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[2014] ZAGPPHC 95
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Ex Parte Purdon (53894/2013) [2014] ZAGPPHC 95 (24 January 2014)
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IN THE HIGH COURT
OF SOUTH AFRICA,
(NORTH GAUTENG,
PRETORIA)
Case
Number 53894/2013
DATE:
24 JANUARY 2014
In the ex parte
application of:
CHARMAINE PURDON
ID NO:
720……………. Applicant
JUDGMENT
MAKGOKA, J
[1] This is an
application for the rehabilitation of the applicant’s estate,
which was sequestrated by an order of this court
made on 23 February
2011. No claims were proven against her estate afterwards. All formal
requirements of the application have
been met. The applicant has
complied with
s 124(2)
of the
Insolvency Act 24 of 1936
regarding
publication in the Government Gazette signifying her intention to
bring this application. The Master and the Trustees
have filed their
respective reports in which they raise no objections for the
rehabilitation of the applicant’s estate.
[2] The applicant,
who is a widow, states the reasons for her sequestration as follows:
‘After my
husband’s death, I relocated from Plettenberg Bay to Pretoria,
where I got employment. I tried to pay the
escalating debts, but my
salary was not enough to cover all the debts. As a result, I fell
behind with payment of my accounts and
was sequestrated.’
(my translation from
Afrikaans)
[3] As a matter of
routine when preparing for rehabilitation applications, I caused to
be retrieved, and perused the sequestration
file - from which it
appears that the applicant’s estate was sequestrated at the
instance of one Jean Evelyn Lucille Lamont
(Lamont). The applicant
did not oppose that application, in which Lamont alleged that she and
the applicant had an oral agreement
during November 2009 in terms of
which she loaned R50 000 to the applicant to set up a hair salon.
[4] Lamont further
alleged that the applicant failed to comply repay the amount in
monthly instalments of R10 000 from May 2010,
as agreed, but had
instead committed acts of insolvency in terms of
ss 8(a)
, (c) and (d)
of the Act, hence the application for ‘compulsory’
sequestration. Lamont averred that the sequestration
of the
applicant’s estate would be to the benefit of creditors. In
support of that supposition, Lamont alleged that according
to deeds
registry search, the applicant was an owner of immovable property.
[5] In terms of
s
127(2)
of the Act, the court has a discretion to grant or refuse an
application for rehabilitation. The insolvent has no right to be
rehabilitated
in any particular situation. The discretion is
dependent upon the conduct of an insolvent in relation to the
business affairs which
led to his insolvency. See for example Ex
parte
Hittersay
1974 (4)
SA 326
(SWA) at 326H-327D and Ex parte Fourie
[2008] 4 All SA 340
(D)
paras [23] - [25],
[6] As stated
earlier, there were no claims proven against the applicant’s
estate, and it is not difficult to fathom the reason
therefor. There
were no assets in the applicant’s estate. The applicant states
that at the time of sequestration, she had
no assets at all, while
her liabilities were R50 000. Therefore, a very real risk of a
contribution being levied against creditors,
existed. Indeed, a
contribution of R5110 was levied against the applicant in terms of
s
14(3)
of the Act, which was paid.
[7] The immovable
property mentioned in the sequestration application is not part of
the final liquidation and distribution account.
I can safely assume
that the applicant did not own such immovable property, otherwise the
trustees would have easily established
that. On that assumption, the
court was clearly misled. Had it been brought to the attention of the
court that the applicant did
not own immovable property, nor any
other assets for that matter, the application for sequestration would
clearly have been refused
on the basis that it would not be to the
advantage of creditors, as no dividend would accrue to them at all.
[8] I am mindful
that this allegation was not made by the applicant, but by supposed
creditor, Lamont. However, the applicant was
served with the
application. If this allegation was incorrect, the applicant had a
duty to place the correct facts before court.
She conveniently chose
not to do so, and in the process she was implicit in the misleading
of the court. She can therefore not
now expect the assistance of this
court without properly explaining this aspect. On this basis alone
the application should be
refused.
[9] An application
for rehabilitation is not a formality. It requires frankness and a
full disclosure of all relevant facts. At
the very least, the
applicant has to satisfy the court of three aspects. First, a full
and frank disclosure of the circumstances
that led to his or her
sequestration. Second, a demonstration that he or she had learnt
lessons from the insolvency, and third,
that he or she is
rehabilitated and ready to re-enter the commercial world and the
economic mainstream. For the latter requirement,
it does not suffice
that since sequestration, the insolvent had lived strictly on a cash
basis. That is a forced, natural, and
intended, consequence of
insolvency, and it is by no means an indication of prudence on the
part of the applicant for which he
or she should be applauded.
[10] The attitude of
many applicants in this Division, as aptly demonstrated in the
present application, is to place the barest
minimum details before
court, coupled with generalised statements. This is clearly not
sufficient. In the present application,
for example, the applicant
has not stated how differently she would approach factors that led to
her sequestration. She does not
seem to appreciate that the
sequestration of her estate had not resulted in any advantage to her
creditors. If rehabilitated, the
applicant, freed of her debts, would
‘cock a snook’ at her creditors and start on a clean
state, incurring more debts.
Indeed, of the reasons she seeks
rehabilitation of her estate, the applicant states that she needs to
obtain credit in the form
of a home loan.
