Brinkman v Botha and Others (1091/2004) [2004] ZAWCHC 23 (11 October 2004)

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[2004] ZAWCHC 23
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Brinkman v Botha and Others (1091/2004) [2004] ZAWCHC 23 (11 October 2004)

IN THE CAPE HIGH
COURT OF SOUTH AFRICA
(CAPE OF GOOD HOPE
PROVINCIAL DIVISION)
CASE NO: 1091/2004
In the matter
between:
ROBERT PAUL
EDMUND BRINKMAN Applicant
and
JOHAN BOTHA
1
ST
Respondent
LIZELLE BOTHA
2
ND
Respondent
ANNA-MARIé SWART
(nee BOTHA) Intervening Creditor
JUDGMENT
DELIVERED ON: 11 OCTOBER 2004
Meer, J:
Introduction
[1] On 20 February
2004 the first respondent’s estate was placed under provisional
sequestration.
[2] On 26 March 2004
his former wife applied to intervene as an intervening creditor in
his sequestration application. The basis
for her intervention is
that the first respondent owes her R329 340.62 as part of a divorce
settlement agreement which was made an
order of Court on 18 June 2000
when a decree of divorce was granted, dissolving her marriage to the
first respondent. The intervening
creditor contends that she is the
first respondent’s chief creditor and he refuses to undertake his
obligation to pay his debt
to her in terms of the deed of settlement.
In October 2003 she instituted proceedings against first respondent
for the recovery of
the amount owing to her. As her claim had by that
stage become superannuated, these proceedings took the form of an
application for
the issue of a warrant of execution to recover the
amount in terms of Rule 66(1) of the Uniform Rules of Court, (“the
Rule 66(1)
proceedings”). It is her contention that the real
purpose for the sequestration application is to frustrate her claim
against the
first respondent, and that the applicant and first
respondent have colluded in the bringing of the sequestration
application to prevent
her claim from succeeding. The first
respondent she contends, is not insolvent.
Background Facts
[3] It is common
cause that this is a friendly sequestration. The applicant and first
respondent whose sequestration he seeks, have
been colleagues and
friends for years. The first respondent, an ear, nose and throat
surgeon and the applicant an anesthetist, work
together regularly.
The first respondent uses the services of the applicant in most of
his operations.
[4] In addition, the
applicant and the first respondent share a common lawyer namely one
Mr Louw, who represents the first respondent
in the Rule 66(1)
proceedings brought against him by the intervening creditor. He also
represents the applicant in the sequestration
proceedings which the
intervening creditor opposes. These have been conducted as parallel
applications with Mr Louw’s active participation
in both, as
appears from the following chronology:
[5] On 7 October
2003 the intervening creditor commenced the Rule 66(1) proceedings to
recover her debt of R329340.62 from the first
respondent.
[6] On 23 October
2003 at the request of Mr Louw, representing the first respondent and
by agreement, the Rule 66(1) proceedings were
postponed until 3
November 2003 (to allow for the filing of opposing and replying
papers and heads of argument).
[7] On 19 November
2003 the first respondent borrowed an amount of R20,000.00 from the
applicant for an undisclosed reason and the
applicant gave him a
cheque for that amount by way of loan. The first respondent undertook
to repay the loan on 31 December 2003.
[8] On 9 December
2003 the intervening creditor filed her replying papers in the Rule
66 (1) proceedings.
[9] On 31 December
2003, the date upon which the first respondent was to repay the
applicant’s loan, the loan remained unpaid.
[10] On 6 January
2003 the first respondent wrote a letter to the applicant informing
him that he was unable to repay the loan.
Applicant relied upon
this letter as constituting a deed of insolvency in terms of
section
8(g)
of the
Insolvency Act No 24 of 1936
. Also on 6 January 2003
applicant called upon first respondent to discuss the non payment of
the loan with him and later that day
the applicant’s founding
affidavit for a provisional sequestration application (“the first
sequestration application”) was
sworn to at the Parow Police
Station. The notice of motion in the first sequestration application
was issued on 7 January 2004 and
a hearing was set down for 2 March
2004.
[11] Shortly
thereafter, ABSA Bank intervened as an intervening creditor in the
first sequestration application, with a debt of R120
000.00 against
the first respondent.
