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[2024] ZAECMKHC 117
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Majiedt N.O and Another v Dippenaar N.O and Others (3815/2022) [2024] ZAECMKHC 117 (24 October 2024)
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IN
THE HIGH COURT OF SOUTH AFRICA
[EASTERN CAPE DIVISION
– MAKHANDA]
CASE NO.: 3815/2022
In the matter
between:-
DONOVAN THEODORE
MAJIEDT N.O
FIRST APPLICANT
OLGA KOTZE
N.O
SECOND APPLICANT
and
DANIEL OLIVIER
DIPPENAAR N.O
FIRST RESPONDENT
MURI-ZANN van GEND
N.O
SECOND RESPONDENT
REHAN COETZEE
N.O
THIRD RESPONDENT
(in their capacities
as trustees of the MD Trust)
JUDGMENT
NORMAN J:
[1]
On 23 April 2024, Malusi J issued an Order placing the estate of MD
Trust, with reference number
IT46/2020 under provisional
sequestration. He also issued a
Rule nisi
calling upon all the
interested parties to show cause on 21 May 2024 why the estate of MD
Trust should not be placed under final
sequestration. He further gave
directives on how service should be effected on interested parties
including, amongst others, the
South African Revenue Services, the
Master of this court and employees of MD Trust, if any, and by
publication in the Daily Dispatch
newspaper. There has been
compliance with the orders relating to service.
[2]
The applicants seek an order, in terms of section 12(1) of the
Insolvency Act 24 of 1936 (the Act),
finally sequestrating the estate
of the MD Trust. To this end the applicants are required to
satisfy the court (a) that they
have a liquidated claim against the
Trust as envisaged in section 9 (1) of the Act; (b)that
the MD Trust had committed
an act of insolvency or is in fact
insolvent; and (c) that there is reason to believe that it will be to
the advantage of the creditors
of the MD Trust if its estate is
sequestrated. The relief for the final sequestration order is opposed
by the respondents.
Relevant facts
[3]
The applicants are the joint trustees of the insolvent estate of Mr
Johannes Dippenaar (Johannes).
He was cited as the second respondent
in his capacity as a trustee of the MD Trust. His wife Ms Martha
Dippenaar (Martha) was previously
cited as a Trustee of MD Trust.
Both the estates of Johannes and Martha were sequestrated. Mr Nel (
Nel) , one of the trustees
of MD Trust also resigned from the Trust.
On 21 May 2024, Mr Daniel Dippenaar (Daniel) , Ms Muri- Zann van Gend
( Muri) and
Mr Rehan Coetzee (Coetzee) were substituted
as the representative trustees of the MD Trust. On 28 May 2024 the
application
was postponed to 05 September 2024 and the provisional
sequestration order was extended. On 05 September 2024 , the
application
was again postponed with the provisional order extended
accordingly.
Applicants case
[4]
The applicants ground the liability of MD Trust to Johannes on,
inter
alia
, the fact that the MD Trust’s property situate in
Jeffreys Bay, known as Port Au Prince, Erf 1[...], A[...] M[...]
M[...]
(the property) was purchased for an amount of R2 350 000.
The purchase price was paid with funds that were borrowed from
Johannes,
according to Nel, who was at the relevant time a trustee of
the MD Trust. However, the amount of the loan as reflected in the
financial
statements of Johannes is an amount of R2 858 485.00.
Nel further stated that, the loan was a long-term loan, payable on
demand.
[5]
The deponent to the founding affidavit, the first applicant stated at
para 15:
“
Although
both sets of financial statements, ironically drafted by the same
auditor, cannot be true, the upshot is that the MD Trust
is indebted
to the estate of the second respondent either in an amount of R1,175m
as a distribution or R2,858,485 for monies loaned
and advanced.”
[6]
The other debt relates to the First Rand Bank Limited, as one of the
creditors of MD Trust.
It holds a mortgage bond over the property of
the MD Trust. On 7 December 2020 FirstRand Bank Limited sought and
obtained default
judgment against the Trustees of the MD Trust
jointly with the trustees of the Geduld Boerdery Trust for the sum
R7 444 893.89.
[7]
First Rand Bank Limited, through its Regional Head, Commercial
Recoveries,
Mr
Elrich Mark Cameron ( Cameron)
,
stated that MD Trust bound the Trust as surety in
solidum
for and as co-principal debtor jointly
and severally with the Geduld Boerdery Trust for due payment of all
monies due to FirstRand
Bank Limited by the Geduld Boerdery Trust.
The estate of the Geduld Boerdery Trust was also sequestrated.
After the
distribution of its assets the sum of R3 022 576.87
of the judgment remained unpaid. First Rand Bank Limited supports
the
final sequestration of the estate of the MD Trust.
[8]
During January 2017 a R2 million continuing covering bond was
registered in favour of the FirstRand
Bank Limited over the property.
There is a shortfall of R3 944 553.74 as shown in the second and
final liquidation and distribution
account. The Geduld Boerdery Trust
is currently indebted to the FirstRand Bank in the total amount of
R6 100 204.60 as
indicated in the bank certificate of
balance. FirstRand Bank Limited has a claim against MD Trust in the
amount of R2 million in
respect of the aforementioned suretyship and
the continuing covering bond.
[9]
The applicants contend that the
MD Trust is factually insolvent as envisaged in section
8 of the Act
in that it has one property valued at R4 175 000.00
but has liabilities in the amount of at
least R 4 917 042.91.
It is for this reason that they conclude that MD Trust is
de
facto
insolvent in that the some of its liabilities exceed the
fair value of its assets.
