Nedbank Ltd v Thorpe (7392/2007) [2009] ZAKZPHC 44 (16 September 2009)

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[2009] ZAKZPHC 44
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Nedbank Ltd v Thorpe (7392/2007) [2009] ZAKZPHC 44 (16 September 2009)

IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL,
PIETERMARITZBURG
CASE
NO : 7392/2007
In
the matter between :
NEDBANK
LIMITED Applicant
and
ROBIN
PATRICK THORPE Respondent
J U D G M E N T
K PILLAY J
[1] On 26 September 2008,
Levinsohn
DJP
, made an order for the provisional
sequestration of the Respondent’s estate.
[2] The Applicant now seeks an order for the final
sequestration of the estate of the Respondent in terms of
section
12
of the
Insolvency Act, 24 of 1936
.
[3] Having perused the summary of facts in the judgment
of
Levinsohn DJP
, I
believe it will be a task of supererogation to repeat same.
[4] I will therefore devote this judgment to a
determination of what I believe to be the sole issue herein, namely,
whether or not
this court can be satisfied that there is reason to
believe that sequestration will be to the advantage of creditors of
the Respondent
if his estate is sequestrated.
[5] It is not in dispute that the judgment debt arose
out of various advances made by the Applicant’s predecessors to a
trust
represented by the Respondent. The Respondent assumed
liability as a surety and co-principal debtor of the trust. The
Respondents
appeal to the Supreme Court of Appeal was dismissed in
2003 and since then the Respondent has made no effort to discharge
this
indebtedness.
(6)
Section 12(1)
of the
Insolvency Act 24 of 1936
provides that:
“
If at the hearing pursuant to the aforesaid rule
nisi the court is satisfied that:
the
petitioning creditor has established against the debtor a claim such
as is mentioned in subsection (1) of section nine; and
the
debtor has committed an act of insolvency or is insolvent; and
there
is reason to believe that it will be to the advantage of creditors
of the debtor if his estate is sequestrated,
it may sequestrate the estate of the debtor.
…………
.
[7] It has not been disputed that the requirements of
sub-section 12(1)(a) and (b)
are met.
[8] In his statement of Assets and Liabilities, Annexure
‘M’ the Respondent claims to have no assets. He is therefore on
his
own version, insolvent.
[9] In addition the statement of assets and liabilities
which he submitted to the Applicant at a
section
65
enquiry also amounts to an act of
“insolvency”
in
terms of
section 8(g)
of the
Insolvency Act,
24 of 1936
and accordingly meets the
alternative requirement of
section 12(1)(b)
Act 24 of 1936.
[10] It is incumbent upon the Applicant to show that
there is
“reason to believe”
that sequestration will be to the advantage of creditors (See
Meskin
& Co v Friedman 1948(2) SA 555 (W) at 559
).
[11]
Roper J at 558 in Meskin v
Friedman
(
supra
)
considered the meaning of the phrase “
reason
to believe”.
He stated:
“
The phrase “reason to believe”
,
used as it is in both these sections,
indicates that it is not necessary, either at the first or at the
final hearing, for the creditor
to induce in the mind of the court a
positive view that sequestration will be to the financial advantage
of creditors. At the
final hearing, though the court must be
“satisfied”
, it is
not satisfied that sequestration will be to the advantage of
creditors, but only that there is reason to believe that it
will be
so.”
[12] The standard of proof differs in respect of a
provisional and final order. For as
Jansen J
,
correctly stated in
London Estates (Pty) Ltd v
Nair 1957(3) SA 591 N @ 593.
“……
...the standard of proof differs in respect
of a provisional and final order (cf. Sacks Morris (Pty) Ltd v Smith,
1951(3) at p.
170 (0). This must relate to the proof of the facts
giving rise to the belief – not to the degree of conviction the
belief engenders.
In both cases the facts must show that there is a
reasonable prospect – not necessarily likelihood, but a prospect
which is
not too remote – that some pecuniary benefit will result
to creditors. But in the case of a provisional order there need only

