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[2018] ZAFSHC 183
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Absa Bank Ltd v Trotskie NO and Others (1940/2018) [2018] ZAFSHC 183 (29 November 2018)
IN THE HIGH COURT
OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Case
number: 1940/2018
In
the matter between:
ABSA
BANK
LTD Applicant
and
CORNELIUS
ABRAHAM TROSKIE N.O. 1st
Respondent
JACOBUS
GERHARDUS TROSKIE N.O. 2nd
Respondent
STEPHANUS
FRANCOIS NEL N.O. 3rd
Respondent
CEDRIC
JOHN PETERSEN N.O. 4th
Respondent
(in
their respective capacities as trustees of the
Boet
Troskie Kinders Trust, registration no TMP1447)
THE
COMPANIES AND INTELLECTUAL
PROPERTY
COMMISSION 5th
Respondent
CLOETE
MURRAY
N.O. 6th
Respondent
[In
his capacity as duly appointed business rescue
practitioner
of B & B Eiendomme (Pty) Ltd (in business rescue)]
ALL
OTHER AFFECTED PERSONS
CORAM:
DAFFUE, J
HEARD
ON:
22
NOVEMBER 2018
JUDGMENT
BY:
DAFFUE,
J
DELIVERED
ON:
29
NOVEMBER 2018
I
INTRODUCTION
[1]
During April 2018 a registered bank and credit provider launched
urgent proceedings by way of a hostile compulsory sequestration
application against a trust. The aspect of urgency has fallen
away and has become moot.
[2]
The matter was eventually ripe for hearing on 22 November 2018.
After hearing argument, I reserved judgment and informed
the parties
that judgment would be delivered on 29 November 2018.
II
THE
PARTIES
[3]
The applicant is Absa Bank Ltd, a registered bank and credit
provider. It was represented by Advv KW Lüderitz SC
and S
Tsangarakis.
[4]
The first four respondents are the businessmen, Messrs CA Troskie, JG
Troskie, SF Nel and an auditor of profession, Mr CJ Peterson
in their
representative capacities as the trustees of the debtor, the Boet
Troskie Kinders Trust (“the Trust”), registration
number
TMP 1447. They have been represented by Advv P Zietsman SC and
JC Coetzer.
[5]
The Companies and Intellectual Property Commission was cited as fifth
respondent and Mr Cloete Murray was cited in his representative
capacity as Business Rescue Practitioner (“BRP”) of B &
B Eiendomme (Pty) Ltd (“B & B”), a company
under
business rescue and supervision. These two respondents do not
oppose the application.
III
THE
RELIEF SOUGHT
[6]
Applicant seeks the usual
provisional sequestration order against the Trust as represented by
its trustees. The return date
was left in the hands of the
court.
IV
PROCEEDINGS
PRIOR TO THE HEARING ON 22 NOVEMBER 2018
[7]
On 17 April 2018 applicant issued an application on a semi-urgent
basis, intending to obtain a provisional sequestration order
on 25
April 2018.
[8]
On 24 April 2018 an answering affidavit was filed, dealing with the
issue of urgency in particular. This caused the applicant
to
remove the matter from the roll of 25 April 2018 by agreement between
the parties, no order as to costs.
[9]
On 15 June 2015 the Trust filed a comprehensive supplementary
affidavit by agreement and on 6 July 2018 applicant filed its
replying affidavit.
[10]
On 20 September 2018 the matter was postponed to 22 November 2018,
costs to be costs in the cause.
[11]
On 9 November 2018 applicant filed an interlocutory application
wherein it indicated that it would seek leave on 22 November
2018 for
the filing of a supplementary affidavit. The Trust responded by
way of an affidavit by its attorney which was filed
on 16 November
2018 and applicant replied thereto on 20 November 2018.
V
POINTS
IN
LIMINE
[12]
Several points
in
limine
were
raised by the Trust. I directed that these points be argued
together with the merits of the application. I shall now
briefly deal
with these aspects. The first issue on the papers was a lack of
urgency. This has become moot and Mr Zietsman
did not make any
submissions in either the heads of argument or during his oral
argument. Secondly, the applicant’s
lack of
locus
standi
was raised. This deals with the merits of the matter and I
shall deal extensively therewith
infra
.
Thirdly, the Trust alleged that Standard Bank should have been joined
in the application insofar as applicant had in mind
the eventual
setting aside (by trustees to be appointed if a sequestration order
is granted) of a bond recently registered in the
amount of R40m in
favour of Standard Bank over the Trust’s most valuable property
situated in Constantia, Cape Town.
There is no sound basis for
such argument as this would mean that each and every time a creditor
applies for sequestration, alleging
that the respondent’s
transactions may be set aside in terms of anyone of ss 26, 29 - 31 of
the Insolvency Act, 24 of 1936
(“the Act”), all
others involved in his/her dealings should be joined. This is
unheard of. Standard Bank may
have a financial interest, but no legal
interest in the relief sought. There is no application for the
setting aside of its
bond. Mr Zietsman did not make any
submissions in this regard.
[13]
The Trust also took a fourth point. Insofar as applicant relies
upon an act of insolvency in terms of s 8 (c) or (d)
of the Act
pertaining to registration of the Standard Bank bond, applicant
failed to prove that the Trust was insolvent at the
time. This
is an issue relating to the merits and I shall consider this aspect
infra
.
It was also alleged in the answering affidavit that any claim
that applicant might have had, had become prescribed.
Although
Mr Zietsman did not deal with the issue in his heads of argument, he
handed a recent judgment to me from the bar.
I refer to
Trinity
Asset Management (Pty) Ltd v Grindstone Investments 132 (Pty) Ltd
2018 (1) SA 94
(CC). Mr Zietsman readily conceded that this
judgment is distinguishable on the facts and therefore irrelevant
in
casu.
In
fact, he conceded that the prescription defence was not sustainable
and that the point taken was not good at all. It is apparent
that the
loan between B & B and the Trust was by intent a long term loan
with no fixed terms of repayment. It is not
the typical
commercial loan considered in
Trinity
supra.
In
any event the trustees admitted the loan (or part thereof) in the
2107 financial statements.
