Nel N.O and Others v Cilliers N.O (1781/08) [2008] ZAFSHC 22 (30 April 2008)

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[2008] ZAFSHC 22
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Nel N.O and Others v Cilliers N.O (1781/08) [2008] ZAFSHC 22 (30 April 2008)

IN THE HIGH COURT
OF SOUTH AFRICA
(ORANGE FREE STATE
PROVINCIAL DIVISION)
Case
No.:1781/08
In the case between:
EUGENE
NEL N.O.
1
st
Applicant
KAREL
JOHAN SPAGENBERG N.O.
2
nd
Applicant
STEPHEN
JAMES GROENEWALD N.O
3
rd
Applicant
(In
their capacities as Trustees of AL2 Vervoer Trust)
and
SUSANNA
JOHANNA CILLIERS N.O
Respondent
(in her capacity as
Trustee of Cilliers Family Trust)
_______________________________________________________
JUDGEMENT:
MOCUMIE, J
HEARD
ON:
18
APRIL 2008
_______________________________________________________
DELIVERED
ON:
30
APRIL 2008
_______________________________________________________
[1] The
three applicants in their capacity as trustees of AL2 Vervoer Trust
(“
AL2”)
sought an order on urgency for a provisional sequestration of the
respondent in her capacity as the trustee of the Cilliers Family
Trust (“
CFT”
).The
application was not served on the respondent. I granted a
provisional sequestration order on 10 April 2008 with the rule
nisi
returnable on 15 May 2008.
[2] On
18 April 2008 the respondent approached this Court in terms of Rule
6(12)(c) of the Superior Courts Practice with an application
for the
reconsideration of the same order on the basis that the order was
granted in the respondent’s absence contrary to the
provisions of
section 9(4A) of the Insolvency Act 24 of 1936 (“
the
Insolvency Act”
).
[3] The
history of this application is shortly as follows. The respondent is
the sole remaining trustee of CFT. CFT is the registered
owner of an
immovable property, Farm No 311, Registration Division Boshoff Road
known as Botha’s Hoek (“
the
game farm”
).
The respondent is a former trustee of AL2 which was finally
sequestrated by order of the High Court of Kimberley on 23 November
2007 under case no: 1031/2007. During the sequestration of AL2, one
(“
L
Cilliers
”),
the respondent’s husband and the respondent informed the Court
that AL2 had no assets to satisfy the judgment in the amount
of R 2
417 036,40 obtained by Scania South Africa (Pty) Ltd (
“Scania”
)
in respect of which the sheriff returned a
nulla
bona
return.
[4] Scania
contended that L Cilliers and the respondent were complicits in the
dissipation of the assets of CFT which amounted to
more than R15
million rand as at the end of 28 February 2003. L Cilliers had paid
himself amounts of money from CFT and made a
loan to a fictitious
close corporation. AL2 made certain determinable payments for the
game farm and the game thereon which payments
could not be accounted
for. What Scania stated in 2007 was never refuted by either L
Cilliers or the respondent. L Cilliers’
personal property was also
sequestrated by an order of the High Court Kimberley on 23 November
2007.
[5] Soon
after the sequestration the applicants were appointed as trustees of
AL2 and were fully authorised to administer the sequestrated
estate.
On 25 January 2008 they called a meeting with L Cilliers and the
respondent to determine what had happened to the assets
of AL2 based
on what Scania had deposed to. L Cilliers intimated during the
meeting, which was mechanically recorded, that AL2
made a loan to
CFT to buy the farm. The amounts AL2 paid out were not accounted for
in any records kept at and by AL2.
[6] On
further investigation it became apparent that the trusts (CFT and
AL2) operated as a single entity as monies moved from one
trust to
the other and that L Cilliers was running both trusts as evidenced
when he acquired the farm and the game with AL2 funds.
The
respondent despite being the sole trustee of CFT was not the
signatory of the transaction. AL2 paid instalments in respect
of the
mortgage bond held by BOE Bank over the farm. AL2 paid the seller of
the farm a substantial amount as well as the transfer
duties and the
cost of registration of the mortgage bond. In essence and as
confirmed by L Cilliers on 7 April 2008, CFT owed AL2
an amount of
R1, 866,630.76.Both L Cilliers and respondent consented to the
sequestration of CFT.
[7] On
29 February 2008, one Mr Eugene Nel, one of the applicant trustees,
learnt that CFT had not only entered into a transaction
to dispose
of the farm but had sold it to a Mr Derek Corns for R2, 7 million
and that there was no game on the farm. Two bonds
were registered
over the farm. When this matter was raised at the enquiry the
respondent said she was unaware of the sale of the
farm and did not
sign any document pertaining thereto. L Cilliers concluded the
transaction and clearly divested CFT of assets
with the knowledge
and consent of the respondent. Despite the respondent’s
protestation to the contrary the objective facts establish
this to
be so.
[8] The applicants
trustees brought an application for the sequestration of CFT on 3
March 2008 under case number 1075/2008. The
application was opposed
and postponed.
[9] An
enquiry in terms of
section 154
of the
Insolvency Act was
conducted
and revealed that the beneficiaries of CFT,L Cilliers’ daughters
were not even aware that they were beneficiaries,
that the sale of
the assets of CFT was not in their interest, that both L Cilliers
and respondent acted contrary to the provisions
of the trust deed of
AL2 and CFT and without any resolution by the trustees.
[10]
The basis upon which the applicants approached this Court was that
CFT is clearly insolvent as it cannot pay the amounts owing
to
AL2.They contended further that the registration of the farm in
favour of HCL Familie Trust and the sale of the farm per se
constitute an act of insolvency.
