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[2011] ZAKZDHC 3
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First Rand Bank Ltd t/a First National Bank v Naidoo and Another, South African Bank of Athens v Naidoo (3869/2010, 8118/2010) [2011] ZAKZDHC 3 (14 February 2011)
IN THE KWAZULU-NATAL
HIGH COURT, DURBAN
REPUBLIC OF SOUTH
AFRICA
CASE NO.
3869/2010
In the matter between:
FIRST RAND BANK
LIMITED
t/a FIRST NATIONAL
BANK
….............................................
APPLICANT
and
RAJENDARAN NARAINSAMY
NAIDOO
Identity No.:
Married out of
community of property to
VANEETHA MOODLEY
Identity No. )
….................................................................
RESPONDENT
AND
In the matter between:
CASE NO.
8118/2010
SOUTH AFRICAN BANK OF
ATHENS
…............................
APPLICANT
and
RAJENDARAN NARAINSAMY
NAIDOO
Identity No.
Married out of
community of property
….......................
RESPONDENT
JUDGMENT
Delivered
on 14 February 2011
SWAIN J
[1] Before me are two
applications, in which the objectives
of both applicants are
identical, that being the sequestration of the respondent.
[2] In Case No.
3869/2010, First Rand Bank Limited has the advantage of having
already obtained a provisional order of sequestration
of the
respondent’s estate, before Hughes-Madondo A J on 07 December
2010. Before me First Rand Bank Limited (First Rand)
seeks a final
sequestration order and by agreement between all of the parties, the
application by South African Bank of Athens
(the Bank of Athens)
awaits the outcome of the First Rand matter, which may be dispositive
of the Bank of Athens matter.
[3] The respondent
launched proceedings to consolidate both matters for hearing, but in
the light of the agreement referred to,
did not proceed with the
application. I mention this solely for the reason that Mr. Harrison,
who appeared for the respondent in
both matters, accepted that in
dealing with the First Rand matter I would be entitled to have regard
to the affidavits filed in
the Bank of Athens matter.
[4] The only ground upon
which the respondent resisted the grant of a final order of
sequestration, was that the applicant had failed
to establish that it
was to the advantage of creditors to sequestrate his estate because
the respondent was hopelessly insolvent.
The same defence did not
find favour with Hughes-Madondo A J, who found that the facts showed
that there was a not too remote prospect,
that as a result of
investigation, assets other than those mentioned may be found, or
recovered, to the pecuniary benefit of the
applicant and other
creditors.
[5] Mr. Harrison submits
however that whereas the applicant bore the onus of establishing at
the stage of a provisional order, that
sequestration was
prima
facie
to the advantage of creditors, at the stage when a final
order was sought, the applicant bore the heavier onus of proving this
issue on a balance of probabilities. His submission was that the
applicant had failed to discharge this onus.
[6] The advantage I have
however, is that I have before me not only the facts that were before
Hughes-Madondo A J at the provisional
sequestration stage, but also
the facts disclosed in the Bank of Athens case, which are of
relevance to the issue of whether the
applicant has established, that
it is to the advantage of creditors to finally sequestrate the
respondent’s estate.
[7] With regard to the
issue of an advantage to creditors, I find the following words of
Roper J, particularly relevant on the facts
of this case
Meskin &
Company v Friedman
1948 (2) SA 555
(W)
at 559
‘
In my
opinion, the facts put before the Court must satisfy it that there is
a reasonable prospect – not necessarily a likelihood
but a
prospect which is not too remote – that some pecuniary benefit
will result to creditors. It is not necessary to prove
that the
insolvent has any assets. Even if there are none at all but there are
reasons for thinking that as a result of enquiry
under the Act some
may be revealed or recovered for the benefit of creditors, that is
sufficient.’
The following words of
Leveson J are equally relevant
Hillhouse v Stott;
Freban Investments
(Pty) Ltd. v Itzkin;
Botha v Botha
1990 (4) SA 580
(W)
at 585 C – F
‘…
.a
Court need not be satisfied that there will be advantage to
creditors, only that there is reason to believe that this will be
so.
That in turn, in my opinion, leads to the conclusion that the
expression “reason to believe” means “good
reason
to believe”. The belief itself must be rational or reasonable
and, in my opinion, to come to such a belief the Court
must be
furnished with sufficient facts to support it. In a broad sense it
seems proper to say, on the basis of the cases, that
“advantage
to creditors” ought to have some bearing on the question as to
whether the granting of the application would
secure some useful
purpose. I express it thus because as Roper J has shown in the
Meskin
case,
there need not always be immediate financial benefit. It is
sufficient if it be shown that investigation and enquiry under
the
relevant provisions of the Act might unearth assets thereby
benefiting creditors.’
