SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document
in compliance with the law and SAFLII Policy
REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG DIVISION, PRETORIA
Case Number: 38645/22
(1) REPORTABLE: YES/NO
(2) OF INTEREST TO THE JUDGES: YES/NO
(3) REVISED: YES/NO
DATE: 21/08/2025
SIGNATURE:
In the matter between:
EDUCATION AND TRAINING UNIT NPC Applicant
(Registration number: 2000/014669/08)
and
EDWARD MWANANDIMAI
(Zimbabwean Passport number: E[...]) Respondent
JUDGMENT
VAN ASWEGEN AJ
INTRODUCTION:
[1] This is an application for the final sequestration of the Respondent's estate on
the following grounds:
[1.1] Acts of insolvency as described in:
[1.1.1] section 8(c) of the Insolvency Act, 24 of 1936 ("the Act"),
by making or attempting to make a disposition of property
in a manner that could prejudice creditors or give
preference to one creditor over another;
[1.1.2] under section 8(e) of the Insolvency Act, by offering to
arrange with creditors for a release, either wholly or
partially, from debts; and
[1.1.3] in terms of section 8(g) of the Insolvency Act, by notifying
creditors of an inability to meet debt obligations.
FACTUAL MATRIX:
[2] The Respondent formed Lopdale Services and Investments (Pty) Ltd
(Registration number: 2015/018619/07), with the company’s start date noted
as 10 February 2015 and with the Respondent serving as both the sole
director and shareholder.
[3.1] A copy of the CIPC report for Lopdale Services and Investment (Pty)
Ltd, registr ation number 2015/018619/07, reflects its registered
address as 1[…] P[...] Road, Glen Austin, Midrand, Gauteng.
[3] The Respondent worked as an accountant at EDUCATION AND TRAINING
UNIT NPC (“ETU”), the applicant , from 11 July 2014 until voluntarily leavi ng
on or around 31 May 2020.
[4] Following the respondent’s resignation, the applicant became aware that,
during his period of employment, the respondent had misappropriated
substantial amounts of money. The respondent’s misappropriation of the
applicant’s funds occurred in the following ways:
[4.1] Payments meant for legitimate creditors like SARS were diverted to his
or Lopdale Services and Investments’ accounts (e.g., FNB 6[…]).
[4.1.1] An ETU internal investigation showed these payments did
not reach the intended recipients.
[4.2] FNB account 6 […], linked to the Respondent, received R678 972.22
between 14 January and 23 July 2015.
[4.3] Lopdale Services and Investments received R14 652 956.02 into FNB
account 6 […], with payments made from 4 August 2015 to 17
December 2019.
[4.4] Payments were made to account number FNB 6 […], totalling
R396 090.55. The first payment to this account occurred on 23 March
2018, and the last was on 23 October 2018.1
[4.5] The Respondent set up supplier accounts resembling exist ing ones,
directing payments to accounts linked to himself.
[4.6] The Respondent created a fake employee, C T Chipango, as part of
the applicant's Discovery Medical Aid Scheme, leading to fraudulent
contributions total ling R160 845.00 from 1 September 2017 to 1 April
2020.
[4.7] ETU paid R239 819.00 for the Respondent’s medical aid contributions
to Bestmed from 1 November 2016 to 1 April 2020, without deducting
these amounts from his salary.
[4.8] ETU also covered the Respondent’s cellular phone accounts, with no
recovery from his salary.
[4.9] The Respondent set up three debit orders on the applicant's account:
[4.9.1] Old Mutual;
[4.9.2] Omax Pearls;
[4.9.3] 2 Omax Pearls.
1 "RA3", " RA4", and "RA5" at 05-1 to 07-1
[4.10] The Respondent manipulated bank master data and payroll records to
gain unauthorized benefits.
[4.11] The Respondent initially had viewing rights to the banking system.
Subsequently, staff granted him payment loading access after he
requested further authorization.
[5] The Respondent's actions were discovered after Mr. Ebrahim Lockhat
became accountant and audited the accounts.
