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2024
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[2024] ZAFSHC 171
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Bana v Georgiou (3759/2023) [2024] ZAFSHC 171 (16 May 2024)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
and
SAFLII
Policy
IN
THE HIGH COURT OF SOUTH AFRICA
,
FREE STATE
DIVISION, BLOEMFONTEIN
Reportable: YES/NO
Of interest to other
judges: YES/NO
Circulate to
Magistrates: YES/NO
Case Number: 3759/2023
In the matter between:
MAHOMED FAROOK
BANA
APPLICANT
(IDENTITY NUMBER:[…])
and
MICHAEL
GEORGIOU
RESPONDENT
(IDENTITY NUMBER:[…])
CORAM:
BUYS,AJ
HEARD
ON:
29 FEBRUARY 2024
DELIVERED
ON:
16 MAY 2024
[1]
This is the court's judgment
in the opposed
application
in
terms of which
the
applicant seeks a provisional sequestration order of the respondent.
[2]
The applicant relies in founding
on the following allegations in support of
the relief he seeks:
[2.1] The applicant
is a creditor of the respondent and he seeks an order of provisional
sequestration based on several acts
of insolvency committed by the
respondent and furthermore because the respondent is factually and
commercially insolvent.
[2.2] The respondent is
indebted to the applicant the sum of R41 500 000.00 (forty-one
million five hundred thousand rand) in terms
of an written
Acknowledgement of Debt
("the AOD")
concluded
between the applicant and the respondent on 1 November 2022.
[2.3] The AOD premised
from an indebtedness in the sum of R40 000 000.00 (forty million
rand) to the applicant by the respondent's
late farther, Mr Nic
Georgiou in respect of past dealings between the applicant and Mr Nic
Georgiou. Mr Nic Georgiou initially
agreed to settle the debt by
utilising funds which were due to him from a listed entity known as
Amaanaat. The indebtedness was
not settled by Mr Nic Georgiou.
However, on 21 September 2021, the respondent assumed responsibility
for the payment of this indebtedness.
[2.4] The respondent
failed to make payment as assumed and agreed. This resulted in the
respondent offering to sell a property in
his portfolio to the
applicant for a price in excess of the indebtedness - the applicant
would only be liable for payment of the
shortfall. A written
agreement was purportedly signed by the respondent, but the on the
applicant's assumption that it is irrelevant,
the agreement was not
attached to the application.
[2.5] The AOD was entered
into, because the respondent requested and required a reasonable
period of time to attend to the sale
of the property and to procure
sufficient funds to settle the indebtedness.
[2.6] In terms of the
AOD, the respondent acknowledged that he was lawfully and truly
indebted to the applicant in the sum of R40
000 000.00 (forty million
rand) and undertook to pay R30 000 000.00 (thirty million rand)
thereof upon the sale of an immovable
property referred to in clause
2 of the AOD, but by no later than 30 June 2023. The balance, namely
R11 500 000.00 (eleven million
five hundred thousand rand) was to be
paid over a period of 23 months at R500 000.00 (five hundred thousand
rand) per month - commencing
from the end of July 2023.
[2.7] The respondent
failed to comply with the terms of the AOD, resulting in the entire
indebtedness becoming due, owing and payable
to the applicant.
[2.8]
The
applicant has established himself as a creditor of the respondent for
a liquidated amount in excess of the minimum requisite
in
sequestration applications. Further to the above, the respondent
committed an act of insolvency as contemplated ins
8(e)
and or s
8(g)
of the Insolvency Act
[1]
("the
Insolvency Act'),
alternatively
the respondent is factually insolvent as contemplated in s 9(3)(v) of
the Insolvency Act.
[2.9] The applicant
relies further on additional indebtedness in terms of an oral
agreement concluded between the respondent and
the applicant on 7
October 2021 in terms of which the respondent undertook to make
payment to the applicant a sum of R50 000.00
(fifty thousand rand)
monthly until the indebtedness has been paid to the applicant in
full. The respondent initially complied
with its obligations in terms
of this oral agreement and made a payment of R150 000.00 (hundred and
fifty thousand rand) to the
applicant on 23 December 2021 - this
payment was for the monthly instalments of October 2021, November
2021 and December 2021.
[2.10] Payment in
terms of the oral agreement was demanded in writing through the
applicant's attorneys of record on 17 May
2023. The respondent was
also requested in the demand to advise the applicant as to the steps
he had taken to sell the property
referred to in the AOD.
[2.11] Subsequent to the
letter of demand, the applicant received a text message from the
respondent's personal assistant (Phoebe
Malan) on 19 May 2023
enquiring whether the applicant was able to meet the respondent. The
applicant only reacted to this request
through his attorneys of
record. No response was received from the respondent.
[2.12] In support of the
allegation that the respondent committed acts of insolvency referred
to
supra,
the applicant relies on the respondent's failure to
pay the indebtedness agreed to and makes a further allegation that,
on the respondent's
own version, "he is both factually and
commercially insolvent and has, for some time now, been structuring
his affairs to
prejudice creditors, which a trustee must investigate
and ensure that there is an equitable distribution to all creditors."
The conduct by the respondent "constitute arrangements with
creditors for releasing him wholly or partially from his debts
and/or
he has given notice in writing to anyone of his creditors that the is
unable to pay any of his debts".
[2.13] Although the
applicant alleges that the respondent is an "individual of
considerable means", in dealing with the
respondent's financial
position and assets, the applicant alleges that as far as he is
"aware the respondent owns no assets
(save for one immovable
property) in his name which is not of considerable value: certainly,
none to the value of the indebtedness
owed" to the applicant.
The allegation goes further in that the applicant states that the
respondent is consequently factually
and commercially insolvent. The
municipal value of the immovable property is R260 000.00.
[2.14] The applicant
suspects that the respondent utilizes various entities to house all
his assets and to secure same to the prejudice
of his creditors by
shifting and moving assets between the different entities in which
the respondent holds directorship. The suspicion
goes further,
namely, that the respondent moved assets from his name into other
entities. The applicant refers specifically to
the entities known as
Accelerate Property Fund of whom he was the erstwhile Chief Executive
Officer, and which is listed on the
Johannesburg Stock Exchange as a
real estate investment trust with a market value of R1,2 billion and
the Michael Family Trust,
being the vehicle through which the
respondent owns shareholding in Accelerate Property Fund. The
applicant draws the conclusion
that the likelihood exists that the
respondent has funds stashed away.
[2.15] The applicant
suspects further that the respondent is utilising the Michael Family
Trust as his own, namely his alter ego,
or he is hiding behind the
veil of the Michael Family Trust to conduct business and derive and
income. The trustee/liquidator will
be able to establish if the
respondent utilised the various entities as a front to abuse their
separate legal
personae
and secondly whether the respondent
has made any dispositions which may be set aside under the Insolvency
Act.
[2.16] The applicant has
good reason to believe that it will be to the advantage of creditors
if the estate of the respondent is
sequestrated. This allegation,
according to the applicant, finds support in the contention that the
respondent's affairs are convoluted
and needs investigation, because,
on the respondent's own version, "there will be, or may be
dispositions of assets, the proceeds
of which will be utilised to
settle • the indebtedness." This investigation will enable
the trustee to investigate whether
certain creditors have been
preferred over others, "as certainly appears to have been the
case, it being evident that the
Respondent has settled with various
creditors, to the exception of the general body of creditors."
According to the applicant,
a reasonable prospect exists, which is
not too remote, that there will be a pecuniary benefit to creditors.
[2.17] The respondent,
being a director of 44 commercial entities, a reasonable prospect
exists that he is the owner of shares in
these entities and further
that he possesses loan accounts, standing to his credit.
[2.18] It is evident that
the respondent's assets are being concealed through the various
commercial entities and corporate structures
in which he remains the
key controlling person of all. The immovable property referred to
supra,
valued at R260 000.00, will be a benefit not only to
the applicant but also to the body of creditors.
[3]
The respondent requested various documents
from the applicant in terms of a notice in terms of rule 35(12) and
(14) of the Uniform
Rules of Court
("the
rules"),
served on the applicant
on 11 September 2023. Of importance in this request is the request by
the respondent to be provided with
the following documents:
[3.1] A copy of the
agreement entered into between the applicant and Mr Nic Georgiou
pursuant to which Mr Nic Georgio would settle
an indebtedness
allegedly due to him to the applicant.
[3.2]
The document evidencing the indebtedness of the
"listed entity known
as
Amaanaat"
to Mr Nic Georgiou.
[3.3] All written
documentary proof evidencing the assumption of liability by the
respondent on behalf of Mr Nic Georgiou to the
applicant.
