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[2008] ZAWCHC 301
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Kulenkampff and Associates v Vosloo (18194/2008) [2008] ZAWCHC 301 (20 November 2008)
IN
THE HIGH COURT OF SOUTH AFRICA
(CAPE
OF GOOD HOPE PROVINCIAL DIVISION)
CASE
NO
:
18194/2008
DATE
:
20
NOVEMBER 2008
In the matter between;
KULENKAMPFF
AND ASSOCIATES
APPLICANT
versus
A
M VOSLOO
RESPONDENT
JUDGMENT
GAUNTLETT.
A J:
fn
this matter, the applicant seeks a provisional order of sequestration
against the first respondent. The applicant is an attorney
practising
at Somerset West. The first respondent is a businessman currently
married to the second respondent, against whom no
order was sought.
The respondents are married out of community of property; there are
pending divorce proceedings between them.
When
the matter was called this morning, counsel for the first respondent
indicated that the application is resisted
in
limine
on
a
basis
of a contended lack
of
urgency,
and a contended deficiency as regards the bond of security furnished
in this matter. Furthermore, it was indicated that
the application is
resisted on its merits, with heavy reliance placed on a contended
failure to disclose material facts in circumstances
amounting to an
abuse. It is contended in particular that the applicant was actuated
by an improper motive in bringing the present
application.
I
heard preliminary argument as regards the issue of urgency, together
with that relating to the objection regarding security. I
indicated
at the conclusion of this argument that I was not minded to sustain
either
in
limine
objection
(my reasons to follow), and directed that argument proceed before me
in relation to the merits of the application.
As
regards urgency, my reasons for not sustaining the objection are
these. The position is that this application was evidently launched
on 3 November 2008, and was due initially to be heard on 10 November
2008. On that date, at the instance of the first respondent
himself -
a factor not without significance in a respect to which I shall later
advert - the application was postponed until today
(20 November
2008). The position today before me is that full papers have been
filed on both sides, and there is no application
(understandably in
the circumstances) that the matter stand down for the filing of
further affidavits. The parties have, quite
properly in the
circumstances, elected to argue this application for a provisional
order on the papers as they stand.
It
follows that the circumstances pertaining today are no longer ones
which impute any immediate suggestion of urgency. In this
regard a
situation not dissimilar to that which was invoked in
Commissioner,
SARS, v Hawker and Services (Ftv) Limited
,
2006(4) SA 292 (SCA) at 299G - 300D has arisen. This is, in the first
pEace that applications for provisional sequestration are
generally
regarded, in this division at least, as requiring in principle that
they be dealt with in principle expeditiously. That
may not
necessarily be dispositive of the matter, but that is the departure
point. Secondly, the objection becomes close to fatuous
in
circumstances where there has been a timescale in terms of which
something like 17 days have elapsed since the initiation of
the
application, and there has been an agreed deferment of the date of
hearing to today. In that respect, too, there are echoes
of the
decision in
Hawker
supra
where a party persisted in seeking the dismissal, no less, of the
matter in circumstances where an application initially brought
on
short notice had been significantly deferred, a full opportunity had
been allowed for the filing of papers, and full argument
had ensued.
In
the present case urgency, as Mr Kulenkampff for the applicant pointed
out, is in any event indicated by a number of transactions
such as
those indicated in the answering affidavit at page 51 paragraphs 21.8
and 21.15. These are indicative of dispositions having
taken place.
Accordingly,
there is in my judgment no proper basis to seek to suggest that the
matter be struck from the roll for a lack of urgency.
The
second preliminary issue, as I have indicated, related to a contended
deficiency in the provision of security. A number of difficulties
immediately present themselves in this regard. First of all, the
alleged deficiency appears nowhere on the papers. The normal practice
is that the security bond does not constitute a part of the papers
filed before Court, nor
f
more
important, has the point been taken, as it should have been, in the
opposing affidavit. Had it been, the applicant would have
been
entitled to answer it. But more fundamentally, as I put to counsel
for the applicant, is the fact that what the argument materially
entails is an attempt at collateral review of the decision taken by
the Master in certifying, as he has done before me, the provision
of
good security. \ see no basis to go behind his certification in
the circumstances I have described. As was indicated in
the line of
authority culminating in the SCA decision in
Oudekraal
Estates v City of Cape Town
2004 (6) SA 222
fSCA)
.
the circumstances in which a Court permits the collateral review of
an administrative decision are very limited. It seems to me
that the
point is one without substance.
