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[2019] ZAWCHC 28
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Standard Bank of South Africa Ltd v Sauer and Another (18273/2018) [2019] ZAWCHC 28 (12 March 2019)
Republic
of South Africa
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
No:
18273/2018
In
the matter between:
STANDARD
BANK OF SOUTH AFRICA
LTD
Applicant
and
RANDAL
JULIAN
SAUER
First
Respondent
BRONWEN
JANINE
SAUER
Second
Respondent
Hearing:
28 February 2019
Judgment:
12 March 2019
JUDGMENT
De Waal AJ:
[1]
The Applicant in this matter seeks the
provisional sequestration of the Respondents’ joint estate.
The Respondents are
married in community of property. The
application was launched on 4 October 2018 as a matter of
urgency.
On 22 October 2018 it was referred for
hearing on the semi-urgent roll on 28 February 2019.
The papers
consist of 873 pages.
[2]
In terms of
s 10
of the
Insolvency Act
24 of 1936
, an applicant in an application for the provisional
sequestration of a respondent, needs to satisfy the Court on a
prima
facie
basis that:
2.1.
The applicant has a claim against the
respondent;
2.2.
The respondent has committed an act of
insolvency or is in fact insolvent; and
2.3.
There is reason to believe that it will be
to the advantage of creditors if the respondent’s estate is
sequestrated.
[3]
Before dealing with the facts of the matter
and the parties’ contentions regarding whether the requirements
are met, I briefly
deal with the approach to disputes of fact in
applications for the provisional sequestration of an estate.
[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.
[1]
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 the 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).
[2]
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 disputed issues.
[3]
[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.
[4]
This is known as the
Badenhorst
rule.
[5]
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.
[6]
I now turn to deal with the three
requirements in the context of the present matter.
The Applicant’s
claim
[7]
When the sequestration application was
launched, the Applicant claimed that the Respondents were liable to
it for the payment of
a sum of more than R16.5 million (plus
interest); R5 376 654.00 in respect of three home loans;
and various suretyship
agreement entered into by the Respondents in
favour of the Applicant.
[8]
The Applicant’s claims are not
seriously disputed by the Respondents. They contend that, save
for a mere “
I say so
”,
the Applicant failed to properly account for the moneys due to them
by providing the Respondents with property statements
and
reconsolidations of account. The Respondents contend that the
real extent of the debts due to the Applicant cannot be
established.
[9]
However, as pointed out by the Applicant,
clause 24.8 of the Terms and Conditions for Loans Secured by
Mortgage Bonds provides
that a certificate signed by any of the
Applicant’s managers, whose appointment need not be proved,
specifying the amount
due to the Applicant and stating that such an
amount is due, owing and payable, will on its mere production be
sufficient proof
of any amount due and/or owing by the debtor in
terms of the agreement, unless the contrary is proved. A
similar clause forms
part of the suretyship agreements.
[10]
Certificates for each of the amounts due
and claimed by the Applicant were attached to the founding affidavit.
I fail to see what
more needed to be done.
[11]
A slightly different argument was made by
Mr De Vries, who acted for the Respondents, at the hearing of
the matter. He
pointed out that there was at least one anomaly
in respect of the amounts due. This related to an instalment
sale agreement
with account number 73501646. In the founding
affidavit the Applicant alleged that the amount due and owing in
respect of
this agreement was R256 872.45, whereas in the
replying affidavit, that amount more than doubled to R554 374.29.
It was contended that the debt could not have doubled over a period
of approximately 4½ months between the signing of the
founding
and the replying affidavit.
[12]
Mr Van Rooyen SC, who appeared
for the Applicant, contended there was no challenge in the answering
affidavit to the validity
of any of the certificates. The
Applicant was accordingly not provided with an opportunity to deal
with the alleged anomaly
in respect of account 73501646. I
agree. In order to show that the Applicant’s claims are
seriously disputed,
it is not good enough to raise a discrepancy
during argument. In any event, the reduction of the Respondents’
overall debt
by approximately R300 000.00 will have no effect on
the outcome of the present matter. The Respondents’
liability
relates to three home loan agreements; and on my
calculation at least 15 suretyships. The alleged discrepancy is
raised in
respect of one suretyship only and relates to an amount
which is relatively small when compared to the overall debt.
[13]
I accordingly conclude that, on the balance
of probabilities, the Applicant has established its claims against
the Respondents.