[11] In addition, on
the papers as presently framed, I am left to speculate as to (i)
whether or not the applicant owned immovable
property at the time of
sequestration, and (ii) the particulars about her salon business. It
worth noting that the above aspects
are mentioned nowhere in the
applicant’s affidavit supporting rehabilitation. They appear
from the sequestration file. It
is therefore clear that the applicant
has not made a full and candid disclosure of material aspects of her
estate.
[12] Without laying
down any rule of practice in this regard, I am of the view that the
court should not be required to search for
and peruse the
sequestration file for supplementary information when considering a
rehabilitation application. The rehabilitation
application should be
fulsome and self-contained.
[13] Another
disquieting feature of the application is that Lamont, who was
vigorous in her quest to sequestrate the applicant’s
estate,
simply disappeared from the scene once the sequestration order was
granted, as she herself did not lodge a claim with the
trustees for
the amount allegedly owed to her by the applicant. This, in my view,
points to collusion, which was lucidly explained
by Satchwell J in
Esterhuizen v Swanepoel and Sixteen Other Cases
2004 (4) SA 89
(W) at
91G-92D:
The collusion is
frequently found in the following pattern of behaviour or
modusoperandi:
(a) A debtor owes
money, frequently in significant amounts(s), to creditors(s) who
expect and rely upon the anticipated repayments
of this outstanding
debt. The debtor cannot make payment of the debt;
(b) He seeks the
assistance of a third party who agrees to initiate sequestration
proceedings to “aid or shield [the] harassed
debtor’ from
his genuine and perhaps demanding creditors(s). (Epstein v Epstein
1987 (4) SA 606
(C))
(c) A friend or
relative masquerades as a ‘creditor’ then avers that the
‘debtor’ has not only failed or
refused to repay this
‘debt’ but has written a letter advising of his inability
to pay the ‘debt’;
(d) An act of
insolvency in terms of
s 8
(g) of the
Insolvency Act 24 of 1936
has
now purportedly been committed and the ‘creditor’
proceeds with sequestration proceedings against the ‘debtor’;
(e) This ‘friendly’
application (or sequestration) procures an order declaring the
respondent insolvent. The respondent
is then relieved of his or her
legal, financial and moral obligations to the original and genuine
creditor(s) save to the extent
that the insolvent estate is able to
satisfy such debt(s). The balance of the genuine indebtedness remains
unsatisfied and, with
the connivance of another, the insolvent has
been ‘enabled to escape payments of his just debts’.
[14] What is
explained above is exactly what transpired in the lead-up to the
application for the ‘compulsory’ sequestration
of the
applicant, as more fully set out in paras [3] and [4] above. This is
a strong pointer to collusion, which is an abuse of
the process of
this court. The abuse of the insolvency process, albeit in different
contexts, has been discussed in a number of
cases.
[15] To avoid any
manipulation or abuse of the process, I take a view that an applicant
for rehabilitation is obliged to demonstrate
how the sequestration of
his or her estate had been to the advantage of creditors, and if it
had not, the reasons therefor. It
should make no difference that the
sequestration resulted from voluntary surrender or compulsory
sequestration, for, in both instances,
the benefit to the body of
creditors, is the overarching and key consideration. Courts have a
particular responsibility to ensure
that people who have in the past
failed in managing their
financial affairs,
and in the process caused financial loss to others, are not without
more, unleashed back into the economic mainstream.
[16] Back to the
present application. I have already remarked that the applicant has
not made any explanation of her ownership,
or otherwise, of immovable
property and her business activities. She has thus shown lack of
candour. What is more, she has not
demonstrated that she had learnt
any lessons from the circumstances which led to her sequestration,
and how differently she would
manage her financial affairs, if
rehabilitated. She seems oblivious to the fact that her sequestration
has caused total loss to
her creditors, to the extent that no claims
were proven against her estate, for the reasons mentioned earlier.
[17] In summary, I
am not satisfied that the applicant has met the test set out in
Kruger v The Master
and Another NO; Ex parte Kruger
1982 (1) SA 754
(W) at 762A, which
Slomowitz AJ stated as follows:
‘As have been
at pains to point out, what the Master should asked himself was not
whether the applicant’s insolvency
causes him hardship, which
it patently does, but rather whether the applicant had shown that he
had shown that he was indeed a
man who had rehabilitated himself in
the sense that he understood her obligations to society in general
and the business world
in particular, or whether, in all the
circumstances, she needed the lesson of time.’
[18] I am of the
view that the applicant needs the lesson of time. For this, and other
reasons discussed above, I am of the view
that I should exercise my
discretion against the applicant at this stage. The application for
rehabilitation should be refused
at this stage.
[19] Before I
conclude, I need to mention a disturbing aspect. There is a growing
practice in this Division, in terms of which applicants
whose
applications for either voluntary surrender or rehabilitation had
been refused by the court, simply re-launch such applications,
on the
same papers, but under a different case number, without mentioning
that an earlier application had been refused.
[20] Often such
applications are brought by the same firms of attorneys, and in some
instances the same advocates are briefed. The
hope is obviously that
the application would serve before a different Judge, who might view
the application differently and grant
it. This is an unethical
practice, and legal practitioners who engage in it would, without
fail, be reported to their relevant
professional bodies.
[21] The following
order is made:
1. The application
for the rehabilitation of the applicant’s estate is refused.
T.M.'MAtCGOKA
JUDGE OF THE HIGH
COURT
DATE OF HEARING :
28 NOVEMBER 2013
JUDGMENT
DELIVERED : 24 JANUARY 2014
INSTRUCTED BY :
CASSIE FOURIE ATTORNEY, PRETORIA