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[2011] ZAKZDHC 26
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Ithala Development Finance Corporation Ltd v Zulu (15713/2009) [2011] ZAKZDHC 26 (8 June 2011)
IN THE HIGH COURT OF SOUTH AFRICA
REPORTABLE
KWAZULU – NATAL, DURBAN
CASE: 15713/2009
In the matter between:
ITHALA DEVELOPMENT FINANCE
CORPORATION
LIMITED
…........................................................................................................
Applicant
vs
SIFISO ZULU
…...........................................................................................
Respondent
________________________________________________________________
JUDGMENT
Delivered on 08 June 2011
Ntshangase J:
[1] This is an extended return day of
a provisional order of sequestration granted against the respondent
in his absence from court
on 19 March 2010. The applicant now seeks a
final sequestration order. The application in that regard is opposed.
[2] The applicant contends that the
respondent has committed an act of insolvency and is, alternatively
insolvent. It is common
cause that summary judgment was granted in
favour of the applicant against the respondent and others for the
payment of R4 824
836.08. The respondent failed to satisfy the
judgment debt or to indicate to the sheriff on 25 June 2008 and on 15
May 2009 disposable
property sufficient to satisfy it. The sheriff
himself did not find sufficient disposable property to satisfy the
judgment debt.
The sheriff rendered nulla bona returns on 25 June
2008 and 15 May 2009. As at 25 August 2009 an amount of R4 675 192,18
remained
outstanding on the judgment debt after the applicant
executed its judgment against the sureties and securities that they
had provided
when they and the respondent procured the loan which
they have failed to repay.
[3] The nulla bona return on the
warrant executed on the respondent on 15 May 2009 is challenged with
reference to
Nedbank
v Norton
1987 (3) SA 619
(N)
as only referring to movable property
and not to immovable property. The challenge is incorrectly premised.
This return of service,
as does one served on the respondent on 25
June 2008, refers also to ‘assets’. The relevant part
thereof reads:
‘
After
enquiry no goods or assets could be pointed out to satisfy the writ.
Despite a diligent search and enquiry I could not find
sufficient
assets at the given address to satisfy this writ I therefore make a
return of nulla bona
’.
‘
Assets’
would include immovable property. The attack on the nulla bona return
on the advanced grounds must fail. Both nulla
bona returns do
establish the act of insolvency in terms of s 8(b) of the Insolvency
Act 24 of 1936 (“the Act”). The
respondent is, by his own
admission, also clearly insolvent.
[4] I deal now with the issues, one of
which pertains to the founding affidavit
which, it was submitted
in limine
on behalf of the respondent, is not valid, in
consequence whereof it is argued, the
application cannot stand. The grounds
advanced for this proposition is that
the authority of Matome Geoffrey Mashao
(“Mashao”) to depose to
the founding affidavit as derived from a resolution of the
Board of Directors whose minutes were
signed by ‘
somebody “PP”
on behalf of Ms
P
Mahamba and not by the Group Companies’
Secretary, is
invalid. I find no merit in
this submission. To Mashao’s
averment in para 1.2 of the founding affidavit that
he was
‘
. . .
authorised
to depose to this affidavit and to bring this application on behalf
of the applicant’
the respondent’s answer was
‘
I
admit the averments herein
’.
[5] The application was also
challenged as flawed by failure to furnish a copy of the petition to
the respondent and all parties
to whom such copy is to be furnished
in terms of s 9(4)A of the Act. This point is not well taken. The
undertaking in para 72.1
and 72.2 of the founding affidavit to comply
with s 9(4)A of the Act pre-dates the provisional sequestration order
granted against
the respondent. This challenge overlooks paragraphs
8.3 and 8.4 of the applicant’s affidavit deposed to by Mlamuli
Jimmy
Duma as to the reason for the inapplicability of the provisions
of s 9(4)A of the Act, save insofar as such provisions apply to
the
domestic worker upon whom service was in fact effected in terms
thereof.
[6] The court was urged to reject as
conjecture the applicant’s averments that it
is ‘
more
probable than not that the respondent is a shareholder in one or
more
’ of the
companies of which he is a director,
that he ‘
must have a
member’s interest
’ in
Close Corporations of which he is a
member; ‘
that it is more
probable than not that
the
respondent must receive director’s fees for most, if not all of
his directorships in the
companies
’,
and other similar averments. This tends to overlook that this is an
arm’s length sequestration. The
position is stated appositely in the words of Hathorn, JP in
Amod
v Khan
1947 (2) SA 432
(N) at 438:
‘
A
debtor knows all about his own affairs and can easily prove the
advantage of the creditors. On the other hand, the creditor has
normally little knowledge of the exact position of the debtor; he
probably does not know what creditors he has, nor the amounts
he
owes, nor the assets he possesses’.
[7] I also do not think that the
applicant’s failure to prove the respondent’s
shareholding in companies and member’s
interests in close
corporations in which the respondent has admitted his involvement,
which number no less than 28, defeats, simply
for such reason the
necessity for investigation of the respondent’s affairs in the
interests of creditors. It is fair to
adopt the following view of
Roper J expressed in
Meskin & Co v Friedman
1948 (2) SA
555
(w) at 559:
‘
In
my opinion, the facts put before 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 . . . .
’
[8] I now deal with the submission
that the applicant has failed in its endeavour to satisfy the court
that on a balance of probabilities,
there is reason to believe that
the sequestration order will be to the advantage of the creditors. In
that regard it is argued
that the relevant belief in the present
matter is not predicated as facts which would engender such belief.
[9] The facts proffered by the
applicant in support of the relevant belief relate to the
respondent’s failure to disclose
ownership of immovable
property and the misrepresentation of the status of Emtateni
Logistics, which the respondent listed as ‘dormant
(Co.
closed)’ in a ‘schedule of businesses in which (he states
he has) been involved’.
