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[2016] ZAFSHC 63
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Senwes Limited v Kruger N.O. and Others (Afrikaanse Protestantse Kerk (Hoopstad) Intervening) (3688/2015) [2016] ZAFSHC 63 (11 February 2016)
FREE
STATE HIGH COURT,
BLOEMFONTEIN
REPUBLIC
OF SOUTH AFRICA
Case
No. : 3688/2015
In
the matter between:
SENWES
LIMITED
Applicant
and
SUSSANNA
JOHANNA
HERMINA
KRUGER N.O.
1
st
Respondent
CHARLOTTE
KONIG N.O.
2
nd
Respondent
WILHELM
MICHAEL
KONIG
N.O
.
3
rd
Respondent
(In
their capacities as trustees of the
ERFPACHT
BOERDERY TRUST, IT1058/03)
AFRIKAANSE
PROTESTANTSE
KERK
(HOOPSTAD)
Intervening Creditor
CORAM:
PLOOS VAN AMSTEL, J
HEARD
ON:
4 FEBRUARY 2016
DELIVERED
ON:
11 FEBRUARY 2016
[1]
This matter came before me on the extended return
day of an order for the provisional sequestration
of the
Erfpacht Boerdery Trust. The applicant, Senwes Ltd, sought a final
sequestration order while the trustees of
the trust
asked me to discharge the provisional order.
I shall refer to them collectively as 'the trust'.
An intervening
creditor, the Afrikaanse Protestantse Kerk (Hoopstad), opposed the
confirmation of the provisional order in its
papers but supported it
when the matter was argued before me.
[2]
There was also an application by the trust for certain parts of the
applicant's replying affidavit to be struck out, alternatively
for a
further affidavit to be received from the trust in order to deal with
what it contended was new matter in the replying affidavit.
By
agreement the application to strike out was not pursued and I allowed
the delivery of a further affidavit by the trust.
[3]
The
first
issue
that I
need
to
deal
with
relates
to
the
applicant's
locus
standi.
It
claims
to
be
a
creditor
of
the
trust
and
therefore
entitled,
in terms
of
s
9(1)
of
the
Insolvency
Act
[1]
,
to
apply
for
the
sequestration
of
its
estate.
The
averment
in the
founding
affidavit
that
the
trust
is
indebted
to
the
applicant
in
an
amount
of
R5 937 965 together with
interest
from
1
July 2015 was
admitted
in the
trust's
answering
affidavit.
There was
no
challenge
by the
trust on
the
papers
to
the
applicant's
locus
standi
as
a
creditor.
There was
such a
challenge
on the
papers
by
APK,
but
it was
abandoned
before
the
hearing
in
additional
heads
of
argument.
Counsel
for the
trust
nevertheless
sought
to
persuade
me
that
on
the
papers as
a
whole
the
applicant
does
not
have
locus
standi
as
it
is
not
a creditor
of
the
trust. I
have
considerable
doubt
whether
it
is
open to
the
trust
to
raise
this
point
in
argument as
it
was not
in
issue
between
it
and
the
applicant
on
the
papers.
On
the
contrary,
the trust
admitted
on the
papers that
the
applicant
was
a creditor.
The point
in any
event
appears
to
me to
be without
substance.
It was
based
on
the
fact
that
the
applicant
ceded
its claims
against
production debtors to
Absa
Bank in
2008
in
securitatem
debiti.
However,
in
2013
the
applicant
obtained
a
judgment in
this
court
against
the
trust for
payment
of a
substantial
amount
and
an
order for
costs.
In 2014
it obtained
a second
judgment
against
the
trust, also
for
a
substantial
amount,
and
an
order
for
costs. The
judgments
were
granted
pursuant
to
settlement
agreements
which were
made orders
of
court by
agreement,
and the
applicant
is entitled
to
enforce
those
judgments.
The
costs
have
been
taxed and
remain
unpaid.
The
applicant
therefore
qualifies
as
a
creditor as
contemplated
in s 9
(
1).
[4]
The basis on which the applicant seeks the sequestration of the
trust is that it committed acts of insolvency and, in addition,
that
it is factually insolvent. I deal firstly with the alleged acts of
insolvency.
[5]
The first
is a
nu/la
bona
return,
which
the
applicant
contends
is an
act
of
insolvency
as
contemplated
in s
8(b) of the
Act.
It
related to a writ
of
execution for
an amount
of
R4 461 575,
interest
and
costs.