[6] The first fraudulent ETU payment was made on 14 January 2015 to SARS,
with a total of 384 such payments occurring during employment, the last being
on 1 April 2020. The payments are itemised in RA6.2
[7] Mr Lockhat's investigation found the Respondent misappropriated over
R17 million, with R6 797 715.60 (“the capital debt”) confirmed.
[8] ETU confronted the Respondent, who signed a written Acknowledgement of
Debt (“AOD”) on 11 September 2020.
[9] The respondent acknowledged the use of funds from ETU and confirmed that
the amount owed corresponds to the outstanding balance specified in Clause
4.3 of the signed Acknowledgment of Debt (AOD).3
[10] The capital debt is defined in clause 3.1 of the AOD as follows:
"The Debtor is truly and lawfully indebted and legally bound to the Creditor in
the amount of six million seven hundred and ninety -seven thousand seven
hundred and fifteen rand and sixty cents (6 797 715.60)."
[11] Clause 4 of the AOD reads as follows:
“4. THE CAUSE OF DEBT
2 08-1
3 RA7 at 09-1
[4.1] The Debtor admits that he stole several million rand from the
Creditor, the total amount stolen being in excess of the Capital
Debt.
[4.2] The Debtor has repaid certain of the money which he stole.
[4.3] The Debtor hereby acknowledges that the Capital Debt which
he owes to the Creditor is the outstanding balance of the
money which he stole from the Creditor.”
[12] ETU also filed a criminal case (Yeoville CAS 116/09/2020) for fraud.
PROVISIONAL SEQUESTRATION ORDER:
[13] On 28 October 2024, Hassim J granted a provisional sequestration order,
returnable on 29 November 2024.4
FINAL RELIEF SOUGHT:
[14] The applicant in the final sequestration order relies on three acts of insolvency
as outlined in:
[14.1] section 8(c) – involving the disposition or attempted disposition of
property that could prejudice creditors or prefer one creditor over
another;
[14.2] section 8(e) – involving an offer to arrange with credi tors for partial or
full release from debts;
[14.3] and section 8(g) of the Insolvency Act 24 of 1936 (“the Act”) – where
notice was given to creditors regarding the inability to pay debts.
[15] The application is founded upon two letters, identified as RA85 and RA96, and
the disposition of capital amounts to a certain Mr. Pillay. Although both letters
were marked “ without prejudice ”, prejudice is only claimed in respect of the
4 0001-18
5 10-1
6 11-1
letter of 6 September 2021 - RA8. I will address this point later on in th is
judgment.
[16] On or about 6 September 2021, correspondence was received from the
Respondent's attorney indicating the following:7
"Our client is willing to settle the amount outstanding of R1 777 000.00.
However, he can only afford an amount of R100 000.00 (One Hundred
Thousand Rand) Monthly (sic) due to the Covid -19 Pandemic and the current
looting unrest, which has affected our client business."
[17] The contents of this letter suggest that the Respondent is attempting to s ettle
the outstanding balance by proposing payment of the lesser amount of
R100 000.00 on a monthly basis due to the Covid -19 Pandemic and the
looting unrest.
[18] In a letter dated 11 October 2021, the Respondent offered to pay
R10 907 928.90, starting 31 January 2022 over a period of 72 months , which
is less than the outstanding balance of R17 104 921.64. 8
[19] A certificate of balance i ndicating an amount of R17 104 921.64 was issued
after all transactions were confirmed by the relevant banks.9
[20] The Respondent has not made any payments since June 2021.
[21] On 12 February 2022, ETU was informed of an urgent application regard ing
the sequestration of the Respondent and the liquidation of Lopdale Energy, a
company of which the respondent is the sole director, 10 scheduled for hearing
on 15 February 2022. The First Respondent acted as co -principal surety for
investment loans given by Mr S Pillay to Lopdale Energy.
7 RA8 at 10-1
8 RA9 at 11-1
9 RA10 at 12-1
10 RA11 at 13-1
[21.1] It is apparent from a win -deed search – RA1111 that the registered
address of Lopdale Energy (Pty) Ltd (registration number
2019/054992/07) was initially reflected as 3 […] O[…] Avenue,
Observatory, Johannesburg, Gauteng, which is the registered place of
business of the applicant . It can be reasonably inferred that the
Respondent operated his business from the premises without the
consent of the applicant.