[10] The applicant points to the fact
that when the sheriff served the warrant of execution on the
respondent, on 25 June 2008 he
claimed
‘
.
. . . to own no vehicle or any other disposable assets’
.
When served with one of 15 May 2009,
‘
(a)fter
enquiry no goods or assets could be pointed out to satisfy this writ
’
A Deeds search revealed that he in
fact owned ‘
unit 4 in the
Sectional Title St James
’. The Deeds search also
revealed acquisition of ownership of this property in 1994 and that
it was apparently sold for R295
000 on 7 November 2008, some four
months after service of the writ on him.
[11] Of the immovable property, the
respondent says no more than that
‘
(t)he
property was sold in execution and the bank concerned took
everything
’.
The respondent does not name the bank;
nor has he submitted documentary support for the averment that the
property was sold in execution.
An investigation would reveal whether
or not some creditor was preferred above others.
[12] Contrary to Emtateni Logistics
being dormant or closed, the affidavit deposed to by Carlos Alberto
Vaz Esteves, (“Esteves”)
the Deputy Head: Road System
Management of the eThekwini Municipality describes its activities as
follows:
‘
6.1
the installations, service, maintenance and general running of all
parking metres within the eThekwini Municipality area have
been
contracted out to a company, namely Emtateni Logistics (Pty) Ltd
(hereinafter referred to as “Emtateni”):
The
aforesaid contract is to run until at least 2012; and
Emtateni
is complying with its contractual obligations and is receiving
payment for its services in accordance with the terms
of the
agreement.
The
contract value runs into millions of rands
7
I
am personally aware that Mr Sifiso Zulu, in some way or another, is
directly linked to and involved in Emtateni.
8
As
far as I am aware and concerned Emtateni is not “dormant”
nor has it “closed down” as it is still performing
its
contractual obligations in terms of the agreement and we receive
regular reports from Emtateni regarding its contractual obligations.’
[13] The respondent’s
concealment of the fact of ownership of immovable property and his
apparent mendacity in regard to the
status of Emtateni Logistics,
lend significant weight in support of the reason to believe that the
sequestration of the estate
of the respondent will be to the
advantage of his creditor.
[14] It was argued with reference to
Gardee v Dhanmanta Holdings and Others
1978 (1) SA 1066
(N)
that the applicant as a single creditor has failed to discharge the
onus it bears to demonstrate that the interrogation would
be the most
appropriate means available to fully investigate the respondent’s
affairs and that the more expensive and cumbersome
procedure of
sequestration will exceed the likely proceeds of ordinary execution.
[15]
Gardee
’s case relied
upon by the respondent cannot apply in the facts of the case before
me. I do not understand the judgment of
Didcott J as propounding in
Gardee
a general rule that in every case where the applicant
is a single creditor he should rest his efforts on ordinary execution
as
a mechanism more advantageous to a creditor than sequestration.
[16] It was also submitted that with
due regard to the large amount owed coupled with interest it
generates, sequestration would
yield a negligible dividend, if any.
In this regard reliance was placed on
London Estates (Pty) Ltd v
Nair
1957 (3) SA 591
(D) in which Jansen J stated:
‘
It
seems to me that a sequestration is to the advantage of creditors
only when it results in some payment in respect of the claims
of
creditors as a body, eg a not negligible dividend’
.
[17] Esteves’ affidavit in
regard to the respondent’s involvement in the business of
Emtateni Logistics whose
‘
.
. . . contract value runs into millions of rands’
is quite significant. This fact
establishes the prospect of discovery or recovery of assets for
disposal which would yield a not
negligible dividend for the
advantage of the creditor, upon a proper investigation of the
respondent’s affairs.
[18] Added to this is the fact that
the actual extent of the respondent’s mendacity and concealment
of assets still remains
to be determined. Coupled with this, is the
respondent‘s involvement in 28 companies and close corporations
from which, the
respondent professes, he derives no income, as
dormant or closed. It of course does not follow that if a company or
close corporation
be dormant it would necessarily be without assets
which would accrue in this case to the respondent. The respondent has
not disclosed
whether or not he has disposable valuable interests as
a director, shareholder or member of the companies and close
corporations
concerned. He also has not disclosed what became of the
millions of rands he had; nor how he sustains himself. Given his past
failure
to disclose ownership of property, it would be fair to
acknowledge that a creditor in the circumstances of this case would
harbour
a rational apprehension that the respondent would persist in
his failure to disclose disposable assets. The facts of this case
present to me the prospect that assets might be unearthed for the
benefit of the creditor. It is, in my view, a proper case for
investigation and inquiry in terms of the Act. As was held in
Hillhouse v Stott; Freban Investments v ITZKIN; Botha v Botha
1990 (4) SA 580
at 585E-F.
‘
It
is sufficient if it be shown that investigation and inquiry under the
relevant provisions of the Act might unearth assets, thereby
benefitting creditors’
[19] I am satisfied in this matter
that the applicant has, on a preponderance of probabilities,
discharged the onus it bears to
demonstrate that the interrogation
would be the most appropriate means available to fully investigate
the respondent’s affairs
and that the results of the procedure
of sequestration will in all probability exceed the likely proceeds
of ordinary execution,
and that there is, in this matter, in fact
reason to believe that sequestration of the respondent’s estate
will be to the
advantage of the creditor.
[20] The following order will issue:
The rule
nisi
is confirmed;
and
the estate of the respondent is
hereby placed under final sequestration.
Appearances:
For Applicant: E Crots,
instructed by Strauss Daly Inc.
Durban.
For Respondent: M F Moosa,
instructed by Kafu & Dlamini
Attorneys, Durban.