[12] On 23 January
2004, as a consequence of ABSA’s intervention, the applicant
withdrew the first sequestration application, his
reason being that
he did not want to become involved in litigation with ABSA who could
out-litigate him.
[13] The intervening
creditor in the current application is of the view that the applicant
and the first respondent colluded to withdraw
the first sequestration
application to afford first respondent an opportunity to repay the
loan to ABSA, which he did in full. According
to applicant the debt
was settled with funds donated by first respondent’s current wife,
also a medical doctor.
[14] In the interim,
the hearing of the
Rule 66(1)
proceedings had been set down for 25
February 2004, and on 11 February 2004 the intervening creditor
furnished heads of argument
to Mr Louw, as first respondent’s
attorney. On the very next day the applicant, also represented by Mr
Louw, signed his founding
affidavit preparatory to commencing the
second, and current provisional sequestration application (“the
second sequestration application”).
The notice of motion was signed
by Mr Louw, also on 12 February 2004.
[15] On 18 February
2004 the second sequestration application was issued and although Mr
Louw was the common attorney in both applications,
he did not inform
the intervening creditor of the provisional sequestration
application, which was crucially pertinent to her
Rule 66(1)
proceedings. Mr Louw instructed a separate advocate in each of the
parallel proceedings, one to appear for applicant in the second
provisional sequestration application and a different one to defend
the first respondent in the
Rule 66(1)
proceedings. It appears that
Mr Louw informed neither advocate about the other litigation. In this
way, the intervening creditor
contends, the
Rule 66
(1) counsel
instructed by Mr Louw was kept in the dark about the sequestration
proceedings and so could not inform his opponent,
the intervening
creditor’s counsel about such proceedings. Mr Louw, she says,
thereby achieved the joint objectives of preventing
any opposition to
the provisional sequestration application and sabotaging the
Rule
66(1)
application.
[16] On 18 February
2004 heads of argument in the
Rule 66(1)
application were filed.
[17] Also on 18
February 2004 the second sequestration application was postponed to
29 February 2004 because the papers were not in
order. Thereafter, on
20 February 2004 an order for the provisional sequestration of the
respondent was granted.
[18] On 22 February
2004 heads of argument in the
Rule 66(1)
proceedings were filed by
the intervening creditor, who was at that stage oblivious to the fact
that a provisional sequestration
application had been granted against
her former husband.
[19] On 23 February
2004 the intervening creditor’s attorney discovered, as she
describes, purely by chance that a provisional sequestration
order
had been granted against first respondent on 20 February 2004.
Consequently, on 25 February 2004 the
Rule 66(1)
proceedings were
postponed to 30 March 2004, and on 19 March 2004 the intervening
creditor commenced this application in opposition
to the second
sequestration application, the return day of which had at that stage
been set down for 30 March 2004. The return day
has subsequently been
extended various times.
[20] In contending
that the first respondent is not insolvent, the intervening creditor
states that he earns R60 000.00 per month,
a fact which is not
disputed. She contends that he can easily repay the loan of R20
000.00 to the applicant. According to her, the
applicant was aware of
first respondent’s debt to her and knew that she was engaged in
litigation against him when he brought the
second sequestration
application. The applicant, in reply does not deny this, but states
that the first respondent informed him that
he owed his former wife
nothing.
[21] Applicant’s
founding affidavit in the second sequestration application cites
under his liabilities a category of “
diverse
skuldeisers en klein skulder
”
who are owed R100 000.00. The provisional sequestration order
granted, made provision for service thereof by registered post on
all
creditors owed more than R5 000.00. To date, no such service has
occurred and this provision of the
rule
nisi
remains unfulfilled.
Was there collusion
between the Applicant and the First Respondent in bringing the
Sequestration application?
[22] In the light of
the aspersions cast by the intervening creditor on first respondent’s
professed insolvency status, a consideration
as to whether there was
collusion should commence by enqiuring whether the first respondent
is indeed factually insolvent. The provisional
sequestration
application lists the value of first respondent’s assets at R390
000.00. As against this, it lists his liabilities
at R490 000.00. Of
his liabilities two items present cause for concern. The first of
these is a debt of R250 000.00 to Systems Analyst,
an entity which
the intervening creditor states is owned by the first respondent
himself. This is not disputed. No detail is given
as to how this debt
was incurred, when it arose or to what it relates, information which
one would expect to be fully furnished,
especially in a friendly
sequestration.
