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[2013] ZANCHC 29
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De Klerk v Griqualand West Corporative CC (1353/2010) [2013] ZANCHC 29 (30 August 2013)
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IN
THE HIGH COURT OF SOUTH AFRICA
(Northern
Cape High Court, Kimberley)
Case
No: 1353/2010
Heard:
24/06/2013
Delivered:
30/08/2013
In
the matter between:
MARTHINUS DAVID DE
KLERK
..........................................
Appellant
V
GRIQUALAND
WEST CORPORATIVE CC
..........................
Respondent
Coram
:
Kgomo JP; Pakati J
et Mamosebo AJ
FULL BENCH APPEAL -
JUDGMENT
KGOMO
JP
The appellant, Mr
Marthinus De Klerk, was finally sequestrated by order of Madame
Justice Williams of this Court on 28 November
2011. She had
previously provisionally sequestrated him on 28 March 2011. The
appellant’s opposing affidavit was perfunctory
and consisted
of only a single non-descript document, “MDK1”. He added
no flesh to this document. Having studied
the provisional
sequestration judgment he did his best to bolster and even embellish
his so-called Supplementary Affidavit, which
was anything but. In it
he dealt with just about all matters afresh and encumbered the
record which escalated from a single volume
to four volumes. This is
totally unacceptable.
The sequestration
order was triggered by the appellant having approached a debt
counsellor, Debt Wise Kimberley, to apply for
a debt review in terms
of s86(1) of the National Credit Act, 34 of 2005 (NCA). Ms Leana Van
Wyk compiled a Debt Restructuring
Proposal consisting of a schedule
on which 17 credit providers are reflected who are owed an aggregate
amount of R2, 363,
238-78. The debt thereon owed to the
respondent, Griqualand West Corporative CC, is the most prominent
and amounts to R800 000-00.
This appeal is with
the leave of Williams J. Two issues therefrom falls for
determination. First, whether the debt restructuring
proposal in
terms of 86(1) of the NCA nevertheless constitutes an act of
insolvency as contemplated in
s8(g)
of the
Insolvency Act, 24 of
1936
. The second aspect which was opened up for debate on appeal is
whether the appellant was in any event also factually insolvent.
In his written
submission Mr Snellenburg, who was not available for oral argument,
which argument was piloted by Mr Rheiders,
urged that Griqualand
West Corporative CC must stand or fall by its postulate that the
appellant committed an act of insolvency
in terms of
s 8(g)
of the
Insolvency Act. In
other words the Corporative has not made out any
case that the appellant is factually insolvent and that the appeal
must for
that reason be upheld.
Section 8(g)
therefore provides:
“
8
Acts of insolvency: a debtor commits an act of insolvency:
(g) if he gives
notice in writing to any one of his creditors that he is unable to
pay any of his debts.”
Counsel for the
appellant argued that Williams J erred in not having followed the
judgment of Bhikha AJ in
Nedbank Limited v Heather Ann
Maxwell
: Case No. 18027/2010 (SGJ), Delivered 28/08/2010,
Unreported. At para 11 and part of para 14 the following is stated:
5.1. “
[11]
Clearly, in taking advantage of a debt review process, and further
the intention encapsulated in the application to a court
for the debt
restructuring should not prejudice or in my mind impute an inability
or unwillingness to pay. In fact the contrary
intention is evidenced
by this process – the debtor indicated her clear and
unequivocal intention to pay in accordance with
the manner and over
the period as ordered. This order is a result of a judicial process
wherein all relevant parties had an opportunity
to participate. The
applicant refused to participate, which is its right and has appealed
against the judgment, as it obviously
is unhappy with the outcome.
Again this is its entitlement.”
5.2. “
[14] If
this submission [adverse to the debt restructuring proposal] is
accepted the very purpose of the NCA is defeated. The consequences
of
the debt restructuring order is to rearrange the existing rights and
obligations after due process, and accordingly as long
as the
respondent meets her obligations and pays her debt, in instalments,
the restructured debt is not due nor is it payable.