I
turn now to a consideration of the merits of the application.
Although the argument before me this morning essentially related
to
two aspects- the contended abuse of proceedings, and an asserted lack
of benefit to creditors - I think it is advisable shortly
to traverse
a slightly wider terrain indicating why I consider that an adequate
case is made out according to the tests applicable
at the stage of a
provisional order of sequestration. First of all, it appears that
there is (correctly) no challenge to the
locus
standi
of
the applicant. It seeks a judgment on the basis of fees and
disbursements which are outstanding and in relation to which the
indebtedness has been admitted by the first respondent. Secondly
there is a judgment debt which is likewise admitted.
I
turn now then to whether or not a requisite case is made out in terms
of the accepted elements for a provisional order of sequestration,
in
other respects. First of all, the applicant relies on a
mutfa
bona
return
(invoking section 8(b) of the
Insolvency
Act, 24 of 1936 (as amended)). The applicant contends namely that the
first respondent has committed an act of insolvency
in this regard.
There was some attempt on the papers to suggest that the return of
service on which this particular claim relies
does not constitute a
return of service as envisaged in
section 8(b)
of the
Insolvency Act.
The
argument was not pressed in oral debate this morning, and it
seems to me that this was for good reason. I can see no basis
whatsoever
for contending that there is no act of insolvency
committed as alleged in this first respect.
The
second ground relied upon involves
section 8(e)
of the
Insolvency
Act. In
this regard there is either a deliberate or other evasion of
the main point which is made in the founding affidavit. It is namely
asserted in sub-paragraph 21.2 of the founding affidavit that first
respondent was indebted to one Trevor Piercy in an amount of
about
R500 000,00. The answer the first respondent seeks immediately to
give in the answering affidavit is to deny "that I
ajm
indebted...'
1
.
But this misses the point. The point made in the founding affidavit
is quite explicit: namely that in order to procure a release
from
that obligation, the first respondent transferred his rights in and
to the trading name "Hunters Choice'' to Piercy.
The point which
has been missed, either deliberately or otherwise, is that that
arrangement is on the face of it, an arrangement
with the creditor of
the first respondent for releasing him wholly or partially from his
debts. In those circumstances, too, it
seems to me that an act of
insolvency is indeed established- I should add in this regard that if
the assets of the first respondent
be considered and the amount by
which his liabilities exceed his assets, it is quite clear of course
that the dispossession of
the name "Hunters Choice" indeed
had the effect of prejudicing his creditors (other of course than
Piercy himself), or
in preferring Piercy above the other creditors.
The
third ground of insolvency relied upon entails
section 8{c)
of the
affidavit. This fastens upon paragraph 21 of the answering affidavit,
where the first respondent from his own mouth alleges
that creditors
with claims against him for payment of a sum of R99 898,79 "were
taken over by Peregrine Meats, who have undertaken
to effect
payment".
I
agree with Mr Kulenkampff that the inference is inescapable at this
stage that Peregrine Meats would not have taken over this
counter-obligation and view it only with a Christmas spirit. There
would have to have been some counter-prestation. It would seem
to
follow in my view that the first respondent at the very least has
sought to make a disposition of his property (in the form
of the
counter-performance to Peregrine Meats), which would have the effect
of prejudicing his creditors or preferring creditors
who now will be
settled by Peregrine Meats.
These
acts of insolvency aside, I am also satisfied that in any event
actual insolvency is established on the required evidential
level
applicable to this stage of the insolvency proceedings. As I was
reminded in argument, where an act of insolvency is proved
and the
debtor in opposing the application alleges that his assets exceeded
his liabilities, the onus is on him to show that this
is the case
(
De
Beer
v Isaacson
1929 AD 345).
Furthermore, if the Court is left in doubt as to
whether the assets will meet the liabilities, as a general principle
it would
tend to grant the order f
Swellendam
Municipality v Kennedy
1934 CPD 448
- 450).
In
this regard the applicant alleges that the liabilities of the first
respondent are of the order of R384 501,31. In answer, the
first
respondent does not contest the claims of creditors with claims to a
value of R204 914,82. In addition, there is the nearly
R100 000 of
ciaims "taken over'
1
by Peregrine Meats. It Is not suggested that those creditors have
released the first respondent from his obligation to pay, and
until
such time then as Peregrine Meats settle the liability to those
creditors, it unavoidably follows that they remain creditors
of the
first respondent. In addition, there is a liability in an
undisclosed amount to the South African Revenue Services.
