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[2015] ZAGPPHC 388
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Fourie NO and Another v Smith and Another (57474/13) [2015] ZAGPPHC 388 (9 June 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
APPEAL
CASE NO: 57474/13
DATE:
9/6/2015
In
the matter between:
PHILIP
FOURIE
NO
First
Applicant
MOHERANE
WILLIAM HARRY MATHIBETI NO
Second
Applicant
and
VINCENT
TREVOR
SMITH
First
Respondent
INGRID
BELITA
SMITH
Second
Respondent
J U D G M E N T
DEWRANCE
AJ
[1]
This
is an application for the sequestration of the estate of the
respondents. The respondents are married to one another
in
community of property.
[2]
The
applicants are the liquidators of Zeta Capital (Pty) Ltd (in
liquidation) (“hereinafter referred to as “Zeta”).
The first respondent was a director of Zeta. Zeta’s
shareholders are the Jackal Trust and the Kairos Trust. The
respondents are the trustees of the Jackal Trust. They,
together with their children, are the beneficiaries of the Jackal
Trust. For the purposes of this judgment, the trustees and
beneficiaries of the Kairos Trust are irrelevant and, therefore,
I
will not discuss it.
[3]
Zeta
was liquidated by an entity, Corporate Money Managers (Pty) Ltd
(“CMM”). I will return to CMM later.
Zeta, in
turn, obtained judgment in the amount of R150 000.00 together
with interest and two costs orders against the first
respondent.
After obtaining the aforementioned judgment, Zeta obtained a warrant
of execution against the first respondent.
When the Sheriff
attended to the first respondent’s residence to attach movable
assets to satisfy the judgment debt, insufficient
assets were pointed
out to satisfy it. This, according to the applicants, is an act
of insolvency as contemplated by the
Insolvency Act 1936
. I
will return to this aspect later.
[4]
At
first blush, the application appears to be a normal run-of-the-mill
sequestration application in that there is a judgment debt;
an act of
insolvency and an allegation that the sequestration will be to the
advantage of creditors. Not so, contends the
respondents.
They steadfastly believe that this application is an abuse of process
and therefore it should be dismissed.
They say that by,
inter
alia
,
introducing certain background facts the applicants have abused the
court process. I deal with this later hereunder.
[5]
The
applicants, by way of background, explained that this application has
some history with CMM. It is common cause that CMM
was placed
under provisional curatorship on 25 April 2009. This was done
pursuant to investigations by the Financial Services
Board (“FSB”)
into the affairs of CMM and the companies forming part of the
so-called “
CMM
group of companies
”.
When the provisional order was confirmed on 18 June 2009, this
court eventually appointed three final curators
to administer CMM and
the CMM group of companies.
[6]
The
applicants explained in their founding affidavit that CMM was an
“
authorised
agent
”
in terms of the Collective Investment Schemes Control Act, 45 of 2002
(“CISCA”). They also explained that
CMM Cash
Management Fund (“the Fund”) also formed part of the CMM
group of companies which was placed under curatorship.
The Fund
is a CISCA-regulated fund and was managed by CMM.
[7]
The
applicants then go on to explain that CMM lured investors into
investing in the Fund and attracted large and numerous investments
from investors. They could do so because CMM offered very
attractive interest rates, which were less attractive than other
CISCA-regulated investments. In essence, they contend that
these “
investments
”
were in direct contravention of the stringent provisions of CISCA and
contrary to the investors’ mandates.
[8]
The
investors’ monies were “
invested
”
into high risk segregated portfolios utilised to provide bridging
finance and short term loans to third parties. In
most
instances, CMM made use of so-called special purpose vehicles
(“SPVs”) forming part of the CMM group of companies
to
provide loans to parties at an extremely high price. One such
SPV was CMM Corporate Finance (Pty) Ltd (“Corpfin”),
which was controlled by the first respondent.
[9]
The
applicants further explained that many of the loans (funded with Fund
money) have not been repaid and it is the primary responsibility
of
the curators to ensure that these debts are recovered in order for
the investors of CMM to be refunded or at least partially
refunded.
The outstanding balance due to the investors amounts to approximately
R1.2 billion.
[10]
In
paragraph 6.13 of the founding papers, the applicants make the
following statement:
“
6.13
The curators found that senior officials within CMM not only granted
loans indiscriminately prior to the curatorship
becoming effective,
but also did so with the purpose of enriching themselves. This
was also admitted by one Philip Sevenster
(‘Sevenster’),
a former CMM official who worked closely with the other CMM
officials, including the respondents.