Factual insolvency
[14]
I am aware that the Applicant argued
factual insolvency in the alternative to the commission of an act of
insolvency. But
I find it convenient to deal with the former
first as it requires a description of the complex, intertwining,
personal and business
interests of the Respondents and those of
associated third parties, which will then serve as an introduction to
the consideration
of both factual insolvency and the act of
insolvency alleged by the Applicant.
[15]
As was stated above, when the application
was launched, the Respondents owed the Applicant more than
R16.5 million. In
its replying affidavit, the Applicant
explains that the debt had been reduced to approximately
R12.4 million, plus interest.
This happened as a result of
certain payments that were received following the sale of some of the
Respondents’ immovable
properties. However, as a result
of those sales, the value of the Respondents’ assets also
diminished. In this
regard, I should point out that the
Applicant annexed to the founding affidavit valuations by
professional valuer, G.F. Zondagh,
for each of the immovable
properties to which the debts of the Respondents relate. These
independent valuations, obtained in December 2017,
established
that the Respondents owned immovable properties to the combined
market value of approximately R11 750 000.00.
Due to
the sales, the total estimated value of these assets was reduced to
R9 165 000.00. Accordingly, on the Applicant’s
version, when the pleadings closed, the Respondents’
liabilities still exceeded their assets by approximately
R3 235 000.00.
[16]
The Respondents do not contest the
correctness of the valuations of their properties. Save for
what is stated above regarding
the discrepancy with account number
73501646, the extent of the Respondents’ liabilities to the
Applicant is also not disputed.
Instead, on the issue of
factual insolvency, the Respondents contend that the Applicant will
receive an amount of approximately
R6 839 885.30 from the
proceeds of the winding-up of RK Sauer Construction South Cape
CC (“
RK Sauer
”),
which amount is already in the joint liquidators’ bank
account. If paid, the Respondents’ liability
as sureties
will be reduced. If R6 839 885.30 is deducted from
the R12.4 million claim, then the Respondents’
assets will
exceed their liabilities by more than R3.6 million.
[17]
In order to assess this defence, it is
necessary to explain the relationship between the Respondents and
RK Sauer. The
Respondents’ liabilities to the
Applicant consist of three categories:
17.1.
The first is three home loans taken by the
Respondents from the Applicant.
17.2.
The second category is 13 suretyships in
respect of the overdraft facility of RK Sauer and 12 instalment
sale agreements concluded
between the Applicant and RK Sauer for
the purchase of vehicles and machinery.
17.3.
The third category is two suretyships given
by the Respondents in respect of an overdraft facility granted by the
Applicant to October
Sky Planthire and Suppliers (Pty) Ltd (“
October
Sky
”) and a business loan to the
Sauer Family Trust.
[18]
The Respondents’ argument does not
relate to the first and third categories. It relates to the
second category, i.e.
the overdraft facility and instalment
agreements of RK Sauer. In respect of this category, the
Respondents are liable
as principal debtors and sureties. When
pleadings closed, this category of debt amounted to R7 740 507.51
on my
calculations. The bulk of the debt relates to the
overdraft on RK Sauer’s current account of R5 304 500.15.
[19]
RK Sauer commenced business rescue
proceedings on 25 August 2017. Two rescue plans was
presented but neither
were accepted. On 20 February 2018,
the business rescue practitioners informed the affected parties that
they would
proceed with an application for the winding-up of
RK Sauer. The employees of RK Sauer then moved on an
urgent basis
for winding-up. The proceedings were then
postponed on a number of occasions at the instance of the employees,
i.e. the applicants
in the liquidation application. In the
meantime, RK Sauer continued to trade primarily if not
exclusively because a
special purpose vehicle that had been created
by the name of CSJ Civils and Construction (Pty) Ltd
(“
CSJ Civils
”)
which entity partly absorbed RK Sauer’s workforce and
rented its plant and machinery. RK Sauer then
subcontracted work from CSJ Civils two tenders awarded to the
former by the George Municipality. About R50 000.00
per
month, was paid to the RK Sauer by CSJ Civils on the basis
of this arrangement.
