Sandcorp 94 CC v Adendorff and Another (4686/05) [2006] ZAWCHC 3 (1 February 2006)

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[2006] ZAWCHC 3
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Sandcorp 94 CC v Adendorff and Another (4686/05) [2006] ZAWCHC 3 (1 February 2006)

12
IN THE HIGH COURT OF SOUTH
AFRICA
(CAPE OF GOODHOPE
PROVINCIAL DIVISION)
“
REPORTABLE”
CASE NO. 4686/2005
In the matter between:
SANDCORP 94
CC APPLICANT
And
PETER ROBERT
ADENDORFF RESPONDENT
INTERVENING
CREDITOR: ELMARIE
ADENDORFF
JUDGMENT DELIVERED ON 01
FEBRUARY 2006
DLODLO,
J
INTRODUCTION
This is an application for
the sequestration of the Respondent’s estate. The provisional
sequestration order was granted on 1
June 2005, returnable on 25
July 2005. On the return date, however, the application was opposed
by an intervening creditor, one
Elmarie Adendorff. The latter is the
Respondent’s ex-wife. Mr. Ulyate appeared for the Applicant whilst
Ms Maas appeared for
the intervening creditor.
BACKGROUND
The Applicant is Sandcorp
cc; a Close Corporation duly registered in terms of the laws of the
Republic of South Africa, trading
as Steers, Melkbosstrand. One
Anneke Adendorff (“the Respondent’s present wife”) is the sole
member of the Applicant. The
Respondent is Peter Robert Adendorff
and is married to Anneke Adendorff. Peter Adendorff is the Manager
of the Applicant. The intervening
creditor is the Respondent’s
ex-wife by virtue of a divorce order granted on 8 November 2002.
The Respondent owes the
intervening creditor an unsecured sum of one hundred and one
thousand seven hundred and fifty rands (R101
750.00), an amount
which came about as a result of maintenance arrears in respect of
which the intervening creditor is apparently
currently armed with a
civil Judgment by the Magistrate’s Court.
Chronologically it would
appear from the papers the events unfolded themselves as follows:
In terms of the settlement
agreement when the Respondent and the intervening creditor divorced,
the Respondent became liable to
the intervening creditor for the
maintenance and half of the proceeds realized upon the sale of the
business. The business was
sold for an amount of One Hundred and
Seventy Five Thousand Rands (R175 000.00).
It is not disputed that the
Applicant lent and advanced an amount of R1 800.00 to the Respondent
who at the time was managing the
Applicant earning an amount of R5
000.00 monthly by way of salary. It is also the true position that
an amount totalling R36 500.00
was paid to the Respondent by the
Applicant in January and March 2005 respectively.
It is apparent from the
papers that the Respondent’s present wife (sole member of
Applicant) was instrumental in enabling and
authorizing the
Applicant to financially assist the Respondent by paying certain of
the Respondent’s monthly living expenses
amounting to an amount of
R11 700.00.
APPLICABLE LAW
(8) On the return day
of the provisional order, the Court has a discretion to sequestrate
the Respondent’s estate provided it is
satisfied as to the three
(3) elements of the Applicant’s case, namely:
that the applicant ‘has
established against the Respondent a claim’ upon the basis of
which one is able competently to seek
sequestration;
that the Respondent have
committed an act of insolvency or is insolvent; and
that there is reason to
believe it will be to the advantage of creditors of the Respondent
if his estate is sequestrated.
(9) The facts relied on by
the applicant in respect of each of the three elements of its case
must be proved at this level, on
a balance of probabilities, the onus
being on the Applicant. (See
Sacks Morris (Pty) Ltd v Nair
1957(3) SA 591 (N) at 593;
BP Southern Africa (Pty) Ltd v
Furstenburg
1966(1) SA 717 (O) at 720;
Mackay v Cahi
1962(4) SA 193 (O) at 194;
Meyer and Kie v Maree
1967(3) SA 27 (T) at 30)
The
Insolvency Act 24 of
1936
as amended substantially contains the law relating to
Insolvency. It is needless to set out in this Judgment the
provisions of
sections 8
and
9
of the above-named Act. The contents
of these sections have become trite law.
