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[2018] ZAFSHC 52
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Nutrigrun (Pty) Ltd v Odendaal and Another (5603/2017) [2018] ZAFSHC 52 (3 May 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No.: 5
603/2017
In
the matter between:
NUTRIGRUN
(PTY)
LTD
Applicant
and
WILLEM
ADRIAAN
ODENDAAL
1
st
Respondent
ANNA
CATHARINA NEL ODENDAAL
2
nd
Respondent
HEARD
ON:
26 APRIL 2018
JUDGMENT
BY:
MATHEBULA, J
DELIVERED
ON:
3
MAY 2018
[1]
This is an opposed application for the provisional sequestration of
the joint estate of the respondents. The applicant
is a company
with limited liability duly incorporated in terms of the laws of the
Republic based at Senekal, Free State and trading
in the agricultural
sector. The 1
st
respondent is a farmer residing at Marquard, Free State. He is
married in community of property to the 2
nd
respondent.
[2]
It is common cause that the respondents are indebted to the applicant
in the sum of R467 992.30. This is for goods
sold and
delivered by the applicant to the respondents at the latter’s
special instance and request. On 11 August 2016
the applicant
instituted an action against the 1
st
respondent for
payment of the aforementioned amount together with interest at the
rate of 10.26% per annum
a tempore morae
. The 1
st
respondent defended the matter. The applicant responded by
launching an application for summary judgement which was granted
by
my sister Gela AJ. The application for leave to appeal that
decision was unsuccessful before my sister Reinders J.
Despite
every effort to enforce this judgement, the respondents have been
unable to make payment. The respondents are admitting
indebtedness to the applicant and inability to liquidate the debt.
[3]
The entire application turns on the following issue. Whether
sequestration of the joint estate of the respondents will
be to the
advantage of the creditors. The opinion of the counsel for the
applicant is that it will be while counsel for the
respondents is
vehemently opposed to such an action.
[4]
In order to succeed in the application, the applicant must comply
with the requirements stipulated in
section 10
of the
Insolvency Act
24 of 1936
.
[1]
As alluded
to above, the point of contention is whether the applicant has
complied with the requirements of paragraph (c).
The section
provides that the court may not grant a sequestration order unless it
is established that there is reason to believe
that it will be to the
advantage of the creditors that the estate of the debtor is
sequestrated. The applicant bears the
necessary onus.
[2]
[5]
At this stage of the proceedings, what needs to be established is
that there is a
prima
facie
reason to believe that sequestration will be to the advantage of the
creditors. It is not necessary that the advantage to
the
creditors be established.
[3]
There must be facts proved that indicate such reasonable prospect not
necessarily a likelihood that some pecuniary benefit
will result to
creditors. This is the approach that was adopted in Meskin &
Co v Friedman.
[4]
The
learned judge expressed himself in the following manner:-
“
In my
opinion, the facts put before the Court must satisfy it that there is
a reasonable prospect – not necessarily a likelihood,
but a
prospect which is not too remote – that some pecuniary benefit
will result to creditors. Even if there are none at
all, but there
are reasons for thinking that as a result of the enquiry under the
Act some may be revealed or recovered for the
benefit of creditors,
that is sufficient …”
(Footnotes
omitted)
[6]
This approach in Meskin & Co case was followed by the
Constitutional Court in
Stratford
and Others v Investec Bank Limited and Others
.
[5]
In paragraph 44 the court stated the following:-
“
The
meaning of the term “advantage” is broad and should not
be rigidified. This includes the nebulous “not-negligible”
pecuniary benefit on which the appellants rely. To my mind,
specifying the cents in the rand or “not-negligible”
benefit in the context of a hostile sequestration where there could
be many creditors is unhelpful
.
Meskin
et al state that—
“
the
relevant reason to believe exists where, after making allowance for
the anticipated costs of sequestration, there is a reasonable
prospect of an actual payment being made to each creditor who proves
a claim, however small such payment may be, unless some other
means
of dealing with the debtor’s predicament is likely to yield a
larger such payment. Postulating a test which is
predicated
only on the quantum of the pecuniary benefit that may be demonstrated
may lead to an anomalous situation that a debtor
in possession of a
substantial estate but with extensive liabilities may be rendered
immune from sequestration due to an inability
to demonstrate that a
not-negligible dividend may result from the grant of an order.”
[7] Counsel for the
applicant submitted that there is a possibility that the granting of
an application can lead to the unearthing
of assets or claims in
favour of the estate. He referred to a number of facts which in
his opinion support his assertion.
The entity called Paradiso
South Africa that laid claim to the attached assets was only
incorporated in 2016. Its only director
and shareholder is the
respondents’ son. He was present at all times when the
sheriff attached the movable property
and did not raise a word that
the assets belonged to his company. The brand mark for the
animals was only approved on 4 November
2016. The transfer of
the Mercedes Benz was also concluded in November 2016. These
incidents are relevant because that
is the period that litigation
between the parties commenced culminating with the summary judgement
granted on 1 December 2016.