Even the accrued
future instalments are not due; hence the claim is not liquidated.”
Disposing of this
argument is relatively straightforward. However, this has to be done
with reference to precedent. Bhikha AJ
referred to the judgment by
Trengove AJ in
Investec Bank Ltd and Another v Mutemeri and
Another
2010 (1) SA 265
(GSJ). It is not altogether very
clear on what basis Bhikha AJ distinguished this case. It is even
more difficult to comprehend
because the learned Acting Judge
(Bhikha) referred to
Naido v Absa Bank Ltd
2010 (4) SA
597
(SCA) which approved the dictum by Trengove AJ in the
Mutemeri
case. In the
Naidoo-case
in para 4 Cachalia JA states:
“
[4]
Mr Reddy's submission, as I understand it, implicitly contains a
concession that sequestration proceedings are not in and of
themselves 'legal proceedings to enforce the agreement' within the
meaning of
s129(1)(b).
That his concession is correct is clear from
the recent judgment in Investec Bank Ltd and Another v Mutemeri and
Another, where
Trengove AJ concluded that an order for the
sequestration of a debtor's estate is not an order for the
enforcement of the sequestrating
creditor's claim, and sequestration
is thus not a legal proceeding to enforce an agreement. He did so
after carefully considering
the authorities which have held that -
'sequestration proceedings are instituted by a creditor against a
debtor not for the purpose
of claiming something from the latter, but
for the purpose of setting the machinery of the law in motion to have
the debtor declared
insolvent' - they are not proceedings 'for the
recovery of a debt'. The learned judge's reasoning accords with this
court's description
of a sequestration order as 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
and imposing disabilities on the
insolvent - it is not an ordinary judgment entitling a creditor to
execute against a debtor.”
At para 7 the Learned
Judge of Appeal continued:
“
[7]
It is clear from the language employed in
s 130(3)(a)
that the
proceedings referred to there do not extend the remit of
s 129
, as
the appellant contends, but as Trengove AJ has correctly pointed out,
it simply provides that where a credit provider decides
to institute
proceedings to enforce the agreement, he may do so only after having
complied with the procedure in
s 129(1)(a).
Similarly the reference
in
s 130(3)(a)
to
s 127
and to
s 131
refers specifically to
procedures which are applicable to those proceedings involving the
surrender and attachment of goods respectively,
under a credit
agreement - not to 'any proceedings' concerning a credit agreement.
It follows that the appellant's insistence that
the respondent had to
comply with the procedure provided for in
s 129(1)(a)
before
commencing sequestration proceedings against him has no merit.”
Whereas Wallis J in
Firstrand Bank Ltd v Evans
2011(4) SA 597 (KZD) did
not specifically refer to
Nedbank Ltd v Heather Ann Maxwell
(above) by Bhikha AJ it is nevertheless implicit in the following
excerpts of his judgment that he would have found that the
Maxwell
judgment
was wrongly decided:
7.1 “
[13] The
letter states that Mr Evans is under debt review. That means that he
must have applied for debt review in terms of
s 86(1)
of the NCA. The
purpose of his application was to obtain a declaration that he was
overindebted, because that is always the purpose
of applying for debt
review. In terms of
s 79(1)
of the NCA:
'(1) A consumer is
over-indebted if the preponderance of available information at the
time a determination is made indicates that
the particular consumer
is or will be unable to satisfy in a timely manner all the
obligations under all the credit agreements
to which the consumer is
a party, having regard to that consumer's
(a) financial means,
prospects and obligations; and
(b) probable
propensity to satisfy in a timely manner all the obligations under
all the credit agreements to which the consumer
is a party, as
indicated by the consumer's history of debt repayment.'
It follows from
this statement, of what constitutes overindebtedness for the purposes
of the NCA, that a debtor who informs his
creditor that he has
applied for, or is under, debt review is necessarily informing the
creditor that he is overindebted and unable
to pay his debts.