be prima facie proof of those facts; in the case of a final order the
Court must be satisfied that those facts exist, presumably
on a
balance of probabilities. This must be the case whether the
applications are opposed or not.”
[13] In addition, the Applicant is obliged to
demonstrate that there are reasonable grounds for concluding that,
upon a proper investigation
of the debtor’s affairs, a trustee may
discover (or recover) assets which might be realized for the benefit
of creditors (
Dunlop Tyres (Pty) Ltd v Brewitt
1999(2) SA 580 (W) at 583
.)
[14] In dealing with the issue whether there is an
advantage to creditors the Applicant contends, as it did in the
provisional sequestration
proceedings, that the Respondent has
embarked on considerable lengths to insulate from his own personal
estate the income which
he generates both from his own activities and
from various investments as well as funds and assets to which he has
access.
[15] The Applicant submits that, in doing so, the
Respondent has abused the institution of a registered trust and
dishonestly made
use of nominees so as to disguise his ownership of
assets.
[16] To illustrate this Applicant avers that the trust
deeds of the
Wentworth Trust
(the principal debtor in respect of the debt,
in
casu
) and the
Banavie
Trust
(which changed its name from the
Robin
Thorpe Family Trust
) are practically in
identical form.
[17] The trustees are replaced from time to time;
however, it is noteworthy that the Respondent remains a trustee
throughout (and
cannot be removed).
[18] What is apparent is that it is the Respondent who
controls the trust and access to the funds held by the trust.
[19] Significantly Applicant has made out the case that
when income due to the Respondent in his personal capacity was
received
into his personal banking account, he religiously caused any
material credit balance to be transferred to the
Banavie
Trust.
[20] The Respondent’s improbable explanation for this
is that he would have received from the trust more than the trustees
wished
him to receive, hence an obligation to make repayment, or that
he erroneously received money that was in fact due to the trust.
[21] It would appear from the following transcript of
the S
ection 65
enquiry, that the Respondent (and his co-trustees) determined that he
should no longer receive any benefits from the trust, specifically

because of his involvement in this matter.
“
Did I understand you correctly, for the tax year
2006 you received approximatelyR700 000 from the Banavie Trust? Is
that correct?
----That would have been for the year ending February
2006.
Okay. And what have you received from the trust
since the 1
st
of March? --- Nothing.
And why is that? --- As I understand it at the
moment, the trustee’s have exercised their discretion in making a
distribution
to me as a beneficiary.
With the greatest of respect that’s a bit of
gobbledygook to me. I don’t exactly understand what you’re
saying there. What
do you mean? --- Well, any income that I receive
from the trust is completely at the discretion of the trustees.
You are one of those trustees. --- I happen to be
one of four trustees, that’s correct.
Okay, yes, ja, and …(intervention) --- And as
things stand at the moment, in exercising that discretion, they’ve
elected not
to hand over any amount to me since the 1
st
of March.
And do you know why? --- I think that it largely
stems from the fact that I’m involved in this particular hearing.”
[22] However, notwithstanding the determination to
exclude the Respondent from the receipt of income from the trust, the
Respondent
was not in anyway deprived e.g. although he claims that
since February 2006, he received no benefit from the trust, it was
the
trust that financed his overseas travel during April 2006.
[23] His claim that he has only ever received
“discretionary”
income as determined by the trustees is not supported by his tax
return for the tax year ended February 2006, which records that

neither he nor his children are beneficiaries of any trust. In a tax
return prepared by co-trustee and accountant, he declares
his income
as
“trustee remuneration”.
He
later gives the disingenuous explanation that this was done in error.
[24] As correctly pointed out, the
Banavie
Trust
allowed the Respondent to enjoy an
affluent lifestyle. The trust purchased a new 2005 model Bentley
Continental GT motor vehicle
at a cost of R2.5 million at monthly
instalments of approximately R20 000.00 for the Respondent’s use.
It was the Respondent
who had arranged for its acquisition (and bound
himself as surety for the liability of the trust in connection with
the transaction).
[25] The Respondent makes every effort to distinguish
himself from the trust. However, as correctly pointed out, his
proverbial
slip of the tongue reveals the contrary. For instance
during the section 65 enquiry, he replied to a question as follows:
“
At one stage I had considered, and when I say I,
I’m really talking on behalf of the trust, Investment in the Point
Road Development,
or for the Point Development. And it had been
something that had been mooted, and again it’s something that never
came to fruition.”
[26] It appears from the Respondent’s answers during
the
section 65
enquiry, that bank officials dealing with the Respondent in
connection with his personal banking arrangements, appear to labour