[3.4]
The written agreement reflecting the arrangement
I
agreement in terms of which the
respondent agreed to sell a property to the respondent, and which
agreement the applicant undertook
to make available at the hearing of
the application, should the need arise.
[3.5] All documents in
which the allegation is made that "on the Respondent's own
version he is both factually and commercially
insolvent and has, for
some time now, been restructuring his affairs to prejudice creditors
...".
[3.6] The notice given by
the respondent "in writing to any one of his creditors that he
is unable to pay any of his debts".
[3.7] The valuation upon
which the applicant relies to conclude that the immovable property
registered in the respondent's name
is not of any considerable value.
[3.8] All documentary
evidence upon which the allegation is made by the applicant that"...
the Respondent owns his shareholding
in APF ..." through "the
vehicle" known as the Michael Family Trust.
[3.9] Copies of all
documents which support the allegation by the applicant that "there
will be, or may be a disposition of
assets, the proceeds of which
will be utilised to settle the indebtedness".
[3.10] All documents upon
which the applicant has made the allegation that certain creditors
have been preferred above others"...
as certainly appears to
have been the case, it being evident that the Respondent has settled
with various creditors, to the exception
of the general body of
creditors".
[3.11] The surety the
applicant alleges the respondent has concluded.
[3.12] The commercial
transactions with third parties the applicant alleges the
respondent"... must reasonably be concluding
... ".
[3.13] The written
valuation of the immovable property in the amount of R260 000.00.
[4]
Simultaneously with the notice in terms of rule
35(12) and (14) referred to
supra,
the
respondent also delivered a Notice of Application to Strike-Out in
terms of which the respondent seeks certain documents and
paragraphs
to be strike out for the following reasons:
[4.1] On the basis that
it amounts to irrelevant hearsay evidence:
[4.1.1] Annexure FB1;
[4.1.2] The second
sentence of paragraph 16 of the founding affidavit which reads "The
Respondent advised me that he merely
required (and requested) a
reasonable period of time to attend to the sale and to procure
sufficient funds to settle the indebtedness."
[4.1.3] Annexures FB3,
FB4, FB5, FB6, FB7, FB8 and FB10.
[4.1.4] Paragraphs 34 and
37 of the founding affidavit.
[4.2]
On the basis that the contents are scandalous,
vexatious and irrelevant in terms of,
inter
a/ia,
rule 6(15):
[4.2.1] The first
sentence of paragraphs 8 of the founding affidavit which reads "In
summary, the essence of this application
is that I am a creditor of
the Respondent, and I seek the sequestration of the Respondent on
account of several acts of insolvency
he has committed, and also on
the ground that he is factually and commercially insolvent.".
[4.2.2] Paragraphs 22,
30-31, 37, 39-41, 44.1, 44.4-44.6, 44.9-44.10, 44.12-44.14 and 45 of
the founding affidavit.
[5]
In a written response, dated 25 August
2023, to the respondent's notice in terms of rule 35(12) and (14)
referred to
supra,
the
applicant held the view that no exceptional circumstances exist which
warrant the use of the application of sub rules 35(12)
and (14),
and is the delivery of the said notice nothing more than "a
stratagem designed to delay the inevitable and to delay
the delivery"
of the respondent's "answering affidavit within the time periods
contemplated in the rules of court".
However, regardless of the
aforementioned contention by the applicant, the applicant responds to
the various requests without providing
any of the documents
requested. I will deal with the relevant responses later in this
judgment.
[6]
The respondent opposition of the
application is based on the following:
[6.1] The founding
affidavit does not contain any evidence upon which a court can grant
the relief the applicant seeks. No case
has been made out that the
respondent is indeed indebted to the applicant in the amount claimed
or that it is due owing and payable.
Further to the above, no case
has been made out that the respondent is even insolvent and that it
is in the interest of the respondent's
creditors to sequestrate the
estate of the respondent.
[6.2] The allegations are
flimsy, speculative, baseless and contradictory. The application is
an abuse of process and brought for
the ulterior and illegitimate
purpose of exercising pressure on the respondent to discharge a debt
which his late farther incurred.
[6.3] The founding
affidavit is replete with incorrect facts and wild unsupported
generalisations, and unsubstantiated and egregious
defamatory
allegations about the respondent are made intentionally to damage the
respondent's reputation.
[6.4] The AOD on which
the applicant relies is
void
and unenforceable against the
respondent for the following reasons:
[6.4.1] The applicant was
not registered as a credit provider with the National Credit
Regulator ("NCR") at the time when
the respondent's late
farther was afforded time by the applicant to repay the indebtedness
to the applicant. For "want of
compliance with the National
Credit Act" the respondent's father's indebtedness to the
applicant was
void
and unenforceable.
[6.4.2]
It "amounts to a credit agreement as referred to in the National
Credit Act", and at the time it was
concluded
"and all times thereafter the applicant was not registered
as a credit provider with the National
Credit Regulator in terms of section 40(1 (a} (sic} of the National
Credit Act ...
In
the result, the acknowledgement of debt is an illegal unenforceable
agreement in terms of section 40(4} thereof'.
[6.5] The respondent
denies that he is the applicant's debtor and that the applicant is
his creditor.
[6.6] The respondent
further denies that he committed any acts of insolvency and that he
is factually and commercially insolvent.
The respondent also denies
that he avoided to make payment to the applicant of a legitimate
debt.
[6.7] The respondent pose
no risk to members of the public or any unidentified body of
creditors and any suggestion that he is doing
so is false, reckless
with no factual or other backing or basis - the quotations by the
applicant are mere "stock phraseology
utilised in sequestration
applications".
[6.8]
Although
the respondent admits signing the AOD, the applicant challenges the
validity and enforceability thereof based thereon that
the AOD
agreement constitutes a
credit
facility
contemplated by s 8(1)(a) read with s 8(3) of the National Credit
Act
[2]
("the
National Credit Act'),
alternatively,
a
credit
transaction
as contemplated by s
8(1)(b)
read with s 8(4)(d) of the National Credit Act, alternatively, a
credit guarantee as contemplated by s
8(1)(c)
read withs 8(5) of the National Credit Act. The latter relates to the
debt owed to the applicant by the respondent's late
farther, which
the applicant contends that the respondent has to pay. The debt owed
to the applicant by the respondent's late farther
amounts to a credit
agreement in terms of s 8(1)(a) or s 8(1)(b) read with the
corresponding provisions in ss 8(3) and 8(4) of
the National Credit
Act.
[6.9] The applicant was
not and is not registered as a credit provider with the NCR,
consequently, in terms of s 89(2)(d) of the
National Credit Act, the
acknowledgment of debt is an unlawful agreement and
void
and
unenforceable. As a result, the applicant has no claim against the
respondent.
[6.10] It is denied that
the total indebtedness emanating from the AOD is the sum of R41 500
000.00. In support of this denial,
the respondent relies on the
applicant's concealment of two pages of the AOD. As per the these two
pages, additional payments of
R50 000.00 per month were provided for
in addition to the the total sum recorded in the AOD. The first
monthly payment has to be
made from January 2022 until October 2022.
Further monthly payments of R50 000.00 per month were to be made from
November 2022
until payment of the total sum of R30 million. If these
additional payments are taken into account, the total indebtedness
emanating
from the acknowledgment of debt is the sum of R42 million.
[6.11] The capital sum in
terms of the AOD is R40 million. All other charges as provided for in
the AOD are for interest.
[6.12] The respondent's
late farther was unable to pay his alleged indebtedness to the
applicant and asked the respondent to assist
him by arranging for
payment of this debt. The respondent did not take on and assume his
late father's indebtedness to the applicant
in his personal capacity,
all he did was to agree with his late father to endeavour to procure
for payments to be made to the applicant
in discharge of his late
father's indebtedness.
[6.13] The respondent
further has no knowledge of his late father's alleged loan account in
a company known as Amaanaat and further
whether his late farther
agreed to settle his indebtedness to the applicant by utilising the
loan account. In terms of rule 35(12),
the respondent requested
copies of the agreement entered into between applicant and Mr Nic
Georgiou in terms whereof Mr Nic Georgiou
agreed to settle the
alleged indebtedness, and the document evidencing the indebtedness of
Amaanaat to Mr Nic Georgiou. In response
to the request for copies of
these documents, the applicant advised respectively that"... no
document of this description
exists" and "The document
requested is not identified with specificity. Further even is (sic)
such document did exist,
such is not required for purposes of
preparing your client's answering affidavit.".