”
(My emphasis).
7.2 “
[19] The
requirements of
s 8(g)
are satisfied when the notice given by the
debtor to the creditor conveys that the debtor is at present unable
to pay his or her
debts. The debtor's willingness to attempt to pay
the debts in the future is not relevant. As Scott J pointed out in
Standard Bank of SA Ltd v Court
supra:
'(A) debtor who
gives notice that he will only be able to pay his debt in the future
gives notice in effect that he is unable to
pay. A request for time
to pay a debt which is due and payable will, therefore, ordinarily
give rise to an inference that the debtor
is unable to pay a debt and
such a request contained in writing will accordingly constitute an
act of insolvency in terms of
s 8(g).
This is particularly so where
the request is coupled with an undertaking to pay the amount due and
payable by way of instalments.
. . . A distinction must, however, be
drawn between an inability to pay and an unwillingness to pay. If a
reasonable person in
the position of the creditor to whom the notice
is addressed would understand the notice to mean that while the
debtor was unwilling
to pay his debt forthwith he could nonetheless
do so if pressed, then the notice will not constitute an act of
insolvency. . .
. In each case where there is a request for time, the
enquiry, therefore, is whether the content of the written statement,
viewed
together with the circumstances to which it may be permissible
to have regard, is such as to negative the inference arising from
the
request for time to pay and to justify the conclusion that the debtor
would be able to pay at once if pressed to do so.'“
7.3 “
[35] ---
(O)nce it is accepted that debt-review proceedings under the NCA do
not constitute an automatic bar to the grant of a sequestration
order, I am unable to see why the fact, that a debt-rearrangement
order has been granted, necessarily affects the situation. ---
(I)n
my view it does nothing more than preclude the creditor from pursuing
its contractual rights, for so long as the debtor is
complying with
the debt-rearrangement order. That is, after all, what the NCA says
in
s 88(3)
thereof. If the debtor does not comply with the
debt-rearrangement order the creditor is not confined to claiming
remedies on the
basis of an amended contract. Instead, the bar on
proceeding against the debtor, 'to exercise or enforce by litigation
or other
judicial process any right or security under that credit
agreement', is removed, and the creditor is entitled to pursue in
full
its contractual remedies. The effect of a debt-rearrangement
order is to place a moratorium on credit providers pursuing their
contractual remedies, for so long as the debtor complies with the
terms of the debt-rearrangement order. Once it is recognised that
an
application for sequestration is not the enforcement of the credit
agreement, it must follow that any moratorium to claiming
payment,
under the credit agreement that exists by virtue of a
debt-rearrangement order, is not a bar to the grant of a
sequestration
order.”
In
Collet v
Firstrand Bank Ltd
2011 (4) SA 508
(SCA) the consumer was in
default with her repayments under a bond. By reason thereof all her
arrear instalments and the whole
outstanding balance became due and
payable. The consumer subsequently successfully applied for a debt
review in terms of
s86(1)
of the NCA. The debt counsellor circulated
the debt restructuring proposal to
Firstrand Bank
(the
respondent) and all other credit providers. None of them accepted
the proposal. The debt counsellor resultantly referred
the matter to
the magistrates court in terms of
s 86(8)
for an order that the
consumer be declared over-indebted; that her debt commitments be
rearranged; that the credit agreements
of those credit providers who
terminated their reviews under
s86(1)
be resumed. At paras 10 and 14
of the judgment Malan JA writing for the unanimous court (five
judges) stated:
“
[10]
The purpose of the debt review is not to relieve the consumer of his
obligations, but to achieve either a voluntary debt rearrangement
or
a debt rearrangement by the magistrates' court. The purposes of the
NCA include the promotion of responsibility in the credit
market by
'encouraging responsible borrowing, avoidance of over-indebtedness
and fulfilment of financial obligations by consumers'.
