee
in terms of the
Act. Knoop did not ask the court merely to re-open Sagadava’s
insolvent estate file. He went further and
asked to be clothed with
powers that are accorded to a trustee. As a fall-back position,
counsel for Knoop suggested that even
if I find that the court erred
in granting the ex parte order, I nonetheless have a discretion in
reconsidering the order to amend
it to the effect that it does not
effectively appoint Knoop as a trustee, but rather be worded in a
manner that ultimately vests
the appointment in the hands of the
Master. I am not persuaded by this argument as it was not the basis
on which Knoop approached
the court on 18 September 2017. To do as
counsel has suggested would be to
ex post facto
remedy an
order which was a nullity. I am also not persuaded that the Master
made an independent decision when issuing the certificate
appointing
Knoop as trustee. The court, when granting the ex parte order,
effectively made this decision for the Master. I am not
persuaded by
any of these arguments, which fall to be dismissed.
[31]
It was further submitted that Knoop did not deceive the Master in the
appointment of him
as trustee. Rather, he first approached the Master
on 14 June 2017 requesting that the insolvent’s estate file be
re-opened
on the basis that Sagadava perpetrated a fraud in
attempting to have his debts discharged. Knoop’s approach to
the Master
was on the premise that it would be ‘in the interest
of the creditors that [he] commence to recover all of the hidden
assets’
[11]
.
What is apparent from the affidavit of Sagadava is that Knoop did not
approach any of the original creditors prior to launching
the ex
parte application and that none of them authorised him to approach
the Master. Whatever information was conveyed to the
Master by Knoop
about the affairs of Sagadava, the inescapable fact is that he
(Knoop) had never been appointed to deal with the
matter,
irrespective of whatever role he had provided to the former trustee,
Mr Schoerie. It is also immaterial that Sagadava may
have incorrectly
construed Knoop’s prior involvement in the insolvent estate as
being akin to those of a trustee. Schoerie
was the person entrusted
with the powers of a trustee.
[32]
The next argument advanced on behalf of Knoop relates to Sagadava’s
tax liability
to his creditors, particularly SARS, in respect of
which no explanation has been provided as to how a liability of
approximately
R372 000 was extinguished despite a dividend of only
approximately R19 000 having been paid from the estate. As alluded to
earlier,
it was contended that no weight should be attached to
Sagadava’s version that SARS has issued a letter confirmation
that
his tax affairs are in order. On the contrary, it was submitted
that Sagadava is unable to account for the change in
the
tax reference numbers used by SARS and this was indicative of his
fraudulent behaviour, to which he has already admitted.
Notwithstanding the potential hurdles posed by the manner in which
the ex parte order was obtained, counsel submitted that Knoop
ought
to get ‘some relief’ from the Court.
[33]
The underlining contention for this argument to come to Knoop’s
assistance is Mr
Redman’s
assertion of the maxim that
‘fraud unravels all’, meaning that in light of Sagadava’s
admitted fraudulent conduct,
the court should be loath to come to his
assistance. In these circumstances, Knoop should succeed in
preserving the ex parte order,
alternatively that it be allowed to
stand with certain amendments. Reliance was placed on the recent
decision of
De Villiers & others v GJN Trust & others
2019
(1) SA 120
(SCA), para 17, where the court held:
‘
In
terms of s 408 of the Act the confirmation of a liquidation and
distribution account by the Master “shall have the effect
of a
final judgment, save as against such persons as may be permitted by
the Court to re-open the account after such confirmation
but before
the liquidator commences with the distribution.” Therefore,
save possibly in the case of fraud, a confirmed account
may only be
reopened before distribution in terms thereof commences. Even then,
reopening will only be ordered on grounds for
restitutio
in integrum
such as
justus error or dolus.’
[34]
Counsel for Sagadava however submitted that the final liquidation and
distribution account
has not been shown to have infringed on any of
the provisions of s 151 of the Act, despite the uncovering of
Sagadava having concealed
assets from the trustee of his insolvent
estate. In the matter of
Gilbery Distillers & Vintners (Pty)
Ltd and others v Morris NO and another
[1990] ZASCA 134
;
1991 (1) SA 648
(A), which
was applied in
De Villiers
(supra), the court held that
despite fraud, the accounts were held to be ‘duly
confirmed’
[12]
and could only be re-opened in the circumstances provided for in
section 112 of the Act. As stated earlier, none of the circumstances
set out in s 112 have been shown to be present, especially as a
dividend was paid to SARS and the remaining creditors waived their
claims.
[35] To the extent that Knoop
relies on Sagadava’s fraudulent non-disclosure of his assets
during the insolvency enquiry and their concealment from his ex-wife
in the course of their divorce proceedings, Mr
Harpur
disputed
the reliance on the proposition that ‘fraud unravels all’.
As persuasive as it may be to dismiss Sagadava’s
submissions
because of his prior concealment, counsel submitted with reference to
Absa Bank Ltd v Moore and another
2017 (1) SA 255
(CC), para
39 where Cameron J pointed out the following:
‘
And
Brusson cannot avoid being bound by relying on its own fraud to
invalidate the loan agreement. Still less can a third party
–
the Bank – disregard the loan agreement because of Brusson’s
fraud. The maxim is not a flame-thrower, withering
all within reach.