[14]
Lastly, Mr Zietsman pointed out that applicant failed to comply with
a peremptory requirement of s 9(3) of the Act in that
it failed to
state whether or not it relies on any security for its claim.
Applicant did not state that it has no security.
In my view
this requirement is relevant to indicate to the court how to exercise
its discretion. A creditor who has sufficient
security for its
claim against a debtor may be hard pressed to convince a court to
grant a sequestration order even if all requirements
for such order
have been met.
In casu
it is common cause that applicant
has no security for its claim; in fact it is the Trust’s
version that applicant is not even
its creditor. Non-compliance may
be condoned in terms of s 157 of the Act and insofar as necessary,
condonation is granted.
All points
in limine
are
dismissed.
VI
NEW
MATTER IN REPLY AND FILING OF SUPPLEMENTARY AFFIDAVITS
[15]
The general rule is that in motion proceedings the applicant must
make out his case in the founding affidavit and new matter
shall not
be introduced in the replying affidavit. This is not an
inflexible and/or absolute rule. In
Shepherd
v Mitchell Cotts Seafreight (SA) (Pty) Ltd
1984 (3) SA 202
(T) at 205E and further the full bench dealt with the
general rule, but stated, relying on
Kleynhans
v Van der Westhuizen NO
1970
(1) SA 565
(O) that it may be apposite to allow new matter in a
replying affidavit. This will
inter
alia
be
the case when it appears that
“…
the
ramifications of respondent’s affairs were extensive and
complex, and that it was impossible for applicant to have all
the
facts fully at his disposal before he launched his application.”
[16]
At 206D –E the court in
Shepherd
found that there could not be any objection that material information
be placed before it by way of the provisional trustee’s
affidavit on the return date of a provisional sequestration order.
Although new matter is placed before the court in
such instance as
the trustee reports on what he has ascertained during the execution
of his statutory duties, it should be considered
insofar as it is
relevant to issues canvassed in the affidavits.
In
casu
the Trust was not confronted with a provisional trustee’s
report as no trustee could have been appointed yet, but by
significant
and material information obtained by applicant after
filing of the replying affidavit. Based on the principle
enunciated
in
Shepherd
there can be no reason why material information that became available
at a later stage may not be presented to the court with the
necessary
leave.
[17]
As mentioned the court may in its discretion permit the filing of
further affidavits. See rule 6(5)(e) of the Uniform
Rules of
Court and
Hano
Trading CC v JR 209 Investments (Pty) Ltd
2013
(1) SA 161
(SCA) at para [10]. It is true that in the absence
of leave being granted by the court, parties are not allowed, even by
agreement, to file further affidavits. It is stated in
Hano
Trading
at
para [11] that the court hearing the application,
“…
as
arbiter, has the sole discretion whether to allow the affidavits or
not”
and
“…
will
only exercise its discretion in this regard where there is good
reason for doing so.”
[18]
In casu
the application for leave was not applied for in a
separate application. In my view it would be an unnecessary
waste of time
and expense to follow such route, bearing in mind that
the matter has been dragging on for seven months. Respondent
was invited
to respond and cannot claim any prejudice if the further
affidavit is allowed. Applicant established that two valuable
St
Francis Bay properties have been sold, that the proceeds have not
been offered to it, but paid over to Standard Bank. The
Trust,
through its attorney, elected to respond in detail to the averments
contained in the supplementary affidavit. I unreservedly
accept
the version of the Trust’s attorney, a person that I admire and
hold in high esteem, to the effect that he was unaware
of the
overdraft facility granted by Standard Bank to the Trust and
consequently the terms thereof. He (as well as his counsel)
only became aware of the sale of the two St Francis Bay properties
after being made aware thereof by applicant’s attorney
in a
letter of 25 October 2018. I am satisfied that the further
evidence is vital and that applicant has made out a proper
case for
the admission of its supplementary affidavit. The interlocutory
application is therefore allowed together with the
affidavits filed
thereafter. In so doing, the full factual matrix is before the
court in order to properly consider all relevant
aspects.
VII
DISPUTE
ON THE MERITS
[19]
The Trust denies that applicant has proven that it is one of its
creditors. Therefore the first requirement of s 10 of
the Act
fully set out
infra
has not been met.
[20]
The Trust alleges that it is solvent and that no act of insolvency
has been committed. Therefore, in the absence of proof
of
insolvency or commission of an act of insolvency, the second
requirement for a provisional sequestration order has not been
met.
[21]
The third requirement, advantage to creditors, is also in dispute,
and lastly, it is the Trust’s case that applicant
brought the
application with an ulterior motive and abused the process; therefore
the court should in the exercise of its discretion
dismiss the
application.
VIII
COMMON
CAUSE FACTS
[22]
The following are common cause:
1) On 20 March 2012 two
general notarial bonds were registered in securitisation of B & B
indebtedness to applicant.
2) On 18 September 2017
the five directors of B & B admitted in writing that B & B
owed two amounts, totalling in excess
of R245m, to applicant and
consented to perfection of the bonds.
3.) On 12 October 2017 a
meeting took place between representatives of applicant and B &
B. B & B was
inter alia
represented by Mr CA
Troskie. At this meeting applicant sought a power of attorney
to sell certain farms of B & B and
also indicated that applicant
would apply for the winding up of B & B as the required s 345
letter of demand (in terms of the
Companies Act, 61 of 1973) had been
delivered by then.
4) On 17 October 2017,
five days after the meeting with applicant when the threat was
communicated, B & B adopted a resolution
to
“
net
off”
an
amount in excess of R36m, or put otherwise, to reduce the Trust’s
loan account in favour of B & B with this amount,
resulting in
the Trust’s debt towards B & B to be decreased. This
appears
inter
alia
from the financial statements of the two entities for the 2016 and
2017 financial years.
5) Two days later, on 19
October 2017, B & B’s board of directors resolved to place
the company under business rescue
and supervision (“business
rescue”).
6) On 20 October 2017 B &
B was indeed placed under business rescue. On that same day B &
B’s financial statements
for the year ending on 28 February
2017 were approved by its board of directors and signed off by two
directors, Messrs CA and
JG Troskie, and its auditors.