[10]
They alleged that the MD Trust committed an act of insolvency in
terms of section 8 (c) in that it made or
attempted to make a
disposition of property which has or would have the effect of
prejudicing its creditors or preferring one creditor
above another.
They also relied on section 8 (d) that the Trust attempted removed or
to attempted to remove its property with intent
to prejudice its
creditors or prefer one creditor above another. They contend
that the sequestration of the MD Trust will
be to the advantage of
creditors as the property can be realized by a trustee who can
distribute the proceeds of sale in accordance
with the distribution
plan in terms of the Act.
Respondent’s
opposition
[11]
The respondents oppose the final order of sequestration and rely on
grounds similar to those that were raised
in resisting the
provisional order of sequestration. Those grounds are: That
applicants as trustees of the insolvent estate of
Johannes do not
have the authority to bring the application and they lack legal
standing to do so; there has been no compliance
with the legal
requirements; a claim that the sum owed to Johannes by the MD Trust
was settled by the MD Trust by providing security
for loan secured by
the second respondent for his farming activities; by providing
security in the form of suretyship for the liabilities
of the
Geduld Boerdery Trust, the liability of the MD Trust was
discharged; that a claim relating to the liability
of the MD
Trust to Johannes has become prescribed; and that the value of the
assets of the property exceeds the sum of its liabilities
and thus
the MD Trust is not insolvent. In an affidavit deposed by the
third respondent the respondents placed further facts
in resisting
the final order. They contend that the claim to Johannes
prescribed because it became due and payable in 2016;
the MD Trust
has a damages claim against the FirstRand Bank Limited for its
refusal, without any legal basis , to consent
to the
cancellation of its bond and thus enable the property to be
registered in the name of the buyer; they denied that the applicants
have established a liquidated claim of at least R100 against the MD
Trust ; and that the authenticity of the financial statements
attached to the founding affidavit were never proven by the
applicants.
[12]
They also stated that the property was sold for R4 175 000.00
and upon transfer the Trust would
have settled the First Rand Bank
Limited debt. However, the First Rand Bank Limited withheld its
consent to cancellation of its
bond security. As a result of such
conduct, the sale could not be finalized. The
purchaser has since withdrawn
from the transaction and requested a
refund of the purchase amount. They further stated that the
applicants were informed of the
transaction at the time it was still
pending. The property had been occupied by the purchaser and
all municipal accounts
and levies were paid in full by December 2022.
Johannes explained in his affidavit that the
distribution or allocation in the financial statements marked
‘MD-11’,
signed on 1 November 2016 shortly before he
signed the suretyship on behalf of the MD Trust on 15 November 2016.
He received
advice at the time that an allocation according to the
financial statement and an agreement with the trustees to settle the
loan
by providing surety as was needed and would enable them to
provide valuable surety to the bank. He confirmed that the
agreement
was concluded with the MD Trust in 2016. In reply to
those allegations, Mr Phillipus Jacobus Roos, the applicants
attorney,
stated , amongst others that there were no documents
produced to support the allegations of an agreement made
because a Trust
cannot rely on a verbal agreement. He also
stated that this transaction was not mentioned in the insolvency
enquiry of the
Geduld Boerdery Trust.
Legal submissions
[13]
Mr De La Harpe SC, for the applicants, made the following
submissions:
13.1 The
respondents claim the loan to Johannes has prescribed but at the same
time contend that that claim was payable
on demand. They further
contend that the value of the assets of the MD Trust, the value of
its immovable property exceed some of
its liabilities and therefore
the allegation that it is solvent cannot be sustained.
13.2
The Applicants are the trustees of the
insolvent estate of Johannes. The loan made by Johannes to the
MD Trust is what gave
rise to a claim in the hands of the applicants
as the trustees of the insolvent estate of Johannes.
13.3. There was
compliance with the manner of service directed by the court in the
provisional sequestration order. He relied
on
section 12
of the
Insolvency Act that
provides :
“
12
Final sequestration or dismissal of petition for sequestration
(1)
If at the hearing pursuant to the aforesaid rule nisi the
Court is satisfied that—
(a)
the petitioning creditor has established against the debtor a claim
such as is mentioned in subsection
(1) of
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,
it
may sequestrate the estate of the debtor.”
13.4
The applicants bear the onus to prove on a balance of probabilities
that they established a liability in
excess of the prescribed minimum
that the estate of the MD Trust is insolvent. There is reason to
believe that the sequestration
of the estate of the MD Trust will be
to the advantage of its creditors.
13.5 In
resisting the grounds advanced by the respondents on the issue of
authority and standing, the applicants
contend that because
Johannes’s estate was sequestrated
section 20
of the
Insolvency
Act vests
the estate of the insolvent in his trustees. They are also
empowered by
section 77
, to recover payment, where necessary, by
legal proceedings. The creditors authorised the trustees to bring the
application as envisaged
in section 73 of the Act. It was
argued that authorisation is relevant only to the trustees liability,
as between himself
and insolvent estate, in relation to the costs of
the legal proceedings. In this regard, reliance was placed on
Patel
v Paruk
[1]
.
13.6
Liability for a loan repayable on demand is not discharged by the
debtor, by making an allocation of the
sum of the loan or by the MD
Trust providing a suretyship which was never called upon for the
liability of another. The claim that
the liability of the MD Trust
was paid or discharged is without merit and should be rejected.