[23] The second item
of concern is the aforementioned debt of
R100 000.00 to
“
diverse
skuldeisers en klein skulder
”.
Here too no details are given as to who these debtors are or how and
when the debts were incurred. Given that this category of
debtors
have to date not received service of the provisional sequestration
order, notwithstanding the
rule
nisi,
one may well ponder whether they actually exist.
[24] If one were to
remove either of these disconcerting debts from the liabilities the
first respondent would be rendered solvent
and there would in the
circumstances be no reason to believe that a sequestration of his
estate would be to the advantage of creditors.
A deduction of the
debt of R250 000.00 owed to Systems Analyst (which in effect is a
debt the first respondent owes to himself),
reduces his liabilities
to R240 000.00, as compared with his assets of R390 000.00. This
clearly flies in the face of insolvency.
If one deducts only the
“
diverse
skulders
”
debt his liabilities are reduced to
R390
000.00
being the sum of his assets, and if one deducts both these debts his
liabilities are further reduced to
R140
000.00
which is less than his assets.
[25] It is
disquieting that the Provisional Trustee to first respondent’s
estate in his report, makes no comment about these two
categories of
debtors and the paucity of information about them, in the face of a
friendly sequestration.
[26] Equally
disquieting in the light of first respondent’s professed insolvency
status is his ability to repayment of the loan
of R120 000.00 to ABSA
with such alacrity. This lends credence to the intervening creditor’s
submission that he is a man of means,
who would similarly have been
able to repay the debt to the applicant of R20 000.00. The fact that
he had access to R120 000.00
begs the question as to why he could not
as easily have arranged access to R20 000.00 in lieu of his debt to
applicant.
[27] On the facts
before me, I am unable to find that the first respondent is factually
insolvent.
On the all important
question of collusion I make the following observations:
[28] Applicant’s
founding affidavit in the second provisional sequestration
application is disturbingly short on detail about the
loan to first
respondent of R20 000.00. It is not explained for what purpose the
loan was advanced, or why it could not be repaid.
Also disquieting is
that applicant appears to have made no great effort to obtain
repayment of his loan, as one might expect, before
resorting to the
drastic step of applying for first respondent’s provisional
sequestration. No explanation is given for the alacrity
in which the
sequestration application was brought.
[29] In the
circumstances the following comments by Conradie, R, (as he then was)
in
Craggs
v Dedekind;
Baartman
v Baartman & Another
;
van
Jaarsveld v Roebuh; van Aardt v Borrett
1996(1) SA 935(C) at 937D-E, are apposite:
“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.”
[30] As to first
respondent’s inability to repay the loan and applicant’s haste in
bringing the sequestration application the
following remarks by
Satchwell, J in
Esterhuizen
v Swanepoel
and 16 other cases 2004(4) SA 89 (W) at 94 A 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 bare inability to pay -
no requests for extensions of time, no proposals to pay in
installments,
no offer to render services or even suggestions that
the lender initiate another cause of action” and at 94G to I:
“(m) The dissatisfied lender apparently chooses the most drastic
remedy to attempt to recover portion of the moneys owed. No
indication
is given that attempts have been made to negotiate a more
satisfactory solution to this desperate state of affairs. The lender
does
not advise the Court that he or she has given the borrower time
to improve his or her financial position, negotiated payment of the
outstanding debt in installments, looked for a contribution from
other relatives or friends, considered proceedings in other Courts
or
fora.