APPLICATION OF LAW TO
FACTS OF INSTANT MATTER
In the instant matter it is
important to note that the intervening creditor is the Respondent’s
ex-wife and that the sole member
of the Applicant cc is the
current/present wife to the Respondent. Reference will be made to
this aspect later on in this judgment.
According to the Respondent’s
present wife, the sole member of the applicant cc, the Respondent
earns a monthly salary of R5
000.00 and the Respondent has been
working at the Applicant’s business since December 2004. According
to Annexures
“EA3”, “EA4”
and
“EA5”
to the
Intervening Creditor’s Opposing papers, the following amounts were
paid by Applicant to the Respondent’s bank account:
On 12 December 2004 R10
000.00
On 24 January 2005 R10
000.00
On 7 march 2005 R26 500.00.
(12) Aforesaid payments have
not been disputed either by the Applicant or the Respondent. On the
contrary, the Respondent’s present
wife in the Replying Affidavit
alleged that the amounts represent outstanding salaries owing to the
Respondent by the applicant.
It is specifically stated in reply that
these amounts do not constitute loans. Simple arithmetic
calculation, however, betrays the
assertion that these are
outstanding salary payments. If the Respondent worked for the
Applicant as from December 2004 and his earning
being the alleged R5
000.00 per month, then the outstanding salary payments would have
been the sum of R20 000.00 (4 months x R5
000.00 per month). Instead
of R20 000.00, however, the Respondent got paid R46 500.00. There is
most certainly, a lot of hidden information
in this regard.
(13) In passing, I need to
mention that I am concerned about the following contents of paragraph
15 of the Founding Affidavit, namely:
“
During November 2004
the Respondent sold part of his business conducted under the name and
style of Skye Marketing for the amount
of R175 000.00, which amount
was used to pay his creditors and living expenses for a few months
thereafter. At the same time he entered
into an agreement with his
two brothers who were unemployed and financially destitute at the
time, in terms whereof they would conduct
the remaining part of the
business (Skye Marketing), being a fresh line foods business, until
such time as the business was earning
a net profit in excess of R3
000.00 per month, whereupon he would be entitled to receive one third
of the nett profit of the business.
To-date the business has not made
such income and the Respondent receives no income from this source,…”
(14) Strangely by way of an
affidavit dated 13 October 2005 the Respondent confirmed the
information provided to one Gerhardus Marthinus
Jacobus Nel.
According to Mr. Nel (who is a business and property broker and who
made a determination of the value of Skye Marketing)
the average net
profit of Skye Marketing, from December 2004 to July 2005, exceeded
the amount of R3 000.00. This, contrasted with
the content of
paragraph 15 set out
supra
, means that the Respondent should
have received one third (1/3) of the nett profit of Skye Marketing,
an income which is not mentioned.
Once again, there appears to exist
information which is vital but which is hidden away.
(15)
Section 8(g)
of the
Insolvency Act provides
thus:
“
A debtor commits an act
of insolvency if he gives notice in writing to any of his creditors
that he is unable to pay any of his debts.”
In my view a debt envisaged
in the above quoted section must be a real debt in the true sense of
the word “debt”. It must also
be due and payable. One must be
careful whenever one is confronted with
Section 8(g)
of the
Insolvency Act. I
am in full agreement with
Meskin
in his work
Insolvency Law
on page 2-16 where he states the following:
“
The giving of a notice
of inability to pay debts is frequently the means used for the
purpose of obtaining what is designated as a
“friendly
sequestration” ie, the notice is deliberately given in order to
furnish the “friendly” creditor with an act of
insolvency for the
purpose of sequestration proceedings to be brought by the latter.
Such notice is indeed an act of insolvency,
provided that the
application for sequestration does not constitute an abuse of the
process of Court.”
(16) In the instant matter
the Respondent who had been served with a writ of execution
consequent to a judgment for arrear maintenance
plus an amount
representing 50% of the proceeds of the sale of part of his business
consulted an attorney. During this consultation
the sole member of
the Applicant in her capacity as the Respondent’s wife was
apparently present. According to the latter the Respondent
was
advised in her presence that he was insolvent and that he should be
sequestrated. The Respondent’s wife subsequently on 16
May 2005
sent a letter on behalf of the Applicant of which she is the sole
member, to the Respondent demanding payment of the sum
of R1 800.00.