[20]
RK Sauer was placed into provisional
liquidation on 23 February 2018 and eventually, after the
intervention of the
Applicant, finally liquidated on
11 December 2018.
[21]
It is in this context that a credit
compromise proposal, dated 30 November 2018, prepared for
RK Sauer by attorneys
Rauch / Gertenbach in terms of
s 155
of the
Companies Act 71 of 2008
, should be assessed. This
proposal was compiled in the hope that it would be considered viable
by the provisional liquidators
of RK Sauer. It was however
eventually rejected on 10 December 2018, i.e. the day
before RK Sauer was
finally liquidated.
[22]
In developing their argument that the
second category of debt can easily be drained if the Applicant was
not “
obstructive
”,
the Respondents placed considerable reliance on the compromise
proposal. The proposal recorded that RK Sauer
had
encumbered in favour of the Applicant vehicles and equipment to the
value of R5 015 563.44 and debtors to the value
of
R1 824 322.30. At the hearing it was contended for
the Respondents that the assets were realised and “
the
money was lying
” with the joint
liquidators for the Applicant.
[23]
There are conceptual (legal) problems and
factual problems with the Respondents’ argument.
The
legal obstacles
[24]
I deal first with the conceptual (legal) problems with the
Respondents’ argument.
[25]
In general a surety cannot claim to be released and cannot
compel the principal debtor to pay before she herself has paid all
that
the principle debtor owes. No right of recourse arises
before the surety has paid the principal debt. In the present
matter it is of course common cause that the Respondents have not
paid RK Sauer’s debts and as things stand they have
no
right to recover any amount from RK Sauer in liquidation.
[26]
Respondent’s counsel however placed reliance on the
judgment of
Millman and Another NNO v Masterbond Participation
Bond Trust Managers (Pty) Ltd (under Curatorship) and Others
1997
(1) SA 113
(C) and
Absa Bank Ltd v Scharrighuisen
2000 (2) SA
998
(C) and the following passage in former, in particular:
“
It follows that
in determining whether at any particular point in time the
liabilities of the surety and co-principal debtor exceeded
his
assets, the obligations undertaken by him as surety and co-principal
debtor must be included amongst his liabilities. To the
extent to
which an amount is recoverable pursuant to the right of recourse a
corresponding amount must be taken into account as
an asset.”
[6]
[27]
But
as Griesel J pointed out in
Scharrighuisen
,
there are considerable difficulties in placing any value on a
conditional (or anticipatory) right of recourse particularly when
the
principal debtor is insolvent or in liquidation, as is the case with
RK Sauer. Whilst there is a notional right
of recourse
against the insolvent debtor, its value is, at best, nebulous.
For this reason Griesel J concluded that
no value could be
placed on the right of recourse in
Scharrighuisen.
[7]
[28]
As seems to be suggested in
Tuning Fork (Pty) Ltd t/a
Balanced Audio v Greeff
2014 (4) SA 521
(WCC) at paragraph
43(ii),
Scharrighuisen
actually stand for the proposition that
the surety's contingent right of recourse against a distressed
company is incapable of being
ascribed a value in insolvency
proceedings.
[29]
This
is all the more so in the present instance where the creditor (the
Applicant) has decided to hold back on lodging claims in
the
liquidation of RK Sauer for fear of having to make a
contribution to the administration of that estate. There is
nothing wrong with the wait-and-see approach adopted by the
Applicant.
[8]
It may turn
out that the Applicant never lodges a claim against in the
liquidation of RK Sauer and no right of recourse
will then
arise.
[9]
[30]
For these legal reasons it is not possible to place any value
of the anticipatory right of recourse in the present matter.
Factual
problems
[31]
But even if one looks past the conceptual
problem, which is that the conditional claim of the Respondents is by
its very nature
too nebulous to place any value on, then there is in
any event sufficient evidence before me to conclude, on a balance of
probabilities,
that the conditional claim in fact has too little, if
any value to make a difference.
[32]
The main reason for this is that the very
document relied upon by the Respondents, i.e. the creditor’s
compromise proposal
dated 30 November 2018, records at
paragraph 9.6.3 that “
no
dividend is expected to be paid to concurrent creditors either in a
final liquidation scenario or in terms of the proposed compromise
”.
In exercising their right to recourse, should it ever arise, the
claim of the Respondents will be a concurrent one
and not a secured
one. This means that the very document that they rely on
indicates that there will be no dividend for them.
The mere
fact that the Applicant may have a secured claim against RK Sauer
in respect of vehicles and equipment and debtors,
does not mean that
the Respondents’ right of recourse is secured. The
Respondents’ right of recourse will be
a concurrent claim.