under the impression that the Respondent is able to give undertakings
with regard to the income of the
Banavie Trust
or the income of companies owned by the trust.
[27] It is indeed probable that the true and complete
control of the trusts vests in the Respondent. There is in my view
enough
evidence to suggest that the
Banavie
Trust
is the alter ego of the Respondent and
is utilized by him for the purposes of receiving income generated
from his various activities
and at the same time insulating his
assets and wealth from his creditors.
[28] I am satisfied that, on the above evidence, a
trustee, duly appointed to his estate, would be in a far better
position than
the Applicant to fully investigate the way in which the
Respondent has used the institution of trust to shield his wealth
from
his creditors. That is quite apparent from a reading of the
record of the section 65 enquiry that the greater powers of
investigation
accorded to a trustee will be required to fully
investigate the Respondent’s financial position, particularly in
relation to
the
Banavie Trust.
SHORT TERM INSURANCE BROKING BUSINESS
[29] It is common cause that the Respondent’s primary
occupation was that of a short term insurance broker and that he
conducted
business as the principal broker of
Thorpe
Insurance Brokers (Pty) Ltd.
[30] Owing to certain alleged malpractices the Registrar
of Short Term Insurance obtained an order in September 1999,
interdicting
the Respondent (and the legal entities through which he
operated) from directly or indirectly, continuing to engage in
broking
and related activities.
[31] The Applicant makes the case that despite the order
of the High Court, the Respondent continued his insurance broking
activities
using
County Capital (Pty) Ltd
trading as
Insurance Online
as the vehicle for those activities. The evidence in support of this
contention is the following:
31.1 A subpoena served upon him in connection with
the proceedings in terms of section 65 of the Magistrate’s Court
Act was served
at the office of
Insurance
Online
.
31.2 The evidence of former employees of “
Insurance
Online
”, namely Mark Farrer (who was
employed for a three year period from 2002 to 2005 and was a director
of County Capital (Pty) Ltd
for two of those years) and Mr Ernest Ken
Schwartz (who was employed by
Insurance
Online
for 18 months from 2002 to
2004) confirms that the Respondent effectively managed and ran the
short term insurance business and
left them in no doubt but that he
owned the business.
[32] An application made by the Respondent to Standard
Bank relating to an application for a personal banking facility –
and signed
by the Respondent – records:
32.1 his work email address as
robint@insonline.co.za
(an e-mail address of the short terms
insurance broking business); and
32.2 under “your business details”, that the
Respondent is employed by
Insurance
Online
and, in relation to the
“department”, that he is the “owner”.
[33] The Respondent arranged for his personal bankers to
provide a rental guarantee to the landlord of
County
Capital.
[34] The evidence of Lalini Armoogam demonstrates that
the Respondent was actively involved in the business of
Insurance
Online
, to the extent of dealing with bank
officials with regard to the placing of insurance for clients of
Insurance Online
.
[35] One of the Respondent’s family trusts (the
Banavie Trust
) is
renumerated for
“consultancy”
and other services provided to
Insurance
Online
by that family trust.
[36] Applicant has in my view, correctly submitted that
the Respondent’s reply to the evidence referred to above is both
evasive
and contradictory, as is demonstrated hereunder:
36.1 He does not deal at all with the substance of the
evidence contained in the affidavits of Farrer and Schwartz, merely
suggesting
that they are
“mistaken”
and that the share register of the company could somehow provide a
conclusive answer to their evidence. A share register quite
patently
does not deal with their evidence at all. In his further affidavit,
he sought to amplify his response to the affidavit
of Mark Farrer.
This response similarly does not deal with the substance of Farrer’s
evidence. It amounts to little more than
a personal attack on
Farrer’s character.
36.2 Having testified on oath that he personally has
had nothing whatever to do with the operation of
Insurance
Online
(the
Banavie
Trust
merely providing the
“payroll
services”
), he explains his dealings with
Ms Armoogam on the basis that he offers advice because he wishes the
Banavie Trust
to be
successful.
36.3 He makes no effort at all al to explain the
entries (his
“business details”
given as
“owner of Insurance Online”
and his work e-mail address being that of
Insurance
Online
) in the application to Standard bank,
admittedly signed by him, contenting himself with the assertion that
the information contained
in the application form signed by him is
factually incorrect.
[37] The High Court interdict of 1999 precluded the
Respondent simply vesting the short term insurance business in one or
other
of his family trusts. Indeed, it was not merely a matter of
utilizing some legally recognised vehicle to insulate the business