[6.14] According to the
applicant, the respondent agreed to sell him a property from his
portfolio of which the purchase price was
in excess of the
indebtedness to the applicant. The applicant would have been liable
for payment of the shortfall. A copy of this
alleged sale agreement
of the immovable property was requested by the respondent in terms of
rule 35(12). The copy provided by
the applicant does not record a
sale of immovable property by the respondent. The agreement provided
by the applicant is an agreement
between Khumonetix (Pty) Ltd
("Khumonetix") and the applicant in terms of which a
pro-rata
of the share in the Letting Enterprise is sold to the
applicant. This agreement is not an assumption by the respondent to
be personally
liable for his late father's indebtedness to the
applicant.
[6.15] The applicant
failed to establish himself as the creditor of the respondent and
consequently that he has the necessary
locus standi
to bring
this application.
[6.16] The application is
an abusive proceeding against the respondent and
in terrorem
to
somehow scare, induce or force the respondent to pay monies he does
not owe to the applicant.
[6.17] The respondent
denies that:
[6.17.1] he made any
offers or any arrangements with any of his creditors to release him
wholly or partially from his debts (s 8(e)
of the Insolvency Act);
[6.17.2]
he gave notice in writing to any of his creditors
that he is unable to pay any of his debts (s 8(g) of the Insolvency
Act).
[6.18] The allegations
referred to
supra
are false, fabricated and made solely to
comply with the requirements of ss 8(e) and (g) of the Insolvency Act
in an attempt to
satisfy the court that the respondent's estate
should be sequestrated and further to mislead the court. These
sections require
from the respondent to address in writing to his
creditors and/or make offers to them to pay his debts to them.
Without knowledge
of the respondent's creditors, the applicant is
unable to make this latter allegation.
[6.19] In respect to the
allegation in terms of s 9(3)(v) of the Insolvency Act, namely that
the respondent is "factually insolvent",
the respondent
denies that he is factually insolvent and further:
[6.19.1]
denies that the applicant has set out any
information pertaining to the respondent's assets and liabilities;
[6.19.2]
that the applicant has failed to set out the
respondent's personal balance sheet nor is the applicant able to do
so, because he
has no knowledge thereof.
[6.20] The allegation of
the applicant, namely that the respondent, on his "own version",
is both factually and commercially
insolvent, is incorrect and a
fabrication. The respondent never provided such a version. This
statement is reckless and without
any facts or evidence. This
allegation is also defamatory of the respondent's good name and
reputation.
[6.21] The alleged oral
agreement entered into between the applicant and the respondent for
payment of R50 000.00 per month under
the heading
"ADDITIONAL
INDEBTEDNESS"
and the subsequent payments made by the respondent in terms
thereof in the sum of R150 000.00 on 23 December 2021 for the months
October, November and December 2021 are denied. Payment of the amount
of R150 000.00 was not paid by the respondent personally,
but was
made in terms of the written agreement entered into between the
applicant and Khumonetix on 7 October 2021 (annexure AA2
to the
answering affidavit).
[6.22] The letter of
demand on behalf of the applicant was received by the respondent. The
meeting that was requested by one of
the respondent's employees was
to provide the applicant an update and further information of how he
intended to "try and procure
that Khumonetix would endeavour to
sell one of their properties to pay" his late father's
indebtedness to the applicant.
[6.23] Considering the
applicant's own version, namely that applicant has no knowledge
whether the respondent has any creditors,
the applicant is in no
position to allege that the respondent is "commercially
insolvent'' or even that the respondent is
"factually
insolvent". These allegations should be struck out and rejected.
[6.24] The applicant's
own version is that the respondent is "... an individual of
considerable means”, meaning that
the respondent is a very
wealthy man. This allegation not only contradicts each and every
allegation that the respondent is factually
and commercially
insolvent, it also contradicts the allegation that the respondent
owns no assets save for one immovable property.
[6.25] No details or
evidence of the respondent's alleged conduct are forthcoming, namely
that the respondent is prejudicing his
creditors "by shifting
and moving assets between different companies where he is a director,
and moving assets from his name
into other entities" and further
that "the respondent is very likely to have funds that belong to
him stashed away".
[6.26] The respondent
admits that he has only one immovable property registered in his
name. However, the value thereof, as alleged
by the applicant, is
denied, because not only is the valuation not properly before court,
Municipal valuations are not at all reflective
of market value. The
alleged valuation by the applicant is based on hearsay evidence and
should be struck out.
[6.27] The article of a
journalist referred to be the applicant is hearsay evidence and
inappropriate and should be struck out.
[6.28] The respondent
denies holding "indirectly" 30% of the shares the Michael
Family Trust owns in Accelerate Property
Fund. This allegation is
without merit and should be struck out.
[6.29] The allegations
that the respondent (a) utilizes both the Michael Family Trust and
Accelerate Property Fund to house all
his assets and to secure the
same to the prejudice of his creditors by shifting and moving assets
between the different companies
where he is a director, (b) is moving
assets from his name into other entities, alternatively into
Accelerate Property Fund, (c)
is very likely to have funds that
belong to him stashed away and (d) is utilising the Michael Family
Trust as his own (his alter
ego), alternatively, he is hiding behind
the veil of the said trust to conduct business and derive an income,
are denied and based
on mere suspicion. These allegations are
harmful, injurious, insulting, defamatory and incorrect.
[6.30] No evidence exists
of any disposition alleged by the applicant. The applicant
furthermore failed to establish a benefit,
in the form of a dividend,
to the respondent's creditors. The dividend has also not been
quantified. Save for the respondent's
immovable property valued at
R260 000.00 referred to
supra,
no reference has been made to
any other assets. The applicant relies on recklessly made
generalisations and the allegation that
the respondent is a director
of "44 commercial entities".
[6.31] The allegation
that the respondent's estate should be placed in the hands of
trustees to investigate the respondent's affairs
to uncover
dispositions, impeachable transactions etc. are horrendous,
injurious, false, unsubstantiated defamatory allegations
and
egregious. The application for provisional sequestration has been
brought by the applicant
"in terrorem
and thus for
ulterior purpose and motive". The respondent is a well-known
businessman, especially in the property arena, and
an application of
this nature and the allegations contained therein have and will cause
the respondent considerable harm.
[7]
The applicant delivered his replying
affidavit, incorporating an application for condoning the late
delivery of the replying affidavit.
[8]
The replying affidavit was due to be
delivered on 27 September 2023, but was only delivered, according to
the applicant, on 17 November
2023 (36 days late according to the
applicant). It should be pointed out that from the filing notice
filed on behalf of the applicant,
the replying affidavit was
delivered on 21 November 2023, namely 39 days late.
[9]
In his application for condonation of the
late filing of his replying affidavit, the applicant relies on the
following explanation:
[9.1] A draft replying
affidavit was prepared by the applicant's attorney and sent timeously
to Senior Counsel on 20 September 2023
to be settled. Due to Senior
Counsel's "excessive workload and prior urgent commitments",
Senior Counsel could not attend
to the settling of the replying
affidavit during the two weeks following 20 September 2023. Further
consultations and documents
were required during a consultation with
the applicant, and during a consultation with Junior and Senior
Counsel on 24 October
2023 was it decided that "certain of the
unforeseen legal contentions raised in the answering affidavit (the
contentions regarding
the National Credit Act) required further
consideration and advise by counsel. The applicant received advise on
27 October 2023
on what is required to finalise the replying
affidavit. The further information and documents were provided by the
respondent to
his attorney whereafter a final consultation was held
on 8 November 2023 with Junior Counsel. The replying affidavit was
settled
a few days later.
[9.2] The respondent
refused a request for an indulgence to deliver the replying affidavit
late.
[9.3] The respondent will
suffer no prejudice by the late filing of the replying affidavit,
compared to the grave prejudice the
applicant stands to suffer if the
replying affidavit is not allowed.
[9.4] With reference to
the case made out against the respondent in the papers, the applicant
states that he has excellent prospects
of success.
[9.5] It is in the
interest of justice that any party with a justified and
bona fide
claim or defence should be entitled to ventilate a claim before a
court of law. A refusal to allow the replying affidavit will result
in the matter being adjudicated on an incomplete and artificial basis
- this is not in the interest of justice.
[10] The respondent
delivered a conditional further affidavit under Rule 6(5)(e) on 7
February 2024 in terms of which the respondent
opposes the
applicant's application for condonation of its replying affidavit,
and, in the event the late delivery of the replying
affidavit is
condoned, the respondent seeks leave to deliver a further affidavit
in response to allegations made by the applicant
in his replying
affidavit.
[11]
The respondent's opposition
of the applicant's application
for condonation of the late delivery of the
replying affidavit is summarised as follows:
[11.1] The applicant
failed to deliver his replying affidavit timeously. This resulted in
the respondent's attorneys to set the
application down for hearing on
30 November 2023.
[11.2] A few days before
the hearing of the application, the applicant delivered his replying
affidavit on 21 November 2023.
[11.3] The applicant
failed to provide a comprehensive and reasonable explanation for his
delay in filing his replying affidavit.