[33]
But it is not even possible, on the
evidence before me, to say that the Applicant’s secured claims
will be fully paid if submitted.
[34]
As far as the instalment agreements
pertaining to vehicles and equipment are concerned, the Applicant’s
claim stood at R2 436 007.36
when the pleadings closed.
The Applicant recorded that an amount of R3 062 336.89 had
already been paid to the
Applicant in this regard and that this had
been taken into account in calculating the Respondents’ overall
liabilities.
It is further stated that there remains a combined
shortfall of approximately R2 million on the instalment
agreements.
This indicates that the claim made in the credit
compromise proposal regarding the Applicant’s security in
respect of the
instalment agreements (the movables, in other words)
is at best doubtful.
[35]
The security of the Applicant’s claim
of R5 304 500.15 in respect of the overdraft facility is
even more precarious.
In the creditor’s compromise
proposal, i.e. the document relied upon by the Respondents, it is
recorded that the debtors
which have been ceded to Standard Bank only
has a value of R1 824 322.30 and that no investigation was
done as to whether
these claims can be recovered. Also, in an
email from RK Sauer’s former General Manager, Mr Xavier
Oswald
Jantjies (“
Jantjies
”),
it is indicated that the recovery of the retention funds is
“
questionable
”.
[36]
Even if the security in respect of the
instalment agreement is good but the debtors book provide no cover
for the overdraft facility,
then the liabilities of the Respondents
as sureties will remain over R5 million, which will mean, on my
calculations, that
their liabilities will still exceed their assets
by approximately R1 million.
[37]
For these reasons the argument of the
Respondents also fails at a factual level.
Act of insolvency
[38]
In terms of
s 8(c)
of the
Insolvency
Act, a
debtor commits an act of insolvency 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
”.
[39]
In the founding affidavit, the Applicant
contends that the First Respondent intends to sell assets of the
joint estate and use at
least a portion of the proceeds to settle the
indebtedness of RK Sauer to its creditors. It is further
submitted by
the Applicant that the creditors of the joint estate are
being prejudiced by the intended utilisation of the excess proceeds
from
the sale of the Respondents’ assets for the payment of
RK Sauer’s creditors.
[40]
The First Respondent himself states the
following in his answering affidavit:
“
The
decision was made by my wife and I to withdraw all the funds that
[we] would have invested in the business rescue of Sauer
Construction, together with the assets owned by the Sauer Family
Trust, from the business rescue proceedings and instead
to
use these funds / assets to support and enable the liquidators to be
appointed to trade Sauer Construction in liquidation, to
the benefit
of all the employees, as well as the general body of creditors
.
”
[41]
It is further stated in the answering
affidavit in respect of the winding-up application brought by the
employees of RK Sauer
that:
“
Properly
handled, with the support from the Sauer Family Trust and other
financial contributions by my wife and I, all emanating
from the sale
of assets,
some of which were
already in the process
, the
liquidators should continue trading the business to realise the
benefit of two pertinent contracts, as well as all the other
projects
that were still ongoing.
”
[42]
The Respondents contend that the above only
amounts to the expression of an “
intention
”
by the First Respondent to make their assets available for purposes
of the business rescue or for RK Sauer to continue
trading
whilst in liquidation.
[43]
In my view, the above statements amount to
more than the expression of such an intention. It is at least
an attempt by the
Respondents to dispose of their property with the
effect of prejudicing their creditors. It is probably more than
an attempt
because it is stated that some of the asset sales were
already in the process
of being sold to help RK Sauer to keep trading.
[44]
In the circumstances I have no difficulty
in concluding, on the balance of probabilities, that the Respondents
made a disposition
of their property, or at least attempted to make
such a disposition, which had or would have had the effect of
prejudicing their
own creditors. As explained above, RK Sauer’s
liabilities far exceed the value of its assets. If the
Respondents
made dispositions to RK Sauer, it is highly
improbable that any of it would ever be recovered.
[45]
Thus, even if factual insolvency was not
established on the balance of probabilities, an act of insolvency
certainly was.
Advantage to
creditors
[46]
I did not understand the Respondents to
have contended at the hearing that if the first and second
requirements for a provisional
order of sequestration are met, that
there will be no reason to believe that provisional sequestration
will be to the advantage
of creditors.