Accordingly the respondents were
disposing their assets. Further that there were assets that the
respondents disposed and
that they had not as yet received the
payment. Such payment can accrue to the estate to defray the
expenses and benefit the
creditors.
[8]
On behalf of the respondents, counsel differed sharply with his
counterpart. He submitted that the applicant was raising
a
suspicion in order to persuade the court to grant the application.
The company referred to viz Paradiso South Africa was
incorporated in
July 2016 before the applicant commenced with litigation. In
this matter, the applicant has not established
that there is
prima
facie
reason to believe that it will be to the advantage of the creditors.
He submitted that the respondents did not possess any
assets of
significant value. They had been rendered destitute by the
drought of 2014/2015. He argued that the applicant
was in
essence engaging in a “fishing expedition” hoping to
unearth something during the interrogation in the event
the
application is granted. Lastly that there were other less
“draconian” procedures that could be engaged to
achieve
the enquiry of the financial position of the respondents. He
specifically referred to
Section 65A
of the Magistrate’s Court
Act 32 of 1944. In his opinion, the application ought to be
dismissed with costs.
[9]
The court must exercise its discretion judicially and lawfully.
In the exercise of such discretion, the court is guided
by the dicta
outlined in Meskin & Co which was followed in Stratford case.
The court is called upon to assess whether
the sequestration will
result in some payment to the creditors. In this matter the
question must be answered in the affirmative.
[10]
The respondents procured the fertilizers to plough their farmland.
The disposition of the crop and others assets is not
dealt with
sufficiently to support the allegations made. The respondents
are residing on the farm with equipment, livestock
and crops.
The surrounding circumstances regarding the manner in which
attachment of assets took place and the timing of
the interpleader
proceedings are matters that must be scrutinized at length.
These can be investigated if a Trustee is appointed
and proper
investigation is undertaken. I do not agree with counsel for
the respondents that the applicant’s hopes
are pinned solely on
the Trustee to investigate. There are cogent reasons given the
surrounding circumstances that such investigation
may reveal or
recover some assets to the benefit of the creditors. The
argument also that there are less “draconian”
procedures
like section 65A of the Magistrate’s Court is also misplaced.
The said section is designed to deal with
the enquiry into the
financial position of the judgement debtor. It is much more
limited in scope and intensity as opposed
to an interrogation in
terms of section 64 of the Insolvency Act.
[11]
In the exercise of my discretion. I am satisfied that there is a
prima
facie
reason to believe that the sequestration will be to the advantage of
the creditors.
[12]
In the circumstances, I make the following order.
12.1.
The joint estate of the respondents is hereby placed under
provisional sequestration
order.
12.2.
A provisional order is hereby issued calling upon the respondent
and/or any
other interested party to show cause, if any on
14 June
2018
why a final order of sequestration should not be granted
against the respondents’ estate.
12.3.
This order, together with a copy of the Notice of Motion and
annexures thereto,
must be served upon the respondents.
12.4.
The copy of this order must be served on:
12.4.1.
Any registered trade union that as far as the Sheriff can reasonably
ascertain represents
any of the employees of the respondents;
12.4.2.
The respondents’ employees, if any, by affixing a copy of the
order and the application
to any notice board, to which the employees
have access inside the respondents’ premises, or if there is no
access to the
premises by the employees, by fixing copy to the front
gate, where applicable, failing which, to the front door of the
premises
from which the respondents reside and/or conduct any
business;
12.4.3.
The South African Revenue Service;
12.5.
The costs of this application to be costs in the administration of
the insolvent
estate of the respondents.
___________________
M. A. MATHEBULA, J
On
behalf of the applicant:
Adv. J. M. C. Johnson
Instructed
by:
Lovius Block
BLOEMFONTEIN
On
behalf of the respondents:
Adv. A. Berry
Instructed
by:
F J Senekal incorporated
BLOEMFONTEIN
/roosthuizen
[1]
Provinsional
Sequastration:-
If
the Court to which the petition for the sequestration of the estate
of a debtor has been presented is of the opinion that
prima
facie -
(a)
the petitioning creditor has established against the debtor a claim
such as is mentioned in sub-section (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,
it
may make an order sequestrating the estate of the debtor
provisionally.
[2]
Braithwaite v Gilbert (Volkskas Intervening) 1984 (4) 717 (W) at 718
B
[3]
This is the view of the authors in their seminal work “Insolvency
Law and its operation in winding-up” edited by
Boraine at
2-21.
[4]
1948 (2) SA 555
(W) at 559
[5]
2015 (3) BCLR 358
(CC)