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[2012] ZAGPPHC 171
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Ex parte:Bekker and Another (24420/12) [2012] ZAGPPHC 171 (11 June 2012)
REPORTABLE
IN
THE NORTH GAITING HIGH COURT,
PRETORIA
REPUBLIC OF SOUTH AFRICA
CASE
NO: 24420/12
DATE:11/06/2012
In
the ex parte application of:
BERNARD
BEKKER
.............................................................................................
First
Applicant
MAGDALEN
A MARIA
BEKKER
..........................................................................
Second
Applicant
JUDGMENT
Tuchten
J:
1.
This is an application brought under s 3 of the Insolvency Act,.24 of
1936 by a husband and wife married in community of property
for the
surrender of their estate. Under s 6 of the Act, the court may accept
the surrender if satisfied that the debtor in question
is insolvent,
that he owns realizable property of a sufficient value to defray all
the costs of sequestration which will in terms
of the Act be payable
out of the free residue of his estate and that it will be to the
advantage of creditors of the debtor if
his estate is sequestrated.
2.
Because this application has been brought ex parte, the applicants
are under a duty to the court to show the utmost good faith.
A
failure to disclose fully and fairly ail material facts known to them
may lead, in the exercise of the court's discretion, to
the dismissal
of the application on that ground alone. Schlesinger v Schlesinger
1979 4 SA 342
W 348E-350B. An applicant who approaches the court ex
parte must disclose all facts known to him or her, however
prejudicial they
may be to the applicant's case.
3.
There Is no doubt that on the papers the applicants are insolvent.
They say that their debts amount to R285 000 and that the
value of
their assets is R175 000. Of that amount, R5 000 (exactly) is said to
be the value of their few remaining household items.
The remainder
relates to a piece of ground, erf 985 Southport Extn 2, Port
-Shepsteno.
4.
The applicants live in Pretoria and the Port Shepstone ground was
bought when, in good times, they could afford to do so. They
hoped to
build a house on it. They bought it on 5 June 2006 for R220 000 and,
they say, registered a bond with Nedbank for R170
000. They say
further that the amount owed to the bondholder was on 22 March 2012
(exactly) R250 000. There are no supporting documents
to corroborate
the improbable assertion that the bondholder allowed the amount owing
to it to exceed the amount of its security
or, if the assertion is
true, why the bondholder allowed this to happen.
5.
The issue In this case is whether the applicants have shown that the
value of the ground is sufficient upon realisation to defray
the
costs of sequestration and to result in a benefit to concurrent
creditors which in this case translates to a reasonable dividend,
The
practice of this Division in such cases that a dividend of at least
twenty cents in the rand must, save in exceptional cases,
be
demonstrated on the papers.
6.
The applicants allege that the forced sale value of the ground is
R250 000. The only evidence in this regard is that of a candidate
valuer and his 'mentor", a professional valuer, both of
Pretoria, where the applicants' attorney practises. The actual
valuation
was done by the candidate. The candidate claims to have
actually visited the ground on 3 March 2012. The candidate and the
professional
valuer proceed to claim that on the same day, they
prepared and signed a written valuation, for which they, or the
professional
valuer, will be paid a fee of R9 000 out of the balance
of the monies available after payment of the bondholder and certain
preferential
costs.
7.
There is no explanation why the attorney did not use the services of
a valuer in Port Shepstone or its environs, why the candidate
had to
travel to Port Shepstone to look at a vacant stand and how the
candidate and the professional valuer managed to prepare
and sign the
valuation in Pretoria on the same day that the candidate travelled
back from Port Shepstone.
S
A photograph is attached to the valuation documents but there is no
allegation that the photograph was taken by the candidate
or while he
was at the property or even that the photograph depicts the ground. I
shall however assume that the vacant property
in the photograph is in
fact the ground.
9.
The method of valuation is said by the candidate, to be based on
certain comparable sales. None of these sales was apparently
within
the personal knowledge of the candidate although he says that he has
. attended various auctions of properties in the vicinity
of the
Hibiscus Coast and Southport Extn 2. But the candidate does not say
when he attended these auctions or testify to any specific
transaction in recent times within his own knowledge.
10.
Instead the candidate relies on an undated valuation report compiled
by Lightstone, an organisation or entity which is not described
in
the papers. The essential document within the Lightstone report is a
list of twenty properties In Southport, Sendingoand Sea
Park
transferred during the period 2010to 2012 for prices varying from
R221 to R1 068 per square metre. Of these, for no reason
disclosed on
the papers, the candidate says that two are relevant. These two
properties fetched R708 and R640 per square metre
respectively.
Whether they are improved or unimproved is not stated. Whether they,
and the ground in question, are in a more or
less desirable part of
Southport is not stated. Why the properties which fetched lower
prices per square metre were not regarded
by the valuators as
comparable is not explained.
11.
Based on these data, the candidate concludes that the market value
of the ground is R450 000. The ground is described in the
Lightstone
report as being in extent 1 071 square metres (registered) and 1118
square metres (cadastral), so the estimated value
is between R406 and
R420 a square metre. Why there are two measurements is not explained.
Nor is it explained whether the Lightstone
valuations are based on
the registered extent or the cadastral extent.