The loans often entailed
possible fraudulent transactions with co-operating third parties to
whom the loans were made. This
often included that such
officials obtained a direct or indirect interest in the party to whom
the loan was made. As far
as the [first] respondent is
concerned, he for example, arranged loans to his companies, Zeta, in
the amount of R950,000.00 (‘the
Zeta loan”) and Matika
Investments (Pty) Ltd (in liquidation ‘Matika’), in the
amount of R2,250,000.0 (sic) (the
Matika loan”).
”
[11]
The
applicants further explained that Zeta and Matika were two of the CMM
debtors who did not repay their loans, which resulted
in the curators
successfully applying for the liquidation of both Zeta and Matika
after the negotiations for repayment failed.
The first
applicant is the joint liquidator of Matika.
[12]
Paragraph
6.15, which, in particular, irked the respondents, provides that:
‘
6.15
The curators have requested the South African Police Services to
investigate the fraud and theft perpetrated, but
have also instituted
civil proceedings against 21 (twenty-one) former CMM directors and
officials, including the respondent, jointly
and severally, for the
payment of an amount in excess of R1 billion (“the 424
action”). The 424 action was instituted
under case number
21263/2012 in this honourable Court and is based on the provisions of
section 424 of the old Companies Act and/or
section 218 of the new
Companies Act. The respondent is one of the defendants who
defend (sic) the 424 action. Pleadings
in the 424 action are
closed and the matter is set down for 3 (three) month trial from 17
March next year…
”
[13]
It
is common cause that the curators of CMM did not pursue the section
424 agreement with first respondent.
[14]
It
is common cause that, on 30 November 2011, a commission of enquiry,
in terms of sections 417 and 418 of the Companies Act, 1973
(“the
enquiry”), was held into the affairs of Zeta. The first
respondent gave evidence at the enquiry.
During the enquiry he
made the following admissions: he sold a BMW 730d motor vehicle (“the
BMW”), which was an asset
in the estate of Zeta, for an amount
of R150,000.00 to defray his expenses; he did not have sufficient
funds to repay the amount
of R150,000.00 to the estate of Zeta; he
signed personal surety in favour of CMM for the Matika loan; and his
house was registered
in the Geoflise Trust (“the Trust”)
of which he is a trustee and a beneficiary.
[15]
After
the enquiry the applicants issued an application against the first
respondent for the payment of the R150,000.00, together
with
interest, relating to the sale of the BMW (“the BMW money
application”).
[16]
The
applicants explained that the curators of CMM also issued a summons
against the respondents for the payment of the amount of
R2,250,000.00, together with interest, relating to the respondents’
surety in respect of the Matika loan (“the surety
action”).
[17]
The
first respondent defended both the BMW money application as well as
the surety action.
[18]
On
1 October 2012, this court granted judgment against the first
respondent in the BMW money application for the payment of an amount
of R150,000.00;
mora
interest at the rate of 15.5% per annum, from 1 April 2010 until date
of payment; and costs on the scale as between attorney and
client
(“the BMW judgment”).
[19]
On
6 March 2013, judgment was granted against the first respondent in
the surety action for: payment of the amount of R2,250,000.00;
interest calculated on the sum of R2,250,000.00 at 3% per month
calculated from 19 August 2008 to date of payment; and costs on
the
scale as between attorney and client, including costs of senior
counsel (“the surety judgment”).
[20]
As
a consequence of obtaining the BMW judgment, a warrant of execution
was issued on 16 November 2012. The Sheriff attached
the
respondents’ movable assets. The Sheriff found that the
approximate value of the movable assets of the respondents
amounted
to R18,800.00. This was not enough to satisfy the BMW judgment
debt. This is the act of insolvency the applicants
say the
respondents committed.
[21]
After
the first respondent’s movable assets were attached, he
launched proceedings for the rescission of the BMW judgment
(“the
rescission application”). The application was opposed.
Before the rescission application was argued,
the respondent withdrew
the application. The first respondent was ordered to pay the
costs on the party and party scale.
[22]
After
the curators obtained the surety judgment, the first respondent gave
notice of his intention to make application for leave
to appeal.
The applicants allege that to date the application for leave to
appeal has not yet been enrolled. They contend
that as the
first respondent conceded at the enquiry that he stood surety for the
Matika loan and that the prospects of success
of his appeal are
“
extremely
slim
”.