As could be expected the Respondent responded in writing and stated
the following:
“
As you know I have a
number of debts and I am unfortunately unable to repay the said loan
at this stage, nor will I be able to do
so in the foreseeable
future.”
(17) Consequent to the
receipt of the above response, which is clearly in line with the
provisions of
Section 8(g)
of the
Insolvency Act, the
Applicant
deposed to the Founding Affidavit for the sequestration proceedings.
I have set out in this judgment payments (huge ones)
made by the
applicant to the Respondent. These payments were made at the time and
moment when it was well within the knowledge of
the Applicant that
the Respondent owes it an amount of R1 800.00. If this was a genuine,
true and real debt which was due and payable,
what would have
prevented the Applicant from informing the Respondent that such an
amount will be deducted from whatever payments
were due to the
Respondent by the Applicant? Why would the Applicant not proceed to
deduct that “debt” from any of these huge
payments it made to the
Respondent? In my view the debt of R1 800.00 claimed by the Applicant
is not real and true debt solely in
the light of various huge
payments made by the applicant to the Respondent after the “debt”
was allegedly incurred. The inability
to pay, evidenced by the
Notice, must be an actual inability to pay, irrespective of the
reason thereof. This Court must carefully
consider the evidential
material presented in support of the application, particularly at
this stage of the proceedings.
(18) Courts ordinarily have
statutory discretion to grant sequestration orders. Courts also have
inherent jurisdiction to ensure and
prevent any possible abuse of its
process.
Meskin: Insolvency Law
page 2-23 makes the following important formulation:
“
The consideration
that the application is a “friendly” one entails the careful
scrutiny thereof by the Court in order to protect
the interests of
creditors. Such scrutiny should be directed, inter alia, to the
sufficiency of the evidence of the claim upon which
the applicant
relies. Even where a provisional order of sequestration has been
granted, the Court may still refuse the granting of
a final order
where it appears that there is an abuse of the process.”
(See, eg,
Craggs v Dedekind
1996(1) SA 935 (C) and see
Beinash
case
supra
in note 4A; and
Dunlop
Tyres
case and
Streicher
case
supra
in
note 8; and
Van Rooyen v Van Rooyen (Automutual Investments
(EC) (Pty) Ltd, Intervening Creditor
(2000) 2 All SA 485
(SE).
Mthimkhulu v Rampersad & Others
(2000) 2 All
SA 512
(N) prescribed a rule of practice (which operates in the Natal
Provincial Division of the High Court) according to which seven
minimum
evidential requirements must be met before a “friendly
sequestration” application will be entertained by the Court.)
It cannot be doubted that the present sequestration
application is indeed a “friendly” one. It is brought by the
Applicant solely
owned by the Respondent’s wife; the latter
certainly has an interest in the affairs of the Respondent. That is
the reason why she
together with the Respondent consulted an
attorney. Courts of law will always ensure that their inherent
jurisdiction is used to
prevent and exclude the possibility of abuse
of its process.
(19) Sequestration
applications are made for the benefit of the general body of
creditors and not for the convenience of the married
couple.
Sequestration applications must always be well grounded and they must
be
bona fide
brought. If there is clear evidence that such
proceedings are being brought
mala fide
, same must not be
allowed to succeed and the party responsible for the
mala fide
application must be punished appropriately by way of costs order. It
remains our law that even if the creditor is able to establish
all
the elements of the case for sequestration, the Court will still have
a discretion on whether or not to grant the sequestration
order, be
it provisional or final. (See:
Sections 10
and
12
of the
Insolvency Act
>, Act 24 of 1936;
Meskin Insolvency Law
page 2-5 para 2.1.1). It is trite law that a Court entrusted with a
discretion must always exercise same judiciously.
(20)
Brinkman v Botha &
Others
2004 JOL 13093 (C) is a case with almost similar facts
as the instant case. In Brinkman case the following remarks by the
Court are
relevant to the instant matter, namely:
“
[33] The undisputed
facts of this case lend themselves to precisely such an inference.