7) The following note
appears at item 5 of B & B’s audited financial statements
for the 2017 financial year in respect
of the Trust’s loan:
“
The
loan has been ceded to ABSA and ABSA has laid claim to the loan
account. The loan bears interest at the SARS official
rate, has
no fixed terms of repayment and by intent is of a long term nature.”
It is also
evident that the loan was reduced from R75 962 148.00 in
the 2016 financial year to R41 446 344.00
in the 2017
financial year.
8) Mr SR Robinson, a
forensic accountant and auditor, was mandated by Mr Cloete Murray,
the business rescue practitioner of B &
B to review B & B’s
financial statements and examine its accounting records particularly
pertaining to the loan account
between B & B and the Trust.
He found that B & B was hopelessly illiquid at all relevant
times, that Mimosa
Rolprentproduksies (Pty) Ltd (“MRP”)
was B & B’s holding company and that the transfer of the
MRP loan to
the Trust did not follow the practice of B & B’s
directors in previous years and that as a result of the transaction
the assets of B & B were reduced by R36 942 257.
In his opinion the transfer was done as an afterthought in
anticipation of an impending action by applicant for B & B’s
winding up and the loan account should be accepted to be
R78 388
601. Although the Trust requested extra time to obtain the services
of its own expert and received ample time - about
sixty days - to
file its supplementary affidavit, it did not file an expert witness’
report to challenge Robinson’s
version which therefore remains
unchallenged.
9) The Trust’s
immovable properties have been valued in the total amount of
R107 900 000.00, although two of those
properties to the
value of some R15m have been sold during the litigation and the
proceeds paid over to another creditor, the Standard
Bank.
10) The valuable
Constantia property of the Trust which was purchased in 2010 and
previously unencumbered, was hypothecated
by a mortgage bond in the
amount of R40m in favour of Standard Bank during October 2017.
IX
THE REQUIREMENTS FOR A PROVISIONAL
SEQUESTRATION
ORDER
[23]
Section 10 of the Act reads as follows:
“
10
Provisional sequestration
If
the court to which the petition for the sequestration of the estate
of a debtor has been presented is of the opinion that
prima
facie
-
(a)
the petitioning creditor has established against the debtor a claim
such as is mentioned in subsection (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.”
[24]
In
Naidoo v Absa Bank Ltd
2010 (4) SA 597
(SCA) Cachalia JA
stated at para [4] that
“…
a sequestration order is
a species of execution, affecting not only the rights of the two
litigants, but also of third parties,
and involves the distribution
of the insolvent’s property to various creditors, while
restricting those creditors’
ordinary remedies imposing
disabilities on the insolvent – it is not an ordinary judgment
entitling a creditor to execute
against a debtor.”
[25]
It is important to note that if the court forms an opinion that
prima
facie
the three requisites set out in s 10 have been met, a
provisional sequestration order may be issued. The threshold is
much
lower than at the stage when a final order is sought in terms of
s 12.
X
THE
LETTER WRITTEN WITHOUT PREJUDICE OF RIGHTS
[26]
It is apposite to deal already at this stage with correspondence
between the parties’ attorneys and in particular the
letter
written by Lovius Block, B & B and the Trust’s attorneys,
dated 31 May 2018. I refrain from dealing with
correspondence
of October 2017 at this stage which will be considered
infra.
It will
be recalled that the application was set down for hearing on 25 April
2018, but removed from the roll by agreement.
On 31 May 2018
the Trust’s attorney wrote a letter to applicant’s
attorney, duly marked without prejudice of rights,
which applicant
decided to attach to its replying affidavit. It is the Trust’s
case that this letter contains inadmissible
evidence, being without
prejudice communication and settlement negotiations. I must now
consider whether the contents thereof
shall be accepted as evidence
or whether it should be struck out as inadmissible.
[27]
The rule of legal professional privilege pertaining to without
prejudice statements is well-known. Statements and even admissions
of
liability made in an attempt to settle disputes between parties are
generally inadmissible in subsequent litigation between
them.
Over the years exceptions to the general rule were recognised.
The latest decision on the topic is
KLD
Residential CC v Empire Earth Investments 17 (Pty) Ltd
2017 (6) SA 55
(SCA). The court dealt with competing interests,
i.e.
the policy underlying the without prejudice rule and the policy
underlying
s 14
of the
Prescription Act, 68 of 1969
, but eventually
found that where a debtor acknowledged liability, thereby removing
any uncertainty, the reasons for providing the
protection of
prescription fell away. See paragraphs [13], [16], [23] and
[36].
[28]
A judgment more to the point is
Absa
Bank Ltd v Hammerle Group
2015 (5) SA 215
(SCA). The court found at paragraph [13] that,
as a general rule, negotiations between parties with a view to a
settlement
of their disputes are privileged from disclosure.
One exception to this rule is evidence of an act of insolvency. In
such a case public policy dictates that an admission of insolvency
should not be precluded in sequestration or winding up proceedings
even if made without prejudice. The
ratio
for such exception is that these proceedings are not a matter between
the parties to the litigation only, but by its very nature
involves
the public interest. The court also held at paragraph [15] that
as a consequence of the admission of liability the
plea of
prescription could not be sustained.
[29]
The letter of 31 May 2018 is significant and contains relevant
evidence of
inter alia
a compromise being negotiated insofar
as the Trust was prepared to accept liability towards applicant in
the lesser amount of R40m,
subject to an amount to be deducted and
still to be calculated pertaining to the value of game and their
offspring. It was
furthermore recorded that the Trust would be
able to settle the outstanding amount due to applicant once it
managed to sell its
immovable properties which were placed in the
market. No doubt, the Trust did not have any means to settle
applicant’s
claim in whichever amount, unless it managed to
sell its immovable assets. The undertaking in this letter was
not complied
with insofar as two valuable immovable properties were
sold whilst the proceeds were paid over to Standard Bank.
Applicant
established this in October 2018 only and this led to the
application to file a further affidavit to place this evidence on
record.
This will be dealt with further at a later stage. I
am satisfied that the letter of 31 May 2018 contains admissible
evidence
and it is therefore allowed as part of the factual matrix to
be considered.
XI
APPLICANT’S
LOCUS
STANDI
[30]
The Trust’s main focus in opposing the application and during
the oral submissions of its counsel is the alleged lack
of
applicant’s
locus
standi
as creditor.