[23]
The
applicants contend that if the interest and attorney-client costs
taken into consideration, the outstanding balance on the Matika
loan is approximately R4.7 million. For the purposes of
this calculation, the deponent applied the
in
duplum
principle and estimated the attorney-client costs extremely
conservatively at R200,000.00. Accordingly, the first
respondent’s
outstanding liability in respect of the Matika
loan and surety judgment should be no less than R3 million.
[24]
The
applicants also contend that, as far as the respondents’
indebtedness to Zeta is concerned, the outstanding balance thereof
is
no less than R500,000.00.
[25]
These
are the background facts which the respondents allege constitute an
abuse of process. I will return to this aspect later.
[26]
Before
I proceed with the merits of this application for sequestration, it
is important to deal with two matters. The first
is the
application for removal, which was heard on 1 June 2015. The
second is whether this application is an abuse of process.
APPLICATION FOR
REMOVAL
[27]
Shortly
before the hearing, the applicants delivered an application for the
removal of the application from the roll. I dismissed
the
application and indicated that reasons will follow. I now turn
to deal with the reasons for the dismissal.
[28]
At
the outset, I must point out that, at the hearing of the application,
the respondents counsel conceded that the applicants were
entitled to
enrol the application. However, the reason for the application
for removal was that this matter ought to be heard
by Murphy J, who
is seized with other matters.
[29]
The
respondents’ attorney, on 7 May 2015, addressed a letter to the
Deputy Judge President of this Division wherein he requested
that
“
the
legal representatives of the parties approach and meet [Justice
Murphy] directly to make detailed arrangements for the hearings
before him
”.
[30]
The
request was made on the supposition that all the CMM matters and
matters related thereto are interrelated and that Justice Murphy
was
au
fait
with all the facts. Therefore, it would be prudent for Justice
Murphy to hear all the matters related to CMM, including this
one.
[31]
The
applicants’ attorney, in response to this letter, wrote to the
Deputy Judge President and, in essence, did not object
to certain
matters being placed before Justice Murphy but objected to other
matters, and this matter in particular, to be placed
before Justice
Murphy.
[32]
The
Deputy Judge President, in a letter dated 12 May 2015, requested the
applicants’ attorneys to contact Justice Murphy directly
regarding this matter but informed them that Justice Murphy is on
long leave until the beginning of the third term, which starts
on 27
July 2015.
[33]
The
respondents, in their affidavit supporting the application for
removal, contended that the aforesaid letter of the Deputy Judge
President was a “
directive
”.
[34]
They
also contended that they would be prejudiced should this matter be
heard before another judge other than Judge Murphy and “
that
it is in the best interest of justice that the directive of the
Honourable Deputy Judge President
that
the (sic) manner and sequence of all remaining applications be
determined by His Lordship
be
adhered to strictly and diligently
.
”
(
emphasis
added
)
[35]
The
applicants contend that the Deputy Judge President did not give any
directive at all.
[36]
It
is necessary to have regard to a proper interpretation of the letters
exchanged between the parties and the Deputy Judge President
to
determine whether a directive was given by the Deputy Judge
President. In my view, there is no basis for the contention
that the DJP made a directive.
Ex
facie
the letter it is abundantly clear that no directive was granted.
If regard is given to the contents of the letters, the respondent
objected that this matter should be placed before Justice Murphy.
The Deputy Judge President cannot be said to have
given any
directive. Accordingly, insofar as the applicants interpret the
letter from the Deputy Judge President as a directive,
they are
mistaken. No reasonable person could interpret the Deputy Judge
President’s letter as a directive.
[37]
The
respondents also contend that this is a complex matter and that this
is an additional reason why it should come before Murphy
J.
[38]
I
disagree with the respondents’ contention that “
[t]his
is a complex matter
”.
The facts of the sequestration application are relatively
straightforward and uncomplicated.
[39]
Accordingly,
the application for removal is dismissed with costs, including the
costs of two counsel.
ABUSE OF PROCESS
[40]
As
indicated, the respondents contend that this application is an abuse
of process. The respondents’ counsel say this
for the
following reasons: the applicants used evidence in the founding
affidavit which is inadmissible; the applicants repeated
defamatory
matter used by the curators of CMM; they breached the
sub
judice
rule; and the use of findings by the curators of CMM are an
illegality. The aforementioned reasons are not apparent from
the respondents’ answering affidavit.