[22] On 14 February 2022, the applicant communicated its intention to intervene in
the proceedings.
[23] On 15 February 2022, the applicant received notification that Mr Pillay, the
creditor, had withdrawn his application s and would not be proceeding with
them.
[24] On 2 February 2022, t he respondent asked Mr Pillay to renegotiate payment
terms, as noted in RA13.12
“RE: SUMENTHBEN POOBALAN PILLAY/EDWARD MAWANANDIMAI AND
LOPDALE ENERTY (PTY LTD
The above subject matter.
It is our instruction to re -negotiate with you the terms surrounding the
Acknowledgment of Debt signed by yourself and our client on 18 th day of
October 2021. I n respect of this agreement our client undertook to pay
R1 500 000.00 (One Millio n Five Hundred Thousand Rand) to you on or
before the 4th day of each month following the month of January 2022 until the
amount is liquidated.
Instruction reveals that our client also undertook to pay the same amount on
or before the 4 th of January 2022 but failed to pay the full amount . In respect
of your letter pertaining to this shortfa ll you instructed our client to pay the
amount of R250 000.00 on the 4 th of January 2022 in order to have
11 13-1
12 15-1
indulgence for the remaining outstanding balance which was to be paid on the
18th of January 2022.
We regret to inform you that our client's business is not preforming as
anticipated and that owing to same he will not be able to expunge the full
R1 500 000.00 instalments on a monthly basis as agreed. We understand
your frustration surrounding the financial commitments not being honoured
and our client shares this sentiment as the circumstances are beyond his
control as well.”13 (my underlining)
[25] The only reasonable inference drawn is that a payment was made to Mr
Pillay, after which Mr Pillay withdrew the proceedings. As a result, a
disposition or arrangement occurred with Mr Pillay that altered the
Respondent’s financial obligations to the applicant, either partially or entirely.
EVALUATION OF FINAL SEQUESTRATION ORDER
[26] Section 12 of the Act requires creditors to prove the following for a final
sequestration order:
[26.1] Debt: The creditor has a liquidated claim of at least R100 against the
debtor.
[26.2] Insolvency: The debtor’s liabilities exceed his/her assets, or an act of
insolvency has occurred.
[26.3] Advantage to Creditors: Sequestration is likely to yield a dividend for
creditors.
[27] The founding affidavit and Certificate of Balance submitted b y the applicant
states that the respondent owes R17 104 921.6414. A subsequent
reconciliation dated after 9 July 2021 reports an amount of R11 028 039.76
owed.15
13 RA13 at 15-1
14 12-1
15 21-43
[28] The evidence indicates that, in a letter dated 6 September 2021, the
respondent acknowledged that the amount of R1 777 000.00 was owed to the
applicant.16 Paragraph 9 thereof states:
“9. Our client is willing to settle the amount outstanding of R1,777,000.00.
However, he can only afford an amount of R100,000.00 (One Hundred
Thousand Rand) Monthly due to the Covid -19 Pandemic and the current
looting unrest, which has affected our client business.” (my underlining)
[29] In correspondence dated 11 October 2021 ("the October 2021 letter"), the
respondent formally committed to paying the sum of R10 907 928.90 over a
period of 72 months.17
“3. However, for the sake of moving forward pending the finalization of
the SARS issues, our client therefore propose settlement of the
following:
3.1 Payment of the amount of R10,907,928.90 (Ten Mil lion Nine
Hundred and Seven Thousand Nine Hundred and Twenty -Eight
Rand Ninety Cent) over 72 months. First payment will be 31 st of
January 2022. Kindly note that this settlement proposal should not
be construed as admission that our client is liable for no t paying to
SARS. But, for the purpose of avoiding back and forth which will cost
both parties time.
3.2 Once the SARS issues is resolved or sorted the settlement
agreement will be reviewed.” (my underlining)
SEPTEMBER 2021 LETTER
[30] The respondent stated that the September 2021 letter is inadmissible as
evidence because the admissions appear in the letter labelled " without
prejudice" by his attorney.