[31]
I mentioned
supra
that B
& B is a debtor of applicant in an amount in excess of R245m.
Ex facie
applicant’s
replying affidavit the debt has increased to over R290m.
[32]
The bone of contention is the legal effect of the two notarial bonds
registered by B & B in favour of applicant mentioned
supra
.
As stated, B & B consented to perfection of the notarial bonds
and to applicant exercising all its rights in the bonds.
However, the parties are at loggerheads as to whether applicant
became a creditor of the Trust with the right to execute against
the
Trust and/or to apply for its sequestration. The attachment of
B & B’s right, title and interest is not in
dispute,
although the applicant’s entitlement thereto is the subject
matter of dispute.
[33]
The Trust admitted that applicant is a creditor of B & B and that
B & B is a creditor of the Trust, but it is denied
that there is
a legal
nexus
between
applicant and the Trust. Its case is that the B & B debt is
not a movable asset, but a right of action and that
it was not
intended to be secured in terms of the notarial bonds.
Applicant should have obtained a cession
in
securitatem debiti
if it wanted security in respect of the loan account (book debt).
Mr Zietsman conceded during oral argument that the parties
to the
notarial bonds could have contracted for such cession in the same
documents and it would not necessarily be required to
enter into
separate documents, but he submitted that the bonds do not favour the
conclusion arrived at by applicant. In this
regard he referred
to several passages in the bonds which are indicative of
hypothecation of movable property and not book debts
and/or rights of
action. He mentioned, to refer to just one example, the
obligation to insure the movables. According
to him book debts
cannot be insured against fire.
[34]
The bonds specifically refer to the following.
In
clause 2 we read:
“…
verbind
en verhipotikeer die Verbandgewer hiermee oor die algemeen al sy
roerende goedere, war dit ookal geleë is, wat die
Verbandgewer
tans of op enige tydstip in die toekoms, ook na die registrasie van
die verband, besit,
hetsy
liggaamlik of onliggaamlik (“die goedere”)
welke almal hiermee tot die beskikking van die Bank geplaas word…”
(emphasis
added – English translation: whether corporeal or incorporeal
(“the goods”).
Clause
7 stipulates that in the event of non-payment of any amount due under
the bond, the bank shall be entitled to foreclose the
bond and to
take possession of the goods hypothecated.
In
terms of clause 7.8 the bond serves
in
rem suam
as authority to the Bank to follow a variety of steps,
inter
alia
in
terms of clause 7.6.2.8
“…
om
alle goedere, skulde en bedrae hoegenaamd wat wel verskuldig of
betaalbaar is of aan die Verbandgewer behoort, hetsy op naam
van die
Verbandgewer of op naam van die Bank, te ontvang, te eis, op te eis
en terug te kry.”
In
English, the bank shall be entitled to receive, claim and collect all
goods, debts and amounts due or payable to the mortgagee
or which
belong to it.
[35]
I was referred to a plethora of authorities by both counsel and
although I considered same, I do not intend to deal with all
of them
in any detail or at all.
[36]
In the first place it is emphasised that general notarial bonds like
the two
in casu
do not fall within the purview of the Security
by Means of Movable Property Act, 57 of 1993. This is clear
from s 1 of this
Act and
Contract Forwarding (Pty) Ltd v
Chesterfin (Pty) Ltd and others
[2003] 1 All SA 267
(SCA) at para
[3]. Harms JA confirmed in paragraph [4] of the judgment the
following:
“
A
perfection clause entitles the holder of the bond to take possession
of the movables over which the bond has been registered.
Such a
clause amounts to an agreement to constitute a pledge and will be
enforced at the instance of the bondholder, whereupon
the creditor
obtains a real right of security.”
[37]
In
Stratgro
Capital v Lombaard
(417/2018)
[2009] ZASCA 142
(23 November 2009) the SCA in no
uncertain terms held
“…
.a
litigant’s
right,
title and interest in a claim constituted incorporeal property
which may be attached at the instance of a judgement creditor and
sold in execution.”
(emphasis
added.) See also
Brummer
v Gorfil Brothers Investments (Pty) Ltd
1999 (3) SA 398
(SCA) at 399E.
[38]
Clause 2 of the notarial bonds clearly and in no uncertain terms
contemplates the securitisation of B & B’s debt
owed to
applicant and particularly including for such purpose B and B’s
incorporeal rights. In my view applicant is a creditor
of the Trust
within the meaning of s 9(1) insofar as it, in pursuance of
perfecting its notarial bonds and the subsequent attachment,
acquired
the right, title and interest in B & B’s claim for payment
against the Trust.
[39]
I reiterate that it is common cause that corporeal and incorporeal
assets/rights were hypothecated under the notarial bonds.
Both
parties to the bond,
i.e.
applicant and B & B, through its board of directors
ex
facie
the financial statements are
ad
idem
that a cession of the Trust’s loan account was agreed upon and
that the bonds were perfected by agreement. It does
not lie in
the mouth of Mr JG Troskie who co-signed B & B’s financial
statements with his father, they duly mandated
by the board of
directors to submit the contrary whilst wearing a different hat as
trustee of the Trust. There can be no
doubt that applicant has
factually proven that a cession of the loan account has been
effected.
[40]
In
LAWSA
2
nd
ed, vol 17, part 2 at p 403 the authors explain that notarial bonds
may be registered over corporeal and incorporeal movables/assets,
including
inter
alia
book debts, liquor licences and the goodwill of a business. The
authors emphasise that only corporeal movables may be hypothecated
in
terms of the Security by Means of Movable Property Act which is not
applicable in this instance.
[41]
In
Solomon
v Registrar of Deeds
1944 CPD 319
the court ordered the registration of a notarial bond
over a liquor licence, stating at p 326 that a right of commercial
value
that can be separately held, alienated and sold such as a
liquor licence, can also by hypothecated. The court relied on
Gaius
who stated that
“
(w)hatever
admits of purchase and sale also admits of pledge.”
This
judgment was cited with approval in
Nkwana
v Hirsh
1956 (4) SA 450
(AD) and more recently in
A-Team
Drankwinkel BK an ‘n ander v Botha en ‘n ander NNO
1994 (1) SA 1
(AA).