Its approach
to overindebtedness is 'based on the principle of satisfaction of all
responsible consumer obligations'. By providing
for a consistent and
harmonised system of debt-restructuring the NCA 'places priority on
the eventual satisfaction of all responsible
consumer obligations'.
It follows that the NCA serves not only the interests of consumers:
its construction calls for a careful
balancing of all relevant
interests.”
“
[14]
The conclusion, that the right of the credit provider to terminate
the debt review under
s 86(10)
can be exercised even after a referral
to the magistrates' court, does not lead to the anomalous result
contended for on behalf
of the amicus curiae. While it is correct to
say that
s 87(1)
requires that the magistrates' court 'must conduct a
hearing', it is not correct to argue that termination of a debt
review terminates
the hearing.
Section 86(10)
entitles a credit
provider to terminate the debt review relating to a specific credit
agreement ('(i)f a consumer is in default
under a credit agreement
that is being reviewed'), not the 'hearing'. The hearing continues
and, if several credit agreements are
being reviewed, continues in
respect of the others.”
It will be noted in
the
Collet-case
(supra) at footnote 4 thereof the SCA
specifically approved the decision by Wallis J in
FirstRand
Bank v Evans
2011 (4) SA 597
(KZD). It is interesting to
note, however, that Malan JA in the Collet case has not referred to
Naidoo v ABSA Bank Ltd
2010 (4) SA 597
(SCA) that had
been decided in the same Court precisely a year earlier (21/05/2010
and 27 May 2011, respectively). Nothing revolves
on this issue for
purposes of this judgment as there is no dichotomy. What should be
added though is that Malan JA found in the
Collet (2011) judgment
that an act of insolvency had been committed within the
contemplation of the provisions of
s8(g)
of the
Insolvency Act,
notwithstanding that
the case involved Summary Judgment, which is a
court process unlike a sequestration which is not.
To put matters beyond
doubt the Supreme Court of Appeal has in
O’Shea NO v Van
Zyl & Others NNO
2012 (1) SA 90
(SCA) in para 26
referred with approval to paras 14 and 15 of the
Investec-judgment
(supra) when it remarked:
“
(26)
--- The letter was unambiguous and must stand or fall as an act of
insolvency on its own terms. It cannot be subjected to interpretation
by reference to events which occurred or knowledge which was obtained
subsequent to its writing. The proper approach to determining
whether
a letter contains a notice of inability to pay in terms of
s8(g)
is
to consider how it would be understood by a reasonable person in the
position of the creditor at the time he receives it, taking
into
account that creditor’s knowledge of the debtor’s
circumstances:
FirstRand
Bank Ltd v Evans
2011 (4) SA 597
(KZD) at paras 14 and 15.”
In
Ex Parte
Minister of Safety and Security
: In Re
S v Walters
[2002] ZACC 6
;
2002 (4) SA 613
(CC) the Constitutional Court expressed itself in
these terms on the precedent system at para 57 (pp 644D –
645A) which
principle Bhikha AJ seems to have overlooked:
“
[57]
What is at issue here is not the doctrine of stare decisis as such,
but its applicability in the circumstances of this particular
case. A
brief comment on the doctrine will therefore suffice. The words are
an abbreviation of a Latin maxim, stare decisis et
non quieta movere,
which means that one stands by decisions and does not disturb settled
points. It is widely recognised in developed
legal systems. Hahlo and
Kahn describe this deference of the law for precedent as a
manifestation of the general human tendency
to have respect for
experience. They explain why the doctrine of stare decisis is so
important, saying:
'In the legal system
the calls of justice are paramount. The maintenance of the certainty
of the law and of equality before it,
the satisfaction of legitimate
expectations, entail a general duty of Judges to follow the legal
rulings in previous judicial decisions.
The individual litigant would
feel himself unjustly treated if a past ruling applicable to his case
were not followed where the
material facts were the same. This
authority given to past judgments is called the doctrine of
precedent.