[41]
In
Lipschitz
and Schwartz NNO v Markowitz
1976 (3) SA 772
(W) the court observed at 775 H-776 A that:
“
A
litigant cannot, as it were, throw a mass of material contained in
the record of an enquiry at the Court and his opponent, and
merely
invite them to read it so as to discover for themselves some cause of
action which might lurk therein, without identifying
it. If this were
permissible, the essence of our established practice and which is
designed and which still evolved as a means
of accurately identifying
issues and conflicts so that the Court and the litigants should be
properly apprised of the relevant
conflicts, would be destroyed
”.
[42]
It
was difficult to establish with sufficient particularity the grounds
for the contention that the application is an abuse of process.
I will attempt to summarise the reasons advanced by the respondents
as to why this application is an abuse of process. They say,
inter
alia
,
that it is an abuse of process for the following reasons:
[42.1]
the
application is an unlawful and fraudulent series of oppressive acts
executed by the curators and, by colluding with them, the
applicants;
[42.2]
the
applicants “
are
clearly solely beholden to the opinions and views conveniently
adopted by the ‘plaintiffs’ and their legal advisers
and
failed to investigate or consider the implications of the withdrawal
of [the 424 action against him] and the circumstances
and
consequences that arise from this fact. As a consequence, the
‘applicants’ are clearly the agents of the
curators,
taking their instructions from the legal advisers of the curators and
not otherwise as they suggest. They are acting
merely as
puppets and lackeys
”;
[42.3]
the
applicants have manifestly failed to conduct an independent
investigation into the affairs of Zeta;
[42.4]
an
enquiry into Zeta was not conducted “
in
good faith and in the interest of its creditors and its affairs in
liquidation, but in collusion, and on the instructions of,
the
curators solely as a pretext to compromise any defence [the first
respondent] may have against the section 424 the case (sic)
of the
plaintiffs in the CMM action
”;
[42.5]
by
proceeding with the application it “
constitutes
an abuse of the process of the court, is a breach of the fiduciary
duties of the applicants as officers of the Court,
is essentially
unlawful, and that [he has a] prima facie if not incontestable (sic)
grounds to set aside all the relief that had
been
fraudulently
obtained
against [him] and adverse to [his] interests, including setting
aside the liquidations of Zeta and Matika and the
appointment of the
[a]pplicants, and claim damages against CMM, the curators, the
plaintiffs and the applicants
”
;
[42.6]
the
facts and circumstances relating to the relationship and disputes
between “
CMM,
Bakkes, the curators and [the first respondent] are material to these
proceedings and that the [a]pplicants are either bound,
or,
alternatively, are bound to disclose, any legal outcome and relevant
circumstances relating to the those relationships and
disputes to the
Court
”;
[42.7]
the
natural conduct of legal proceedings in this matter will require
extensive discovery and disclosure from all sides and the first
respondent contends that it cannot be resolved on the basis of an
application for sequestration nor on the basis of motion proceedings;
[42.8]
the
curators of CMM were duty bound to conduct impartial and objective
investigations and to conduct the affairs of CMM in terms
of the
rules of good governance as formulated in terms of the Banks Act.
They failed to do so;
[42.9]
the
basis of the questions and statements put to the first respondent at
the enquiry by the attorney on behalf of the curators was
at all
times unfounded, if not false;
[42.10]
no
evidence exists that the first respondent participated in any
unlawful actions regarding CMM or colluded with CMM and Bakkes;
[42.11]
the
curators continue, contrary to their duties, to present material
misrepresentations that they knew, or were duty bound to have
known,
to be false on behalf of CMM in various legal actions and
proceedings;
[42.12]
his
application to represent Corpfin and to obtain leave to institute
damages against CMM and the curators is still pending.
[43]
I
now turn to deal with the application as an abuse. Broadly
speaking, it appears that the respondents are saying that the
applicants have an ulterior purpose.
[44]
When
a court finds an attempt to use, for ulterior purposes, machinery
devised for the better administration of justice, it is the
duty of
the court to prevent such an abuse. But it is a power which has
to be exercised with great caution, and only in a
clear case.
[1]
In
Beinash
v Wixley
,
[2]
the late Chief Justice Mahomed said the following:
“
What
does constitute an abuse of the process of the court is a matter
which needs to be determined by the circumstances of each
case.
There can be no all-encompassing definition of the concept of ‘abuse
of process’. It can be said
in general terms, however,
that an abuse of process takes place where the procedures permitted
by the Rules of the Court to facilitate
the pursuit of the truth are
used for a purpose extraneous to that objective. …
”
[45]
In
Estate
Logi v Priest
,
[3]
Solomon JA, with reference to
King
v Henderson
(1898, A.C, 720)
said the following:
"
It
is neither fraud nor an abuse of the powers of the Court to petition
for a sequestration order with an indirect motive, that
is, for a
purpose other than the equal distribution of the testator's assets,
as, for example, to exclude the appellant from a
partnership.