[31] It is trite
that collusion is an abuse of the Court process and will not be
tolerated. In
Bevan
v Bevan & Ward
1908 TH 193
at 197 Curlewis, J stated:
“
In our law,
ordinarily speaking, collusion is akin to connivance, and means an
agreement or mutual understanding between the parties
that the one
commit or pretend to commit an act in order that the other may obtain
a remedy at law as for a real injury
”
[32] A final order
of sequestration will not be granted where the sole or predominant
motive of the applicant is something other than
the
bona
fide
achievement of the sequestration of the estate. The procuring of a
suspension of legal proceedings by or against the debtor is such
a
motive
1
As Roper, J stated
in
Millward
v Glaser
1950(3) SA 547 at 551B:
“
If the facts
were such as to justify the inference that the motive of the
applicant in filing her petition was not to bring about
the
respondent’s insolvency for its own sake but to harass or oppress
the respondent or (as it was put in King v Henderson
(1898, A.C.
720))
‘fraudulently to defeat her rights’ by stifling her action
for damages, there is in my view no doubt that the Court would be
entitled to discharge the provisional order either in the exercise of
the discretion conferred upon it by
sec. 12
of the
Insolvency Act or
by virtue of its inherent jurisdiction to prevent abuse of its
process (see, e.g., Ex parte Griffin: in re Adams
(L.R. 12 Ch.D.
480)
; Berman v Brimacombe
(1925 TPD 548)
; Borchers v Kaehne (1933,
S.W.A. 105); Amod v Khan (1947(1), S.A.L.R. 150 (N.P.D.)”.
[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 the 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 and, crucially, the underhand manner
in which
the attorney common to both applications conducted himself, all bear
the hallmark of collusion.
[34] The conduct of
Mr Louw and that of his clients, the first respondent and the
applicant constitute an abuse of the Court process.
Mr Louw had a
professional and ethical duty to disclose all relevant facts about
both applications. His material nondisclosure is
a dereliction of
such duty.
[35] Regard being
had to all of the above, a final order of sequestration cannot be
granted.
[
36]
As
regards costs the intervening creditor requests attorney and client
costs against applicant, first respondent and Mr Louw jointly
and
severally. I have no doubt that their conduct warrants a punitive
cost order of such a nature. In respect of Mr Louw, it is trite
that
costs de bonis propriis are not lightly awarded. However by any
standard Mr Louw’s conduct was an abuse of the court process
and
reprehensible.
Mr Louw was not before
me on the question of costs. I however note that he would have been
aware that a punitive costs order was
being sought against him at
least a week before the hearing when Mr Dippenaar filed heads of
argument requesting such costs. He chose
neither to attend the
hearing, challenge the allegations against him, nor to explain his
actions, or apologise therefor. It is right,
proper and just that he
be made to bear the costs of his conduct.
2
There will therefore
be an order in the following terms:
1 The provisional
order of sequestration against the first respondent granted on 20
February 2003 is hereby discharged;
2 The applicant,
first respondent and Mr Louw of Visagie Vos & Vennote shall bear
the costs of this application jointly and
severally on a scale as
between attorney and client.
Y S MEER
IN THE CAPE HIGH
COURT OF SOUTH AFRICA
(CAPE OF GOOD HOPE
PROVINCIAL DIVISION)
REPORTABLE
CASE NO: 1091/2004
In the matter
between:
ROBERT PAUL EDMUND
BRINKMAN Applicant
and
JOHAN BOTHA
1
ST
Respondent
LIZELLE BOTHA
2
ND
Respondent
ANNA-MARIé
SWART (nee BOTHA) Intervening Creditor
JUDGMENT BY : MEER,
J
For
the Applicant : Adv. L M OLIVIER
Instructed
by : VISAGIE VOS & ASSOCIATES
(Per
J S LOUW / LB0081)
501
Wale Street Chambers
33
Church Street
Cape
Town
For
the Respondents : (1) and (2) not represented.
For
the Intervening Creditor: Adv. D J DIPPENAAR
Instructed
by : H J SWART ATTORNEYS
TYGERVALLEY
Per HEYNS &
ASSOCIATES INC.
50
Keerom Street. The Chambers
Cape
Town (Ref: H J Swart/lk/B182)
Date(s)
of hearing : Tuesday, 07 September 2004
Judgment
delivered : Monday, 11 October 2004
1
see
Meskin
Insolvency Law,
Butterworths p2-22 par 2.1.5 and the cases mentioned therein:
Dal’s
Service Station (Pty) Ltd v Labuschagne
1962(3)
SA 723(SR).
2
See
Washaya
v Washaya
1990 (4) SA 41
at 45G