from the personal estate, but required that his true interest in the
brokerage be hidden from the authorities and from the court
which had
granted the interdict. Hence the birth of “
Insurance
Online
”.
[38] In my view the evidence referred to above
establishes that there is reason to believe that the Respondent is
being dishonest
in denying his beneficial interest in, and
involvement in the operation of, County Capital (Pty) Ltd trading as
Insurance Online.
Levinsohn DJP was fully justified in concluding
that this evidence:
“
all points in one direction and that is that the
Respondent despite having been interdicted was the beneficial owner
(either through
shareholding, trusts or otherwise) of a substantial
brokerage business”.
[39]
Levinsohn DJP
was equally justified in recording that:
“the Respondent’s denials
once again have a very hollow ring”.
[40] There are not in truth any real disputes of fact
which exist with regard to the evidence of the Respondent’s
beneficial ownership
of the business
“
Insurance
Online
”
.
40.1 He does not dispute having signed an application
form for finance in which he is described as the
owner
of Insurance Online. He simply says that the information is wrong
and that he signed it without reading the document. No possible

source of the information other than the Respondent himself is
suggested and there is no endeavour at all to explain the entries
in
the form. It is a classic bare denial.
40.2 The evidence of Farrer and Schwartz is similarly
dealt with by reference to what is, upon analysis, no more than a
bare
denial.
40.3 The involvement of one of the Respondent’s
family trusts, the Banavie Trust, in deriving income from Insurance
Online,
is an admitted fact. So too is the fact that the Respondent
personally provided a rental guarantee to the landlord for the
premises
occupied by Insurance Online.
OTHER COMPANIES AND CLOSE CORPORATION
[41] The Applicant, correctly points out that in the
course of testifying under oath in the proceedings in terms of
section 65
of the
Magistrates’ Court Act, and in dealing with companies in which he
was a director, the Respondent gave untruthful evidence.
41.1 With regard to Brightmore CC and Holdthor Life
and Pension Brokers CC, he testified on 30 May 2006 that he had
disposed
of his interests, claiming that his membership interest in
the former had been sold some years previously, to a purchaser whose

identity he did not recall.
41.2 That information was false. He was in fact
still the sole member of both close corporations when he gave that
evidence.
What he in fact did was to dispose of those interests to a
close associate, Barbara Gail Shaw, acting once again as trustee of
a
trust, and did so only on 13 June 2006, two weeks
after
he had testified.
41.3 The Respondent’s response to this evidence is
evasive. He claims that the Applicant is being
“unfair”
to him and records that he refutes the
“innuendo”
(but, significantly, not the facts which give rise to it).
41.4 It also means that the Respondent’s written
statement of his assets as
‘nil’
was inaccurate.
[42] There is also the matter of the investments in
properties effected through close corporations of which the
Respondent’s minor
children are the members (and were the members
when still at school).
[43] The Applicant submits that viewed in isolation it
might be said that the tender age of his children at the time is not
evidence
that the Respondent has any direct or indirect interest
therein, despite the Respondent having provided his personal
suretyship
in respect of the loans advanced to the close
corporations. Those investments cannot, however, be viewed entirely
in isolation.
In the light of the other evidence referred to above,
those property investments provide an additional basis for concluding
that
the trustee may usefully investigate the acquisitions and that
the sequestration of the estate of the Respondent will be to the

