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[2013] ZAKZDHC 73
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International Financial Advisors KSCC and Another v Wood and Another (1583/2013) [2013] ZAKZDHC 73 (26 November 2013)
IN
THE KWAZULU-NATAL HIGH COURT, DURBAN
REPUBLIC
OF SOUTH AFRICA
Case
No: 1583/2013
In
the matter between:
INTERNATIONAL
FINANCIAL ADVISORS
KSCC
.............................................
FIRST
APPLICANT
KUWAIT
INVESTMENT COMPANY
KSCC
....................................................
SECOND
APPLICANT
and
STRATH
McBARRON
WOOD
..........................................................................
FIRST
RESPONDENT
KATHELEEN
ELIZABETH
WOOD
.............................................................
SECOND
RESPONDENT
JUDGMENT
Delivered:
26 November 2013
MBATHA,
J
[1]
The applicants applied for an order provisionally sequestrating the
joint estate of the respondents who are married in community
of
property. It is common cause on the papers that the respondents
either committed an act or acts of insolvency or are in fact
insolvent and that the applicants have
locus standi
as
creditors to bring this application. The extent of the debts of the
respondents is approximately R8million and the only issue
in dispute
between the parties is whether or not the provisional sequestration
of the respondents would be to the advantage of
creditors like the
applicants who are owed approximately R4million by the respondents by
way of a judgment in favour of the applicants
against the respondents
dating back to October 2010.
[2]
The applicants are adamant that the sequestration will benefit
creditors while the respondents contend otherwise.
[3]
The test for a provisional sequestration is whether the balance of
probabilities
prima facie
favours the applicants and in this
case in particular whether there is reason to believe that the
provisional sequestration will
benefit not only the applicants but
the body of creditors as a whole. I am mindful of the fact that the
onus is on the applicants
to prove this aspect in order for the
application for the provisional sequestration of the respondents to
be granted.
[4]
The applicants purported to make out a case that the sequestration of
the respondents would benefit creditors by referring to
a number of
entities and trusts in which particularly the first respondent had
and may still have a viable interest and that a
duly appointed
trustee armed with the insolvency legislation will uncover assets
which will yield a not negligible dividend to
the general body of
creditors and it is claimed that the prospect of such a result is by
no means a remote prospect.
[5]
The respondents and their children emigrated to the United States of
America and the respondents are the holders of what was
referred to
as “green cards” to enable them to secure employment in
that country and eventually full citizenship. They
deny that they
have any tangible assets in the Republic of South Africa capable of
being converted into any tangible means of contributing
to their
admitted debts to creditors. If they had such assets capable of being
attached, so they argue, the applicants could have
used the process
of execution to locate such assets and in that way have sought to
recover what was due to them.
[6]
The applicants in both the founding affidavit and further in the
replying affidavit itemised various assets in which the first
respondent may have a financial interest and to this must be added
the fact that these assets were not uncovered with the assistance
of
the respondents as this application is decidedly an acrimonious one
and not a “friendly sequestration” where a court
would be
anxious even without opposition to the application, to carefully
examine the papers to determine whether the sequestration
would
benefit creditors.
[7]
The fact that the respondents oppose the application and base the
opposition solely on the basis that their sequestration will
not
benefit creditors (and being represented by senior counsel) would in
ordinary circumstances have seemed somewhat peculiar,
but since the
respondents are in the process of applying for citizenship in the
United States of America I will assume that their
sequestration will
not be helpful in their ambitions to become citizens of that country.
[8]
The applicants makes a case that the first respondent was the
controlling mind of a trust, The Strath Wood Family Trust, and
that
the trust is a shareholder of Chemspec Holdings Limited owning 5861
shares and that in addition the first respondent was a
high profile
director of this company prior to him leaving the country. This
company is a public listed company named Chemspec
Limited. In
addition to being a director of Chemspec Limited first respondent is
alleged to have been a director or member of some
twenty eight (28)
other companies of which I need to refer only to one namely Zevoli
243 (Pty) Ltd.(Zevoli). Zevoli allegedly acquired
substantial
immovable properties by itself and through the other companies
mentioned with an alleged value of R141million. The
case for the
applicants is that the first respondent effectively uses the trust
and the companies mentioned to insulate his wealth
from his creditors
and it is only a trustee armed with the powers conferred upon him or
her by the Insolvency Act who will be able
to fully investigate the
business affairs of the first respondent and effectively pierce the
veil of the trust and the affairs
of the companies mentioned to
locate assets which in reality belongs to the first respondent.
[9]
I mentioned only the involvement of the first respondent in this one
trust as I do not think any purpose will be served to deal
with each
and every alleged involvement by him in a business entity and his
response to suggestions that he is shielding himself
from his
creditors.
[10]
The question of what constitutes a benefit to creditors has been
authoritatively interpreted and in the leading case on this
topic,
Meskin
&
Co
v Friedman
[1]
,
Roper J identified indirect advantages to creditors such as the
opportunity to have a full investigation of the insolvent’s
affairs where the complexity of the insolvent’s involvement in
the business world warrants such an investigation. I was handed
an
unreported judgment by Levinsohn DJP of this Division in the case of
Nedbank
Limited v R P Thorpe
(Case No: 7392/2007) in which he was faced with a case involving
various trusts from which it was said that creditors of the insolvent
may benefit and I found his judgment from pages 15 to 28 both
instructive and helpful.
[11]
In the answering affidavit the first respondent set out to explain
why any investigation into his business affairs will not
avail his
creditors. It was argued on behalf of the respondents that the
applicants went no further in the papers than to identify
a
spes
that assets may be recovered and in reality nothing will materialise
making the sequestration of the respondents a futility.
[12]
I disagree with this submission. The applicants, in my view,
established a strong
prima facie c
ase why it would benefit the
general body of creditors to have the respondents provisionally
sequestrated. I am persuaded
that the efforts made by the first
respondent to explain away the realistic expectations of the
applicants that a material benefit
may result in his and the 2
nd
applicant’s sequestration fortifies a genuine expectation that
a proper investigation into his affairs would lead to a substantial
windfall for the benefit of his creditors.
[13]
I therefore grant an order in terms of paragraphs 2 and 3 of the
Notice of Motion with the return date in paragraph 2 to read
the 7
th
day of January 2014.
_________________
MBATHA
J
Date
of hearing: 27 September 2013
Date
of Judgment: 26 November 2013
Counsel
for the ApplicantS: Adv C.P Hunt SC/ Adv G.M Harrison
Instructed
by: Larson Falconer Hassan Parsee Inc.
Ridgeside
Office Park
Umhlanga
DURBAN
Counsel
for the Respondents: Adv G.D Harpur SC
Instructed
by: Norton Rose Fulbright South Africa
3
Pencarrow Crescent, Pencarrow Park
La
Lucia Ridge
DURBAN
[1]
1948
(2) SA 555
W at 558-559