16 RA8 at 10-1
17 RA9 at 11-1
[31] As a general principle, negotiations between parties aimed at resolving a
dispute are protected from disclosure, regardless of whether they are
expressly marked as “without prejudic e”. However, simply including the
phrase "without prejudice" does not, by itself, determine whether a document
is protected from disclosure in litigation.
[31.1] In Jili v South African Eagle Insurance Co Ltd 18 it was found -
"No conclusive legal significance attaches to the phrase
"without prejudice". The mere fact that a communication carries
the phrase does not per se confer upon it privilege against
disclosure, for example where there exist no dispute between
the parties or it does not form part of a genuine attempt at
settlement... nor is a communication unadorned by that phrase
always admissible in evidence, for it will te protected from
disclosure if it forms part of settlement negotiations."
[32] An offer made on a 'without prejudice' basis can be used as evidence of
insolvency. In insolvency cases, admissions of insolvency are generally not
privileged, regardless of context, because of public policy.
[33] Indebtedness is protected from disclosure only if documented during
settlement negotiations.
[33.1] In Naidoo v Marine & Trade Insurance Co Ltd 1978 (3) SA 666
(A), Trollip JA explained that " without prejudice" communications
allow parties to negotiate settlements without such offers being
considered admissions of liability, referencing Lord Mansfield's
perspective on compromise offers.
[34] The author's subjective intention in using " without prejudice " is irrele vant.
Instead, intention should be assessed objectively, based on how a reasonable
18 1995 3 SA 269 N at 275B
recipient would interpret the correspondence as a whole. The objective
assessment must be made having regard to all the correspondence.
[35] It is clear that there was no ea rlier correspondence before the September
letter.
[36] In the September 2021 letter 19, the respondent's attorney stated that certain
amounts should be deducted from the total of R17 686 038.90. The
respondent did not dispute this total.
[37] The letter st ated that the respondent owed R1 777 000.00, not R11 028
039.76 as shown in the reconciliation. Therefore, the respondent's attorney
indicated that certain amounts should be deducted from the total of R17 686
038.90.
[37.1] The respondent repaid R7 100 000.00
[37.2] Of this, R6 242 558.21 was reportedly paid to SARS on behalf of
the applicant, with claimed confirmation.
[37.3] Three payments totalling R2 093 487.63 were made for the
applicant, pending confirmation.
[37.4] R541 182.94 involves five "Eddy transaction list" items, which
the respondent denied liability for.
[38] The letter does not refer to ongoing negotiations, nor does it demonstrate that
the respondent agreed to pay R1 777 000.00 to avoid litigation. This payment
was calculated by the respondent’s attorney as the actual amount owed,
differing from the applicant’s calculation of R11 028 039.76 . The
acknowledgment of the R1 777 000.00 debt is not considered protected from
disclosure.
OCTOBER 2021 LETTER
19 RA8 at 10-1
[39] The letter dated 11 October 2021 ( “the October 2021 letter ”)20, appears to be
in response to a letter from the applicant's attorney with an attached excel
spreadsheet. The respondent's attorney stated that payments had been made
to SARS on the applicant's behalf and that "all the requested documents will
be provided as soon as possible, [the re spondent was] busy putting the
documents together". The said letter is also labelled "without prejudice".
[40] The respondent in this letter concedes a debt of R10 907 928.90, less any
payments already made to SARS.
[41] His offer to repay this amount in 7 2 instalments constitutes an act of
insolvency under section 8(g) of the Act. Whil st the debt admission may be
protected, the act of insolvency is not.
[42] Although the October letter is marked " without prejudice ", the respondent
does not contend that it is protected from disclosure, which contrasts with the
position taken concerning the September letter.
[43] He argued that paragraph 6.9 of the founding affidavit —which addresses the
October 2021 letter —as well as other sub -paragraphs of paragraph 6, were
irrelevant, scandalous, and vexatious, and do not further the Applicant’s claim.
[44] Unlike with the Septem ber 2021 letter, the respondent did not claim that this
letter was protected from disclosure.
