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[2017] ZAKZDHC 8
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Hollard Life Assurance Company Limited t/a Hollard Life v Chetty (757/2016) [2017] ZAKZDHC 8 (3 March 2017)
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Certain
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IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
LOCAL DIVISION, DURBAN
CASE
NO: 757/2016
In
the matter between:
HOLLARD
LIFE ASSURANCE COMPANY LIMITED
trading
as HOLLARD LIFE (Registration No:
1993/001405/06)
Applicant
and
SANJAY
CHETTY (Identity No: …)
Respondent
JUDGMENT
HENRIQUES
J
Introduction
[1]
This is an opposed sequestration application. After hearing the
submissions of the parties’ representatives on 17 February
2017, I granted a provisional sequestration order and indicated that
my reasons would follow. These are my reasons.
Background
facts
[2]
The applicant instituted these proceedings against the respondent in
May 2016, seeking the provisional sequestration of the
respondent in
terms of s 8(b) and s 8(d) of the Insolvency Act 24 of 1936 (“the
Act”) and the attempts the respondent
made to compromise his
indebtedness with the applicant.
[3]
On or about 28 January 2013, the applicant instituted action in the
Gauteng Division, Pretoria, against the respondent, an insurance
broker,
[1]
for
payment of the sum of R 119 688 for broker commission paid in
advance but not earned. Such action, I am advised, is presently
pending between the parties. During litigation, cost orders were
obtained against the respondent. The applicant has attempted to
execute in respect of an amount taxed in its favour. The sum involved
in respect of the taxation is the sum of R 3 131.66
and a sale
in execution was arranged for September 2015.
[4]
Pursuant to an attachment by the sheriff, interpleader affidavits
were filed by L. J. Snyman
[2]
and
Shelika Khelawan.
[3]
[5]
Ms. Khelawan
stated under oath that she was employed on a temporary basis at
Everton Financial Strategies and the items attached by the sheriff
were her personal belongings and did not belong to the respondent. As
a consequence of the interpleader affidavits, the sale did
not
proceed on 15 September 2015 and was cancelled. As at the time of the
opposed application, being 17 February 2017, the taxed
amount
together with legal costs remained unpaid.
[6]
It is common cause, and it was not an issue raised by the respondent
in either his preliminary answering affidavit or by
Mr
Deoduth
, who appeared for the
respondent at the hearing of the matter, that there had been
non-compliance with any of the procedural requirements
in terms of
the Act.
[7]
It is also not disputed that the applicant is a creditor as envisaged
in s 9(1) of the Act.
[4]
[8]
In terms of s 10 of the Act, a court may make an order of provisional
sequestration in respect of the estate of a debtor if
the court is of
the opinion that,
prima facie
:
[8.1]
a creditor has established against the debtor a claim such as is
mentioned in subsection 1 of section nine; and
[8.2]
the debtor has committed an act of insolvency or is insolvent; and
[8.3]
there is reason to believe that it will be to the advantage of
creditors of the debtor if his estate is sequestrated.
Issue
[9]
The issues for determination in this application are whether:
[9.1]
the applicant is entitled to an order of provisional sequestration
either in terms of s 8(b) and / or s 8(d), alternatively,
whether or
not the respondent has committed an act of insolvency or is factually
insolvent; and
[9.2]
whether sequestration will be to the advantage of the creditors of
his estate.
[10]
When the matter initially served before the court, the respondent
filed a preliminary answering affidavit and sought leave
to file a
more comprehensive affidavit. No such further affidavit has been
filed.
[11]
In the initial answering affidavit, the respondent disputed the
amount of his indebtedness to the applicant. He indicated that
as he
had continued in his employment as a financial broker, he has been
able to, from policies written up, liquidate his indebtedness
to the
applicant in the sum of R 60 000. In addition, he submitted that
an order of provisional sequestration would not be
to the advantage
of his general body of creditors, as the applicant had not made any
allegations in respect thereof in its papers.
[12]
The only assets which he owned was an immovable property over which
there were two (2) mortgage bonds registered, the value
thereof
exceeding the value of the property. As a consequence, it would only
be secured creditors who would be paid and there would
be no
advantage to concurrent creditors as there were no assets against
which monies could be recovered to settle his debts.
[13]
The respondent reserved his right to deliver a comprehensive opposing
affidavit together with documentary evidence once he
was in a
position to do so. Among the reasons he submitted for not being in a
position to do so, was that he was involved in a
dispute with his
former attorneys of record who exercised a lien over his file.