[47]
Given that I have already found that there
was at least an attempt by the Respondents to dissipate their assets
to the prejudice
of their creditors, it follows in my view that there
is reason to believe that there will be pecuniary benefit for
creditors if
a trustee is appointed to sell the Respondents’
assets in an orderly fashion.
[48]
I indeed understood the parties at the
hearing to be
ad idem
that the relationships and transactions between the Respondents,
RK Sauer, to some extent the Sauer Family Trust, and the
new
entity CSJ are, to put it mildly, murky and that an investigation
would be in the interest of the Respondents’ creditors.
The Second Respondent transferred her shares in CSJ Civils to
RK Sauer’s former General Manager, Jantjies, on
30 September 2018. Jantjies is now the director of
CSJ Civils. The possibility cannot be excluded that
RK Sauer has simply moved its business over to CSJ Civils
with the financial assistance of the Respondents.
Conclusion
[49]
In the circumstances, I conclude that a
proper case has been made out for a provisional order of
sequestration. I note that
it is not in dispute that service of
the application has been effected on all relevant parties; that the
required security has
been furnished; and that the Master has filed a
report stating that there are no facts to his knowledge that will
justify dismissal
of the application.
[50]
An order is accordingly granted in terms of
the annexure marked “
X
”
hereto.
______________
H J DE WAAL AJ
Acting
Judge of the High Court
Cape
Town
12 March 2019
APPEARANCES
Appellant’s
counsel: Adv R Van Rooyen SC
Appellant’s
attorneys: Edward Nathan Sonnenbergs, Cape Town
Respondents’
counsel: Adv J De Vries
Respondents’
attorneys: Liesel Scholtz Inc., George
[1]
Investec
Bank Ltd v Hugo Amos Lambrechts N.O. & Others
Case Number: 6570/2014 (unreported Judgment delivered by
Rogers J on 27 November 2014) at para 15.
[2]
Kalil
at 979A
[3]
Kalil
at 979B
[4]
Kalil
at 980B – D
[5]
With reference to the decision in
Badenhorst
v Northern Construction Enterprises (Pty) Ltd
1956 (2) SA 346
(T) at 347H – 348B.
[6]
Millman
at
123C
[7]
Scharrighuisen
at paras 23 – 29
[8]
See
Cools
v The Master
1998
(4) SA 212
(C):
“
[33]
It is understandable that a creditor would not want willingly to run
the risk of a contribution becoming payable by him in
an insolvent
estate. It is, in my view, perfectly proper for a creditor to
decline to prove a claim whilst there is such
fear or until, because
of changed circumstances, he is prepared to run that risk. A
creditor would therefore be justified in
withholding his claim from
proof until he is satisfied that, in his opinion, it is worthwhile
running the risk of becoming liable
for a contribution in terms of
the Act, should no assets of sufficient value be found to prevent a
contribution being levied
in terms of
s 106
of the Act. There is, in
my opinion, no basis for attacking the bona fides of third
respondent for holding back proof of his
claim until he was
satisfied to run the risk of a contribution.”
[9]
See
Proksch
v Die Meester en Andere
1969 (4) SA 567
(A) at 589D – F (my underlining):
“
Wesenlik
is die vordering van 'n borg, wat nie die skuldeiser betaal het nie,
teen die insolvente boedel van die hoofskuldenaar,
'n voorwaardelike
ongelikwideerde vordering
indien
die skuldeiser 'n vordering teen die insolvente boedel ingestel het
.
Dit is voorwaardelik omdat die borg alleen dan 'n vordering sou hê
wanneer hy die skuld van die hoofskuldenaar sou betaal,
en dit is
ongelikwideer omdat die bedrag wat hy van dié skuldenaar kan
eis alleen dan vasgestel kan word wanneer bekend
is hoeveel die
skuldeiser uit die boedel van die skuldenaar kry. Omdat die
skuldeiser 'n vordering ingestel het teen die insolvente
boedel van
die hoofskuldenaar, is die borg alleen verplig om die verskil te
betaal tussen die bedrag van die skuld en die bedrag
wat die
skuldeiser uit die insolvente boedel ontvang.
In
'n geval soos hierdie, waar die skuldeiser wel 'n vordering teen die
insolvente boedel ingestel het, kan die quantum van die
vordering
wat die borg teen die skuldenaar het – en dit is hierdie
vordering wat gelikwideer moet wees – dus eers
vasgestel word
nadat die krediteur sy dividend uit die insolvente boedel ontvang
het
.”