[42]
In
Lynn
& Main Inc v Brits Community Sandworks CC
[2008] ZASCA 100
;
2009 (1) SA 308
(SCA) the court held at paragraph [6] that cession is
a method by which incorporeal rights are transferred, e.g from a
creditor
as cedent to a cessionary in respect of a right to recover a
debt from the debtor. In
GN
v JN
2017 (1) SA 342
(SCA) at 356A the court held that
“
(b)y
its very nature movable property comprises both corporeal and
incorporeal things.”
[43]
Finally, on the law, it is prudent to refer to
Netherlands Bank of
SA v Yull’s Trustees and the United Building Society
1914
WLD 133
, the court held at p 137 as follows:
“
A
book debt being a right of action, the pledgor by giving the pledgee
the right to collect it in fulfilment of his agreement of
pledge
must
be taken to have intended to cede his right of action
to the pledgee, or to whomsoever the pledgee may have ceded the bond
to.
By
our law no particular form of words is necessary to constitute a
cession, provided the intention to cede is clear.
”
(emphasis
added.)
[44]
Mr Zietsman’s submission that it is not clear from the notarial
bonds that a cession has taken place and that third parties
considering the bonds would be totally in the dark is not correct in
light of the common cause facts and the legal position.
[45]
At the meeting of 12 October 2017 referred to
supra
Mr CA
(Boet) Troskie, referred to as Mr Troskie snr in the letter of Lovius
Block dated 16 October 2017, annexure FA 7.4, mentioned
in response
to applicant’s statement that B & B had a claim against the
Trust in the amount of R75 962 148.00,
that B & B owed
the Trust an amount for game purchased by B & B for which the
Trust paid. Reliance was then placed
on set off to be
effected. In the answering affidavit reference is made to a
resolution taken as late as 17 October 2017
that the loan from MRP be
transferred and
“
netted
off the loan to the trust.”
The
following strange comment is made immediately hereafter in paragraph
14.1:
“
As
far as we know this was a ratification of an earlier decision.”
It is not said who the
deponent referred to but the vagueness of the explanation is evident.
[46]
I am satisfied that a proper case has been made out for purposes of
the standard of proof required in s 10 in respect of the
quantum
of
applicant’s claim. I mentioned
supra
that
applicant relies on the report of a forensic accountant and auditor,
while the Trust failed to present any countervailing evidence.
In his answering affidavit Mr JG Troskie stated that due to time
constraints it was not possible to obtain expert evidence to deal
with Robinson’s report. A further sixty day were provided
for filing of a supplementary affidavit, but no further word
was said
to countervail applicant’s case in this regard. The trustees
should have been warned that they could not rely on
bare, general or
ambiguous denials and that they should have grappled with all
relevant factual averments relied upon by applicant.
See:
Wightman
t/a JW Construction v Headfour (Pty) Ltd and another
2008 (3) SA 372
(SCA) at para [13].
[47]
I agree with applicant’s counsel that Robinson’s expert
report is not meaningfully disputed or countervailed with
any
evidence, but more importantly, the paucity of the Trust’s
defence is exacerbated by the commonality of individuals who
are
directors of B & B and MRP and trustees of the Trust. The
two main role players are Mr CA (Boet) Troskie and his
son, Mr JG
(Jaco) Troskie. These entities and persons were all intimately
involved in the reduction of the loan account.
The concurring,
common and contracting minds of the three entities do not stand at
arms’ length from one another given their
family and/or close
ties. Although the exact facts which resulted in the reduction
of the loan account must be within the
peculiar knowledge of the
dramatis
personae,
the
trustees failed to take the court in their confidence. The
dictum
of Marais JA in
My
Heavy Metal; Belfry Marine Ltd v Palm Base Maritime SDN BHD
1999 (3) SA 1083
(SCA) at paragraph [17] comes to mind and may
equally apply
in
casu.
A
commonality of control by Messrs Troskie is evident and one is struck
by the evasiveness which permeates it.
[48]
It is noteworthy to mention the following to show the above mentioned
directors’ and trustees’ lack of
bona
fides
.
On 13 October 2017 applicant’s attorneys informed the directors
of B & B that applicant has attached the loan
account and that
they should refrain from dealing with it. A similar letter was
written to the auditors and trustees of the
Trust on 16 October 2017.
Notwithstanding this knowledge B & B’s directors resolved
on 17 October 2017 to reduce the
loan account and two days later the
2017 financial statements were approved and the same day a resolution
taken to place B &
B in business rescue. As strange as it
may sound and prior to the aforesaid resolution of 17 October 2017,
the Trust’s
2017 financial statements, reflecting the reduction
in the loan account, were issued as long ago as 31 August 2017.
The same
partner of Newtons Chartered Accountants, one L Greyling, is
responsible for compilation of the financial statements of both
entities.
[49]
Applicant’s claim is not
bona fide
disputed on
reasonable grounds. The Trust conceded its liability to B & B in
the amount of R44 446 334.00.
I am satisfied that
applicant has proven from both a factual and legal perspective that
the Trust is liable to it. Therefore, at
best for the Trust it owes
applicant R44 446 334.00 and at worst, R74 443 113.00.
I again refer to Robinson’s
report, read with the applicable
financial statements.
XII
INSOLVENCY
/ ACTS OF INSOLVENCY
[50]
The next aspect to consider is whether or not the Trust is
insolvent. I am convinced that the Trust is not a trading
trust
in the true sense of the word notwithstanding allegations that it
purchased game in its own name. I refer to its financial
statements and in particular the statement of comprehensive income on
page 279, read with the relevant note 12 on page 288.
It is in
essence an investment entity, the owner of shares in several
companies and luxury immovable assets situated in well-known
affluent
areas such as Constantia, Fancourt and St Francis Bay. The
million dollar question is whether its assets, fairly
valued, exceed
its liabilities. This will be discussed in the following
paragraphs, but before I do that, I shall firstly
consider whether it
is possible to find insolvency on the basis of inference.
[51]
Over a century ago Innes CJ made the following remark in the
well-known case of
De
Waard
v
Andrew and Thienhaus
Ltd
1907 TS
727
at p 733
:
“
Speaking
for myself, I always look with great suspicion upon, and examine very
narrowly, the position of a debtor who says:
“
I
am sorry that I cannot pay my
creditor, but my assets far exceed my liabilities.”