13.7
The debt created by the loan was not to be regarded as immediately
repayable. Only upon demand, would the
trustees of the insolvent
estate of the MD Trust, have completed the cause of action for its
recovery and only then would prescription
commence to run. They
relied on
Stockdale
& Another v Stockdale
[2]
.
The applicants have demonstrated that the sequestration of the estate
of the MD Trust will be to the benefit or to the advantage
of its
creditors
[3]
. A final order for
the sequestration of the estate of the MD Trust should issue with the
costs of the application including its
postponement to be costs in
the sequestration.
[14]
Mr Coetzee, on the other hand, who represented the respondents in his
capacity as a trustee of the MD Trust
and not as a legal
practitioner, made the following submissions:
14.1 In
addressing the prescription point he submitted that the claim in
relation to the loan made by Johannes to the
MD Trust may have
prescribed because repayment of the loan amount became due and
payable in 2016 when it was advanced.
14.2 The
respondents persist in their objections to the final order of
sequestration being granted based largely on
the grounds, inter alia,
that in an application for sequestration the applicant bears the
onus. Where the respondents dispute the
indebtedness upon which the
applicants rely, the onus on the respondents is to prove, not that,
it is not indebted to the
applicant, but that the indebtedness
is
bona
fide
disputed
and on reasonable grounds. When the respondents discharge that onus,
the application should fail even if it appears that
the MD Trust is
nevertheless unable to pay its debts. In this regard the respondents
relied on
Kalil
v Decotex (Pty) Ltd. and Another
[4]
.
14.3
The practical considerations dictate that an applicant should apply
for sequestration only after the claim
in question has been proved
having followed the appropriate procedure. Sequestration proceedings
are not designed to settle disputes
about reciprocal claims when
ordinary procedures were available and appropriate for such cases.
They relied on
Lindhaven
Meat Market CC v Reyneke
[5]
.
14.4. The
general rule is that a party wishing to produce a document must prove
that it is authentic especially where
the entire application depends
on that document. The applicants rely for their claim to be a
creditor and to be vested with
locus standi
to proceed with
the application, on the financial statements whose authenticity or
correctness was not proved nor confirmed by
either the author of the
documents or any of the trustees involved
in
the preparation thereof. They also contend that the applicants
did not comply with the formal requirements for sequestration.
14.5 Nel
stated that the financial statements appear to reflect the asset at
cost and that an allocation of that value
to Johannes and
Martha in discharge of the indebtedness which, if correct, means that
any claim related thereto may have
prescribed.
Discussion
[15]
The applicable test when an applicant seeks a final order of
sequestration is that the court must be satisfied
that the
requirements for a sequestration order are proved on a balance of
probabilities. I shall first address the defences
raised by the
respondents in resisting the grant of the final order of
sequestration.
Were the trustees
authorised to institute these proceedings?
[16]
In terms of section 20 of the Act the effect of sequestration of the
estate of Johannes is that he was divested
of his estate and upon the
appointment of the applicants as trustees his estate vested in them.
That estate included all property
of the insolvent at the date of
sequestration.
[17]
The respondents contend that the applicants have no authority to
institute these proceedings because they
were not authorised by the
creditors or the Master. On 7 December 2022, the applicants
attorneys, Honey Attorneys sought
, by way of a letter sent to all
known creditors, sought consent to proceed with the sequestration
proceedings and requested them
to ratify all actions already taken by
the applicants. In a letter dated 24 March 2023, Jaco Ross Inc.
Attorneys,representing
Karan Beef , responded to Honey Attorneys as
follows in relation to this application:
“
1.
The aforementioned matter refers
2.
We confirm that we act on behalf of our client, Karan Beef the only
proven creditor of the
insolvent estate of Mr J.O Dippenaar.
3.
On behalf of the only proven creditor of the insolvent estate, we
hereby confirm that we
supported the sequestration application of MD
Trust at the time that it was issued, that we still support the
application and
we further
request
that you obtain the Master of the High Court’s authority.
4.
Kindly acknowledge receipt.
Yours faithfully
Jaco Ross Inc.
Attorneys.”
[18]
The respondents contend that no such authority was sought and
obtained from the Master. The applicants rely
for their authority to
bring the application on the fact that they are joint trustees of the
sequestrated estate of Johannes as
they were appointed by the Master
of the High Court in Bloemfontein on 10 May 2022. They also rely on
the provisions of sections
73 and 77 of the Act, which provide:
“
73 Trustee may
obtain legal assistance
(1) Subject
to the provisions of this section and section 53 (4), the trustee of
an insolvent estate may with
the
prior written authorization
of
the creditors engage the services of any attorney or counsel to
perform the legal work specified in the authorization on behalf
of
the estate: Provided that the trustee-
(a) If he or she is
unable to obtain the prior written authorization of the creditors,
due to the urgency of the matter or
the number of creditors involved,
may with the prior written authorization of the Master engage the
services of any attorney or counsel to perform the legal work
specified in the authorization on behalf of the estate;
or
(b) ...” ( my
emphasis)
77.
Recovery of debts due to estate
A trustee shall, in the
notification of his appointment in the Gazette, in terms of
subsection (3) of section 56, call
upon all persons indebted to the
estate of which he is trustee to pay their debts within a period and
at a place mentioned in that
notice, and if any such person fails to
do so, the trustee shall forthwith recover payment from him,
if
need be by legal proceedings
.”
[19] In
the Patel’s case, Tindall JA , relying on Gerothwohl v Cochrane
stated:
“
The original
proviso, prohibiting the trustee from instituting or defending any
legal proceedings without the prescribed consent,
was enacted as
between the trustee and the creditors, in order to protect the estate
from being dissipated in litigation.