The blame is squarely placed
on the shoulders of his Senior Counsel. This explanation is
insufficient to justify the condonation
of the late delivery of the
replying affidavit. The periods between 27 September 2023 (the date
the replying affidavit was supposed
to be delivered) and 24 October
2023 (when the consultation with Junior and Senior Counsel regarding
the replying affidavit took
place) and between 24 October 2023 and 21
November 2023 (when the replying affidavit was delivered) have not
been explained by
the applicant.
[11.4] The month it took
for the applicant's counsel to consider the dispute the applicant has
raised in his answering affidavit
and the request to procure further
documents and information to deal with the respondent's version
advanced in his answering affidavit
confirm that the respondent has
raised a
bona fide
and reasonable answer to the claim the
applicant seeks to enforce in this application.
Application to
Condone the Late Delivery of the Applicant's Replying Affidavit
[12]
At the commencement
of the hearing of the application,
Mr Spiller on behalf of the applicant,
handed up a Note: Condonation and the Admission of the Respondent's
of the Supplementary
Answering Affidavit. It should be mentioned that
this Note is in form nothing other than supplementary heads of
argument and deals
mainly with the applicant's condonation
application. Mr Symon SC correctly objected to this Note being handed
up. However, consented
later during argument by Mr Spiller to the
Note being handed up for the Court's convenience. Heads of argument
are for the assistance
of court and Applicant's and when appropriate,
supplementary heads of argument are necessary to deal with a specific
issue that
may arise and which is of such importance that a court's
attention should be drawn thereto. A disturbing practice has started
to
develop where legal partitioners during argument refers to case
law not canvased or referred to in their heads of argument or where
legal practitioners attempts to hand up supplementary heads of
argument. This not only may cause the opposing legal representative
to be caught off guard with new legal argument not canvassed in
initial heads of argument
it
also put a court in a peculiar position, because a court, without
having sight of the supplementary heads of argument and/or
new case
law referred to prior to the commencement of the hearing, may not be
able to engage with legal representatives thoroughly
on the new
issues raised. Although the Note handed up by Mr Spiller has been
allowed, legal representatives should refrain from
these practices,
because it may result in unnecessary postponements with unnecessary
costs and delays.
[13]
Mr
Spiller, with reference to the Note, submitted that the essential
question in an application for condonation is whether it is
in the
interest of justice to grant condonation. He further submitted that
lateness is not the only consideration in determining
whether an
application for condonation should be granted. The applicant's
prospects of success on the merits and the importance
of the issues
to be determined are relevant factors.
[3]
[14]
I
was referred to the case of Pangbourne Properties Ltd v Pulse Moving
CC and Another
[4]
in support of
the submission by Mr Spiller that the applicant's replying affidavit
should be admitted "in order to decide
the merits of the dispute
between the parties unfettered by technicalities".
[5]
[15]
With
reference to various case law,
[6]
Mr
Spiller further submitted, when adjudicating applications for
condonation, that:
[15.1] In exercising a
discretion in relation to procedural matters, such a discretion must
be exercised in a manner which facilitates
the determination of the
real dispute between the parties on its real merits.
[15.2] A court will not
exclude relevant evidence simply because there has been
non-compliance with the Rules. The court will always
endeavour to
determine the real issues on the basis of all of the relevant
factors.
[15.3] In deciding
whether to admit an affidavit filed out of time, the central
consideration is prejudice. Unless prejudice has
been caused to a
party by the late filing of the affidavit, the affidavit will be
admitted so that the true dispute can be decided
having regard to all
relevant facts.
[15.4] The court's
discretion should be exercised so as to ensure the expeditious (and
if possible inexpensive) determination of
the real dispute between
the parties.
[16]
Mr Spiller further submitted that the
explanation provided by the applicant for the delay, although not
comprehensively detailed,
covers the whole period of the delay.
He further submitted that:
[16.1] If condonation is
not granted, then the court will proceed to consider the application
on the basis of an incomplete picture
of the facts. The interest of
justice require that a court determine the real issues between the
parties.
[16.2]
The absence of prejudice is determinative of whether to grant
condonation or not. I was also referred to Anglo Operations
Ltd v
Sandhurst Estates (Pty) Ltd
[7]
where the words of Brand JA are apposite:
"I am not entirely
sure what is meant by the description of the application as 'totally
irregular'. If it is intended to convey
that the application amounted
to a deviation from the Uniform Rules of Court, the answer is, in my
view, that, as has often been
said, the rules are there for the
Court, and not the Court for the rules. The Court a
quo
obviously
had a discretion to allow the affidavit. In exercising this
discretion, the overriding factor that ought to have been
considered
was the question of prejudice. The perceived prejudice that the
respondent would suffer if the application were to be
upheld, is not
explained. Apart from being deprived of the opportunity to raise
technical objections, I can see no prejudice that
the respondent
would have suffered at all. At the time of the substantive
application the respondent had already responded - in
its rejoining
affidavit - to the matter sought to be included in the founding
affidavit. The procedure which the appellant proposed
would have
cured the technical defects of which respondent complained. The
respondent could not both complain that certain matter
was
objectionable and at the same time resist steps to remove the basis
for its complaint. The appellant's only alternative would
have been
to withdraw its application, pay the wasted costs and bring it again
supplemented by the new matter. This would merely
result in a
pointless waste of time and costs."
[16.2]
With reference to Pangbourne Investments
supra,
[8]
the
contemporary approach is that an affidavit filed out of time should
be admitted unless its admission will result in prejudice
to the
other side, so that merits of the dispute be decided "unfettered
by technicalities". No genuine prejudice has
been raised by the
respondent.
[16.3] The
applicant has excellent prospects of success on the merits,
particularly if the replying affidavit is admitted.
[17]
Mr
Symon SC, on behalf of the respondent, submitted with reference to
Grootboom v National Prosecution Authority
[9]
that
the court has a discretion whether to grant condonation in the
interest of justice.
The
Constitutional Court held in Grootboom as follows when determining
what is in the interest of justice:
"I have read the
judgment by my colleague Zondo J. I agree with him that, based on
Brummer
and
Van Wyk,
the standard for
considering an application for condonation is the interests of
justice. However, the concept 'interests of justice'
is so elastic
that it is not capable of precise definition. As the two cases
demonstrate, it includes: the nature of the relief
sought; the extent
and cause of the delay; the effect of the delay on the administration
of justice and other litigants; the reasonableness
of the explanation
for the delay; the importance of the issue to be raised in the
intended appeal; and the prospects of success.
It is crucial to
reiterate that both
Brummer
and
Van
Wyk
emphasise that the ultimate determination of what is in the
interests of justice must reflect due regard to all the relevant
factors
but it is not necessarily limited to those mentioned above.
The particular circumstances of each case will determine which of
these
factors are relevant." (footnotes omitted)
[18]
Relying on the relevant factors set out in
Grootboom
supra,
Mr
Symon submitted that it is not in the interest of justice to condone
the late delivery of the applicant's replying affidavit
based on the
following:
[18.1] The degree of the
applicant's failure to comply with Rule 6(5)(e) is extensive and
inordinate.
[18.2] The applicant's
disregard of the Uniform Rules of Court invariably succeeded in
derailing the timely hearing of this application,
causing the
respondent prejudice as he was anxious and had the right to have this
sequestration application timeously adjudicated
within the prescribed
timelines. This delay has an effect on the administration of justice
and the respondent.
[18.3] The applicant did
not properly explained his delay, and the excuses proffered by the
applicant are unconvincing and unreasonable.
No account has been
given for the month between the date the answering affidavit was
delivered and 20 September 2023 when the draft
replying affidavit was
send to Counsel to be settled. It took five weeks from the date the
answering affidavit was delivered until
the consultation with Senior
Counsel and Junior Counsel on 24 October 2023. Advice was received
from counsel on 27 October 2023
on the way forward, resulting in
further unexplained delays of eleven days and thirteen days until a
further consultation and delivery
of the replying affidavit. The
applicant claimed that he procured "further information and
documents" from an unidentified
source at an unspecified time
after receiving advise on 27 October 2023. The materiality of the
unidentified additional documents
and information cannot be assessed
and no rationale is provided for why the materiality thereof did not
prompt the applicant's
earlier attention.
[18.4] The applicant has
very weak, if any, prospects of succeeding with this application for
sequestration.
[19]
It
is trite that an applicant who seeks condonation for the
non-compliance of the Uniform Rules of Court must show good
cause.
[10]
This
requires an affidavit dealing with the merits
[11]
and setting out the defence.
[12]
[20]
What
is meant by
"good
cause"
has
not being defined,
[13]
but
a court confronted with the question whether
"good
cause"
has
been shown exercises a discretion according to the circumstances of
each case.