[14]
At the hearing of the opposed application,
Mr
Deoduth
indicated that his instructing
attorneys had received instructions to tender payment of the taxed
amount together with legal costs,
and that a cheque was available at
court for immediate payment. As a consequence, because the amount in
the action was disputed,
the applicant would not be entitled to an
order of provisional sequestration.
Analysis
[15]
Ultimately, the question which this court has to decide, in my view,
is whether or not the amount claimed by the applicant
in the action
for broker commission advanced is disputed or not? If it is not, then
the applicant is entitled to an order of sequestration,
provided it
can demonstrate advantage to creditors.
[16]
If one considers the annexures to the founding affidavit, it would
appear that the amount is not disputed. I say so for the
following
reasons. If one has regard to the contents of annexure “JVN6”,
an e-mail was sent on 31 July 2013 by the
respondent’s (former)
attorney to the applicant’s attorneys of record. It is apparent
therefrom that the respondent
admitted an indebtedness to the
applicant in the sum of R 100 439.83. A proposal is contained in
such e-mail which reads as
follows:
‘
We
refer to our without prejudice telecon dated 30 July 2013.
We
referred to your summons dated 24 January 2013 were out client was
indebted to Hollard Life Assurance for an amount of R119 688.00.
(One hundred and nineteen thousand six hundred and eight rands).
Our
client has provided us with a commission statement dated 27 March
2013 where it reflects that our client is presently indebted
to
Hollard Life for an amount of R100 439.83 (one hundred thousand
four hundred and thirty nine rands and eighty three cents.
It is
our understanding that as our client “signs up” new
clients the debt is being liquidated.
We
propose that we hold our file in abeyance until the entire amount is
liquidated or alternatively our client is willing to satisfy
this
debt by paying an amount of R2500.000 per month.’
[5]
[17]
Subsequently, on 26 August 2013, a full and final settlement figure
was is requested.
[6]
[18]
On 15 August 2013, a further letter is sent on a “without
prejudice” basis in which a tender was made to pay ‘R
10 000.00 per month towards the capital, interest and costs the
latter being either taxed or agreed with the first instalment
being
the 15
th
October 2013’.
[7]
[19]
On 29 August 2013 an e-mail was exchanged which reads as follows:
‘
We
advised that we requested a full and final settlement figure on the
26 August 2013. We received an email on the 27 August 2013
with the
capital amount of R119 688.00.
We
attach a copy of our clients commission statement dated 27 March 2013
reflecting an amount of R100 439.83.’
[8]
[20]
Further correspondence is exchanged on 22 August 2015. An e-mail is
sent by one Shelika Khelawan to the applicant’s attorneys
of
record. The contents of the e-mail record the following:
[9]
‘
I
refer to the abovementioned matter:
1.
A letter of demand or summons was not
received by us / Sanjay Chetty.
2.
We have received the invoice from our
appointed attorneys and informed them of our current financial
situation.
3.
Due to the nature of our business
(insurance), we have had numerous lapses which resulted in large
commission clawbacks. This is
something we unfortunately cannot
control.
4.
We do not intend on shirking this
responsibility, however due to not receiving a commission from the
relevant insurance companies
in the past 5 months, we unfortunately
could not meet this payment.
We
apologise for the delay in responding to your email, however please
advise if you would accept payments split over two (2) months
as at
this point, due to our financial situation, we cannot settle in full.
Part
payment will be done by 31 August 2015 and the remainder will be
settled in full before 30 September 2015.
I
trust the above to be in order and invite you to contact me if you
require further clarification
.’
[21]
Subsequently and on 4 September 2015, presumably after the sheriff
had affected the attachment, Shelika Khelawan sent an e-mail
to
Carolyn at the applicant’s attorneys of record which reads as
follows:
‘
Dear
Carolyn
As
discussed with Mr. Sanjay Chetty, please advised us on the amount we
need to settle, to stay the sale in execution.
Thanking
you
Regards,
Shelika
Khelawan
.’
[22]
In his heads of argument and at the hearing of the matter,
Mr
Deoduth
submitted that the only claim
which the applicant has is the one for the taxed costs.
[23]
He submitted that the amount claimed by the applicant for broker
commission in the action is the subject of pending litigation
and is
disputed. In addition, the e-mail of July 2013 did not amount to an
unequivocal acknowledgement of indebtedness.
Mr
Deoduth
submits that in none of the
correspondence referred to did the respondent unequivocally
acknowledge his indebtedness in the amount
claimed in the summons.
Further, the communications were marked “without prejudice”
and constituted
bona fide
settlement negotiations and therefore, I could not have regard to
same.