The legislature
could not have intended that steps taken by a trustee to institute or
defend proceedings must necessarily
be a nullity because the
prescribed consent had not been obtained. An interpretation to the
contrary would bring about the result
that, where there is not
enough time to enable the trustee to obtain such consent, he may be
powerless to issue a summons
timeously in order to prevent a claim
due to the estate from becoming prescribed or to file a plea in order
to prevent a default
judgment from being obtained against him...”
.
[20] In
Lupacchini
NO & another v Minister of Safety and Security
[6]
, the Supreme Court of Appeal held :
“
[22]
I
regret that I can find no indications that legal proceedings
commenced by unauthorised trustees were intended to be valid.
On
the contrary, the indications seem to me all to point the other way.
Unless it were to be the case that all transactions performed in
conflict with the section are to be treated as valid – which
clearly cannot be the case, because otherwise the Act would be
altogether ineffective – then I find nothing to distinguish
its
effect on legal proceedings. Indeed, it would seem to me that the
case is even stronger for finding legal proceedings to be
a nullity.
Conradie J sought to reconcile his finding in
Watt
with
his expressed view that unauthorised trustees are not capable of
validly contracting as follows:
42
‘
In
entering appearance to defend this action the [trustees] incurred no
contractual liability on behalf of the trust save possibly
for
payment of their attorneys’ fees; that, however, is not
something which arises in these proceedings. The trust incurred
no
contractual liability for costs to the plaintiff. It did not even
incur any liability for potential, judicially imposed, costs.
If the
[trustees] were not authorised to conduct the litigation they would
incur personal liability for any adverse costs order’.
( my
emphasis)
While
it is open to third parties to conclude contracts with trustees at
their peril, they are left no choice when it comes to being
sued. If
the only consequence of trustees suing in conflict with the section
is to be that the trust is not bound to pay the costs,
which is what
Conradie J seems to suggest, that would be cold comfort to those who
are sued by a wealthy trust that is administered
by impecunious
trustees.
43
I
do not think the legislature could have intended to submit third
parties to litigation at the hands of unauthorised trustees
with the
consequence that they are precluded from looking to the assets of the
trust for recompense if the trust were to lose.”
[21] The
facts herein are distinguishable from the Lupacchini matter. On 31
October 2022 the application was issued
notifying all the parties
that the application would be made on 06 December 2022. On 07
November 2022 the application was served
on the Master of the High
Court. On 8 November 2022 the Master issued the certificate
confirming that sufficient security
had been furnished
to
prosecute all
sequestration proceedings
in this matter.
That to me , signified authority to the applicants to prosecute the
sequestration application. It was in
writing and was given prior to
the hearing of the matter. That meant that the trustees actions
were consistent with the authority
of the Master. Nothing precluded
the Master from filing a report and raised lack of support for
sequestration.
[22]
In
Ex
parte: Master of the High Court of South Africa (North Gauteng)
[7]
,
Bertelsmann J stated:
“
28.
The South African insolvency system is creditor - driven. The
majority of creditors in number or claims have the right to elect
trustees and liquidators and to take decisions in respect of the
manner in which assets falling into the estate or constituting
property of a corporate body in winding-up should be dealt with.
Nonetheless, their choice of trustees is subject to the Master's
approval and
the exercise of their
functions is subject to the Master's control.
(my
underlining.)
[23]
The applicants alleged that they were authorised by the creditors.
The following facts are relevant:
[24]
In the replying affidavit deposed to by the second applicant, it is
stated that the applicants rely on section
73 (1) and contended that
authority is not something which the respondents are able to
competently challenge. She further
stated: “
I,
however, place on record that the trustees have received the
necessary authority from creditors to bring this application
.”
The letter dated 24 March 2023, from Jaco Roos Attorneys,
representing Karan Beef, specifically requested the
applicants to obtain authority from the Master of this court. By
that time authority from the Master was already in place
as I have
found. Most importantly, in that letter it was specifically
stated that “
On behalf of the only proven creditor of the
insolvent estate, we hereby confirm that we supported the
sequestration application
of MD Trust at the time that it was issued,
that we still support the application.”
[25]
The other creditor as aforementioned is the FirstRand Bank. In an
affidavit deposed to by Cameron, he stated:
“
I hereby
confirm that FirstRand Bank supports the final sequestration of the
MD Trust.
” Later in the affidavit he stated:
“
17.
FirstRand Bank Limited therefore supports the application for
sequestration, requires that the rule nisi be conformed
(sic) and
made final and severely objects to any suggestion that the rule nisi
be extended any further.”
[26]
In
Robert
Thornton Smith
v
Kwanonqubela Town Council
[8]
Harms JA stated, when he had to consider the validity of the
submission that raised the question whether what seemed to be
unauthorised institution of the proceedings was capable of
ratification:
“
[9]
It is in general essential for a valid ratification "that there
must have been an intention on
the part of the principal to confirm
and adopt the unauthorised acts of the agent done on his behalf, and
that the intention must
be expressed either with full knowledge of
all the material circumstances, or with the object of confirming the
agent's action
in all events, whatever the circumstances may be"
(Reid and Others v Warner
1907
TS 961
at
971 in fine - 972).”
[27]
The sentiments expressed by the creditors display their intention to
adopt and confirm or support the actions
taken by the applicants.
That should allay any concerns that the applicants were on a frolic
of their own. I am satisfied that
the applicants were duly authorised
by the creditors who indicated their support for the application in
writing.