[14]
The
tendency is to grant such an application where:
[20.1] The applicant has
given a reasonable/satisfactorily explanation of his/her delay;
[20.2] The application is
bona fide
and not made with the object of delaying the
opposite party's claim;
[20.3] There has not been
a reckless or intentional disregard of the rules of court;
[20.4] The applicant has
a
bona
fide
defence and/or the action or defence
is not ill-founded; and
[20.5]
Any procedural prejudice caused to the opposite party can be
compensated
for
by an appropriate order as to costs.
[15]
[21]
I am in agreement with the submissions made
by Mr Symon SC, with reference to the relevant factors to be
considered as set out in
Grootboom v National Prosecution Authority
supra
when
determining whether the condonation is in the interest of justice,
namely:
[21.1] The applicant's
explanation for the delay in delivering its replying affidavit is
unreasonable. No satisfactory explanation
for the delay has been
provided by the applicant, leaving various and long periods of delays
without any explanation. I also align
myself with what the
Constitutional Court held in Grootboom, namely:
"[23] It is now
trite that condonation cannot be had for the mere asking. A party
seeking condonation must make out a case
entitling it to the court's
indulgence. It must show sufficient cause. This requires a party to
give a full explanation for the
non-compliance with the rules or
court's directions. Of great significance, the explanation must be
reasonable enough to excuse
the default.
…
[34]
The language used in both Van Wyk and
eThekwini is unequivocal. The warning is expressed in very stern
terms. The picture depicted
in the two judgments is disconcerting.
One gets the impression that we have reached a stage where litigants
and lawyers disregard
the rules and directions issued by the court
with monotonous regularity. In many instances very flimsy
explanations are proffered.
In others there is no explanation at all.
The prejudice caused to the court is self-evident. A message must be
sent to litigants
that the rules and the court's directions cannot be
disregarded with impunity.
[35]
It is by now axiomatic that the granting or
refusal of condonation is a matter of judicial discretion. It
involves a value judgment
by the court seized with a matter based on
the facts of that particular case."
[21.2] The applicant has
a right to have this application for sequestration adjudicated
timeously under the timelines prescribed
by the Uniform Rules of
Court. The applicant's disregard of the prescribed timelines
invariably succeeded in derailing the timely
hearing of this
application to the prejudice of the respondent. Any submission on
behalf of the applicant that no genuine prejudice
exists finds no
support. The prejudice is self-evident.
[21.3] For reasons set
out
infra,
the applicant has no prospects of success with this
application for sequestration.
[21.4]
As
remarked in Grootboom, "A message must be sent to litigants that
the rules and the court's directions cannot be disregarded
with
impunity". The applicant has a duty to adhere to the Uniform
Rules of Court, which are set in place to "regulate
the
litigation process, procedures and the exchange of pleadings".
[16]
The insufficient/flimsy
explanation for failure to comply with the Uniform Rules of Court, as
proffered by the applicant, is not
accepted. In this case, the
applicant has not made out a case entitling him to an indulgence. It
follows that the application for
condonation must fail.
[22]
I deem
it
unnecessary
to
deal with
the
respondent's
application
to
deliver
a further
affidavit.
Application to
Striking Out
[23]
Subrule 6(15) makes provision that a "court
may on application order to be struck out from any affidavit any
matter which is
scandalous, vexatious or irrelevant, with an
appropriate order as to costs ... The court may not grant the
application unless it
is satisfied that the applicant will be
prejudiced if the application is not granted".
[24]
The
court has a discretion in an application to strike out a matter from
an affidavit
[17]
[25]
In
Vaatz v Law Society of Namibia,
[18]
the court, dealing with the grounds for striking out and more
specifically with the terms "scandalous", "vexatious",
"irrelevant" and "prejudice" held as follows:
"In
Rule
6(15)
the
meaning
of
these
terms
can
be
briefly
stated
as
follows:
Scandalous matter -
allegations which may or may not be relevant but which are so worded
as to be abusive or defamatory.
Vexatious
-
allegations which may or may not be relevant but
are so worded as to convey an intention to harass or annoy.
Irrelevant matter -
allegations which do not apply to the matter in hand and do not
contribute one way or the other to a decision
of such matter."
[26]
Subrule
6(15) is not
exhaustive
of the grounds upon which an application to strike out a matter from
an affidavit may be brought.
[19]
Inadmissible evidence, for example hearsay evidence, can also be
struck out.
However,
inadmissible evidence appearing in affidavits may be struck out
without invoking subrule 6(12) and notice of such an application
to
strike out may be given in terms of rule 6(11). Such an application
is in essence an objection against the admission of evidence
which is
only made at the hearing of the main application.
[20]
In
Cultura 2000 and Another v Government of the Republic of Namibia and
Others
[21]
it was held:
"Rule of Court 6(15)
provides that on application the Court can order to be struck out
from any affidavit any matter which
is scandalous, vexatious or
irrelevant but that such matter shall not be struck out unless the
Court is satisfied that the applicant
will be prejudiced in his case
if such matter were allowed to remain.
The Rule concerned does not
refer to hearsay
statements in affidavits. Such statements can
be struck out irrespective of
whether there is prejudice or
not."
(own emphasis)
[27]
To
succeed with an application to strike out, the applicant must show
that the matter sought to be struck out is be scandalous,
vexatious
or irrelevant, and secondly, the court must be satisfied that if such
matter is not struck out the parties seeking such
relief would be
prejudiced.
[22]
In Weber v
Vermaak
[23]
full
court held:
"Ek dink egter nie
dat Hofreel 6 (15) bedoel is om 'n party in staat te stel om vryelik
irrelevante bewerings te maak wat slegs
deurgehaal kan word indien
benadeling ten opsigte van 'n aangevraagde bevel bewys kan word Nic.
Reeds in
Anderson
and Another v Port Elizabeth
Municipality,
1954 (2) SA 299
(OK) te bl. 309, het REYNOLDS, RP.,
verklaar dat die deurhalingsprosedure nie bedoel is om gebruik te
word vir bloot tegniese besware
wat tot voordeel van Nicmand strek
nie, maar slegs koste vermeerder. Dit, na my mening is wat Hofreel 6
(15) beoog. Ek dink nie
dat die woord "saak" in Hofreel 6
(15) te eng vertolk meet word nie."
[28]
In
Vaatz v Law Society of Namibia
supra,
[24]
the court dealt with prejudice in scandalous or irrelevant matters
which may be defamatory of the other party as follows:
"The phrase
'prejudice to the applicant's case' clearly does not mean that, if
the offending allegations remain, the innocent
party's chances of
success will be reduced. It is substantially less than that. How much
less depends on all the circumstances;
for instance, in motion
proceedings it is necessary to answer the other party's allegations
and a party does not do so at his own
risk.
If a party is required
to deal with scandalous or
irrelevant
matter the
main issue could be side-tracked
but if
such
matter
is left unanswered the innocent party may well be
defamed. The retention
of such matter would therefore be
prejudicial to the innocent
party."
(own
emphasis)
[29]
During argument, Mr Symon SC persisted with
the respondent's application to strike out the following documents
and paragraphs:
[29.1] The Windeed
search, marked as annexure FB6 and the Lightstone valuation, marked
as annexure FB7. The applicant relies on
these two documents in
support of the allegations that the respondent is the owner of the
immovable property situated at Lakeview,
Bloemfontein and secondly
that this property is valued at R260 000.00. The respondent's
complaint against these documents is based
thereon that it amounts to
irrelevant hearsay evidence. I am in agreement with this contention,
and accordingly, the application
to strike out these documents should
succeed.
[29.2] Paragraph 37 of
the founding affidavit and the article published in the Daily
Investor, marked as annexure FB8. The applicant
relies on this
article in support of the allegation that the respondent created
Accelerate Property Fund "by purchasing properties
from his own
personal portfolio and that of family members". The respondent's
complaint against the allegations in paragraph
37 and annexure FB8 is
based thereon that it amounts to irrelevant hearsay evidence. I am in
agreement with the respondent's contention,
and accordingly, the
application to strike out these allegations and document should
succeed.
[29.3] The first sentence
of paragraph 8 of the founding affidavit wherein the applicant
alleged "In summary, the essence of
the application is that I am
a creditor of the Respondent, and I seek the sequestration of the
Respondent on account of several
acts of insolvency he has committed,
and also on the ground that he is factually and commercially
insolvent". The respondent's
complaint against this portion is
based thereon that the contents thereof are scandalous, vexatious and
irrelevant. I am not satisfied
with the respondent's contention, nor
has the respondent showed any prejudice that he will suffer prejudice
if this portion is
not struck out. Accordingly, the application to
struck out this portion should not succeed.