”
[46]
In
Brummer
v Gorfal Brothers Investments (Pty) Ltd en Andere
,
[4]
Streicher JA said that the aforementioned passage does not mean
that motive is always applicable. Thus, he put it as
follows:
[5]
“
Hierdie
passasie was egter nie bedoel om te sê dat motief of doel nooit
ter sake is nie en dit is ook nie hoe Solomon AR dit
verstaan het
nie. Al wat in King beslis is, is dat motief op sigself nie `n
misbruik van die regsproses daarstel nie. Lord
Watson het op 731
gesê:
‘
In
the opinion of their Lordships, mere motive, however reprehensible,
will not be sufficient for that purpose (to constitute an
abuse of
process or a fraud on the Court); it must be shewn that, in the
circumstances in which the interposition of the Court
is sought, the
remedy would be unsuitable, and would enable the person obtaining it
fraudulently to defeat the rights of others,
whether legal or
equitable.
’”
[47]
Streicher
JA also said that:
[6]
“…
Na
verwysing na en goedkeuring van die stelling in Wilbran dat
‘
the courts of justice had no concern
with the motives of parties who asserted a legal right’ het
Lord Watson op 732 gesê:
‘
Motive
cannot in itself constitute fraud, although it may incite the person
who entertains it to adopt proceedings which, if successful,
would
necessarily lead to a fraudulent result; and it is not the motive,
but the course of procedure which leads to that result,
which the law
regards as constituting fraud.
’”
[48]
Court
proceedings may not be used or threatened for the purpose of
obtaining for the person so using or threatening them some collateral
advantage to himself, and not for the purpose for which such
proceedings are properly designed and exist; and a party so using
or
threatening proceedings will be liable to be held guilty of abusing
the process of the court and therefore disqualified from
invoking the
powers of the court by proceedings he has abused. A legal
process is abused when it is used for a purpose other
than for what
it has been intended or designed for.
[49]
In
Standard
Credit Corporation Ltd v Bester and Others
[7]
the court stated that:
“
In
general terms, however, an abuse of the process of the court can be
said to take place when its procedures used by a litigant
for a
purpose for which it was not intended or designed, to the prejudice
or potential prejudice of the other party to the proceedings.
”
[50]
In
Brummer
supra
,
[8]
the court said the following:
In
Goldsmith v Sperrings Limited
[1977]
2 All ER 566
(CA)
was die vraag
of
sekere
aksies `n misbruik van die regsproses daargestel het. Scarman
LJ het die toets soos volg geformuleer op
582c:
‘
In
the instant proceedings the defendants have to show that the
plaintiff has an ulterior motive, seeks a collateral advantage for
himself beyond what the law offers, is reaching out ‘to effect
an object not within the scope of the process’: …
In a
phrase, the plaintiff’s purpose has to be shown to be not that
which the law by granting a remedy offers to fulfil,
but one which
the law does not recognise as a
legitimate
use of the remedy sought
: ...’
Dit
is nie net die hoofdoel waarvoor 'n spesifieke regsproses bestem is
wat geoorloof is nie en ek meen nie dat die voormelde formulerings
van die toets om te bepaal of 'n aanwending van die regsproses 'n
misbruik daarvan is, verstaan moet word om te sê dat dit
die
geval is nie. Die aanwending van 'n regsproses vir 'n doel anders as
die spesifieke doel waarvoor dit bestem is, kan nietemin
redelik
wees. Dit sal die geval wees indien daardie doel binne die breë
bestek van die betrokke regsproses val. So byvoorbeeld
kan in sekere
omstandighede aansoek gedoen word vir 'n bevel dat die eiser
sekuriteit vir koste verskaf. 'n Verweerder wat
so 'n aansoek
doen met die doel om 'n einde aan die litigasie te maak, maak
nietemin redelike gebruik van die betrokke regsproses
omrede sy doel
binne die breë bestek van die betrokke regsproses val. Dit
is in die woorde van Mahomed HR 'n ‘legitimate
purpose’.
Daarteenoor, indien dit onredelik
is om die regsproses vir sodanige doel te gebruik, word dit
misbruik. Dit sal die geval
wees indien die regsproses gebruik
word vir 'n doel wat geen verband hou met die doel waarvoor dit
bestem is nie
.