The
sheriff
served
the
writ
on
the
third
respondent personally. Service on
the other
two trustees was effected by service
on the
third
respondent,
who
is the
husband
and
son-in-law of
the
other
two,
respectively.
Neither
the
validity
nor
the
effectiveness
of the
service was
challenged
in the
papers or
before me
in
argument.
It
was in fact
admitted
in
the
trust's
answering
affidavit that service on
the other
two trustees was effected by service
on the
third
respondent.
According
to
the
return of
service the
sheriff
demanded
payment
of the
amount
owing
on the
writ,
in response
to
which
the
third
respondent
informed
him that
the
debt could
not
be paid and
that
the
trust
did
not own
assets
or
property
which
was
available
for
attachment
in
satisfaction
of
the
writ.
He
consequently
rendered
a
nu/la
bona
return.
Counsel
for
the
trust
submitted
that
the
sheriff
knew
about
immovable
property
that
the trust
owned,
and
that
certain
farms
are
referred
to
in
both the
writ and
the
return
of
service.
I
agree
with
counsel
for
the
applicant
and APK
that
this
is
beside
the
point.
Where
the
debtor
is served
with a
writ
of
execution
and
fails
to satisfy the
judgment
or
to indicate
to
the sheriff
disposable
property
sufficient
for that purpose,
then
he commits
an
act
of
insolvency.
There
is
no
duty on
the sheriff
to endeavour
himself
to
find
sufficient disposable property
to
satisfy
the
judgment
where he
had
been
informed
by the
debtor
that
there
are
not
sufficient
such
property.
[2]
In
Dicks
[3]
Holmes
J referred
to
Estate
Logie
[4]
where
the
Appellate
Division
held that
a
debtor
commits
an act
of
insolvency
under s
8(b)
[5]
if the
writ
is
presented
to
him
and
he
neither
satisfies
it
nor
points
out
sufficient
disposable
property
to
satisfy
it;
and
that
the
concluding
words
of
the
section,
namely
"or
if it
appears from
the
return
made by
such officer that
he has not
found
sufficient
disposable
property"
do
not
apply
where
a
debtor
is
personally
served
with
the
writ
and neither
satisfies
it
nor points out sufficient
disposable
property.
Holmes
J
said
[6]
the
position
is that
section
8(b)
[7]
refers to
two
acts
of
insolvency. The first arises where the writ is presented
to the debtor and he fails, upon demand of the
officer in
question, to satisfy the judgment or to indicate disposable property
sufficient to satisfy it. The other act of insolvency
arises where
the debtor is not present or presented with the writ, but the officer
fails to find sufficient disposable property
to satisfy the judgment,
and makes a return to that effect.
[6]
After I reserved judgment I invited counsel to make submissions as to
whether the conduct of the third respondent when the writ
was served
on him could constitute an act of insolvency, having regard to the
fact that the writ was not served personally on the
other two
trustees. Counsel for the trust submitted,
with reference to
O'Shea
[8]
,
that
one of several trustees cannot commit
an act
of
insolvency on his
own. He
also
referred me
to
other
cases in
support
of
the
principle
that
trustees
have to
act
jointly.
O'Shea
is
distinguishable
on
the facts.
In
that
case a
trustee was
subpoenaed
to
give
evidence
in an
enquiry
concerning
a
company in
liquidation.
He
testified
that
the
company
had lent
money to
the trust
of which
he
was
one
of the
trustees. In a
subsequent
application
to
sequestrate
the
trust
the
liquidators
of
the
company
sought
to
rely on
his
admission
regarding
the
loan
to
establish
that the
company
was
a
creditor.
The
court
held that
when
he
testified he
did so as a
witness,
in
his
personal capacity, and
was
not
speaking
for the
trust.
His
admission
was
therefore
not one
by the
trust,
and
he
was
not
authorised
to
speak
for
the
other
trustees.
The facts
in the
present
case are
different.
The writ
was
served
on the
third
respondent
in his
capacity
as
a trustee.
He also
accepted
service
of
the
writ
on
behalf
of
the
other
two
trustees.
He
was
required,
in
his
capacity
as
trustee,
to
satisfy
the
writ
or
point
out
sufficient
disposable
property
that
could
be
attached
for
that
purpose,
and
he
responded
on behalf
of the trustees.
His
authority to do so was
not denied
on the
papers by
any of the trustees.
[7]
The bald
denial by
the
third
respondent that he
said
what was
recorded
in
the
return
is
not
enough.