[29.4] Paragraph 22 of
the founding affidavit wherein the applicant alleged that the
respondent "has committed an act of insolvency
as contemplated
in Section 8(e) and/or (g) of the Act, alternatively he is factually
insolvent, as contemplated in Section 9(3)(v)".
The respondent's
complaint is based thereon that the allegations contained in
paragraph 22
supra
are defamatory of his good name and
reputation. I am not satisfied with the respondent's contention, that
the allegations referred
to
supra
are defamatory. Accordingly,
the application to struck out these allegations should not succeed.
[29.5] Paragraph 30 of
the founding affidavit wherein the applicant alleged that the
respondent "is both factually and commercially
insolvent and
has, for some time now, been structuring his affairs to prejudice
creditors, which a trustee must investigate and
ensure that there is
equitable distribution to all creditors". The respondent's
complaint against this portion is based thereon
that the contents
thereof are scandalous, vexatious and irrelevant.
[29.6] Paragraph 31 of
the founding affidavit wherein the applicant alleged that the
"conduct of the Respondent falls within
the ambit (sic) section
8 (e) and (g) of the Insolvency Act, in that such constitute
arrangements with creditors for releasing
him wholly or partially
from his debts and/or he has given notice in writing to anyone of his
creditors that he is unable to pay
any of his debts". The
respondent's complaint against this portion is based thereon that the
contents thereof are scandalous,
vexatious and irrelevant.
[29.7] Paragraphs 39, 40,
and 41 of the founding affidavit wherein the applicant alleged that
the respondent "is very likely
to have funds that belong to him
stashed away" and he utilize both Accelerate Property Fund and
the Michael Family Trust as
a front to house all assets and to secure
same to the prejudice of his creditors by shifting and moving assets
between the different
companies of which the respondent is a director
and moving assets from his name into other entities, alternatively
into Accelerate
Properties Fund. The essence of the applicant's
allegation is that the respondent utilise the Michael Family Trust
"as his
own, and his alter ego, alternatively he is hiding
behind the veil" of the said trust "to conduct business and
derive
an income". The respondent's complaint against the
allegation in paragraphs 39, 40 and 41 is based thereon that the
allegations
contained therein are "egregious, ... harmful,
hurtful, injurious, defamatory". I am in agreement with the
respondent's
contention. The retention of the allegations in
paragraphs 39, 40 and 41 will be prejudicial to the respondent, and
accordingly,
the application to strike out these paragraphs should
succeed.
[29.8] Paragraphs 44.1,
44.4, 44.5, 44.6, 44.9, 44.10, 44.12, 44.13 and 44.14 of the founding
affidavit wherein the applicant attempts
to make out a case why it
will be to the advantage of creditors if the estate of the respondent
is sequestrated, the applicant
alleged that the respondent's
"convoluted affairs" must be investigated by a trustee,
with the "result in the setting
aside of impeachable
transactions". It is also alleged that the respondent preferred
certain creditors over others, and, being
a "director of some 44
(forty-four) commercial entities and the CEO" of Accelerate
Properties Fund, the general body
of the public needs to be protected
- especially because of the uncertainty with the manner and the sort
of business dealings the
respondent has embarked upon or will in
future embark upon in his personal capacity. According to the
applicant, the respondent's
assets are "evidently being
concealed through the various commercial entities" and
"corporate structures" referred
to
supra.
The
respondent's complaint against the allegation in the paragraphs
referred to
supra
is based thereon that the allegations
contained therein are "horrendous, injurious, false and
unsubstantiated defamatory".
I am in agreement with the
respondent's contention. The retention of the allegations in
paragraphs 44.1, 44.6, 44.9, 44.10 and
44.12
supra
will be
prejudicial to the respondent, and accordingly, the application to
strike out these paragraphs should succeed. I am not
satisfied with
the respondent's contention that the complaints in paragraphs 44.4,
44.5 and 44.14 are defamatory, and as a result
the application to
strike out these paragraphs should not succeed.
[29.9] The complaint
raised in paragraph 44.13 relates to the valuation of the immovable
property referred to in annexure FB7 supra
and constitutes
inadmissible hearsay evidence. Accordingly I am satisfied that the
application to strike out paragraph 44.13 should
succeed.
[29.10] ln paragraph 45
of the founding affidavit the applicant alleges that he is unaware of
further creditors of the respondent,
but that the granting of a
provisional sequestration order will result in the order being
published in the Government Gazette and
local newspapers with the aim
to give creditors to join the proceedings. The respondent's complaint
against this portion is based
thereon that the contents thereof are
scandalous, vexatious and irrelevant.
[30]
I am not satisfied that the respondent has
made out a case to strike out the allegations in paragraphs 30, 31
and 45
supra,
and
accordingly, the application to strike out these paragraphs should
not succeed.
Legal Principles in
Sequestration Applications
[31]
In terms of s 10 of the Insolvency Act, a
court "may make an order sequestrating the estate of the debtor
provisionally"
if it is
prima facie
satisfied that:
"(a)
the petitioning creditor has established against
the debtor a claim such as is mentioned in subsection (1) od section
9; and
(b)
the debtor has committed an act of
insolvency or is insolvent; and
(c)
there
is
reason
to
believe
that
it
will
be
to
the
advantage
of creditors of the debtor if his estate is
sequestrated".
[32]
The
onus of satisfying a court on the three requirements referred to in s
10 of the Insolvency Act rests throughout on the sequestrating
creditor
and no
onus
is
on the debtor to disprove any element.
[25]
a.
Liquidated Claim:
[33]In
terms of s 9(1) of the Insolvency Act, a creditor (or his/her agent)
who has a liquidated claim against the debtor for not
less than
R100.00, or two or more creditors (or their agents) who have
liquidated claims against the debtor amounting,
in aggregate,
to
not less than R200.00, "who has committed an act of insolvency,
or is insolvent, may petition the court for the sequestration
of the
estate of the debtor''.
[34]
The
first hurdle the applicant has to cross is whether its monetary claim
against the respondent is fixed and determined, either
by agreement,
judgment or otherwise.
[26]
[35]
The applicant relies first and foremost on
the AOD in terms of which the respondent
allegedly
agreed
and
undertook
to
pay
the
capital
amount
of
R41 500 000.00 and secondly on an oral agreement under the heading
"ADDITIONAL INDEBTEDNESS" in terms of
which the applicant undertook to make
monthly payments to the applicant in the sum of R50 000.00 until the
indebtedness to the applicant
was paid in full. As a result of these
agreements, according to the applicant, he established himself as a
creditor of the respondent
for a liquidated amount.
[36]
According to the respondent, the ostensible
debt owed by the respondent's late farther, the AOD and the
ostensible oral agreement
are invalid and void and as a result did
the applicant fail to make out a
prima
facie
case that he has a liquidated
claim against the applicant. The respondent's opposition is
specifically based on the contention that
the underlying indebtedness
and the AOD are invalid and void credit agreements.
[37]
S 8 of the National Credit Act defines
credit agreements as follows:
"(1)
Subject
to
subsection
(2),
an
agreement
constitutes
a
credit agreement for the purposes of this
Act if it is-
(a)
a
credit
facility,
as
described
in
subsection
(3);
(b)
a
credit
transaction,
as
described
in
subsection
(4);
(c)
a
credit
guarantee,
as
described
in
subsection
(5);
or
(d)
any
combination
of
the
above.
…
(3)
An agreement, irrespective of its
form but not including an agreement contemplated in subsection (2) or
section 4 (6) (b), constitutes
a credit facility if, in terms of that
agreement-
(a)
a
credit
provider
undertakes-
(i)
to supply goods or services or to
pay an amount or amounts, as determined by the consumer from time to
time, to the consumer or
on behalf of, or at the direction of, the
consumer; and
(ii)
either
to-
(aa) defer the consumer's
obligation to pay any part of the cost of goods or services, or to
repay to the credit provider any part
of an amount contemplated in
subparagraph (i); or
(bb) bill the consumer
periodically for any part of the cost of goods or services, or any
part of an amount, contemplated in subparagraph
(i); and
(b)
any
charge,
fee
or
interest
is
payable
to
the credit provider in respect of-
(i)
any amount deferred as contemplated
in paragraph (a) (ii) (aa); or
(ii)
any
amount
billed
as
contemplated
in
paragraph (a) (ii) (bb) and not paid within the
time provided in the agreement.
(4)
An agreement, irrespective of its
form but not including an agreement contemplated in subsection (2),
constitutes a credit transaction
if it is-
(a)
…
(f)
any other agreement, other than a
credit facility or credit guarantee, in terms of which payment of an
amount owed by one person
to another is deferred, and any charge, fee
or interest is payable to the credit provider in respect of-
(i)
the
agreement;
or
(ii)
the
amount
that has been deferred.