”
(
emphasis added
)
[51]
In
this case I have to decide whether the application for sequestration
is an abuse of process. I have already demonstrated
that in
Estate
Logi supra
,
the erstwhile Appellate Division found that it is neither fraud nor
an abuse of powers of the court to petition for the sequestration
order with an indirect motive for a purpose other than the equal
distribution of the testator’s assets, for example, to exclude
the appellant from a partnership.
[52]
In
casu
,
Zeta obtained a judgment against the first respondent. The
judgment stands. Application for rescission was launched
and
aborted. The Sheriff could not obtain sufficient assets to
satisfy the judgment. This is an act of insolvency as
contemplated in
section 8(b)
of the
Insolvency Act. The
applicants allege that the sequestration will be to the benefit of
creditors.
[53]
It
can hardly be said that the remedy which the applicants are seeking
is unsuitable. This is the only cause of action left
open to
them. They are duty bound to finalise the affairs of Zeta which
will ultimately allow them to be discharged as liquidators
of Zeta.
[54]
It
can also hardly be said that the applicants are obtaining the remedy
fraudulently to defeat the rights of others, whether legal
or
equitable. The respondents’ venom is mostly directed at
the curators of CMM. They contend that the liquidators
are
“
puppets
and lackeys
”
of the curators of CMM. No evidence has been adduced to sustain
this allegation. It is mere conjecture and speculation.
[55]
With
regard to the possible claims for damages which the first respondent
has against the CMM curators, there is nothing to suggest
that the
applicants will not pursue such an action or compromise the action.
[56]
Accordingly,
for the reasons set out above, I am satisfied that the applicants are
not guilty of abuse of process.
BMW JUDGMENT
[57]
I
have already indicated that the applicants obtained the BMW judgment
and that the first respondent launched an aborted application
to
rescind the BMW judgment. In the process, two costs orders were
obtained against the first respondent.
[58]
The
first respondent contends that he is desirous to have the BMW and
surety judgments, and all the ancillary judgments that followed
thereafter, set aside. Mr Terblanche, on behalf of the
respondents, referred me to the matter of
Behrman
v Sideris and Another
[9]
as a proposition that the BMW order, until set aside, stands.
Roper J, at page 368 stated the following:
“
The
application for sequestration is opposed on behalf of the respondents
on two main grounds. It is said that the petitioner
is only a
cessionary of the judgment debt and not of the original cause of
action, and that it is a debt apparently for goods sold
and
delivered. It is said that the judgment was illegally obtained
in view of the fact that, at the time when it was obtained,
the
administration order was in existence, and that, therefore, the Court
must treat the judgment debt as a nullity. The
other ground of
opposition is that, in any case, there would be no benefit to
creditors in superseding the administration order
and sequestrating
the estate of the respondents.
With
regard to the first of these grounds I am unable to see how I can
treat the judgment debt in question as null and void.
Under
section 36(b) of the Magistrates’ Courts Act the court is given
power to rescind or vary any judgment granted by it
which was void ab
origine, and if the contention of the respondents is that this
judgment was void, they should, as seems to me,
have applied to the
magistrate’s court under that section for an order rescinding
the judgment on the ground alleged.
This step was not taken by
the respondents and the judgment, therefore, stands unrescinded.
”
[59]
The
learned judge stated further that:
[10]
“
The
ordinary rule, however, is that the judgment stands and must be
recognised as valid until it is set aside by the Court…
I am
obliged, therefore, to regard the judgment debt as a valid one and
the applicant as having a valid claim as a judgment creditor
by
cession in place of the original judgment creditors. …
”
[60]
I
am bound by the aforementioned judgment by Roper J and there are no
compelling grounds for me to deviate therefrom. As indicated,
the first respondent launched an aborted application for rescission
of the BMW judgment. It stands until set aside.
[61]
The
same applies to the surety judgment.
[62]
Accordingly,
I am satisfied that the BMW judgment is valid.
ACT OF INSOLVENCY AND
INSOLVENCY
[63]
As
previously indicated, the Sheriff could not obtain sufficient assets
to satisfy the BMW judgment.
Section 8(b)
of the
Insolvency Act
provides
that:
“
A
debtor commits an act of insolvency -
(a)
…
(b)
if a court gives judgment against him and he fails, upon the demand
of the officer whose duty it is to execute that judgment,
to satisfy
it or to indicate to that officer disposable property sufficient to
satisfy it, or if it appears from the return made
by that officer
that he has not found sufficient disposable property to satisfy the
judgment;
(c)
…
(d) …
(e) …
(f)
…
(g) …
(h)
…
”
[64]
During
the hearing of this matter, respondents’ counsel wisely and
correctly conceded that the first respondent committed
an act of
insolvency. This is clearly an act of insolvency and there is
no other way to construe it.