As
against this the first respondent asserts assets with a value of R37
997,56. But this, as has been pointed out, must be added
to the value
of the rights to the trading name "Hunters Choice" which,
as Mr Kulenkampff has observed, Is clearly not
of inconsiderable
value inasmuch as it was part of an arrangement to procure the
release from an obligation of R500 000,00. In
addition there is the
admission by the first respondent that he owns firearms and a
crossbow evidently of not insignificant value
and that he had to
claim for about R80 000,00 against Peregrine. The first respondent in
addition alleges that he has a claim against
the second respondent in
respect of the accrual, but inasmuch as those proceedings are both
pending and imminent, a matter to which
I shall refer again shortly
in a slightly different context, it is not necessary to take that
into account.
So
for these reasons, it seems to me that a case is made out (on the
test applicable at this stage) that the liabilities of the
first
respondent exceed his assets.
I
turn now to consider whether in the circumstances a benefit to
creditors has been demonstrated. En this regard, it is evident
to me
that the assets listed in paragraph 20 of the founding affidavit, to
the sum of R37 997,56, first of all can be realised
and be to the
benefit of creditors. In addition there is the claim against
Peregrine Meats in the sum of R80 000,00 to which I
have referred,
which can also be realised. There is furthermore the question of the
release from Peregrine Meats and the sum of
R99 898,79 presenting
itself as an amount which potentially can be reclaimed and realised
for the benefits of the first respondent's
creditors in terms of the
provisions relating to undue preference and dispositions.
In
short, it seems that one is at this stage considering that an overall
position appears to be established of cfaims of the order
of R800
000,00 against the first respondent with assets which may be of the
order of R500 000,00. Whether these amounts are exact,
it seems to
me, need not be further debated at this stage, given the relatively
clear position regarding those assets and liabilities
to which I have
already made reference, and which establish a benefit to creditors.
I
turn finally to the question of an abuse of proceedings. As Mr
Robertson for the applicant pointed out to me this terminology
is
used in paragraph 13 of the opposing affidavit. The exact formulation
which the first respondent had in mind, however, is not
consistent:
it straddles various references to motive, a sham and a general
strategy of pursuing this application now in the
immediate advance of
the scheduling of the divorce proceedings. It is stressed in this
regard that this application was launched
on 3 November and the
coincidence of this date and that relating to the divorce proceedings
rs a matter which has been stressed
in oral argument and which I have
taken into consideration.
It
seems to me that the matter, however, is disposed of in two ways.
First of all, as Mr Kulenkampff pointed out in reply, the factual
sub-stratum for the contention of an abuse and an object to pursue
these proceedings for an improper purpose is not readily supported
by
conduct in relation to the securing of the hearing. As I already
noted, while it was launched on 3 November, and was initially
due to
be heard on 10 November, even prior to the filing of the answering
affidavit in this matter the applicant readily agreed
to the
postponement of this matter to 20 November 2008. It seems to me
entirely correct to state, as he does (record page 111,
para 18.S):
"I
state the obvious to emphasise that within the timeframe applicable,
it was simply not possible to engineer the result claimed
by the
first respondent and that I made no endeavour to do so. On the
contrary E readily agreed to a postponement beyond 14 November
2008."
These
facts, it seems to me, entirely vitiate a factual basis for the
allegation of an abuse or a sham. Indeed, they are such -coupled
with
the decision, quite properly, not to seek to file further affidavits
and to deal with the matter as it stood - which makes
it unfortunate
and even reprehensible that the contention was stil) advanced in
argument. It seems to me that there was no responsible
basis for the
contention that the strategy which is being pursued in this matter
has been one which has entailed the sequestration
of the first
respondent to advance, it would seem, the interests of the second
respondent (for whom the applicant used to act,
but has not acted
since 3 November, in the divorce proceedings), it was apparent in
oral argument that the leading
dicta
regarding
the questions of improper motives and their relevance juristically in
Tsose
v Minister of Justice
1951 (3) SA 10
(A) and in
Brummer
v Gorfii
Brothers
1999 (3) SA 389
(SCA), have not been considered and applied.
