Fortuin and Others v Various Creditors (A566/2003) [2003] ZAWCHC 66; 2004 (2) SA 570 (C) (1 December 2003)

About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Western Cape High Court, Cape Town
SAFLII
>>
Databases
>>
South Africa: Western Cape High Court, Cape Town
>>
2003
>>
[2003] ZAWCHC 66
|

|

Fortuin and Others v Various Creditors (A566/2003) [2003] ZAWCHC 66; 2004 (2) SA 570 (C) (1 December 2003)

8
IN THE HIGH
COURT OF SOUTH AFRICA
(CAPE OF GOOD
HOPE PROVINCIAL DIVISION)
REPORTABLE
CASE NO:
A566/2003
In
the matter between:
JOHN
FORTUIN 1
ST
Appellant in Case No: 116/2003
MAGDELENA
FORTUIN
(née
SKIPPERS)
2
ND
Appellant in Case No: 116/2003
JOHANNES
EVERHARDUS
MARTHINUS
VAN SCHALKWYK APPELLANT in Case No: 118/2003
ERNEST
BOUWERS 1
ST
Appellant in Case No: 120/2003
ADRIANA
JANETTA BOUWERS
(née
BEUKES)
2
ND
Appellant IN Case No: 120/2003
JOHANNES
PERSENS 1
ST
Appellant in Case No: 479/2003
GRIETA
PERSENS
(née
SYSTER)
2
ND
Appellant
in Case No: 479/2003
MZWANDILE
HEADMAN BOOI 1
ST
Appellant in Case No: 481/2003
NANCY
NOMVULA BOOI 2
ND
Appellant in Case No: 481/2003
VARIOUS
CREDITORS RESPONDENTS
_____________________________________________________________________________
JUDGMENT
DELIVERED ON 01 DECEMBER 2003
_____________________________________________________________________________
DLODLO,
A.J
INTRODUCTION
This is an
appeal against an Order and Judgment of the Magistrate of
Malmesbury, handed down on 01 April 2003 in which the applicants’
joint application for an administration order was dismissed. The
Appellants are referred to as the Applicants.
FACTUAL
BACKGROUND
Applicants
issued applications for an administration order out of Malmesbury
Magistrates Court. The necessary notices were given
to the
Applicants’ creditors as required in terms of section 74A(5) of
the Magistrate’s Court Act, 32 of 1944 (The Act).
The
Applications were set down together for hearing on 01 April 2003.
When the applications were argued, the magistrate raised
an issue
with the Applicants’ legal representative concerning the amounts
offered by applicants. The issue was in the magistrate’s
own
words:
“
Is hierdie bedrag
voldoende om die kapitale skuld in ‘n redelike tydperk te delg, tot
voordeel van beide die Applikante en hul Krediteure,
veral as rente
en die administrasiefooi van 12.5% in aanmerking geneem word?”
On the same day
the magistrate handed down his judgment in terms whereof each
individual application was dismissed. The Applicants’
grounds of
appeal are as follows:
[a] The magistrate erred in
law in finding that the amounts reflected as owing to the creditors
by the Applicants in their respective
applications constituted
liquidated money debts which attracted interest “as from the date
that the debtor is in
mora
even if the
contract itself did not make provision for that payment of interest.”
[b]
The magistrate erred in law in finding that the provisions of section
74 of Act 32of 1944 contemplate that:
“Die
aanbod wat die Applikante maak moet daarop gemik wees om die skulde
en gepaardgaande kostes ten volle te vereffen.”
As
a consequence the magistrate erred in finding that the Applicants
were obliged to have available for distribution to creditors
an
amount such that
“die
skuld binne ‘n redelike tyd vereffen moet word.”
[c] The
magistrate erred in finding in effect that interest which might
accrue to a creditor post administration ought to be taken
into
account when deciding whether to grant an application or not
particularly when no evidence was advanced by any creditor that
such
interest would indeed accrue post administration. As a consequence
the magistrate erred in Law in failing to take into account
the
provisions of section 74(H) and that any interest which might accrue
post sequestration, is a separate debt which must be proved
by the
creditor concerned.
[d]
The magistrate erred in law in finding, in effect, that the said
section 74 purports to qualify, define or prescribe a minimum
payment.
APPLICABLE
LAW
The
requirements for the granting of an administration order are set out
in section 74(1) of the Act as follows:
“
(1) Where a
debtor-
[a] is unable
forthwith to pay the amount of any judgment obtained against him in
court, or to meet his financial obligations, and
has not sufficient
assets capable of attachment to satisfy such judgment or obligations,
and
[b]
state that the total amount of all his debts due does not exceed the
amount determined by the Minister from time to time by notice
in the
Gazette, such Court or the court of the district in which the debtor
resides or carries on business or is employed may, upon
application
by the debtor, or under section 65I, subject to such conditions as
the court may deem fit with regard to security, preservation
or
disposal of assets, realization of movables subject to hyphothec
(except movables referred to in section 34 bis of the Land Bank
Act,
13 of 1944), or otherwise, make an order (administration order)
providing for administration of his estate and for the payment
of his
debts in installments or otherwise.”