[45] The respondent’s decision not to assert protection from disclosure of the
October 2021 letter may be construed in one of two ways:
[45.1] The October 2021 letter does not pertain to the settlement of a
dispute and, as such, is not privileged; or
[45.2] The respondent had waived privilege.
20 RA9 at 11-1
[46] The respondent cites MacKay v Cahi 1926 (4) SA 193 (O) at 206 as authority
for the position that requestin g additional time to pay a debt does not amount
to an act of insolvency.
[46.1] In this case, it was determined within the context of section 8(e) of
the Act (and not section 8(g)) that the respondent's proposal to
pay 25 cents in the Rand, contingent on r eceiving an extension
until the end of the year for payment of the balance, did not
amount to an arrangement for release from debts, either wholly or
partially, based on the facts presented. Consequently, it was not
considered an act of insolvency.
[47] In the October 2021 letter, the respondent acknowledges a debt of
R10 907 928.90, less any amounts paid to SARS. The assertion that
repayment of R10 907 928.90 can only be made in instalments over 72
months is regarded as an act of insolvency in terms of section 8(g) of the Act.
While the admission of the debt may be protected from disclosure, the act of
insolvency itself is not.21
MONIES LENT TO LOPDALE ENERGY – ACKNOWLEDMENT OF DEBT
[48] Mr Pillay lent significant funds to Lopdale Energy (Pty) Ltd ("Lopdale"), whose
director and sole shareholder is the respondent, leading to an
acknowledgment of debt for R18 750 000.00 signed by the respondent.
[49] The debt acknowledgment signed by Lopdale Energy (Pty) Ltd and the
Respondent in favour of Mr Pillay on 18 October 2021, along with related
correspondence and payments made , shows that by 4 January 2022 the
respondent and Lopdale Ene rgy (Pty) Ltd had paid Mr Pillay at least
R1 250 000.00 and subsequently more.22
[49.1] The said acknowledgment of debt states as follows:
21 Absa Bank Ltd v Hammerle Group 2015 (5) SA 215 (SCA) para 13
22 EM6 at 43-1
“We, the undersigned,
LOPDALE ENERGY (PTY) LTD
[Registration Number: 2019/054992/07]
and
EDWARD MWANANDIMAl
[Passport Number E[…]]
(hereinafter referred to as "the Debtors")
do hereby acknowledge ourselves to be truly Indebted unto and in
favour of SUMENTHEREN POOBALAN PILLAY (hereinafter referred
to as the "Creditor”), his successors in title or assigns, In the sum of
R18 750 000.00 (Eighteen million seven hundred and fifty
thousand rand) (hereinafter termed as the Capital Sum), being the
agreed indebtedness due, owing and payable by the Debtors to the
Creditor arising out of the three investment agreements as described
in the settlement agreement.”
[50] The respondent does not claim his estate was solvent at the time of payment.
He denies committing an act of insolvency under section 8(c), arguing there is
no proof he disposed of property to prejudice or prefer creditors. He also
notes the applicant failed to specify the prope rty or its disposition. The
respondent stated that “Lopdale Energy (Pty) Ltd ” fulfilled its agreement with
Mr Pillay and that it is a separate legal entity.
[51] Contrary to the respondent’s claim that “Lopdale Energy (Pty) Ltd” fulfilled the
agreement with Mr Pillay , payment records show funds came from accounts
other than that of Lopdale Energy (Pty) Ltd, specifically:
[51.1] Lopdale Services and Investments and
[51.2] Mr. Edward Mwananadimai – Lopdale Business Account.23
[52] The foregoing indicates that Lopdale Services and Investments, another legal
entity where the respondent holds a directorial position, also made payments
23 EM6 at 43-1
in connection with the agreement. Additionally, the respondent facilitated
payments to Mr. Pillay through the Mr. Edward Mwanandimai – Lopdale
Business Account, which is a business account managed by the respondent.
[53] The statement that the respondent failed to make payment to Mr Pillay is
accordingly not correct.