[8] In addition, it is
also apparent that creditors
“may often lack detailed
knowledge of the debtor’s affairs, but may be able to adduce
sufficient facts to indicate that
the debtor may be possessed of
substantial assets that have been squirreled away and that may be
discovered by an insolvency enquiry.
If this is the case, advantage
to creditors has normally been established”.
Mars The Law of
Insolvency in South Africa 9
th
Ed pg 140 and authorities
cited
[9] Of significance in
this regard are striking disparities between a list of the
respondent’s assets and liabilities furnished
by him to First
Rand, in October 2009 (Annexure “FA9”) and a list of the
respondent’s assets and liabilities,
furnished by him to the
Bank of Athens dated 13 October 2007 (Annexure “J”).
[10] The respondent
confirmed the accuracy of the statement of assets and liabilities
furnished to First Rand, under oath at a Section
65 enquiry,
conducted in the Magistrates’ Court. As regards the statement
of assets and liabilities furnished to the Bank
of Athens, which is
annexed to the applicant’s founding affidavit, the respondent
was content to deal with what was reflected
thereon by simply stating
that it was given to the Bank of Athens
“at a time when
the businesses in which I was involved and more particularly the
values that were set out therein, were also
based on current market
values at that time before the property market took a substantial
slump.”
He then went on to say
“As
can be noted, these were values given to the applicant based on a
best case scenario”.
The affidavit in which the
respondent made these remarks is dated 24 August 2010. It should be
noted that the answering affidavit
filed by the respondent in the
First Rand matter is dated 21 May 2010.
[11] What is immediately
apparent is that there are assets reflected on the schedule presented
to the Bank of Athens, which are
not dealt with by the respondent in
the First Rand matter at all.
[12] The first item is
that of
“thoroughbred horses”
which
the respondent represented he was the owner of, with a value of R1M.
In the First Rand matter the respondent raised the issue
of horses,
solely for the purpose of showing the existence of two further debts
which he owed, to substantiate the hopeless state
of his insolvency.
The respondent stated that he owed the Breeders Association
R132,890.82 for horses which he purchased as part
of a syndicate and
which had been sold. That the horses were allegedly bought as part of
a syndicate contradicts the representation
he made to the Bank of
Athens. No details are furnished to explain how horses, which he
valued at R1M in October 2007 are sold
for an undisclosed amount,
with the result that an amount is left owing to the Breeders
Association in 2010.
[13] In addition the
respondent refers to a debt owed to the Normandy Stud for stabling
fees for a horse in the amount of R80,000.00.
The respondent asserts
that the trainer of the horse is exercising a lien over the horse,
which again was bought by a syndicate.
The respondent states that the
account is however in his name, which may result in the debt being
set off. Again no details are
furnished by the respondent as to the
price paid for the horse and why, if owned by a syndicate, he is
liable alone for the stabling
fees. Again, no information is
furnished by the respondent to explain whether the value of this
horse forms portion of the estimate
of R1M placed upon the value of
the race-horses he owned in 2007.
[14] First Rand as a
result, makes the valid point that the respondent’s interest in
horses was never disclosed by the respondent
before this point and no
mention was made of this interest by the respondent at the Section 65
A enquiry.
[15] In addition, in the
statement of assets and liabilities furnished to the Bank of Athens,
the respondent reflected as an asset,
an immovable property situated
at 291A South Ridge Road, Glenwood valued at R3.5M, owned by Fixed
Point Investments (Pty) Ltd.
The respondent represented that he had a
fifty percent interest in a loan account with a value of R1.2M. As
pointed out above,
the respondent did not dispute that he still owned
this asset, and in his affidavit in the First Rand matter, made no
mention of
it.
[16] An immovable
property situated at 112 Lyndhurst Mews was reflected on the schedule
supplied to the Bank of Athens valued at
R650,000.00 encumbered by a
bond of R250,000.00, producing a net value of R400,000.00. This asset
was not reflected on the schedule
furnished to First Rand, because as
pointed out by the applicant in that matter, the property was sold to
the Ted Naidoo Incorporated
Trust on 02 July 2008 and transferred on
10 March 2009. The respondent, despite having represented to the Bank
of Athens that he
was the sole owner of the property, states in his
affidavit in the First Rand matter, that the property was co-owned by
the respondent
and his wife. The respondent states that the property
was sold to enable the respondent to pay the creditors of Tiger
Steel, including
the applicant. The respondent gives no details of
what balance was raised after the sale of the house, but has
furnished the sale
agreement which reflects the sale price as
R750,000.00. The agreement however is subject to the suspensive
condition
“
That a loan
of R750,000.00 secured by a mortgage bond to be registered over the
property is obtained by the purchaser on the normal
terms and
conditions of any registered Commercial Bank within thirty days of
signature”.