Clear
and
satisfactory
evidence
is
required
to
impeach
a
return of
service
[9]
. In any
event, the
return
does
not
state
that
the
third
respondent
said
there
was no
property.
It
states that
he said
there were
no assets
or property
sufficient
to
satisfy
the
writ.
Whether
or
not
the
sheriff
knew
that the
trust
owned
farms,
and
whether
or
not
he knew
that
they
were all
subject
to
mortgage
bonds,
is
irrelevant
in the
light
of the
third
respondent's response
when
the
writ
was
served
on
him.
conclude
therefore
that the
trust
committed
an act
of
insolvency
as
evidenced
by the
nu/la
bona
return.
[8]
The second and third alleged acts of insolvency relate to sub
sections 8(c) and (d). The applicant contends
that the trust made a
disposition of some of its property which had the effect of
prejudicing its creditors or of preferring one
creditor above
another, and that it removed some of its property with intent to
prejudice its creditors or to prefer one creditor
above another. The
complaint relates to the maize on farms owned by the trust, which the
applicant says was harvested and delivered
by the trust with the
intention to apply the proceeds towards its indebtedness to APK, and
to livestock which was disposed of.
[9]
The
trustees
say
they
had
nothing to
do with
the
harvesting
or the
delivery
of
the maize
and
that
this
was
done
at
the
instance
of
APK, who
claimed
that it
was
entitled to do so by
virtue of a
notarial
bond
and
threatened
to
launch
urgent
proceedings
in the High
Court
if the
trustees
did
not
allow
them
to
harvest the
maize. I
am
not
persuaded
that the
harvesting
of the
maize
by APK
constituted
a
disposition
by the
trust
of its
property.
It was
more a case
of
self-help
by APK. The
applicant
also
contends
that
since
January 2012
the
trust has
made
a
disposition
of
livestock
and other
movable
assets
to
a
value
of
some
R8m.
[10]
As
part
of
an
application by
the
trust
for
credit
in
January
2012
the
third
respondent,
as trustee,
stated that
the trust
owned
movable
assets in
the
form
of
trucks,
bakkies,
trailers,
tractors
and
equipment
to the
value
of
R2 616 000
and livestock to the
value
of
R8 372
3000. According
to
the
inventory prepared by
the sheriff
the
livestock currently
owned
by the
trust
is valued
at
R302 080.
The
applicant
says this shows that the trust
has
disposed
of
livestock to the value of
approximately
R8m. In
the
trust's
answering
affidavit
the
third
respondent
says
APK
attached
and
sold
all
the
bakkies
and
trailers.
He
says
it
also
attached
several
sheep
and
104
head
of Nguni
cattle.
The
inventory relating
to
the
attachment
by
APK
reflects
that it
attached
goods,
including some livestock, to the value
of
R1 625 490.
The
third
respondent
also
says
the
trust
lost many
sheep
to
disease, a
flood
and
a
drought.
Some
livestock
was
sold,
but the
trust
has
provided
no
information
as to the
number
of
animals,
the
proceeds
of the
sale,
or what
happened
to the
proceeds.
This
is
plainly
not
a
satisfactory
explanation
as
to what
happened
to
the
movable
assets
disclosed
in the
application
for
credit,
which were
said to
have a
value
of
nearly R11m
in 2012.
The
applicant's
averment
that
none
of
the
proceeds
of these
assets,
save
those
attached
by APK,
was
paid
towards
the
debts owing
to
the
applicant
and
APK
is
undisputed
on
the
papers.
I agree
with
counsel
for
the
applicant
and
APK
that
the
most
probable
inference
in the
circumstances
is
that
the
trust
disposed of
the
assets
which are
unaccounted
for,
to
the
prejudice
of
its
creditors.
This
constitutes
an act
of
insolvency
as
contemplated
in s 8(c).
[10]
In the light of the acts of insolvency committed by the trust it is
not necessary to make a finding with regard to its alleged
insolvency. Suffice it to say that there is a substantial dispute of
fact in this regard on the papers. The applicant said in the
founding
papers that the trust had liabilities amounting to R14 630 624. After
the provisional sequestration order was granted,
however, creditors
with total claims of R18 089 710 lodged nominations with the Master
for the appointment of a provisional trustee.