To
my mind the best proof of solvency is that a man should pay his
debts; and therefore I always examine in critical spirit the
case of
a man who does not pay what he owes.”
[52]
In
Court v Standard Bank of South Africa
[1995] ZASCA 39
;
1995 (3) SA 123
(AD)
at 134C-D and 135 I- 136B Vivier, JA dealt with the position of a
debtor who failed
to
pay her debts notwithstanding several letters of demand and then made
the following remark:
“
The
appellant had sufficient time to realise her assets and to pay her
creditors. She had not done so and had failed to pay the
interest on
the capital amounts.”
The
Trust did not receive several letters of demand prior to launching of
the application
in
casu
as
was the case in the above judgment, but a period of seven
months has expired since receipt of the application and still
no
payment has been forthcoming.
[53]
The court is also entitled to consider the further averments
pertaining to other creditors of the Trust and I quote the following
from
Fedco
Cape (Pty) Ltd v Meyer
1988 (4) SA 207
(ECD) at 212C - F
:
“
In
addition it appears from the evidence that respondent is also heavily
indebted to various other creditors in substantial amounts
and that
also in those instances he had failed to meet his due commitments to
pay his debts in any manner or form. …
In
the final analysis the Court is faced with direct evidence with
regard to respondent's assets and liabilities which is, as I
have
stated, inconclusive either way; it is more or less evenly balanced.
The Court also has before it the indirect and inferential evidence
concerning the respondent's behaviour and machinations which should,
I believe, be added to and considered in conjunction with the direct
evidence.
Once
that is done the scales are clearly in my judgment preponderantly
tipped in favour of a finding of respondent's insolvency.”
(emphasis
added.)
It
is apparent from the facilities letter issued by Standard Bank on 19
July 2017, attached to the Trust’s affidavit in the
interlocutory application, that even Standard Bank is much concerned
with its financial position. It insisted that the Constantia
property be sold by 10 August 2017, failing which a mortgage bond be
registered over the property. This eventually transpired
as
indicated
supra.
I noted
from the Deeds Registry’s records of this property that it was
purchased in 2010 and that it was not hypothecated
for more than
seven years until registration of the Standard Bank bond. The
two properties in St Francis Bay that have been
sold recently were
not mortgaged, but Standard Bank insisted in its letter of 19 July
2017 that they be sold forthwith in order
to repay the banking
facility. No doubt, a major creditor like Standard Bank may do
everything lawful within its power to
obtain payment of what is due
to it and/or to arrange for further security. That Bank is so
conscious of the Trust’s
financial predicament that it extended
overdraft facilities
ex
facie
the
above letter to 25 August 2018 only, which is unheard of in the
commercial world insofar as overdraft facilities are generally
reviewed on an annual basis.
[54]
In
Realizations Ltd v Ager
1961 (4) SA 10
(D &CLD) at pp
11C-12G Williamson, JP stated the following:
“
…
whether
in fact the respondent is insolvent. …. is not a material
consideration in considering an application for sequestration
based
upon an act of insolvency except upon the final approach, …
The question of actual insolvency is not in issue
at the stage of the
enquiry as to whether the petitioner has proved his case. He has to
establish the act of insolvency….
An advantage to
creditors is shown generally when the petitioning creditor
establishes that the debtor has a substantial estate
to sequestrate
and that the creditors cannot get payment except through
sequestration. … In considering whether it
is to the
advantage of creditors the Court does not consider whether other
alternative methods of obtaining payment might not bring
better
results. … The Court in a sequestration matter is not
entitled to give a debtor a moratorium if the result
would be to
deprive the creditors of the prospect of an early dividend. A
discretion, of course, must be exercised in the
light of all the
circumstances and the fact that there may be no prejudice to
creditors if an order is not granted, because there
is a substantial
prospect of early payment, is a matter which is relevant and a matter
which I should and have considered in this
case. …
Prima
facie
,
on papers,
this
respondent is a man of considerable assets who should be able to pay
his debts but the fact remains that he has not paid his
debts, and he
has considerable debts now which are not being met.
”
(emphasis
added.)
Williamson
JP also relied upon the well-known
dictum
of Innes, CJ quoted
supra
.
[55]
A debtor who has committed an act of insolvency may be sequestrated
even if he is technically solvent. See:
DP Du Plessis
Prokureurs v Van Aarde
1999 (4) SA 1333
(TPD) at 1335E - G. A
debtor confronted with a sequestration application shall reveal his
financial position with clarity
in the answering affidavit.
See:
Absa Bank Ltd v Rhebokskloof (Pty) Ltd and Others
1993
(4) SA 436
(CPD) at 447B – H. Berman, J commented as follows
pertaining to the inaction of the debtor:
“
He
did not avail himself of the opportunity afforded him to set out
precisely what his asset position was (and is) nor did he state
specifically what his liabilities were (and are). It seems to me that
he was deliberately evasive in regard to providing details
of his
assets … although contending that his assets were worth more
than this amount, he failed to set out precisely what
his assets were
and what their fair value was.”
[56]
Mr Zietsman criticised applicant for relying on a so-called skeleton
founding affidavit and then trying to make out a case
in a voluminous
replying affidavit. The alleged insolvency of the Trust is set
out in three or four paragraphs of the founding
affidavit whilst
applicant elaborated extensively in reply. Usually there is
merit in such criticism, but in my view the
nature of the proceedings
and particularly the dealings between the Trust and other entities
within the Troskie group of companies
required a more detailed reply
than is normally expected.
[57]
According to applicant the Trust is factually insolvent based on the
following facts. In the founding affidavit it is
alleged that
the total amount of its liabilities is R124 443 113.14 and
although Deeds Registry records of eight immovable
properties were
attached, no valuations thereof were presented. It was merely
alleged that the market value of the properties
did not exceed the
total debts.
[58]
The Trust denies actual insolvency. I accept that the Trust
provided a clear picture of the extent and values of its
immovable
properties.
It
presented sworn valuations and admissible evidence in respect of its
immovable properties in the total amount of R107 900 000.00.