Compliance with
statutory requirements
[28] A
creditor who commences sequestration proceedings against a
debtor must deposit with the Master security
for the payment of all
fees and charges necessary for the prosecution of all sequestration
proceedings and all costs of administering
.
[29] In
the founding affidavit at paragraph 21.6, the first applicant stated,
inter alia,
“
21.6
I will instruct my legal representatives to comply with the formal
requirements
for a sequestration and to file a compliance affidavit
with this Honourable Court”.
[30]
Prior to the applicants obtaining a provisional sequestration order
and on 08 November 2022, there was compliance
with the ‘
formal
requirements for a sequestration
”. The respondents
denied that the applicants complied with the legal requirements for
the relief sought. In response
to paragraph 14, where the respondents
deny such compliance, the second applicant replied as follows
:
‘
21.6
I will instruct my legal representatives to comply with the formal
requirements for a sequestration and to file a compliance
affidavit
with this Honourable Court.’
There are two compliance
affidavits filed that deal with the service of the application itself
and the rule nisi and the furnishing
of bond of security.
[31]
Section 9 (3) (b) provides that the petition
shall
be accompanied
by a certificate of the Master given not more than 10 days
before the date of such petition that sufficient security has
been
given for the payment of all fees and charges necessary for the
prosecution of all sequestration proceedings and of all costs
of
administering the insolvent estate until the appointment of a
provisional trustee. That is the date on the notice of motion.
It guarantees the proper administration of funds and property
by the executor or trustee. The words employed
by the
Legislature “shall” makes compliance with that section
mandatory. In
Court
v Standard Bank of SA Ltd ; Court v Bester NO
[9]
,
the
Supreme Court of Appeal held:
“
On
15 July 1991 the application without the Master's report was served
on the appellant. The original papers, together with the
certificate,
were returned to the Registrar and the application came before the
Court on 17 July 1991. To sum up, the certificate
did not accompany
the application either when it was signed, filed with the Registrar,
issued or when it was served. By the time
the papers were served on
the appellant security had however, already been furnished and the
certificate had come into existence.
It was before the Court when the
matter was heard.
Sec 9(3) (b) of the Act requires the application
to be accompanied by the certificate and requires further that the
certificate
must have been issued not more than ten days before the
date of the notice of motion (Anthony Black Films v Beyl
1982 (2) SA
478
(W)). The subsection is silent as to when the certificate must
accompany the application. It seems clear that the certificate need
not be attached to the application when it is signed and that it need
not even then exist. (Rennies Consolidated (Transvaal) (Pty)
Ltd v
Cooper
1975
(1) SA 165
(T)
at 166 E-H; Mafeking Creamery Bpk v Mamba Boerdery (Edms) Bpk;
Mafeking Creamery Bpk v Van Jaarsveld
1980
(2) SA 776
(NC)at 781C and De Wet NO v Mandelie (Edms)
Bpk
1983
(1) SA 544
(T) at 546 C-D).
Different
views have been expressed in the Provincial Divisions as to when
thereafter the certificate must accompany the application.
In the
Transvaal it has been held that the certificate must be obtained
before the application is filed and served and must accompany
such
filing and service. (Arnawil Investments (Pty) Ltd v Stamelman and
Another
1972
(2) SA
13
(W)
at 14 A; the Rennies Consolidated case, supra at 166 F-H; A Holman
Trading Co (Pty) Ltd v Pipeweld Construction and Erection
(Pty)
Ltd
1977
(4) SA 360
(T)
at 363 B-D; and De Wet NO v Mandelie (Edms) Bpk., supra, at 547 G-H.
In the Arnawil Investments case, supra, Marais J stated
(at 13-14)
that the purpose of the security requirement of sec 9(3) was to
discourage frivolous or vexatious proceedings against
solvent persons
and to safeguard such persons against monetary loss where such
proceedings are nevertheless brought. For security
to be an effective
brake on unfounded petitions for sequestration it was thought to be
necessary to insist on security being furnished
at some stage prior
to the incurring of costs by the respondent. That stage would be
reached before the service of the application
on the respondent.
Hence the words "the petition shall be accompanied by a
certificate". Marais J went on to say (at
14 B-C):
"The
use of the word 'shall' in conjunction with 'accompanied' in my view
also closes the door to means of proof other than
a prescribed
certificate, of the fact that the Master has been furnished with the
required security for costs. If this is the correct
construction of
the sub-section, a respondent served with a petition for his
sequestration would not be put to any expense whatever
if, at the
time of service, he finds no security certificate in the papers
served on him. And that does seem to have been the result
intended by
the Legislature."
[32]
The notice of motion was signed on 28 October 2022
.
The certificate of tendered security by the Master was delivered on
08 November 2022. I have already referred to the
contents
of the Master’s certificate. I accordingly reject the
respondents complaint that there was no compliance with
the legal
requirements.
Did
the Trust commit an act of insolvency?
[33]
Nel stated that First Rand Bank Limited instituted an action to
recover its debt from the MD Trust. It obtained
default judgment and
thereafter the sheriff attached the property in question. A sale in
execution was arranged to be held on 9
September 2022.
Thereafter the FirstRand Bank Limited and Nel who was the only
trustee remaining at the time , agreed to
cancel the sale in
execution subject to certain terms and conditions. They entered
into an agreement relating to payment
terms of the debt between MD
Trust and the First Rand Bank Limited.