These include the
claims by the applicant and APK. The trust disputes many of these
claims and contends that its liabilities do
not exceed R9, 4 m. There
is also a substantial dispute on the papers with regard to the value
of the farms owned by the trust,
which are the only assets of
significance. Both the applicant and the trust put up several
valuations by professional valuers,
and the deponent to the trust's
affidavit also offered his own opinion as a property broker who
specialises in the sale of farms.
The valuations vary from some R10 m
to R24 m. Counsel for the applicant submitted that a more reliable
indication of the value
of the farms is to be found in a contract for
the sale of the farms, as one farming unit, which was concluded by
the trust in February
2014. In terms of this contract the trust sold
the farms to the Truter Boerdery Trust for a purchase price of R9,
5m. The sale
included irrigation equipment, tractors, a planter and
trailers. This is not in dispute. The only response by the trust was
to
say that the transaction did not proceed as the trust did not
regard the price as reasonable. No explanation is provided as to how
the trustees managed to persuade the purchaser that this was a basis
for not proceeding with the transaction. It seems plain that
there
must have been a different reason.
[11]
It
is
not
possible in
the light
of
the
disputes of
fact to
make
a
definite
finding
as
to
the
liabilities
of
the
trust
and
the
value
of
its assets.
I have a
discretion
whether
or
not to grant
a
sequestration order
where
an
act
of
insolvency
was
committed but
there
is
no clear
proof
that
the
respondent
is
insolvent.
The
background is important
in
this
regard. The trust
has
several
judgments
and costs
orders
against
it
which
remain
unsatisfied.
It
has
breached
several settlement agreements
by
failing to
make
the
payments which
it
undertook
to
make.
Assets
with
a
very
substantial
value have
disappeared
over the
last three
years.
The
trust
is
on its own admission
not in a
position to
pay its
debts,
and
there
is
no reason
to believe
that
its
position
is
likely
to improve.
Compare in
this regard
the
approach
of
Potgieter
J
in
Sussman.
[11]
In
those
circumstances
it seems
to
me that
the
consequence
of the
acts
of
insolvency
should
be the
sequestration
of the
trust.
[12]
There was some debate before me as to whether a sequestration would
be to the advantage of the creditors of the trust. The
fact that
there will be a significant dividend is not in issue. Nor was it in
issue that there are several judgments against the
trust. It seems
likely that a better price will be obtained for the farms if they are
marketed properly than on a forced sale in
execution. It was also
submitted by counsel for the applicant and APK that there is a need
for an investigation as to what happened
to the assets which are
unaccounted for, or their proceeds. These assets are said to have had
a value of several million rand.
I must also have regard to the fact
that the two biggest creditors of the trust both want a final
sequestration order. I am satisfied
in those circumstances that there
is reason to believe that a sequestration will be to the advantage of
creditors.
[13]
I make the following order:
(i)
A final order of sequestration is granted in respect of the Erfpacht
Boerdery Trust.
(ii)
The applicant's costs, including those occasioned by the employment
of two counsel, are to be
paid out of the estate.
(iii)
The costs of the intervening creditor relating to the hearing before
me on 4 February 2016, including those
occasioned by the employment
of two counsel, are to be paid out of the estate.
________________________
J.A.
PLOOS VAN AMSTEL, J
On
behalf of Applicant:
Adv P Zietsman
SC
Instructed by:
Phatshoane Henney
BLOEMFONTEIN
On
behalf of Respondents:
Adv HJ Benade
Instructed by:
Steenkamp De Villiers
Coetzee Attorneys
BLOEMFONTEIN
On
behalf of Intervening Creditor: Adv FH Terblanche SC
With Adv AJ Wessels
Instructed by:
EG Cooper Majiedt Inc
BLOEMFONTEIN
[1]
Insolvency
Act
24
of
1
936
[2]
Meskin, Insolvency Law 2-6(7);
Dicks
v Marais
1
952
(3) SA
1
65
(NPD)
[3]
Dicks v
Marais
1
952
(3) SA
1
65
(NPD) at
1
68
[4]
Estate
Logie v Priest
1
926
AD 312
[5]
Of the Insolvency Act
1
9
1
6.
[6]
At
1
68E-F
[7]
Of the
1
936
Act.
[8]
O'Shea
NO v Van Zyl NO
2012
(
1
)
SA 90 (SCA)
[9]
Sussman & Co (Pty) Ltd v Schwa rzer
1
960
(3) SA 94
(OPD) at 96D-H
[10]
p 45
[11]
Sussman
&
Co (
Pty)
Ltd v Schwarzer
1
960
(3) SA 94
(OPD)
at 97C-D.