benefit of creditors in the sense described above. I agree fully with
the above submissions.
THE PRIOR APPLICATION FOR SEQUESTRATION
[44] On 12 July 2004, the Applicant brought an
application to sequestrate the estate of the Respondent. This
application was dismissed
with costs by McCall J on 19 January 2005.
[45] The Respondent contended in his answering
affidavit, that:
the same issues arise in this application;
that it is not open to the Applicant to resurrect these
issues and
“harass him”
.
[46] Having considered the evidence before him,
McCall
J
stated as follows:
“
There are two possibilities, namely that the
application should be dismissed with costs, or that the Applicant
should be given leave
to amplify its papers. In my view,
insufficient care was devoted to the preparation of the papers in the
first instance, and the
Court should not allow the Applicant to
attempt to repair the inadequate case presented to the Court. The
serious prejudice can
be occasioned to the Applicant if it has to
proceed de novo, if necessary after having issued a fresh, properly
prepared writ,
or after having pursued the other possible means I
have suggested for obtaining an order against, or further information
from the
Respondent….”
[47]
Levinsohn DJP
,
correctly, in my judgment, rejected the Respondent’s contention in
this regard as follows:
“
Counsel for the Applicant however submits that the
dismissal of the first application did not debar the launching of the
present
one. I agree with counsel for the Applicants submission.
The present application is substantially different to the first one

insofar as the evidentiary material contained therein is concerned..”
[48] Indeed there were a number of deficiencies in the
application papers before
McCall J.
McCall J’s
comments (
supra
) make
it clear that he intended his order, dismissing the application, to
have the effect of absolution from the instance, entitling
the
application to proceed anew if the deficiencies in its application
could be remedied.
[49] The Respondent’s opposition to the application is
grounded in the submission that the relief claimed against the
Respondent
is the most drastic and invasive relief possible in civil
proceedings. It is contended therefore that it is therefore a
constitutional
imperative that full force and effect must be given to
section 12
.
[50] Notwithstanding the above submission, the
Respondent accepts that on the case law, it suffices that the duly
established facts
must allow an inference that there is a reasonable
prospect that sequestration will result in a pecuniary advantage
otherwise not
available to the creditor/s. It is accepted further
that the inference need not elevate the prospect to a likely one but
it must
be significant.
[51] An important principle in regard to the issue of
“advantage to creditors, quoted with approval by
Levinsohn
DJP
in the provisional sequestration
application, was that laid down in
Amod v
Khan 1947(2) SA 432 N @ 438
where
Hathorn
JP
stated as follows :
“
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. Consequently, it is
difficult for him to provide satisfactory proof that the
sequestration
of the debtor’s estate will be to the advantage of
the creditors. Yet that is what the Insolvency Act, 1916, demanded.
The
various Courts in South Africa, recognizing the creditor’s
difficulty – and here I speak in a very general way – were
inclined
to accept, as proof, very little evidence that sequestration
would be to the advantage of the creditors. The legislature knowing

this, and knowing also that the advantage of the creditors is, and
always has been, a consideration of great importance in relation
to
the question whether a debtor’s estate would be sequestrated,
altered the position in 1936, and made it much easier than it
had
been for the creditor to make a case in relation to the benefit of
the creditors.”
[52] In
Hillhouse v Stott; Freban Investments (Pty)
Ltd v Itzkin; Botha v Botha
1990 (4) SA 580
(W),
Leveson J
stated:
“………
a Court need not be satisfied that there
will be advantage to creditors, only that there is reason to believe
that that 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 accrue
some useful purpose. I express
it thus because 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.”
[53) Indeed the case made out by the Applicant,
especially the manner in which the Respondent has been conducting his
business affairs;
his evasiveness and obfuscation, compel me to the
conclusion that an investigation and enquiry under the relevant
provisions of
the Act might indeed unearth assets which could benefit
the Applicant herein.
I accordingly make the following order:
The rule nisi granted on 26 September 2008 by
Levinsohn DJP is hereby confirmed.
The respondent’s identity number is recorded as
5304285019080.
_______________________________
K
PILLAY J
Date
of Judgment : 16 SEPTEMBER 2009
Counsel
for Applicant :
ADVOCATE
S R MULLINS SC
ADVOCATE
K C McINTOSH
Instructed
by :
DE
VILLIERS, EVANS & PETIT
.
Applicant’s Attorneys
c/o
AUSTEN
SMITH
Walmsley
House
191
Pietermaritz Street
PIETERMARITZBURG
Counsel
for Respondent :
ADVOCATE
K J KEMP SC
ADVOCATE
M F MOOSA
Instructed
by :
BEALL
CHAPLIN & HATHORN
Respondent’s
Attorneys
c/o
STOWELL
& COMPANY
295
Pietermaritz Street
PIETERMARITZBURG