[10] Mr.
Zietsman for the respondent submitted that the provisions of
section
9(4A)
of the
Insolvency Act are
couched in peremptory terms and give
the Court no discretion to grant a provisional order without prior
notice to interested parties
especially the debtor . The exception
being the instance of
nulla
bona return
by the sheriff. He argued that it is only fair that the
audi
alteram partem
rule
be observed especially in instances of this nature.
[11] It
is trite that in all applications for sequestration the respondent
ought to be notified of such application in terms of
Rule 6(2)
read
with Rule 6(5)(a) of the Uniform Rules of Court. Apart from the fact
that the Uniform Rules of Court require such notification,
fairness
and equity also demand such notification in that provisional
sequestration affects a person’s status and freezes his
assets.
See
Gouws
v Scholtz
1989 (4) SA 315
(NC) at 320j-321A
[12] Mr.
Zietsman submitted further that the difference in practice on
whether the Courts had discretionary powers to grant or refuse
provisional orders without first notifying the respondent in the
High Courts has now been settled by the incorporation of section
9(4A) inserted by section 2 of Act 69 of 2002 which took away any
discretionary powers the Courts had in the past to entertain
ex
parte
applications in sequestration matters. See
Gouws
v Scholtz
at 316-317
supra
for an overview of the practice of the various High courts.
[13]
Section 9(4A)
of
the
Insolvency Act reads
as follows:
“
(4A) (a)
When a petition is presented to the
court,
the petitioner
must
furnish a copy of the petition-
(i) to every registered trade
union that, as far as the petitioner can reasonably ascertain,
represents any of the debtor's employees;
and
(ii) to
the employees themselves-
(aa) by
affixing a copy of the petition to any notice board to which the
petitioner and the employees have access inside the debtor's
premises; or
(bb) if
there is no access to the premises by the petitioner and the
employees, by affixing a copy of the petition to the front
gate of
the premises, where applicable, failing which to the front door of
the premises from which the debtor conducted any business
at the
time of the presentation of the petition;
(iii) to
the South African Revenue Service; and
(iv) to the
debtor,
unless
the court, at its discretion
,
dispenses
with the furnishing of a copy
where the court is satisfied that it would be in the interest of the
debtor or of the creditors to dispense with it.
(b) The petitioner must, before or
during the hearing, file an affidavit by the person who furnished a
copy of the petition which
sets out the manner in which paragraph
(a) was complied with.
[Sub-s. (4A)
inserted by
s. 2
of Act 69 of 2002.]”
(My emphasis)
[15] It
is correct that the amendment sets out clearly that the application
must be served on the debtor before it can be entertained
by the
Court. It is also correct that the use of the word “
must”
indicates
that the provisions are peremptory. It is however not correct as
contended on behalf of respondent that the amendment
has taken away
the entire discretionary powers that the Court has. That discretion
is accommodated by the use of the qualifying
words
“
unless
the court, at its discretion dispenses with the furnishing of the
copy…
”
.
[16] It
is clear from the cited cases including
MacKay
v Cahi
1962 (4) SA 193
(O) that in appropriate cases the Court can grant
the applicant leave to proceed without notice to the debtor. The
cases referred
to convey one message that because of the seriousness
of the order and its effect on the person and status of a debtor it
is undesirable
to grant sequestration orders without prior notice.
These decisions nowhere stipulate that it cannot and should not be
done. Each
case will be determined on its own merits and
circumstances. The Legislature could not have intended to protect
recalcitrant debtors
to the disadvantage of the very creditors the
Act was designed to protect.
[17] In
my view, looking at the papers before me it is clear that the
respondent is not acting in the interests of the creditors
by
allowing and standing by as L. Cilliers, her husband, dissipates the
assets of CFT. There is sufficient evidence which signify
that
unlawful dispositions have been made and same will in all
probability continue. This conduct has the effect of prejudicing
the
creditors. We have here to deal with people who have dealt with
assets of one trust which is under sequestration without an
order of
the Court or the knowledge of the appointed administrators to
benefit another trust. If they were made aware of the impeding
application there was a grave risk that they would have continued to
get rid of or dissipate the assets of CFT.
[18] The order is not
fatal. I cannot see what prejudice the respondent will suffer as she
has herself consented to the sequestration
of the estate of CFT as
alluded to above. I am inclined to condone a deviation of the
established practice in the light of these
exceptional
circumstances.
[19] The
effect of the decision of the full Bench of the Free State in
MacKay
v Cahi
supra
or section 9(4A) cannot be interpreted to have taken away the
Court’s discretion to grant a provisional order of sequestration
without notice to a debtor where a proper case has been made out.
The administrators of the estate, the applicants, acted diligently
to safeguard the interests of the creditors but were eluded by the
respondent and L. Cilliers.
[20] It
is not as if the respondent has no remedy. The provisional order
gives her the option of anticipating the return date and
show cause
why the order should not be made final.
[21]
In
the circumstances the application is dismissed with costs.
________________

B. C. MOCUMIE, J
/em