[53.1] It is abundantly clear from the respondent’s answering affidavit
with reference to RA13 24 that the respondent had requested an
indulgence from Mr Pillay to renegotiate payment of
R500 000.00 instead of R1 500 000.00. The Respondent
himself would have made these payments as is indicated here in
below:
“When regard is had to the Applicant's Annexure "RA13" as
mentioned in paragraph 6.16 of the founding affidavit, being a
letter dated 02 February 2022 to Pillay, in that letter, I had
requested Pillay an indulgence to renegotiate the terms of the
agreement to allow me to pay R500 000.00 to him instead of
R1 500 000.00 that we had initially agreed on.” 25
[54] The applicant used First National Bank's online system to chec k the FNB
proofs of payment from the respondent, as shown in Annexure "SRRS1". 26
Fourteen payments were validated, but sixteen could not be verified. Since
ABSA Bank lacks an online verification system, their proofs of payment could
not be tested.
[54.1] The applicant alleged that it is concerned that:
[54.1.1] the respondent may have provided unverifiable
proofs of payment and
[54.1.2] that without independent verification, there is no
assurance that the payments are accurate.
24 15-1
25 Paragraph 24 at 21-6
26 23-202
[54.2] Therefore, the applicant argued for an independent review of the
respondent's finances.
[55] Payment was made to Mr Pillay after the respondent indicated that he could
pay his debt of R1 777 000.00 to the applicant in monthly instalments of
R100 000.00, requiring 72 mont hs to fully settle the amount (as stated in the
September letter). The October letter referred to the respondent’s
acknowledgment of indebtedness to the applicant in the amount of
R10 907 928.90. It is evident that the payments made by the respondent to Mr
Pillay led to Mr Pillay receiving payment before the applicant.
[56] The applicant argued that a fair and equitable distribution of the respondent's
estate among creditors by a trustee serves the best interests of all the
creditors. Additionally, the applicant asserted that a trustee's investigation may
identify assets suitable for liquidation, thereby facilitating the repayment of the
respondent's debts and providing further benefit to the creditors.
RESPONDENT’S OPPOSITION TO SEQUESTRATION ORDER:
[57] The respondent, in his supplementary answering affidavit, opposes the
sequestration for the following reasons:
[57.1] The respondent is factually solvent.
[57.2] The respondent disputes the amount of debt claimed by the
applicant.
[57.3] Sequestration of the respondent is not expected to benefit creditors.
[57.4] The court may use its discretion not to grant a final sequestration
order.
[58] I will address the se grounds for opposing th e final sequestration order in the
sequence as set out here in above.
FACTUALLY SOLVENT
[59] The respondent asserted that he is solvent.
[60] The respondent however failed to fully disclose his assets in his initial
answering affidavit, only addressing them in his supplementary answering
affidavit. He claims his balance sheet “ EM1"27 lists all assets and liabilities,
with equities – shares and securities of R145 021 256.52. However, there is
no confirmatory affidavit from the accounting officer – Tshepisho Moshapo - or
any other supporting documentation, such as a sworn appraisement, provided
to substantiate his claim of solvency, except for an offer to present documents
at the hearing. Counsel for the respondent sought to submit documentation to
the court on the date of the hearing to support his claim of solvency; however,
counsel for the applicant objected. The objection was upheld on the grounds
that the respondent had sufficient opportunity to disclose these documents in
both the answering and supplementary answering affidavits but failed do so.
The applicant also did not have insight in these documents before the hearing
date.
[60.1] According to EM1 - the balance sheet - the value of the respondent’s
assets and liabilities both amount to R153 201 256.52, indicating
they are equal and offset each other.
[61] The applicant relies upon acts of insolvency in this application for a final
sequestration order rather than factual insolvency.
[62] The Insolvency Act 24 of 1936 has designated certain acts or omissions by a
debtor as “ acts of insolvency” and, if the sequestrating creditor can prove to
the satisfaction of the court that the debtor has committed one of these acts of
insolvency, it is not necessary to prove actual insolvency. 28 It accordingly
follows that a debtor’s estate may be sequestrated even though he or she is
technically solvent.29
27 36-1
28 Agricultural & Industrial Mechanisation (Vereeniging) (Edms) Bpk v Lombard 1974 1 SA 291
O 293; De Villiers v Maursen Properties (Pty) Ltd [1983] 4 All SA 517(T); 1983 4 SA 670 (T).