[34]
The applicants refer in this regard to immovable property. In
Hassan
and Another v Berrange NO
[10]
,
Zulman
JA, considered, amongst others, the provisions of s 12(1) read with
sections 9(1)
;
8
(a) and
8
(d) of the
Insolvency Act. At
paragraph 45, he stated:
“
[45]
Meskin
21
in
dealing with
s 8(d)
states:
‘
It
is submitted that the word ‘removes’ and the word
‘remove’ have their ordinary meanings and affect the
meaning to be assigned, in this context, to the word ‘property’.
By the use of the latter word it is submitted, the
intention is to
refer only to corporeal movables, ie, property capable of being moved
physically from one place to another. The
intention is to hit a
debtor’s physical moving or attempted moving of any of his
corporeal movables from one place to another
(whether or not such
moving constitutes also a disposition (as defined in
section
2
of
the
Insolvency
Act) which
occurs
with the requisite intent. To speak of a ‘removable’ in
the context of immovable property or of an incorporeal
right is, it
is submitted, giving language its ordinary meaning, notionally
unsound.’
The
learned author refers for these propositions to
S
v Levitt
22
and
the reported judgment of the court
a
quo
23
and
to the definition of ‘property’ in
section
2
of
the
Insolvency
Act. This
definition
defines property as meaning ‘movable or immovable property
wherever situate within the Republic, …’.
It is not
necessary to decide in this case whether the learned author is
correct in restricting the meaning of the word ‘property’
in
section
8(d)
to
corporeal property. This is so since the transfer of a balance owing
to a debtor by his bank to another bank would be tantamount
to a
transfer of actual money, a corporeal, represented by the credit, as
was the situation in the present matter. In the context
of theft of
money represented by a credit our courts have accepted that a
misappropriation thereof can constitute or amount to
theft because
such misappropriation is the equivalent of the appropriation of the
actual corporeal money.
24”
[35] Lewis
JA , in the same judgment differed from the approach that the authors
in Meskin adopted. She
found that the word ‘property’
in general refers to both corporeals and incorporeals. Therefore, she
found, there can
be no reason to restrict its meaning in
section 8
(d) to movables only.
[36] A
disposition is defined in section 2 of the Act as “
... any
transfer or abandonment of rights to property and includes a sale,
lease, mortgage, pledge, delivery, payment, release,
compromise,
donation or any contract therefore, but does not include a
disposition in compliance with an order of court”.
[37] A
contract of suretyship, although not specifically mentioned in the
definition is a disposition since it
is a contract which provides for
a payment by the debtor.
[11]
A
creditor who has received such a disposition, and who wishes to avoid
the setting aside thereof needs to prove that , the disposition
was
made in the ordinary course of business
[12]
;
and it was not intended to prefer one creditor over another.
[13]
In this case that creditor would be the First Rand Limited, the
very creditor that supports the final sequestration order
[14]
.
[38]
The applicants allege that MD Trust made or attempted to make a
disposition of the property and or removed
or attempted to remove the
property, to the prejudice of his creditors or preferring one
creditor above another. Nel
admitted that the deeds of
sale were concluded but denied that the Trust had committed an act of
insolvency.
[39]
There are two deeds of sale that the applicants rely on. First is the
deed of sale between MD Trust and Arno
Bouwer. Nel represented
the Trust when he entered into that agreement. It was the
same trustee that entered into
the second one between the MD Trust
and the Nellie and Casper Family Trust. Johannes and Martha are
referred to the application
as unrehabilitated insolvents. The
respondents do not challenge the authority of Nel to enter into those
agreements instead they
admit that the MD Trust concluded those sale
agreements.
[40]
The applicants also rely on the agreement between the Trust and the
First Rand Bank Limited, which amounts
to the MD Trust abandoning or
transferring its rights to the property to the Bank. That , too,
constituted a disposition as envisaged
in the Act.
[41] In
Burger
N.O. and Others v Bester N.O. and Others
[15]
,
the
appeal was dismissed with costs on the basis that the application did
not engage the Constitutional Court’s jurisdiction.
However,
the Constitutional Court at paragraph 37 stated:
“
[37]
The second issue on which the applicants rely to establish
jurisdiction, relates to the authority of a trustee,
which is a legal
question. However, the law relating to the operation of a trust
is well-settled. The powers of a trustee
to act on behalf of
the trust are located within the four corners of the trust deed.
They provide for the circumstances in
which the actions of
trustees may bind a trust. Thus, a trustee acting outside the
parameters of the powers conferred on
her will be found not to have
acted on behalf of the trust. In Hoosen N.O v Deedat.
[16]
,
a trust deed was silent on the delegation of powers, rights, and
duties to a single trustee, but conspicuously made provision
for
collective action by the trustees. That Court rejected the
notion that a single trustee could act for a trust on her
own
initiative without her co-trustees’ authorisation. This
principle has not changed. In Land and Agricultural
Development Bank of SA v Parker (Land Bank)
[17]
the
same principle was reiterated by the Supreme Court of Appeal.
The broad context in that matter concerned a dispute
over a family
trust. The family trust was alleged to owe over R16 million to
the Land Bank which sought the payment of these
monies. The
question at the forefront of the enquiry was which circumstances had
bound the trust through the dealings of
its trustees. The
Supreme Court of Appeal said:
“
[A]
provision [in a trust deed] requiring that a specified minimum number
of trustees must hold office is a capacity-defining
condition.
It lays down a prerequisite that must be fulfilled before the trust
estate can be bound. When fewer trustees
than the number
specified are in office, the trust suffers from an incapacity that
precludes action on its behalf.”
[38] In
my view, nothing more needs to be said about the requirements to bind
a trust
. The requisite number of trustees must be in office
before the trust can be said to have acted.