[24]
The Supreme Court of Appeal has considered the very issue raised by
Mr
Deoduth
in relation to the admissibility of the correspondence referred to
earlier on in this judgment. In
Absa
Bank Ltd v Hammerle Group
[10]
the
court held that the correspondence exchanged between the parties
constituted an unequivocal acknowledgement of indebtedness
by the
respondent and showed that the respondent was unable to pay its
debts, and as a consequence was commercially insolvent.
In addition,
the court was of the view that where a party concedes insolvency in
correspondence written “without prejudice”,
an exception
exists to the general rule that negotiations between parties, which
are undertaken with the view to settlement of
the disputes, are
privileged from disclosure.
[25]
At paragraph 12 of the judgment, the court held the following:
‘
In
my view the contents of this letter again serve, not only as an
unequivocal acknowledgment of indebtedness by the respondent,
in the
amount claimed under the loan agreement, to the appellant. It also
shows that the respondent is unable to pay its debts
and is, in
consequence, commercially insolvent. The respondent contended that
the letter was written with a view to settling a
dispute and was as
such inadmissible. It accordingly applied that the letter be struck
out, which application was granted.’
[26]
At paragraph 13 the court went on to say the following:
‘
It
is true that, as a general rule, negotiations between parties which
are undertaken with a view to a settlement of their disputes
are
privileged from disclosure. This is regardless of whether or not the
negotiations have been stipulated to be without prejudice.
However,
there are exceptions to this rule. One of these exceptions is that an
offer made, even on a ‘without prejudice’
basis is
admissible in evidence as an act of insolvency. Where a party
therefore concedes insolvency, as the respondent did in
this case,
public policy dictates that such admissions of insolvency should not
be precluded from sequestration or winding-up proceedings,
even if
made on a privileged occasion. The reason for the exception is that
liquidation or insolvency proceedings are a matter
which by its very
nature involves the public interest. A concursus creditorum is
created and the trading public is protected from
the risk of further
dealing with a person or company trading in insolvent circumstances.
It follows that any admission of such
insolvency, whether made in
confidence or otherwise, cannot be considered privileged.’
[11]
[27]
In my view, if one has regard to the correspondence exchanged between
the parties, the following is evident:
[27.1]
the respondent unequivocally acknowledges an indebtedness to the
applicant for broker commission;
[27.2]
the amount appears to have been compromised by the parties;
[27.3]
despite undertakings to settle his indebtedness in instalments of R
2 500.00 per month and subsequently in two
(2) payments, the
respondent has failed to do so. The letter written on behalf of the
respondent clearly acknowledges that he is
insolvent and unable to
pay his debts and “further compromises the compromise
concluded” by tendering to make payment
in two (2) instalments.
None of these tenders of compromise have been complied with;
[27.4]
I must thus conclude that payment of the taxed amount would not have
non-suited the applicant as there has been a compromise
and an
unequivocal acknowledgment to pay the amount of broker commission.
[27.5]
the respondent has committed acts of insolvency as envisaged in terms
of the Act and is insolvent;
[27.6]
in addition, the taxed costs are in respect of a bill taxed on the
18
th
of May 2015. As at the time of the sale in execution, being September
2015, such amount had not been paid. The amount in respect
of the
taxed costs and legal costs is only tendered on the 17
th
of February 2017.
[28]
Insofar as the aspect of advantage to creditors is concerned, the
applicant submits the following:
[28.1]
the respondent, on his version, appears to have interests in other
entities;
[28.2]
he is the owner of two (2) immovable properties and no proper
valuations have been put up by the respondent. This is
despite an
undertaking that he would do so within a month of the filing of the
preliminary answering affidavit;
[28.3]
by effecting the compromise with the applicant, the respondent has
also preferred one creditor above the other;
[28.4]
the respondent indicates that he is employed, which implies an income
to be used for the benefit of creditors. In addition,
from a list of
his liabilities, it is apparent that he has several credit cards and
bonds which imply either an income to service
such debt or to satisfy
bank credit checks. The corollary of this is that there would be an
advantage to creditors if no further
debt is incurred;
[28.5]
there is a prospect that a trustee will uncover interest in several
corporate entities as well as movable assets. This
is consistent with
the respondent’s continued practice as an insurance broker.
Advantage
to creditors
[29]
Advantage to creditors need not be established, only that there is
reason to believe that sequestration will be to the advantage
of
creditors. The applicant bears the onus to prove this
prima
facie
at a stage when a provisional order is sought. That there is reason
to believe, is established if there are facts proved which
indicate
that there is a reasonable prospect, not necessarily a likelihood,
but a prospect which is not too remote, that some pecuniary
benefit
would result to creditors.