[65]
The
applicants also contend that the first respondent is hopelessly
insolvent. They say so with reference to the BMW judgment
and
the surety judgment, which remains unsatisfied. Not so say the
respondents. The first respondent says he is clearly
solvent.
He does so on the basis of a “
balance
sheet
”
attached to his answering affidavit. The balance sheet, which
appears to be unaudited, suggests that his net worth
runs into
millions of rands. Much more than the BMW judgment and the
surety judgment.
[66]
For
instance, the first respondent claims that his household goods and
movable assets amount to R450 000. This is contrary
to the
valuations of the movable assets which the Sheriff attached and
valued. He valued them at approximately R18 800.
The
other claims are for salary, legal costs and civil claims against the
curators of CMM and CMM. In short, he claims that
his assets
are worth R32 million.
[67]
However,
one thing stands out as a sore thumb. He cannot and is not in a
position to satisfy the BMW judgment and the surety
judgment.
In this regard, Mr Terblanche referred me to a passage by Innes CJ
in the matter of
De
Waardt v Andrew and Thienhaus Ltd
[11]
where the following was said:
“
Now,
when a man commits an act of insolvency he must expect his estate to
be sequestrated. The matter is not sprung upon him
… Of
course; the Court has a large discretion in regard to making the rule
absolute; and in exercising that discretion the
condition of a man’s
assets and his general financial position will be important elements
to be considered. 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 a critical spirit the case of a man who does not
pay what
he owes.
” (
emphasis
added
)
[68]
I
agree with the aforementioned passage. The first respondent,
however much he protests that he is solvent, cannot pay what
he
owes. Any promise that he will eventually pay rings hollow.
This is simply not good enough.
[69]
Accordingly,
I am satisfied that the first respondent committed an act of
insolvency as contemplated by
section 8(b)
of the
Insolvency Act and
that the respondents are insolvent.
ADVANTAGE TO CREDITOR
[70]
The
applicants say that this application will be to the advantage of
creditors. They say that this is the case even though
the
respondents do not own immovable property and do not own sufficient
movable assets to cover their known indebtedness.
[71]
Mr
Terblanche submitted that it will be to the advantage of creditors
for the following reasons:
[71.1]
the
first respondent is a trustee and beneficiary of the Geoflise Trust
which owns the immovable property in which the respondents
reside;
[71.2]
the
first respondent alleges that he has a claim for a salary from AFSEF
amounting to R400 000, which is an asset which may
well be
applied to the advantage of his creditors;
[71.3]
the
first respondent is an astute and experienced businessman with
numerous and varied interests, and who is likely to have structured
his financial affairs in a manner calculated to his creditors.
These affairs should be investigated. Trustees will
be able to
scrutinise the respondents’ financial affairs and recover any
assets that may have been concealed;
[71.4]
the
first respondent is dissipating his assets in pursuing fruitless and
costly litigation.
[72]
The
first respondent, in his answering affidavit, specifically refrained
from dealing with the merits of the sequestration application.
Instead, he dealt with the alleged abuse of process of court. A
bare denial is made that the allegations contained in the
sequestration application are correct. This is not good enough.
[73]
Accordingly,
I am satisfied that there is reason to believe that the sequestration
will be to the advantage of the respondents’
creditors.
EXERCISE OF DISCRETION
[74]
If
a court which hears an application for the sequestration of a
debtor’s estate is of the opinion that
prima
facie
:
[12]
[74.1]
the
applicant has established against a debtor a liquidated claim for not
less than R100;
[74.2]
the
debtor has committed an act of insolvency or is insolvent; and
[74.3]
has
reason to believe that it will be to the advantage of creditors of
the debtor if the estate is sequestrated
it may grant a
provisional sequestration order. No more than
prima facie
proof of these facts needs to be produced for the provisional order
to be granted. The onus of proving facts rests on the
applicant
and it remains on him throughout.
[75]
If
a court is
prima
facie
of the opinion that three
facta
probanda
enumerated in the
Insolvency Act have
been established, it is
empowered, but not obliged, to provide a provisional order of
sequestration. It may instead dismiss
the application, or
postpone its hearing or make such other order as in the circumstances
appears to be just.