The application
must be made in writing in the prescribed form accompanied by a full
statement of his/her affairs confirmed by affidavit
in which the
applicant declares that to the best of his/her knowledge the names
of all creditors and the amounts owed to them severally
are set
forth in the statement and that the declaration made in it is true.
APPLICATION
OF LAW TO FACTS
Administration has been
described as a modified form of insolvency suited to deal with
relatively small estates where costs of sequestration
proceedings
would exhaust the estate. The Applicant in section 74 proceedings
presents the Court, in a statutory prescribed form,
with
circumstances of his financial misfortune. He sets out how he
became the victim, whether intentionally or as a result of
ignorance
on his/her part. He provides facts from which it is possible to
gather how his financial predicament resulted in him
not being able
to provide sufficient means to maintain himself and his/her
dependants. In other words, he commits an act of insolvency
in that
he is not able to pay his creditors. As was held by Corbett J (as
he then was) in
Cape
Town
Municipality
v Dunne
1964(1) SA 741
(Watermeyer J (as he then was) concurring) the aim of an
administration order is to “assist a debtor over a period
of
financial embarrassment without the need for sequestration.”
In
Prima
Slaghuis (Cartonville) vs Roux en ‘n ander
1973(1) SA108(T)
the Court drew a distinction between the effect of judgment
execution provisions in terms of section 65 of the
Act and the
object and effect of the provisions of section 74 of the Act. The
Court set it out as follows:”Artikel 65 is van
toepassing waar ‘n
enkele vonnisskuldeiser die bepalings van hierdie artikel gebruik om
voeldoening van sy vonnisskuld te verkry.
Artikel 74 is van
toepassing waar die vonnisskuldenaar bedreig word deur ‘n sameloop
van skuldeisers en hy verligting wil verkry
in die sin dat daar nie
onmiddellike eksekusie gehef word op sy goedere nie, maar dat daar
‘n administrasie bevel uitgereik
word waarkragtens daar ‘n
eweredige distribusie van sy skuldeisers sal wees ter geleidelike
betaling van sy skulde deur die administrateur
wat die Hof aanstel.”
The court hearing the
application has a discretion to grant the application. The
discretion, however, must be exercised judicially
and on proper
grounds. The learned magistrate’s finding seems to imply that the
scene created in terms of section 74 is directed
in obtaining the
settlement of a debtor’s relevant debts. Seeing that section 74U
provides that an administration order lapses
when the costs of
administration and
“the
list of creditors”
have
been paid, it must be kept in mind that the word
“debts”
in section 74
A(1) means debts which are due and payable and does not include
obligations to pay money
in
futuro
.
In Jones and Buckle – the Civil Practice of the Magistrate’s
Courts in South Africa
(9
th
edition) at page 306 – 307, the authors put it thus: “
Thus
the capital sum of a mortgage bond which is not due and payable at
the time when the administration order is granted is not
a debt for
the purpose of this section.”
I am of the view that the
interest which has yet to accrue on a debt cannot be regarded as
part of a debtor’s debts at the time
of an application for an
administration order. See in this regard
Wedge
Steel (Pty) Ltd. vs Wepener,
1991(3)
SA 444 WLD. In my view the debtor does not have to show that he has
an ability to make immediate progress in the reduction
of the claims
of his
“listed
creditors”.
This cannot, in my view, be a pre-requisite to obtaining an
administration order. Holding otherwise would run counter to the
intention of the Legislature, namely, to assist a debtor over a
period of financial embarrassment without the need for
sequestration.
(See section 74 of the Act as interpreted in
Cape
Town Municipality v Dunne
supra
)
Section 74 also makes
provision for a review and appropriate amendment of the
administration order in case where the debtor’s
altered or changed
circumstances so indicate. The provisions of section 74 of the Act
are designed for obtaining some
concursus
creditorium
easily,
quickly and inexpensively. These provisions are appropriate for
dealing with the affairs of debtors who have little assets
and
income and who genuinely wish to cope with the financial misfortune
that has befallen them. The effect is that a
concursus
creditorium
commences and
that the rights of the general body of creditors have been taken
into consideration. In
African
Bank Ltd. v
Weiner
and others
2003 (4)B
All SA 50 (C)
Griesel J (Selikowitz J concurring) dealing with the matter
regarding the provisions of section 74 of the Act observed
as
follows:
“
It may be
accepted, therefore, that it was never the intention of the
legislature that a debtor should be bound up in an administration
order indefinitely, where there is no reasonable prospect of such
order being discharged within a reasonable period of time. On
the
contrary, I am of the view that the mechanism of an administration
order is intended to provide a debtor with a relatively short
moratorium to assist in the payment of his or her debts in full and
to ward off legal action and execution proceedings during such
period.”