This figure shall be accepted without questioning. I disregard
the fact that the Constantia property has been in the market
for many
months and the highest offer received was R35m. Although I take
judicial cognisance that the property market, even
in the previously
booming Western Cape, is depressed at the moment and there is no
light in the tunnel, I shall except the value
placed on this property
as its fair market value. However,
in
my view the Trust failed to give a complete picture of all its assets
and liabilities and also its ability to pay what is due
by it.
A court is entitled to look at the undisputed and unexplained
indications of a debtor’s inability to pay his
debts and his
failure to make an open and honest disclosure of his financial
position. See:
Uys
and Another v Du Plessis
2001
(3) SA 250
(CPD) at 255B - G
.
[59]
Averments were made in respect of immovable properties registered in
the names of the Elna Troskie Trust and the Jaco Troskie
Trust on the
supposition that these trusts are indebted to the Trust and that the
loan accounts form part of the Trust’s
estate. Several
further allegations are made in respect of other loan accounts in
favour of the Trust, the value of its shareholding
in other companies
and other investments. In reply applicant showed the evasiveness and
lack of proper proof in this regard as
well as the fact that none of
these investments and/or shares and/or loans will apparently bear any
fruit for the Trust.
When Mr Zietsman made his submissions to
me, he insisted that the Trust had proved total assets to the value
of R171 147 769.00
and total liabilities in the amount of
R97 788 623.00 based on the so-called minimum assets
deposed to by the deponent,
JG Troskie. He maintained that the
assets exceeded the liabilities by more than R73m. Mr Troskie
is not an auditor
and could not present admissible evidence in
respect of the valuations of listed shares or shares in private
companies, the values
of unidentified motor vehicles or the chances
of collecting any money in respect of the loan accounts of his and
his sister’s
trusts. The value of the game is also
seriously contested. The claim of B & B (which is lawfully
applicant’s
claim) was accepted in the lesser amount of R44m in
total disregard of the report of Robinson. If the valuations of
the immovable
properties are accepted, it must not be forgotten that
two properties to the value of about R15m have been disposed of in
the meantime.
Although the status of the debtor is generally
adjudicated as at the date of the application – in April 2018
in this case
– the fact that a debtor disposed of assets since
then - cannot be disregarded. If the R15m is subtracted from
R107 900 000.00,
the total immovable assets amount to
R93m. On its own version the Trust’s liabilities, based
on a concession of the
B & B claim in the lesser amount of R44m,
exceed its assets. I have not taken into account the value of
the game which
on applicant’s version is worth just over
R1.4m. In reply applicant has set out in detail why much of the
assets relied
upon by the Trust shall not be taken into consideration
and this probably prompted Mr Zietsman to rely on the so-called bare
minimum
of assets. However applicant also showed with reference
to the Trust’s own financial statements that its liabilities
are much more than reflected in the Trust’s two answering
affidavits. I do not deem it apposite to repeat those, save
to
confirm that I am in agreement that the Trust has not played open
cards by not providing detailed information of its liabilities
as at
the time of the application. The liabilities exceed the assets
by much more than I calculated
supra.
[60]
Factual insolvency may be established indirectly as stated in
Mars
supra.
See
also:
Cohen
v Jacobs (Stand 675 Dowerglen (Pty) Ltd intervening)
[1998] 2 All SA 433
(W) at para [51].
Absa
Bank Ltd v Rhebokskloof supra
is also a typical case in point in order to rely on insolvency by way
of inference. Much weight should be attached to a respondent’s
unexplained failure to pay his debts. The learned judge dealt
with this aspect at 446H – 447D, relying on the
dictum
of Innes CJ, mentioned
supra
.
In conclusion on this topic, respondent had sufficient time to settle
his admitted debt, but failed to do so. The
best proof of
solvency is to settle one’s debts. Applicant has proven
factual insolvency, or at least insolvency by
inference.
[61]
Applicant
relies on several acts of insolvency
committed by respondent in terms of s 8 (c) and/or 8 (d) and/or 8 (e)
of the Act. Subsections
(c) and (d) read as follows:
“
8.
A
debtor
commits an act of insolvency-
(c)
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 of preferring one creditor above another;
(d)
if
he removes or attempts to remove any of his property with intent to
prejudice his creditors or to prefer one creditor above another;”
[62]
In the case of s 8 (c) the act of insolvency is committed when the
debtor disposes of or attempts to dispose of his property
which has
or would have the effect of prejudicing his creditors or preferring
one above another. In the case of s 8(d) the
removal or
attempted removal of his property by a debtor with the intent to
prejudice creditors or prefer one above the other is
an act of
insolvency. In the first instance intent is not relevant and in
the second instance a disposition does not have
to be proven,
although the debtor’s intent must be proven.
[63]
I am of the view that the Trust has committed acts of insolvency in
terms of s 8 (c) by disposing of two immovable properties
and paying
the proceeds to Standard Bank as an unsecured creditor.
Standard Bank was preferred above and to the detriment
of applicant
and any other creditors. It may even be argued that the
extension sought in the letter of 31 May 2018 is akin
to an act of
insolvency in terms of s 8 (g). The Trust made it clear that it
could not pay its debt unless some of its properties
were to be
sold. I do not make any finding in this regard. It also
entered into a compromise with applicant as its
creditor. This
falls within the ambit of s 8 (e).
[64]
The registration of the Standard Bank bond which applicant relied
upon in the founding affidavit as an act of insolvency must
be
considered now. “Disposition” is defined in s 2 of
the Act to include “mortgage”. See also
Mars loc
cit
at paragraph 4.4 and
Schlemmer v Mehnert
25 SC 870
referred to by the authors pertaining to registration of mortgage
bonds outside the jurisdiction of the court. I therefore
agree
with applicant that a disposition has taken place within the ambit of
s 8 (c). There is sufficient indication that
the Trust was
insolvent at the stage when the disposition was made.
XIII
ADVANTAGE
TO CREDITORS
[65]
Applicant is a major, perhaps the largest, creditor of the Trust.
It has shown that the Trust is prepared to dispose
of valuable
immovable properties to its and also other creditors’
prejudice. This has been done during pending sequestration
proceedings and in the face of an undertaking that proceeds of the
sale would be paid to applicant. Mr Zietsman’s suggestion
that applicant may sue the Trust is not valid in the circumstances.