[76]
In
exercising its discretion in this regard, the court may take into
consideration whether other alternative methods of obtaining
judgment
might not bring better results. There is no reason why, at this
stage, the court should not dismiss the application
by virtue of its
inherent jurisdiction to prevent abuse of its process if, in fact,
there has been such abuse. However, before
refusing an order
and, by doing so, effectively giving moratorium to the debtor, the
court must be satisfied that creditors will
stand to lose
nothing.
[13]
Smith
[14]
says that:
“
If
the court, in the case of a provisional order, is prima facie of the
opinion and in the case of a final order, is satisfied there
are
three facta probanda, and enumerated in
sections 10
and
12
respectively of the act (sic), have been established, it is empowered
but not obliged to provide either a provisional or final
order of
sequestration as the case may be. The court has an overriding
discretion to be exercised judicially upon consideration
of all the
facts and circumstances of the particular case. The discretion
has been referred to as ‘large’ or
‘wide’ but
be that as it may, the discretion is not to be exercised lightly.
Accordingly, to paraphrase the words
of Broom J, when a sequestrating
creditor has proved an act of insolvency and there is reason to
believe that the sequestration
will be to the advantage of the
creditors, very special considerations are necessary to disentitle
him to his order.
” (
emphasis
added
)
[77]
I
have already indicated that the applicants have made out a case for
the sequestration of the respondents’ estate.
They have
satisfied the three
facta
probanda
enumerated in
section 10
of the
Insolvency Act. That
leaves me
with the question of whether to exercise my discretion in not
granting the order.
[78]
The
authorities referred to above are clear. I have a wide
discretion but the discretion is not to be exercised lightly.
Special considerations must be present which disentitle the
applicants to their order.
[79]
Smith
[15]
summarises
special considerations which were present in cases where courts have
refused to grant final sequestration orders.
They are: that the
respondent was not insolvent; that the respondent has brought an
action against the sequestrating creditor which,
if successful, might
wipe out the debt; that if the sequestration took place any damages
recovered in the action would be excluded
from the insolvent estate
and would not be available for creditors; the sequestrating creditor
was in no appreciable danger of
losing her money; and there was no
suggestion that any other creditors were pressing the respondent for
payment.
[80]
In
my view, the aforementioned examples are not a
numerus
clausus
.
Each case must be judged on its merits.
[81]
In
my view, in this matter there are no special considerations present
which will disentitle the applicants to the order they seek.
There is simply no alternative method which may bring a better
result.
[82]
Accordingly,
I decline to exercise my discretion against granting the order.
ORDER
[83]
I
am satisfied that the applicants have made out a case for the relief
they seek. Therefore, the following order is made:
[83.1]
the
application for removal is dismissed;
[83.2]
the
estate of the respondents is provisionally sequestrated;
[83.3]
a
rule
nisi
is issued calling on the respondents and any other interested parties
to show cause to this court on 16 July 2015 at 10h00
why the
respondents should not be finally sequestrated;
[83.4]
that
the costs of the application for sequestration and removal, including
the costs of two counsel, are costs of sequestration.
___________________________
DEWRANCE,
AJ
Representation
for the applicants
:
Counsel
Adv F Terblanche SC
Adv H
R Fourie
Instructed
by Attorneys:
Roestoff & Kruse
17
Dely Road
Hazelwood
Pretoria
Ref: J
J Roestoff/MAT1104
Representation
for respondents:
Counsel
Instructed
by
De Jager du Plessis Attorneys
Ref: S
de Jager/DM
c/o J
P Kruyshaar Attorneys
7
th
Floor Rentbel Towers
Room
714
Cnr
Bureau Lane and Church Square
Tel:
011 789 8471
Fax:
011 789 8475
[1]
Hudson
v Hudson and Another
1927 AD 259
at p 268
[2]
[1997] ZASCA 32
;
[1997]
2 All SA 241
(A) at p 251
[3]
1926
AD 312
at 320
[4]
1992
(2) All SA 127 (A)
[5]
See
p 136
[6]
See
p 136
[7]
1987
(1) SA 812
(W) at 820 A - D
[8]
See
p 137
[9]
1950
[2] SA 366 (TPD)
[10]
At
p 370
[11]
1907
TS 727
at 733
[12]
See
the
Laws
of South Africa
(2
nd
ed) vol 11, p 229, para 225
[13]
See
LAWSA
supra
p
232 para 226; Smith
Law
of Insolvency
(3
rd
ed) p 65
[14]
Supra
p 65
[15]
Supra
p 65