The law is
settled on this point and the argument does not assist the
applicants.”
(my emphasis)
[42]
As aforementioned the respondents admit the agreements and associate
themselves with the actions of
Nel. I am satisfied that the
applicants proved that the MD Trust committed an act of insolvency
when it entered into the aforementioned
sale agreements, including
the payment arrangement agreement with the First Rand Bank Limited,
as envisaged in sections 8 (c) and
8(d) of the Act.
Has a liquidated claim
been established by the applicants?
[43] The
applicants allege that they have a liquidated claim of R2,350m,
alternatively R1,175m against the MD Trust.
Earlier on in the
founding affidavit the first applicant stated that the MD Trust is
indebted to Johannes’s estate either
in the amount of R1,175m
as a distribution or R2,858,485. In the alternative, they
claim that the apparent allocation
or distribution of R2 350 000.00,
has never been settled. Nel filed an answering affidavit where
he admitted that the funds
used to purchase the property were
borrowed from Johannes. He also stated that the financial statements
appear to reflect
the asset at cost and an allocation of that value(
and the value of the loan) to Johannes and Martha in discharge of the
indebtedness.
He further stated that if that is correct, then any
claim related thereto may have prescribed. In response to those
allegations
the second applicant stated:
“
AD
PARAGRAPH 7
13.
It is common cause that the money was lent. There is no evidence that
the loan and / or ‘apparent’
/ allocation was settled.
AD PARAGRAPH
8.1
It
is common cause that the loan was payable on demand. There could be
no prescription.”
[44]
The circumstances surrounding the loan are stated in Johannes’s
answering affidavit. He indicated
therein that he never
intended to reclaim the purchase amount advanced by him when the
property was purchased. This would
mean that it was a donation
but Nel stated that it was unlikely that it was a donation at
the insolvency hearing. He further
admitted that Johannes has a claim
against the MD Trust.
[45]
Johannes stated that he was advised of the benefits of reflecting the
loan in the Trust’s financial
statements, which advice he
believed to be correct at the time. He was further advised at the
time that an allocation as per the
statement and an agreement with
the trustees to settle the loan by providing surety as was needed by
the First Rand Bank Limited
as it was willing to grant the loan. He
confirmed that the agreement was concluded with the MD Trust in 2016
in terms of the advice
he received then. As aforementioned the
surety constituted a disposition. On this very issue Johannes
vacillated as
he contended that there was a loan, the Trust provided
surety for his loan with the First Rand Bank Limited and that there
was
an allocation or distribution which discharged the loan.
[46]
Nel had stated that it was a loan payable on demand. The
current trustee state that the loan was due
and payable in 2016.
They also state that the agreement between Johannes and the Trust was
a verbal one.
[47]
Given the various versions given by the respondents in relation to
the loan , on a balance of probabilities
, the version of the
applicants is to be preferred, namely that, since the loan was
repayable on demand, it has not prescribed.
I also find that
whether the indebtedness was discharged or whether the claim has
become prescribed are issues that have not given
rise to a genuine
dispute of fact. In any event, the respondents have not
availed themselves of their right to apply
for the deponents
concerned to be called for cross- examination under Rule 6 (5) (g) of
the Uniform Rules of Court in relation
to the loan to Johannes. I
find that the defences raised by the respondents are untenable.
They are not bona fide. In
Plascon
– Evans Paints (TVL) Ltd. v Van Riebeck Paints (Pty) Ltd
[18]
Corbett JA stated:
“
The existence of
disputes of fact does not, as I have indicated, necessarily preclude
a final interdict being granted. The main
consequence is simply that,
in terms of the above- mentioned general rule, where the affidavits
in this case raise real and bona
fide disputes of fact, the appellant
is bound to accept the respondent’s version of the facts.”
As stated above,
there are no genuine disputes of fact herein.
[48]
In
Kleynhans
v Van der Westhuizen NO
[19]
it
was held that a liquidated claim in terms of
s
9(1)
of
the
Insolvency
Act means
a claim where the amount is fixed either by agreement or by an order
of court or otherwise. What the legislature intended was that
there
should be certainty in connection with the amount of the claim.
[49]
I am satisfied that the applicants have established a claim
against the MD Trust.
Even if it were to be proved that there
was an allocation of R1,175 mil, there would still be an amount of
R1, 175 m outstanding
which will be more than the R100 prescribed in
the Act. The parties are in agreement that there was a loan for
the purchase
price of R2,350 000.00. It is also apparent that
that loan was not repaid.
For all the above
reasons I am satisfied that the applicants have established their
claim against the MD Trust.
Whether
sequestration of the Trust’s estate will be to the advantage of
creditors?
[50]
The loan to the Trust by Johannes was revealed in the insolvency
enquiry. On Johannes’s version the
loan was put on the
financial statements as a loan and as a repaid loan. It is not
disputed that the amounts relating to
the loan are different on the
statements. That calls for further investigations to enquire into the
affairs of the trust for the
benefit of the concursus. The
conduct of the MD Trust where it attempted to dispose of its sole
asset supports the applicants
allegations that placing the trust
under final sequestration will be to the advantage of all creditors.
There are no reasons
advanced by Johannes why he would loan to the
Trust a huge amount but have no wish of claiming it back. Once the
loan was discovered
, then he raised an allocation as having
discharged the debt. In my view that conduct if allowed to continue,
apart from the rands
and cents, would be prejudicial to the body of
creditors.