It has been emphasised in those decisions and in others that the law
is generally
not interested in motives, least of afl in commercial
transactions.
In
oral argument Mr Robertson however relied on the decision in
Amond
v Khan
,
a copy of which has been handed up to me, a 1947 NPD decision (fulf
bench). In that matter, the Court concluded thus:
"...the
answer in my judgment is that he was determined to sequestrate
respondents estate, not for the purpose of obtaining
payment of his
debt, but for the purpose of preventing the respondent from obtaining
payment of his claims against the appellant's
son. Thus the appellant
deliberately abused the process of the court, for I have no doubt
whatsoever that he must have known all
about the position between is
son and the respondent...".
As
was most latterly emphasised by
Cameron,
J A
in
Commissioner
of SARS v Hawker Air Service (Ptvl Limited
supra
at 303 - 304, a Court is slow to find that a party has acted with an
improper ulterior purpose. In that matter, reversing
the conclusion
of the court of first instance, the SCA held that:
"The
real motive of SARS was plainly to collect VAT. No acceptable basis
was advanced for impugning this."
It
seems to me that similar considerations apply in the first instance.
Obviously it may be to the benefit of the applicant for
sequestration
to be achieved prior to any resolution of the (opposed and therefore
protracted) divorce proceedings between the
parties. That however
does not detract from the fact that the applicant is owed the money.
The respondent has offered no answer
to it (other than the insouciant
answer that the applicant should rather have moved to execute against
his property and not to
seek a provisional sequestration order,
despite the trite authority in
Loqie
v Priest
1934 AD and subsequent decisions). it seems to me clear that the
contention regarding improper motive, to the extent that this
is
supposed to relate to an improper object, and in turn to an abuse,
lacks a proper legal-cum-factual foundation.
Lastly
in this regard, and it was not clear to me whether this was intended
to be argued as an adjunct to the improper motive contention
or as a
separate ground for abuse, it was argued at some considerable length
that the applicant was obliged to disclose in the
founding affidavit
that it had acted not only for the first respondent as her attorneys,
but that (at the time) was acting in the
divorce proceedings for the
second respondent. Once again, it seems to me that a simple legal
observation has been overlooked.
This is that the present application
was clearly not an ex
parte
application,
and that accordingly the strictures of cases like
Schiesinqer
v Schlesinqer
and others do not apply. Secondly, it seems to me that there was no
materiality in the question of the applicant acting for the
second
respondent in the divorce proceedings. In fact, the founding
affidavit does record that the applicant had been advised by
the
second respondent as to the correct factual state of affairs, and so
the source of information for the applicant in particular
respects
was itself explicitly disclosed. I reject the suggestion that in the
circumstances of this matter, where the applicant,
seeking to recover
admitted fees and admitted debt, was obliged to annex - as the
argument went - the ante-nuptial contract of
the first and second
respondents. The application of the duty of disclosure in this matter
it seems to me has been wholly misconceived.
For
these reasons I am satisfied that a proper order has been made out
for a provisional order of sequestration. I intend to grant
an order
in the usual terms regarding service { unless there is anything that
the counsel on either side wishes to say to me in
that regard), and
furthermore that it be returnable on, if somebody has a diary, I
think Tuesday, 26 January is a court day .
MR
ROBERTSON (?)
:
I don't have my diary here, M'Lord, but
I
'M
check that if
I
may
when
I...
(intervention).
COURT:
Yes.
MR
ROBERTSON
:
it's a Tuesday.
COURT
:
I think it's Tuesday, 26 January. So in short there will be a
provisional order of sequestration, there will be the usual order
as
to service, the order will be returnable on Tuesday, 27 January, or
the nearest provisional day, with the usual order at this
stage as to
costs.
I
see, Mr Camptor (?), you are there clutching papers, is there a
particular matter you wanted an order to be made in?
MR
CAMPTOR
:
Yes, (indistinct - not speaking into microphone).
COURT
:
Yes?
MR
CAMPTOR
:
(Indistinct) watting outside chambers and we... (intervention).
COURT
:
1 gather, yes,
f...
(intervention).
MR
CAMPTOR
:
..(indistinct) the matter.
COURT
:
Oh, I see, well then let's go up to chambers and you'll be
welcome to..(indistinct).
The
Court will now adjourn.
GAUNTLETT,
A J