It enables the
citizen, if necessary with the aid of practising lawyers, to plan his
private and professional activities with some
degree of assurance as
to their legal effects; it prevents the dislocation of rights,
particularly contractual and proprietary
ones, created in the belief
of an existing rule of law; it cuts down the prospect of litigation;
it keeps the weaker Judge along
right and rational paths, drastically
limiting the play allowed to partiality, caprice or prejudice,
thereby not only securing
justice in the instance but also retaining
public confidence in the judicial machine through like being dealt
with alike. . . .
Certainty, predictability, reliability, equality,
uniformity, convenience: these are the principal advantages to be
gained by a
legal system from the principle of stare decisis.'”
At para 60 (p 646D-H)
(of
S v Walters
(supra)) the Court decided that
according to the hierarchy of courts in Chapter 8 of the
Constitution, the Supreme Court of Appeal
“clearly ranks above
the High Courts” and that “courts are bound to accept
the authority and the binding force
of applicable decisions of
higher tribunals.” In the circumstances Mr Rheiders with the
invocation of the
Nedbank Limited v Heather Ann Maxwell
,
North Gauteng High Court Division case, attempted to close the
stable gate long after the horse had bolted.
It is perhaps not
unkind to dismiss the appellant’s argument, dealt with next,
as a red herring. The argument is to the
effect that Debt Wise
Kimberley was not the appellant’s agent and therefore the Debt
Restructuring Proposal scheme prepared
by it should not be construed
to mean that the appellant committed an act of insolvency in terms
of
s 8(g)
of the
Insolvency Act. The
distinction that is sought to
be drawn is that whereas in the
Evans-case
the
consumer personally disseminated the letter of indebtedness,
however, in the instant case the distribution was made by the
debt
counsellor who was not even an attorney.
The distinction sought
to be drawn escapes me. The appellant personally instructed the debt
counsellor as regards his indebtedness
to each and every one of the
17 creditors who appears on the Debt Restructuring Proposal
Schedule. What is more he confirmed
the correctness of the schedule,
Annexure “JAB4”, in an affidavit in an application that
served in the magistrates
court. Short schrift.
I am satisfied that a
reasonable person in the position of the creditor (the directing
mind of Griqualand West Corporative CC)
receiving the Debt
Restructuring Proposal relating to Mr De Klerk would understand it
to convey and constitute a notice of inability
to pay in terms of
s
8(g)
of the
Insolvency Act. The
courts have held that this is the
proper approach to adopt to make such a determination. See the
Evans-case
(supra) at para 14 and
O’Shea
NO
(supra) para 26 and
Chenille Industries v Vorster
1953 (2) SA 69(O).
In the premises the
decision by the court
a quo
that the appellant, Mr De Klerk,
had committed an act of insolvency with the dissemination of the
Debt Restructuring Proposal
cannot be faulted.
The only issue that
remains for determination is whether the appellant was factually
insolvent. The debt counsellor, as stated,
determined that the
appellant was over-indebted. That finding was justified. The
appellant has not queried the correctness of
the schedule of
creditors drawn up on his instructions. The total debt is reflected
as R2, 363 238-78. According to the
schedule the instalments
currently payable stand at R40 292.04 per month. The proposed
restructured instalment is given
as R14 365.98 per month.
As far as the position
with Griqualand West Corporative, the creditor, is concerned the
R800 000-00 shown in the schedule
is a reference to the
original amount advanced to the appellant. However, as at 01
February 2011 the amount had already escalated
to R1,052 992.12.
The agreed interest rate is 16.5% per annum. The proposal shows that
the appellant was required to pay
an instalment of R3000-000 per
month to Griqualand West Corporation. The rescheduled proposal was
that the instalment be scaled
down to R1066.01 per month. Adv De
Bruin SC for the credit provider makes a valid point that the
payment offered is even insufficient
to take care of the interest
charged, let alone the capital amount.