12.
The candidate says in his report that he considered six sources of
information in the determination of market value, Lightstone,
"S.A.P.T.G - Dataverkope", the Pietermaritzburg Deeds
Office. “Elendomsagente/Ontwikkelaars - Southport",
Jonker
on valuations in South Africa and Davis Langdon's property and
construction handbook 2011 on replacement values.
13.
The candidate then proceeds to conclude that the property has a
forced sale value of R250 000. Why this should be so is not
explained.
14.
The candidate then proceeds to say something in his report which I
think is rather curious. He says that for the sake of thoroughness,
he tested his valuation by means of the "GC69 metode (ook bekend
as die Stapelmetode)", by which an individual value
Is attached
to each item, eg dwelling house, swimming pool, fences and ground
value separately.
15.
But this ground is said to be empty of any improvements. There was
thus simply no room for the application of this method and
the
assertion by the candidate that he tested his valuation by this means
cannot be true.
16.
The valuation proffered by the applicants for these reasons does not
inspire confidence but the position is far worse for the
applicants
when the evidence produced is tested against the probabilities.
17.
Market value Is the price likely to be paid by a wilting buyer to a
willing seller. For the determination of a market value,
there must
be evidence of a market. The crucial question is whether there are
willing buyers for this particular piece of ground.
That there
existed in the past willing buyers and willing sellers for other
pieces of ground is only evidence from which an inference
relating to
this specific piece of ground might, of might not, be drawn on the
facts. This brings me to what I regard as the greatest
weakness in
the applicants' case.
18.
The applicants have been in financial trouble since February 2009,
due to the weakened economy and world wide recession. This
invites
the question whether the applicants have tried to sell the ground.
But the papers are silent in this regard. The court
should not be
left to speculate on this important question. Either the applicants
attempted, unsuccessfully, to sell the ground
or they decided not to
try to sell it. Either way, they owed a duty to the court to explain
what they did, or did not do, in this
regard. Similarly, i think it
is to say the least strange that no evidence has been produced by
local estate agents to testify
to whether they have buyers on their
books, for vacant stands En Southport Extn 2. There is no indication
why the candidate or
the professional valuer did not seek information
from the most obvious and reliable source, ie the applicants
themselves, and did
not produce evidence emanating from the estate
agents whom one would expect to be active in the market if such there
is, for vacant
ground in Southport Extn 2.
19.
in all the circumstances, the most probable inference is that the
applicants have tried, unsuccessfully, to sell the ground.
This fact,
if true, will be potentially destructive of the evidence of the
valuers.
20.
Finally, l want to refer to the financial distribution plan presented
by the applicants to show how the proceeds of the ground
(and the
moveables) would be allocated. On the assumption that the ground and
the moveables will realise R175 000, the applicants
assert that after
payment to the bondholder of the preferent part of its claim (R170
000) and costs there will be a balance of
R25 804,50 available for
distribution to creditors. The anticipated costs include R15 000 to
the auctioneer, R9 000 to the valuer
and R15 000 to the attorneys
acting for the applicants. No evidence has been produced to establish
that the applicants' creditors
would not be financially better off if
they were left to take such steps in execution as they were minded
rather than invited to
accept the cold comfort of a speculative
dividend.
21.
Continued experience in the unopposed motion court in this Division
has led me to conclude that an unholy industry has arisen,
which
capitalises on the misery of ever Increasing numbers of people who,
because of the difficult financial times in which we
live, are unable
to live within their means, very often through no fault or no great
fault of their own.
22.
This Industry offers debtors the alluring prospect of escaping the
attentions of their creditors in return for handing over
what remains
of their patrimonies. The services of the same valuers, week after
week, are retained to produce a result which, on
paper and after
manipulation of the figures , indicates that an acceptable benefit to
creditors will be achieved, But then the
appointed trustee files a
liquidation and distribution account which in many instances does not
result in any dividend at all to
creditors.
23.
In our procedural system, there is more often than not no opposition
as such to a particular application for surrender This
is at least
partly because H is generally not financially worthwhile for a
concurrent creditor to incur the expense of the intervention
in and
opposition to such an application. There are, however, fairly
frequent interventions by bondholders. In my experience {some
two
years) I have not heard or heard of a case in which, after such an
intervention, a debtor has persuaded the court to accept
the
surrender of his estate.
24.
In my opinion, therefore, a court should evaluate critically the
evidence provided of values of assets In the estate sought
to be
surrendered and consider in this context whether the debtor has
provided the court with all material evidence on this issue
which is
within his knowledge. I do not think that a debtor who omits to
disclose fully what efforts he has made to sell the assets
which he
claims will provide the free residue which can be distributed to the
benefit of concurrent creditors and what he has been
offered for
these assets can be said to have made a full and fair disclosure of
all material facts known to him.
25.
Tested against the criteria I have discussed, the applicants have not
persuaded me that they have made a full and fair disclosure
of all
material facts known to them or that there will be a benefit to
creditors from the surrender of their estate. The application
is
dismissed.
NB
Tuchten
Judge
of the High Court
11
June 2012
For
the applicant: Adv P de Klerk
Instructed
by Herman Esterhuizen Smalman Attorneys Pretoria