According to First Rand,
the Trust in question possesses no assets other than the house and
from a Deeds Office search conducted
by the applicant, two bonds were
registered over the property on 09 February 2009. The first was in
favour of ABSA Bank in the
sum of R495,000.00 and the second was in
favour of the respondent for the sum of R290,000.00. I therefore put
to Mr. Harrison that
it appeared the suspensive condition had not
been fulfilled, and that the respondent by way of a book entry, had
loaned the Trust
the balance of the purchase price. Mr. Harrison
found himself unable to dispute the proposition which I had put to
him. No details
were furnished by the respondent of the terms of the
loan that he gave to the Trust.
[17] In the statement of
assets and liabilities furnished by the respondent to First Rand, he
reflects a property situated at 19
John Geekie Road as having a nil
value, by virtue of the fact that it is valued at R1.6M with a bond
of R1.6M, including arrears
of R400,000.00. However, in the schedule
provided to the Bank of Athens, the property is reflected as having a
net value of R700,000.00
by virtue of the property being valued at
R2M with a bond of R1.3M. Due allowance being made for the
respondent’s statement
that the value placed upon the property
was a
“best case scenario”,
the
undertaking made by the respondent in his affidavit to furnish an up
to date bond statement, as well as a valuation of the property
before
the hearing of the matter, becomes of vital importance. No such
valuation, or statement, has been provided by the respondent
and when
I brought its absence to the attention of Mr. Harrison, no
explanation was advanced for its absence. In addition, the
respondent
maintains in his affidavit that he is only a co-owner of this
property, whereas in both of the schedules provided respectively
to
First Rand and the Bank of Athens, no such limitation is placed upon
his ownership of the property.
[18] When all of the
above is considered, I am satisfied that the applicant has
established that there are reasons for thinking
that as a result of
enquiry under the Act, some assets may be revealed or recovered, for
the benefit of creditors.
[19] Mr. Harrison
submitted however, that the advantages to creditors of enquiry and
investigation could be equally satisfied without
finally
sequestrating the estate of the respondent, by directing that the
respondent be interrogated in terms of Section 152 of
the Insolvency
Act. Mr. Harrison drew my attention to the severe consequences for
the respondent in his practice as an accountant
of being finally
sequestrated. Regard being had to the critical shortcomings by the
respondent in revealing the true and accurate
state of his assets and
liabilities, I do not consider this to be a viable alternative.
[20] Mr. Harrison also
submitted, in what may only be termed
“a last gasp”
defence that the applicant had failed to comply with the
peremptory requirements of Section 9 (4) (A) (b) of the Insolvency
Act.
This argument was raised before Hughes-Madondo A J and rejected
and consequently need not detain me further.
[21] Mr. Harrison also
asked that I order that the respondent’s costs of opposition be
included as costs of the sequestration
in terms of Section 97 (3) of
the Insolvency Act. In the light of the serious shortcomings in the
respondent’s affidavit
referred to above, I am not prepared to
make such an order.
[22] In the light of the
conclusion I have reached in the First Rand case, it becomes
unnecessary to deal with the merits in the
Bank of Athens matter,
which will simply be adjourned
sine die.
The order I make is the
following:
In Case No. 3869/2010
the estate of the respondent is finally sequestrated.
In Case No. 3869/2010
the costs of the applicant are to be costs in the sequestration of
the estate of the respondent.
In Case No. 8118/2010
the application is adjourned
sine die.
______________
K. SWAIN J
Appearances /…
Appearances:
CASE NO. No.
3869/2010
For the Plaintiff :
Mr. A. Camp
Instructed
by :
J M S Incorporated
C/o
Gavin Price Attorneys
Durban
For the 1
st
Respondent
:
Mr. G.M. Harrison
Instructed
by :
Attorneys Ebrahim Ameer Durban
CASE NO.
8118/2010
For the Plaintiff :
Mr. A. Escott Watson
Instructed
by :
K G Tserkezis Inc.
Durban
For the Respondent
:
Mr. G.M. Harrison
Instructed
by :
Attorneys Ebrahim Ameer Durban
Date of Hearing
:
07 February 2011
Date of Filing of
Judgment :
14 February 2011