(5)
An agreement, irrespective of its
form but not including an agreement contemplated in subsection (2),
constitutes a credit guarantee
if, in terms of that agreement, a
person undertakes or promises to satisfy upon demand any obligation
of another consumer in terms
of a credit facility or a credit
transaction to which this Act applies."
[38]
In
Carter Trading (Pty) Ltd v Blignaut
[27]
the court dealt with the question whether a written acknowledgement
of debt amounts
to
a credit agreement
in
terms of s 8 of the National Credit Act. The court held that:
"[16] From the
aforegoing it, in my view, follows that the payment of the amount
owing was deferred to 24 December 2008 and
that the defendant
undertook to pay, in addition to the amount owing, at least the cost
of preparing the acknowledgment of debt
(whatever it may have been)
and, in the event of a failure to pay the sum owing, also collection
commission and legal fees.
[17]
In the application
of these terms of the acknowledgment of
debt
to the
provisions of s 8(4)(f) of the Act it would appear that those terms
are exactly what is envisaged in the Act to be a credit
agreement,
namely an agreement in terms of which payment is deferred and at
least a fee or charge is payable in respect of the
acknowledgment of
debt, and interest and legal fees are payable in the event of a
failure by the defendant to pay the amount as
agreed therein.
[18]
For this reason alone the
acknowledgment of debt in my opinion clearly falls within the ambit
of the provisions of s 8 of the Act
and, therefore, constitutes a
credit agreement as envisaged in the Act."
[39]
S 40 of the National Credit Act provides
further that:
"(1) A person
must apply to be registered as a credit provider if the total
principal debt owed to the credit provider
under all outstanding
agreements, other than incidental credit agreements, exceeds the
threshold prescribed in terms of section
42(1).
…
(4)
A
credit
agreement entered into by a credit provider who is required to be
registered in terms of subsection (1) but who is not so
registered is
an unlawful agreement and void to the extent provided for in section
89."
[28]
[40]
The
prescribed
threshold
in
terms
of
s 42(1)
of
the
National
Credit
Act is
"nil
R0".
[29]
[41]
S
89
of
the
National
Credit
Act
deals
with
unlawful
credit
agreements
and provides as follows:
"(2) Subject to
subsections (3) and (4), a credit agreement is unlawful is-
…
(d) at the time the
agreement was made, the credit provider was unregistered and this Act
requires that credit provider to be registered;
(5)
If a credit agreement is unlawful in terms
of this section, despite any other legislation or any provisions of
an agreement to the
contrary, a court must make a just and equitable
order including but not limited to the and order that-
(a)
the credit agreement is void as from
the date the agreement was entered into."
[42]
In
Desert Star Trading 145 (Pty) Ltd and Another v NO 11 Flamboyant
Edleen CC and Another
[30]
the
Supreme Court of Appeal in dealing with the
locus
standi
of
the applicant creditor in proceedings for the winding-up of a close
corporation, more specifically where the
locus
standi
is
disputed on the grounds that the indebtedness
to
the creditor arose out of agreements that are void for failure to
comply with certain provisions of the National Credit Act,
held as
follows:
"(16) On the view
that I take of the matter it is not necessary that any firm
conclusion be reached at this stage on the respondents'
contentions.
It suffices that the indebtedness is disputed on bona fide and
reasonable grounds for, as Corbett JA made plain in
Kalil v
Decotex (Pty) Ltd and Another.
'In regard to locus
standi as a creditor, it has been held, following certain English
authority, that an application for liquidation
should not be resorted
to in order to enforce a claim which is
bona fide
disputed by
the company. Consequently, where the respondent shows on a balance of
probability that its indebtedness to the applicant
is disputed on
bona fide
and reasonable grounds, the Court will refuse a
winding-up order. The
onus
on the respondent is not to show
that it is not indebted to the applicant: it is merely to show that
the indebtedness is disputed
on
bona fide
and reasonable
grounds.'" (footnotes omitted)
[43]
The alleged indebtedness
to the applicant by the respondent's
late farther is the sum R40 000 000.00. The
total sum allegedly due and payable by the respondent to the
applicant in terms of the
AOD is R41 500 000.00, and payment of this
amount was to be effected by the respondent as follows:
[43.1] R30 000 000.00 not
later than 30 June 2023 (clause 2 of the AOD).
[43.2] R11 500 000.00 at
R500 000.00 monthly payments over a period of 23 months.
[44]
Clause 2.4 of the AOD makes provision that
all monies received by the applicant from the respondent in terms of
the AOD shall first
be used for payment of legal costs, if any, then
for payment of interest, and then for the reduction of the
outstanding capital
amount.
[45]
Clause 2.5 of the AOD records further that
should the "Capital amount and Interest not be paid on the dates
mentioned in paragraph
2" of the AOD, "then the full
outstanding amount of the Capital plus interest will become due and
payable by the"
respondent, "immediately and without any
notice".
This
provision is also confirmed by the applicant in his founding
affidavit where the applicant specifically states that should
"any
payment of the capital amount not be paid on due dates, then then
(sic) the full capital amount (plus interest) would
become due, owing
and payable" to the applicant.
[46]
Clause 10 of the AOD imposes liability on
the respondent for all costs and disbursements, including legal costs
that are incurred
by the applicant in "enforcing or securing
compliance by the Debtors of the stipulations of this agreement, or
which may flow
from any legal action arising out of this agreement,
which shall include but not be limited to collecting or endeavouring
to collect any or all of the amounts
payable by the Debtors or otherwise, shall be due and payable by the
Debtors to the Creditor
on demand".
[47]
It is the respondent's case that the AOD
constitutes a credit transaction and regulated credit agreement under
ss 8(1)(b) and 8(4)(f)
of the National Credit Act, because it
provides for the deferred payment of the amount allegedly owed by
respondent to the applicant,
and further that interest is payable to
the applicant in respect of the AOD or the amount that has been
deferred. The respondent's
defence goes further, namely, the AOD,
being a credit agreement, is in terms of ss 40(4), 89(2)(d) and
89(5)(a)
of the
National Credit Act unlawful and void, because the applicant is not a
registered credit provider.
[48]
The alleged oral agreement between the
applicant and the respondent on which the applicant relies under the
heading "ADDITIONAL
INDEBTEDNESS" and the subsequent three
payments made in terms thereof by the respondent in the total sum of
R150 000.00 are
denied by the respondent. The respondent attached to
his answering affidavit a copy of a handwritten agreement (annexure
AA2) with
the further allegations that this handwritten agreement is
an agreement entered into on 7 October 2021 at Fourways between the
applicant and Khumonetix. In terms of this handwritten agreement,
Khumonetix agreed to pay the applicant R50 000.00 per month for
24
months. The payments received by the applicant were not made by the
respondent, but were made by Khumonetix in terms of the
handwritten
agreement.
[49]
Mr
Bhana SC, on behalf of the applicant, referred me to the "Badenhorst
principle"
[31]
and
correctly submitted that it is trite that winding-up proceedings are
not to be used to enforce payments of a debt that has
been disputed
on
bona
fide
and
reasonable grounds. With reference to Trinity Asset Management (Pty)
Ltd v Grindstone Investments 132 (Pty) Ltd,
[32]
Mr Bhana SC submitted that the formulation of a legal dispute is not
sufficient to defeat a sequestration application. In applying
what
has been stated in Trinity Asset Management to the dispute raised by
the respondent, namely that the AOD is invalid and void,
Mr Bhana SC
submitted that the Badenhorst principle does not apply where the
dispute raised is based on legal principle.
[50]
The
Constitutional Court
stated
in
the Trinity
Asset
Management
(Pty)
Ltd
v
Grindstone Investments 132 (Pty) Ltd
supra
as follows:
"[87] When the
dispute about the debt is not about whether it exists or its amount
but about its exigibility, things are different.
Then the doubt
arises from a disputed principle, not contested facts. This means
that the liquidating or sequestrating court is
not diverted into a
time-consuming and complex factual enquiry. The only point before it
is a law point. That law point can be
determined with precision and
with dispatch.
[91] A good analogy is
when an applicant at risk of harm seeks an interim interdict. When
the facts are unclear, the interdicting
court must weigh prospects,
probabilities and harm. But when the respondent, who is sought to be
interdicted, has a killer law
point, it is just and sensible for the
court to decide that point there and then. The court is in effect
ruling that, whatever
the apprehension of harm and the factual rights
and wrongs of the parties' dispute, an interdict can never be granted
because the
applicant can never found an entitlement to it.