The application for the sequestration of the
first respondent is
shrouded in collusion. The friendship between applicant and the first
respondent, the former’s knowledge of
the Rule 66(1) litigation by
the intervening creditor against the first respondent, the flimsy
information about the act of insolvency
relied upon, the
unsatisfactory and undetailed information pertaining to the first
respondent’s debts.”
Similarly in
Esterhuizen
v Swanepoel and 16 others
case 2004(4) SA 89 (W) at 94A the
following remarks are also apposite:
‘
(k) The borrower is
so horrified at his own abject financial situation, that he/she
immediately writes a letter advising of an inability
to repay the
loan. There is stated a bare inability to pay – no requests for
extensions of time, no proposals to pay in instalments,
no offer to
render services or even suggestions that the lender initiate another
cause of action.’
(21) Indeed the undisputed
facts and circumstances in the instant matter lend themselves to an
inescapable inference of collusion
between the Applicant (a cc solely
owned by the Respondent’s wife) and the Respondent. I cannot lose
sight of the very obvious
manoeuvre on the part of this married
couple intended most certainly to cushion their own matrimonial
relationship. At the risk of
being repetitive I set out infra the
reasons why I have found the existence of collusion in the instant
matter:
The Respondent is married to
the sole member of the Applicant and the latter is instrumental in
the bringing of this application.
The Respondent is employed
by the Applicant in a very important capacity.
After the alleged loan of R1
800.00 by the Applicant to the Respondent, the former “overpaid”
the latter certain huge monthly
payments and claimed that those
amounts did not constitute loans.
There is no evidence that
the Applicant and the Respondent (despite their relationship at work
and domestically) negotiated any
repayment of the alleged debt of R1
800.00. The Applicant in a Section 8(g) letter to the Respondent
hardly alludes to the possible
extension of time within which to
honour this “debt”. Application to sequestrate the Respondent
is both drastic and uncalled
for, especially brought by a party
which monthly pays the Respondent.
(22) The Respondent’s
present wife (sole member of the Applicant) is not disqualified in
law from bringing applications of this
nature against the Respondent
because their marriage is in any event out of community of property.
But it remains of paramount importance
that the application must be
for the benefit of the general body of creditors. It has not been
successfully shown that this application
will benefit creditors.
(23) In
Craggs v
Dedekind, Baartman v Baartman and Another, Van Jaarsveld v Roebuck,
Van Aardt v Borrett
1996(1) SA 935(C) Conradie J (as he then
was) stated on 937:
“
Friendly
sequestrations seem to share certain characteristics. Although, like
pornography, they may be hard to define, they are easy
to recognise.
The debt which the sequestration creditor relies upon is almost
always a loan. It is usually quite a small loan, very
often made in
circumstance where it would have been apparent to the whole world
that the respondent was in serious financial difficulty.
Despite
this, the loan is customarily made without security of any sort. It
is seldom evidenced by a written agreement, or even subsequently
recorded in writing. The only writing that is produced to the court
is the letter stating, with appropriate expressions of dismay
that
the debt cannot be paid, and, sometimes, for good measure, setting
out details of the respondent’s assets of liabilities.
Very often
debtor and creditor are related: fathers commonly sequestrate sons,
wives sequestrate husbands and sweethearts sequestrate
each other,
without, I am sure, any damaging effect on their relationship.
Co-operation between debtor and creditor, which is fine,
can easily
turn into collusion, which is not. A Court should, I consider, be on
its guard against it. Because of this, and when the
signs are there,
a Court may be forgiven for requiring rather more from a friendly
petitioner in the way of establishing his claim
than it might
otherwise do. He should, I believe, present sufficiently detailed
evidence to satisfy a sceptical Court that he indeed
has a claim
against the respondent.”
I fully agree with the above
sentiments. They apply with full force in the instant matter.
COSTS
(24) The general rule remains
that the successful party is entitled to its costs. In the instant
matter there is no justification
for introducing an exception to this
rule.
ORDER
(25) In the circumstances I
make the following order:
The application is dismissed
and the Rule Nisi granted on 1 June 2005 is discharged.
The Applicant is to pay
costs of the Intervening Creditor.
_____________________
DLODLO, J