The reason for the
escalation of the amount owed is not only due to the accrued
interest charged but also because appellant had
not made any payment
to Griqualand West Corporative since January 2009 to the date of
hearing of the provisional sequestration
application by the court
a
quo
on 25 February 2011.
The appellant made the
averment that the value of the bonded farm by far exceeds the money
owed to the Corporative, even on a
forced sale in execution. He
contends that three years prior to February 2011 First National Bank
(FNB) did an appraisal of the
farm and placed a R5 million value
thereon. This statement was not supported by any documentary
evidence. Besides, three years
was a long time ago. For the proper
determination of the value of land see
Nel v Lubbe
1999 (3) SA 109
(W) at 111D-G where Leveson J stated:
“
The
purpose of furnishing a sworn valuation is therefore to establish the
price that is likely to be realised from the sale of the
property on
what is called a forced sale so that it can be determined that there
will be a free residue available for creditors
and advantage to
creditors is thereby established. A practice has therefore grown up
in this Division (I cannot speak for others)
whereby a sworn
valuation is furnished by an expert witness, usually, as in the
present case, an estate agent. He expresses an
opinion with respect
to the price that the property will fetch. Normally the opinion of a
witness is not receivable in evidence.
But the opinion of an expert
witness is admissible whenever, by virtue of the special skill and
knowledge he possesses in his particular
sphere of activity, he is
better qualified to draw inferences from the proved facts than the
Judge himself. A Court will look to
the guidance of an expert when it
is satisfied that it is incapable of forming an opinion without it.
But the Court is not a rubber
stamp for acceptance of the expert's
opinion. Testimony must be placed before the Court of the facts
relied upon by the expert
for his opinion as well as the reasons upon
which it is based. S v Gouws
1967 (4) SA 527
(E); S v Govender and
Another
1968 (3) SA 14
(N). The Court will not blindly accept the
assertion of the expert without full explanation. If it does so its
function will have
been usurped.”
This dictum has been
approved on innumerable occasions in this Division and indeed in
others. The bland statement by De Klerk
concerning the speculative
value of his land said to have been carried out a long time ago is
vague and unhelpful and is therefore
rejected. His claim was
reminiscent of what is stated in
De Waard v Andrew Thienhaus
Ltd
1907 TS at 733 where the Court, per Innes CJ (Solomon J
and Bristowe J concurring):
“
Now,
when a man commits an act of insolvency he must expect his estate to
be sequestrated. --- (H)e must expect, if he does not
satisfy the
claim, that his estate will be sequestrated. Of course, the Court has
a large discretion in regard to making the rules
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 the 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. ”
Having regard to all
the issues raised I am satisfied that the court
a quo
did not
misdirect itself. The appeal on the merits must fail.
ON THE ISSUE OF
COSTS
Apparently
per in
curiam
the court
a quo
when granting leave to appeal
ordered that the respondent (Griqualand West Corp) pay the costs of
the application for leave to
appeal. Counsel were agreed that it was
an error. I agree. The conventional order is that such costs are
costs in the appeal.
The correction follows.
ORDER
The appeal is
dismissed with costs.
The court
a quo’s
order (granting leave to appeal on 25 April 2012) to the effect that
“die Respondent [Griqualand West Corporative CC] word
gelas om
die kostes van hierdie aansoek te betaal” is set aside and
replaced with the following:
“
The
costs of the leave to appeal heard on 25 April 2012 are costs in the
appeal.”
_______________________
F DIALE KGOMO
JUDGE PRESIDENT
Northern Cape High
Court, Kimberley
I concur
___________________________
B M PAKATI
JUDGE
Northern Cape High
Court, Kimberley
I concur
___________________________
M C MAMOSEBO
ACTING JUDGE
Northern Cape High
Court, Kimberley
On
behalf of the Appellant
:
Adv
Rheiders
(Haarhoffs)
On
behalf of the Respondent
:
Adv J P De Bruin SC
(Van
De Wall & Vennote)