The Trust will on all probabilities carry on during such
litigation
to dispose of its assets and applicant may eventually find an empty
shell.
[66]
The court must be satisfied that there is reason to believe that
sequestration of a debtor will be to the advantage of his
creditors.
Generally, creditors’ views are important and they know what is
in their best interests.
In
casu
applicant,
as the largest or one of the largest creditors, insists that the
third requirement for a final order of sequestration
has been proven.
[67]
Williamson JP said the following in
Realizations
Ltd supra
at 14H in respect of the advantages attached to an investigation of
the insolvent’s affairs: “
The
best judges of their interest in this regard are the creditors.”
[68]
Trustees to be appointed will have to investigate the Trust’s
affairs. There are several unexplained issues and/or
indications of suspicious conduct (to put it mildly) that may have to
be dealt with in accordance with ss 26 and 29 -31 of the
Act. I
mentioned the disposition of the two St Francis Bay properties and
the transactions in respect of the loan account.
XIV
DISCRETION
[69]
Mr Zietsman submitted that applicant’s motive in bringing the
application on an urgent basis was clear. It wanted
to ensure
that reliance could be placed on the provisions of s 88 of the Act in
terms whereof the Standard Bank bond over the Constantia
property
could be declared invalid. Although the debt was incurred more
than two months prior to the lodging of the bond,
the registration
thereof could never be hit by s 88 as the bond was lodged – not
registered – outside the period of
six months from any possible
date of sequestration. By the time applicant intended to apply
for sequestration, the period
of six months has expired.
[70]
Bertelsmann
et
al, Mars:
The
Law
of Insolvency in South Africa
,
9
th
ed at p 141 and further deal with the discretion of the court in
adjudicating applications for sequestration. The authors
inter
alia
state
the following, relying on case law:
“
Where
it is clear that … the creditor has some other ulterior object
in making application and not the benefit of creditors,
the court
will refuse a sequestration order, but the
onus
of establishing that such is the case rests on the person asserting
it.”
The
authors continued at p 143 in submitting that a sequestration order
will also not be granted if the application is made
“
predominantly
to embarrass and harass the debtor and to prevent him from obtaining
judgment of debts due to him, or to put pressure
on him to compromise
a claim then being investigated in arbitration proceedings or if very
special considerations seem to require
such refusal.”
If
one considers all the circumstances
in
casu
and
in particular the manner in which the
dramatis
personae
arranged for B & B to be placed under business rescue when
threatened with winding up, the suspicious dealings relating to
the
loan accounts and the reneging on the agreement with applicant to
settle the debt from the sale of immovable properties, applicant
cannot be faulted for taking steps to apply for sequestration of the
Trust.
[71]
The Act was promulgated for the benefit of creditors and not for the
relief of harassed debtors as Holmes J, as he then was,
said in
R
v Meer and others
1957 (3) SA 641
(N) at 619A. A debtor seeking to persuade a court to
exercise its discretion in his/her favour must place evidence before
the court
that clearly establishes that the debts will be paid if a
sequestration order is not granted. I refer to the full bench
decision
in
Nedbank
Ltd v JH Potgieter
2013 GDR 2290 (GSJ) at para [19].
[72]
In casu
we have a situation where the Trust in the first place
undertook to sell its immovable properties to pay applicant, only to
renege
on that agreement by paying another creditor, Standard Bank,
and secondly, in denying its indebtedness or the extent thereof, and
thirdly in dealing with the loan account to the prejudice of
creditors.
XV
CONCLUSION
[73]
I conclude in confirming that I am of the opinion that,
prima
facie,
applicant has proven the three requisites of s 10. Furthermore,
in exercising my discretion I am not convinced that a provisional
sequestration order should not be issued.
[74]
In coming to the above conclusions, the Trust should be provisionally
sequestrated. The normal return date in this Division
is four
weeks from the granting of the provisional order. The festive
season is around the corner and problems may be experienced
to comply
with the order. Therefore, a later than normal return date
appears to be apposite and this will be reflected in
my order.
[75]
Mr Zietsman asked in the alternative to his main argument that the
application be dismissed, and in the event of a provisional
order
being granted, that an order be made that the Trust’s costs in
opposing the application, consequent upon the employment
of two
counsel, shall form part of the sequestration costs in terms of s
97(3) of the Act. In my view this is a reasonable
approach.
I did not find that applicant had an ulterior motive to bring the
application, but the application was brought
with a degree of
high-handedness and I am satisfied that the opposition was not
unreasonable.
XVI
ORDERS
[76]
1.
The estate
of the Boet Troskie Kinders Trust, registration number TMP 1447, as
represented by first, second, third and fourth respondents
(“the
Trust”) is placed under provisional sequestration in the hands
of the Master of the Free State High Court, Bloemfontein.
2.
A
provisional order is hereby issued calling upon the Trust and any
other interested parties to show cause, if any, to the court
on 17
January 2019 at 9h30 why a final order of sequestration should not be
granted against the Trust.
3.
This order,
together with a copy of the notice of motion and annexures thereto,
shall be served upon the Trust.
4.
A copy of
this order shall be served on:
4.1 any registered trade
union that as far as the sheriff can reasonably ascertain represents
any of the employees of the Trust;
4.2 the Trust’s
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 Trust premises, or if there is no access to the premises
by the employees, by affixing a copy to the front
gate, where
applicable, failing which, to the front door of the premises from
which the Trust conducts any business; and
4.3 the South African
Revenue Service.
5.
The sheriff
shall ascertain whether the employees of the Trust are represented by
a trade union and whether there is a notice board
on the premises to
which employees have access.
6.
Applicant’s
costs of this application, including the costs consequent upon the
employment of two counsel and the applicant’s
costs of the
interlocutory application, together with the Trust’s costs of
opposition of the main application consequent
upon the employment of
two counsel, shall be costs in the administration of the insolvent
estate of the Trust.
______________
J
P DAFFUE, J
On
behalf of Applicant: Advv KW Lüderitz SC and S Tsangarakis
Instructed
by:
c/o
Symington & De Kok
Bloemfontein
On
behalf of 1
ST
to 4
TH
Respondents: Advv P
Zietsman SC and JC Coetzer
Instructed
by: Lovius Block
Bloemfontein