It is of significance to
note that section 74J makes provision for the distribution of the
available amount by the administrator
pro
rata
amongst
the creditors (unless creditors have agreed to the contrary or the
Court has ordered otherwise). The solution to the interest
issue
could be found by invoking the provisions of section 74J. The
magistrate could have in terms of section 74J ordered for
example
(if he wanted) that the distributed payments must first be allocated
to the reduction of the capital debt. That would
limit the growth
in the debtor’s interest burden with which the magistrate seemed
so concerned. That would easily have ensured
the eventual
extinction of the capital debt and consequently allow the gradual
payment of the interest debt.
The Magistrate clearly
misdirected himself when he found that the periodic payments which
fail to cover a debtor’s interest burden
is anything other than
“
payment”
of
a debt. The fact that the payment is insufficient to avoid the
amount of the total debt mounting does not render the installment
anything other than a
“payment”
of a debt.
Indeed in an administration
application situation
(like
the present one where Applicant is a debtor with a simple and
limited estate, having a regular income with a disposable residue,
unable to pay his debts and where sequestration would hold no or
insufficient advantage to creditors)
it
would generally be to the benefit of the debtor and the affected
creditors for an administration order to be granted. In a situation
where a creditor is able to exact payment of the installments due in
preference to the payment by the debtor of his obligations,
an
undesirable situation of the making of undue preferences would be
likely to result. There is a further advantage in the
administration
order in such a situation, namely the avoidance of
such undue preferences.
The section
expressly refrains from requiring a debtor to show, or a Court to
find that an application for administration would
hold some
immediate advantage for creditors or indeed the debtor himself/
herself.
The fact that
the Applicants have or might have very little money with which to
pay the body of creditors and that this will result
in the creditors
having to wait a long time before they receive their money, is
indeed not a factor that should play a decisive
role in
adjudicating any application for an administration order.
Indeed as stated by Francis
AJ, (as he then was) in an
unreported
Judgment of Witwatersrand Local Division
in
the matter of
August
Francis,
the
machinery of section 74 of the Act was designed for the very purpose
of assisting debtors and that any benefits that creditors
might
derive from it, should be accepted. Had it been the intention of
the Legislature that there should be an immediate benefit
to
creditors, it would have made express provision therefor, as in the
Insolvency Act regarding sequestration proceedings. Similarly,
the
amount of outstanding debt coupled with the period that it will take
to pay off the debt, is not the only factor that should
be taken
into consideration. The statutory provisions clearly provide that
the total amount of all the Applicants’ debts should
not exceed
R50 000.00 (Fifty Thousand Rand).
There is no provision in the
section under discussion for the period within which any debt has to
be paid. Once more had that been
the intention of the Legislature
that a debt has to be paid in full within a certain time period, it
would have made express provision
to that effect. In the light of
the
African
Bank Ltd.
case
supra,
I
have to considered the circumstances of each debtor individually. I
have found that (regard being had to financial resources
and debts)
the administration order is the only appropriate remedy to address
their current financial predicaments. There is nothing
to suggest
that they will be bound-up indefinitely. There is also nothing to
suggest that there is no reasonable prospect of such
order being
discharged within a reasonable period of time. Most importantly,
the provisions of the section contemplate a review
and appropriate
amendment of the administration order in circumstances where the
debtor’s altered circumstances so indicate.
This illustrates that
a longer term view of the debtor’s position should be taken and
that the potential for the debtor to subsequently
improve his
position and ability to address his debt burden after the date of
the initial application is a factor which should
be acknowledged,
unless the facts of the particular case exclude such a
consideration. (cf. Section 74B (e) (ii) which enjoins
consideration
by the court, insofar as the evidence permits, of the debtor’s
‘future income’)
It is clear that the Court
a
quo
did not
consider those aspects that should have been considered in the
granting of an administration order. By refusing the application
for the reasons set out in its judgment, the Court
a
quo
failed to
exercise its discretion properly and judicially.
I am satisfied that the
Applicants complied with the formal requirements of the prescribed
statutory provisions. I am furthermore
satisfied that the Court
a
quo
did not
exercise its discretion judicially. The findings and orders made by
the Court
a quo
stand to be set
aside. The Appeal should therefore succeed.
ORDER
In the
circumstances I am of the view that the following order should be
made in each of the appeals:
[a] The
Appeal is upheld.
[b] The
application is referred to the Magistrate who is ordered to make an
order in terms of section 74 C of the Act.
[c] There is
no order as to costs.
_______________________
DLODLO,
A.J
I agree and
it is so ordered. ______________________
VELDHUIZEN, J