[92] Exactly the same
here. The High Court found that Trinity could never enforce its
claims against Grindstone, regardless of any
factual dispute or
rights and wrongs. The question then is whether the High Court was
wrong, as a matter of law, to decide this
law point. I do not
understand the Badenhorst principle to preclude a determination, by a
liquidating or sequestrating court, of
a killer law point based on
common-cause facts. As Rogers J pointed out in Orestisolve:
'(T)he rule, which is not
inflexible, would not generally be an obstacle to liquidation if the
court felt no real difficulty in
deciding the legal point. . . .
(T)he equivalent rule in England finds application where the dispute
is shown to be one whose resolution
will require the sort of
investigation that is normally within the province of a conventional
trial. A purely legal question would
not have that character.'
[93] This is not to say
that a liquidating or sequestrating court can never rely on
Badenhorst to refer legal issues, even on common
cause facts, to
a trial court. First-instance courts may have many reasons for
kicking for touch. But Badenhorst does not preclude
a court from
deciding a straightforward legal issue based on common-cause facts.
And that is what the High Court did here. The
prescription point was
therefore properly before the SCA and was understood as being so by
both the majority and minority. And
it is properly before this
court." (footnotes omitted)
[51]
My interpretation of Trinity Asset
Management is that a sequestrating court is not prohibited by the
Badenhorst principle from deciding
a straightforward legal issue. My
understanding of Trinity Asset Management is also that a legal issue
raised does not preclude
the sequestrating court from deciding the
matter where a
bona fide
and
reasonable
dispute
has been raised by the respondent. I do not find any prohibition to
apply the Badenhorst principle where the dispute is
based on a legal
principle. However, the defence raised by the respondent, namely that
the AOD is a
void
and
invalid credit agreement turns upon a legal principle and not a
dispute of fact, and, as correctly submitted by Mr Bhana SC,
this
defence can be disposed of on papers before me.
[52]
With
reference
to
Carter
Trading
(Pty)
Ltd
v
Blignaut
supra,
[33]
the
AOD
constitutes a credit transaction and regulated credit agreement under
ss 8(1)(b) and
8(4)(f)
of
the
National
Credit
Act,
because
it
provides
for
the
deferred
payment of the amount allegedly owed by respondent to the applicant,
and further that interest is payable to the applicant
in respect of
the AOD or the amount that has been deferred. The AOD, being a credit
agreement, is in terms of ss 40(4), 89(2)(d)
and
89(5)(a) of the National Credit Act unlawful and
void,
because
the applicant is not a registered credit provider.
[53]
In
applying the Badenhorst principle, the defence raised by the
respondent against the alleged oral agreement relied upon by the
applicant is based on a dispute of fact on
bona
fide
and
reasonable grounds.
[34]
[54]
Accordingly, the applicant has failed cross
the first hurdle and satisfy that he has a liquid claim against the
respondent. The
application for this reason alone should fail.
[55]
In the premise of the above finding, I find
it unnecessary to deal with the remaining requirements referred to
supra,
namely,
whether the respondent has committed an act of insolvency or is
insolvent, and secondly whether there is reason to believe
that it
will be to the advantage
of
creditors of the respondent if his estate is sequestrated.
[56]
Accordingly I make the following order:
1.
The application to condone the late
delivery of the replying affidavit is dismissed.
2.
Annexures FB6, FB7 and FB8 to the
founding affidavit are struck out.
3.
Paragraphs
37, 39, 40, 41, 44.1, 44.6, 44.9, 44.10,
44.12 and 44.13 of the founding affidavit are struck out.
4.
The application for provisional
sequestration is dismissed.
5.
The applicant is ordered to pay the
costs of the application for provisional sequestration, including the
costs of the condonation
application referred to in paragraph 1
supra
and the application to strike out
referred to in paragraphs 2 and 3
supra.
Costs to include costs of two counsels.
JJ BUYS, AJ
On behalf of the
Applicant: Adv. A.R.
Bhana SC
Adv L.M. Spiller
EGCM
Attorneys
Bloemfontein
On behalf of the
Respondent: Adv. S. Symon SC
Adv D. Sive
Van der Merwe &
Sorour
Bloemfontein
[1]
Act
24 of 1936.
[2]
Act
34 of 2005.
[3]
Ferris
and another v FirstRand Bank Ltd
2014 (3) SA 39
(CC) at 43G-44A.
[4]
2013
(3) SA 140
(GSJ) at paras 16 and 18.
[5]
At
para 19.
[6]
Venter
v Van Wyk, case number 30323/04 delivered in the north Gauteng High
Court on 27 June 2005; Trans-Africa Insurance Co Ltd
v Maluleka
1956
(2) SA 273
() at 278F-G; Federated Trust Ltd v Botha
1978 (3) SA 645
(A) at 654C-F and Hart and Another v Nelson
2000 (4) SA 368
(ECD) at
374G-375F.
[7]
2007
(2) SA 363
(SCA) at para 32.
[8]
At
para 19.
[9]
2014
(2) SA 68
(CC) at para 22.
[10]
Irvin
v Nefdt
1950 (1) SA 431
(T). As to the meaning of "good cause"
generally see Madinda v Minister of Safety and Security [2008] 3 All
SA 143
(SCA).
[11]
Du
Plooy v Anwes Motors (Edms) Bpk
1983 (4) SA 212
(0).
[12]
Markides
v Levendale
1954 (4) SA 181
(SR), Gordon v Robinson
1957 (2) SA 549
(SR), Dalhouzie v Bruwer
1970 (4) SA 566
(C) and Broadley v
Stevenson 1973 (1) SA 585 (R).
[13]
Du
Plooy v Anwes Motors (Edms) Bpk
supra.
[14]
Nathan
(Pty) Ltd v All Metals (Pty) Ltd 1961 (1) SA 297 (D).
[15]
Silber
v Ozen Wholesalers (Pty) Ltd
1954 (2) SA 345
(A) at 353A and Smith v
Brummer
1954 (3) SA 352
(O) at 358A; Silverthorne v Simon
1907 TS
123
at 124; Ford v Groenewald
1977 (4) SA 224
(T) at 225GH and
226A-C; Oostelike Tvlse Ko-op Bpk v Aurora Boerdery
1979 (1) SA 521
(T); Flugel v Swart
1979 (4) SA 493
(E) at 497G-H; Feldman v Feldman
1986 (1) SA 448
(T); Grand v Plumbers (Pty) Ltd
1949 (2) SA 470
(0)
at 476-477; Dalhouzie v Bruwer
supra
at
571F, 572C and 574H-575A and Du Plooy v Anwes Motors
supra
at
217H. See also Ferris v FirstRand Bank Ltd
2014 (3) SA 39
(CC) at
43G-44A.
[16]
Lauw
v Grabler and Another (3074/2016) (2016] ZAFSHC 206 (15 December
2016) at para 18.
[17]
Titty's
Bar and Bottle Store (Pty) Ltd v ABC Garage (Pty) Ltd
1974 (4) SA
362
(T) at 368G.
[18]
1991
(3) SA 563
(NM) at 566C-E.
[19]
Titty's
Bar and Bottle Store (Pty) Ltd v ABC Garage (Pty) Ltd
supra.
[20]
Wiese
v Joubert en Andere
1983 (4) SA 182
(0) at 196F-197E.
[21]
1993
(2) SA 12
(NM) at 27H. See also Wiese v Joubert and Andere
supra.
[22]
Helen
Suzman Foundation v President of the Republic of South Africa and
Others
2015 (2) SA 1
(CC) at para [27] and Breukel and Another v
Department of Home Affairs and Another
2023 (4) SA 583
(WCC) at para
[88].
[23]
1974
(3) SA 207
(O) at 216A-D.
[24]
At
566J-567B.
[25]
Braithwaite
v Gilbert (Volkskas Bpk Intervening)
1984 (4) SA 717
(W) at 718.
[26]
Stephan
v Khan 1917 CPD at 24, Kleynhans v Van der Westhuizen NO 1970 (2) SA
742 (A).
[27]
2010
(2) SA 46
(ECP). See also Fourie v Geyer 2020 (6) SA 569 (NWM).
[28]
Du
Bruyn NO v Karsten
2019 (1) SA 403
(SCA) at para 26. See also Fourie
v Geyer
supra.
[29]
GN
513 of 11 May 2016: Determination of a Threshold for Credit Provider
Registration (Government Gazette No. 39981).
[30]
2011(2)
SA 266 (SCA).
[31]
Badenhorst
v Northern Construction Enterprises (Pty) Ltd
1956 (2) SA 346
(D at
347-348.
[32]
2018
(1) SA 94
(CC) at paras [28], [86], [87) and [93).
[33]
See
also Du Bruyn NO v Karsten
supra
and
Fourie v Geyer
supra.
[34]
Desert
Star Trading 145 (Pty) Ltd and Another v NO 11 Flamboyant Edleen CC
and Another
Supra.