Fraud unravels all directly within its compass, but only between
victim and perpetrator, at the instance of the
victim. Whether fraud
unravels a contract depends on its victim, not the fraudster or third
parties.’
[36] The ‘victims’
who would have suffered as a result of Sagadava’s concealment
would have been the original creditors in the insolvency – his
ex-wife, children and SARS. None of those creditors were consulted
by
Knoop before the ex parte application and none of these ‘victims’,
including SARS, sought to be joined as interested
parties to the
litigation. Sagadava has put up proof that the individual creditors
have waived their claims and SARS has certified
that his tax affairs
are in order. Knoop’s contention of the fraud perpetrated by
Sagadava does not assist him in proving
his
locus standi
for
bringing the ex parte application, or for any wider purpose in
bringing the application. Moreover, the court in
Central African
Building Society v Pierce NO
1969 (1) SA 445
(RA) held that:
‘
.
. . the confirmation of a distribution account has the effect of
final sentence; it has precisely the same effect as a judgment
of a
court, and, before another court can go behind such a judgment,
application must be made to have it set aside’.
[37]
In the final analysis, I am satisfied that the reconsideration
application must succeed.
The ex parte order granted was a nullity in
as much as the Master and not the court has the power to appoint
trustees to an insolvent
estate, albeit this case concerned the
re-opening of an insolvent estate. Knoop was re-vested with powers he
never originally had.
His basis for bringing the application, no
matter how opprobrious the conduct of the insolvent may have been,
does not clothe him
in law with authority to bring the
application, especially where there is no basis to do so under s 112
of the Act. For all
of these reasons, the order secured by Knoop
should be set aside. I am not persuaded that I should grant any
relief to amend
the ex parte order.
[38]
As regards costs, Sagadava has been successful in the reconsideration
application as a
result of which the ex parte order must be set
aside. As a general rule, costs should follow the result, which would
result in
Knoop and Sivaraj being liable for Sagadava’s costs.
All of the parties in this matter appear to be mired in controversy.
Sagadava and his brother Sivaraj are embroiled in a bitter dispute
over certain immovable property which appears to have passed
ownership under circumstances best described as dubious. Knoop has
been accused of initiating this application to bolster the strength
of Sivaraj’s case in his litigation against Sagadava. This
court still has no clarity as to why Knoop elected to bring the
urgent application on an ex parte basis for his appointment as
trustee and for the re-opening of the insolvent estate file. The
authorities indicate that even though the liquidation and
distribution account may be closed, precluding the re-opening, this
does not prevent a damages claim arising from fraud which may have
been subsequently discovered. In the exercise of my discretion,
I am
of the view that each party should bear their own costs.
[39]
I make the following order :
1. Sagadava
Naidoo is granted leave to intervene as a party to the application
brought by the applicant;
2. Sivaraj
Naidoo is granted leave to intervene in the re-consideration
application
brought by Sagadava Naidoo;
3. The ex parte
order granted in favour of the applicant on 18 September 2017
against
Sagadava Naidoo is reconsidered and set aside;
4. Each party is to
pay its own costs.
Chetty J
Appearances
For the Applicants:
NPG Redman
SC Instructed
by:
Beaumount Incorporated
Durban
North
Tel:
031 942 2864
Email:
tanusha@beaumontinc.co.za
For Sagadava Naidoo :
Harpur SC and S Dayal SC Instructed
by:
Vishal Junkeeparsad & Company
304 African Palm Building, Umhlanga
Tel:
031 566 4274
Email:
vishals@sai.co.za
For Sivaraj Naidoo :
RA Solomon SC and A MacManus Instructed
by:
Dwarika Naidoo and Company
320 Dr Pixley Ka Seme
Street Durban
Tel:
031 306 4809
Email:
cpillay@dwarikanaidoo.co.za
Date reserved:
30 August 2019
Date delivered:
31 October 2019
[1]
Applicant’s Founding Affidavit, para 41.
[2]
Affidavit by Sagadava Naidoo as Party/Intervening Party, para 8.
[3]
Ex parte The Master of the High Court South Africa (North
Gauteng)
2011 (5) SA 311
(GNP) at 327B-C.
[4]
Ex Parte The Master
para 26.
[5]
Ex Parte The Master
para 27.
[6]
Ex Parte The Master
para 33.
[7]
Schlesinger v Schlesinger
1979 (4) SA 342
(W).
[8]
Annexure ‘A’ to Applicant’s Supplementary
Affidavit.
[9]
Annexure ‘MN7’ to Opposing Affidavit of Sagadava Naidoo.
[10]
Sivaraj Naidoo’s Heads of Argument in the Reconsideration
Application, para 39.
[11]
Applicant’s Founding Affidavit, para 41.
[12]
Gilbery Distillers & Vintners (Pty) Ltd and others v Morris
NO and another
[1990] ZASCA 134
;
1991 (1) SA 648
(A) at 656D-E