[51]
The applicants contend that the MD Trust is factually insolvent as
envisaged in section 8 of the Insolvency
Act No. 24 of 1936 (the Act)
in that it has one property valued at R4 175 000.00
but has liabilities to the value
of at least R 4 917 042.91.
It is for this reason that they conclude that MD Trust is
de
facto
insolvent in that some of its liabilities exceed the
fair value of its assets. The respondents simply denied this and
attempted
to raise the issue of movable assets in the amount of
R300 000.00. Even if that amount is taken into account there
will still
be a shortfall of about R600 000.00.
[52] I
am satisfied that the applicants proved that final sequestration of
the MD Trust will be to the advantage
of creditors. The creation of a
concursus creditorum will enable the supervised liquidation of the MD
Trust’s assets for
the objectively regulated benefit of all of
its creditors.
Costs
[53]
It follows that the applicants have been successful in the relief
they sought and are accordingly entitled
to their costs.
[54]
In the circumstances I accordingly make the following Order:
ORDER
1.
A final sequestration order be and is hereby granted in terms
of
section 12(1)
of the
Insolvency Act 24 of 1936
, sequestrating the
estate of the MD Trust, with reference number IT 46/2010.
2.
The applicants costs of the application, including all
reserved costs, as taxed or agreed, shall be included in the costs of
the
sequestration of the MD Trust with reference number IT 46/2010.
T.V. NORMAN
JUDGE OF THE HIGH
COURT
APPEARANCES:
For
the APPLICANTS :
ADV
DE LA HARPE SC
Instructed
by
:
JACO
ROOS ATTORNEYS INC.
129
GORDON ROAD
COLBYN,
PRETORIA
TEL:
012 430 7928
EMAIL:
jaco@jacoroos.co.za
/
jana@jacoroos.co.za
REF:
J ROOS/J REYNEKE/MAT1506
c/o
:
DE
JAGER & LORDAN INC.
2
ALLEN STREET
MAKHANDA
EMAIL:
marius@djlaw.co.za
For
the RESPONDENTS
:
MR
REHAN COETZEE (In Person)
STEENKAMP
& JANSEN INC.
5
BARNES STREET
WESTDENE
BLOEMFONTEIN
EMAIL:
litigasie@sdvc.co.za
REF:
R. COETZEE/DIP5/0005
c/o
:
McCALLUM
ATTORNEYS
OFFICE
NO. 10, FIDELITY BUILDING
87
HIGH STREET
MAKHANDA
EMAIL:
mike@mccallums.co.za
Matter
heard on
:
05
September 2024
Judgment
delivered on :
24
October 2024
[1]
Patel v Paruk’s Trustee
1944 AD 469
at 474; see also
Bowman N.O v Sacks and Others
1986 (4) SA
459
W at 461.
[2]
Stockdale and Another v Stockdale 2004 (1) SA 68 (C).
[3]
Stratford and Others v Investec Bank
Limited and Others [2015] JOL 32695 (CC).
[4]
Kalil v Decotex (Pty) Ltd. and Another
1988 (1) SA 943
(AD) at 956 G
– I.
[5]
Lindhaven Meat Market CC v Reyneke
2001 (1) SA 454
(W) at 459 C – D.
[6]
Lupacchini NO & another v Minister of Safety and Security
2010(6) SA 457 (SCA), para 22.
[7]
Ex
parte: Master of the High Court of South Africa (North Gauteng)
(2011 (5) SA 311
(GNP)) [2011] ZAGPPHC 105; 28042/11 (27 June 2011).
[8]
Robert
Thornton Smith
v
Kwanonqubela Town Council
(399/97)
[1999] ZASCA 58
;
[1999] 4 All SA 331
(A) (10 September
1999) at para 9.
[9]
Court v Standard Bank of SA Ltd ; Court v Bester NO ,
[1995] ZASCA 39
;
1995 (3)
SA 123
(A) paras 14-17.
[10]
Hassan
and Another v Berrange NO (170/05)
[2006] ZASCA 79
;
2012 (6) SA 329
(SCA) (31 May 2006).
[11]
Langeberg Kooperasie Bpk v Inverdoorn Farming and
Trading Co. Ltd 1965 (2) SA 597 (A) at 602.
[12]
Griffiths
v Janse van Rensburg NO and Another
[2016] 1 All SA 643
(
SCA).
[13]
Cooper
& Another NNO v Merchant Trade Finance Ltd
2000 (3) SA 1009
(
SCA).
[14]
Courier – IT S.A ( Pty )Ltd v Van Staden and Another ( 21/
6064) [2022] ZAGPJHC 94 (14 February 2022).
[15]
Burger N.O. and Others v Bester N.O. and Others (CCT 246/20) &
(CCT 160/20)
[2021] ZACC 48
;
2024 (1) BCLR 1
(CC) (13 December
2021).
[16]
Hoosen
N.O. v Deedat [1999] ZASCA 49; 1999 4 SA. 425 (SCA).
[17]
Land and Agricultural Development Bank of SA v Parker
[2004]
ZASCA 56
;
2005
(2) SA 77
SCA
(
Land Bank
).
[18]
Plascon
– Evans Paints (TVL) Ltd. v Van Riebeck Paints(Pty) Ltd. (
53/84) [ 1984]ZASCA 51; 1984(2)ALL SA 366(A)
[1984] ZASCA 51
; ;
1984 (3) SA 623
;
1984(3) SA 620( 21 May 1984) paragraph 24
[19]
Kleynhans
v Van der Westhuizen NO (198/69)
[1970] ZASCA 24
( 25 March 1970)