[12]
[30]
The leading authority on what is meant by an advantage to creditors
is the decision in
Meskin
& Co v Friedman
[13]
where
Roper J held the following:
‘
What
is the nature of the “advantage” contemplated in these
two sections? Sequestration confers upon the creditors of
the
insolvent certain advantages. . .which, though they tend towards the
ultimate pecuniary benefit of the creditors, are not in
themselves of
a pecuniary character. Among these is the advantage of full
investigation of the insolvent’s affairs under
the very
extensive powers of enquiry given by the Act. In
Awerbuch,
Brown & Co v Le Grange
(1939 OPD
20)
, it is suggested that this right of inquisition is in itself an
advantage such as referred to in the sections, so that it is
sufficient
to make out a reasonable case for enquiry without showing
that any material benefit to the creditors is likely to result from
the
investigation. With great deference I venture to think that this
states the position more favourably to the petitioning creditor
than
is justified by the language of the sections. As the “advantage”
of investigation follows automatically upon sequestration,
the
Legislature must, in my opinion, have had some other kind of
advantage in view when it required that the Court should have
“reason
to believe” that there would be advantage to the creditors. The
right of investigation is given, as it seems
to me, not as an
advantage in itself, but as a possible means of securing ultimate
material benefit for the creditors in the form,
for example, of the
recovery of property disposed of by the insolvent or the disallowance
of doubtful or collusive claims. In my
opinion, 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. It is not
necessary to prove that
the insolvent has any assets. Even if there
are none at all, but there are reasons for thinking that as a result
of an enquiry
under the Act some may be revealed or recovered for the
benefit of creditors, that is sufficient. . . .’
[31]
Meskin’s
case was cited with approval by the SCA.
[14]
[32]
Having regard to the contents of the answering affidavit as well as
the investigation conducted by the applicant which is evident
from
the supplementary affidavit, in my view, the applicant has shown it
will be to the advantage of creditors for the respondent’s
estate to be sequestrated. All the moreso in light of the authorities
which I have referred to above.
[33]
It is for these reasons that a provisional order of sequestration was
granted.
___________________
HENRIQUES J
Case
Information
Date
of argument
: 17
February 2017
Provisional
Order of sequestration issued
:
17
February 2017
Reasons
for judgment delivered
: 03
March 2017
Appearances
Counsel
for Applicant
: Mr C
Roux
Instructed
by
: RC Christie
Incorporated
c/o Jeff Bloch &
Associates
403 Kingsfield Place
30 Joe Slovo (Field
Street)
Durban
4001
(T) 011-452 7701
(F) 011-452 7709
Ref: Mr Christie/CS/A834
Counsel
for Respondent
:
Adv. N.
N. Deoduth
Instructed
by
: Atisha
Ghela
Shop 11, Royal Palm
6 Palm Boulevard
Umhlanga Ridge
(T) 031-568 1759
(F) 086 539 2479
Ref: AG/C007
c/o Messenger King
Durban
[1]
The respondent traded in his personal capacity and also under the
name Everton Financial Strategies.
[2]
Pages 82 and 83 of the indexed papers.
[3]
Pages 86 to 88 of the indexed papers .
[4]
Section
9(1) of the Act reads as follows:
‘
A
creditor (or his agent) who has a liquidated claim for not less than
fifty pounds, or two or more creditors (or their agent)
who in
aggregate have liquidated claims for not less than one hundred
pounds against a debtor who has committed an act of insolvency,
or
is insolvent, may petition the court for the sequestration of the
estate of the debtor.’
[5]
Page 89 of the indexed papers.
[6]
Page 90 of the indexed papers.
[7]
Page 91 of the indexed papers.
[8]
Page 92 of the indexed papers.
[9]
Page 97 of the indexed papers.
[10]
2015 (5) SA 215 (SCA).
[11]
The Supreme Court of Appeal confirmed that this was the principle
enunciated in
Absa
Bank Ltd v Chopdat
2000
(2) SA 1088
(W) at 1092H – 1094F which was subsequently
affirmed in this division in
Lynn
& Main Inc v Naidoo & another
2006
(1) SA 59
(N) paras 23 to 24.
[12]
Meskin
& Co. v Friedman
1948
(2) SA 555
(W) at 558-559
;
Stratford & others v Investec Bank Ltd & others
2015
(3) SA 1
(CC) para 45;
London
Estates (Pty) Ltd v Nair
1957
(3) SA 591 (D).
[13]
1948 (2) SA 555
(W) at 558-559.
[14]
Commissioner,
South African Revenue Services v Hawker Air Services (Pty) Ltd;
Commissioner, South African Revenue Service v Hawker
Aviation
Partnership & others
[2006] ZASCA 51
;
2006
(4) SA 292
(SCA).