O 293; De Villiers v Maursen Properties (Pty) Ltd [1983] 4 All SA 517(T); 1983 4 SA 670 (T).
29 DP du Plessis Prokureurs v Van Aarde 1999 4 SA 1333 (T) 1335
[63] The applicant relied upon committed acts of insolvency in the September and
October letters. I will deal with these letters here in below:
SEPTEMBER 2021 LETTER
[64] The September letter reads as follows:
"2. Instruction reveals that our client entered into an Acknowledgement of
Debt (...AOD) with your company …
3. Instruction also reveals that after signing the AOD.... our client kept to the
terms of the agreement of paying R6 797 715.60 (....). These payments
were paid in full by our client.
4. In terms of paragraph 4.2 and 4.3 of the AOD signed ...the paragraph
stated clearly that both parties 'agreed that our client had repaid part of
the money back' and our client acknowledges the capital debt which he
owes.
5. According to the reconciliation statement sent to our client ...it is stated
that the total amount our client owed, which was R17 686 038.90 in the
reconciliation statement. It was also confirmed that our client had paid
R7 100 000.00 and you confirmed our client paid SARS on your behalf of
[sic] an amount of R6 242 558.21 which has brought the outstanding
balance owed ... to R4 071 003.89. Attached hereto the reconciliation
statement as 'Annexure A2'
6. In addition, there were three payments in dispute by [the applicant] which
our client paid on behalf of [the applicant] and it does not reflect on the
reconciliation statement as yet.
[The applicant] is yet to confirm these payments which are payments for:
• Surge Partners R 560 000.00
• IPSOS R 1 000 000.00
• IPSOS R 533 487.63
TOTAL: R 2 093 487.63
Please find the attached proof of payment of the above payments hereto
as 'Annexure A3'
7. Instruction also revealed that our client received a statement from [the
applicant] called 'Eddy transaction list'. On the list our client dispute [sic]
the transaction [sic] stated to be used by our client. Ou client denied being
liable with the following on the transaction list which are:
• …
Total: R541 182.94
8. Lastly after deducting the above amounts from R4 071 003.89 outstanding
and the reconciliation statement the total amount owed by our client to [the
applicant] will be R1 777 000.00.
9. Our client is willing to settle the amount outstanding of R1,777,000.00.
However, he can only afford an amount of R100,000.00 (One Hundred
Thousand Rand) Monthly due to the Covid -19 Pandemic and the current
looting unrest, which has affected our client business.” (my underlining)
10.
[65] In the September 2021 letter, the respondent's attorney acknowledged the
misappropriated amount of R17 686 038.90 but argued that certain
deductions applied. The purpose of the letter was to contend that the
respondent owed R1 777 000.00 , not R11 028 039.76 as claimed by the
applicant.
[66] The said letter was neither part of negotiations nor to stop litigation.
[67] The agreement to pay R1 777 000.00 was also not an offer of compromise.
[68] The said letter is also not protected from disclosure . In Lynn & Main Inc v
Naidoo 2006 1 SA 59 (N) 65–67; [2005] JOL 15372 (N), it was held that an act
of insolvency could be proved and relied upon even though it was contained in
a letter marked ‘without prejudice’.
[69] An offer, even if made 'without prejudice' , is admissible as evidence of
insolvency because public policy requires that admissions of insolvency not
be protected in insolvency proceedings, regardless of privilege.
[70] In terms of subsection 8(g) of Act 24 of 1936 , a debtor commits an act of
insolvency ‘if he gives notice in writing to any one of his creditors that he is
unable to pay any of his debts.’
[71] A typical instance of a section 8(g) notice arises when the debtor, or their legal
representative, sends correspondence to the creditor indicating that the debtor
is currently unable to discharge the debt in full and proposes to settle the
obligation through instalment payments.30
[72] In the September correspondence, the respondent stated a willingness to
settle the amount of R1 777 000.00. However, he noted that, as a result of the
COVID-19 pandemic and the looting unrest, he was only abl e to commit to
monthly payments of R100 000.00.31
[73] Even though the September 2021 letter, does not state that the respondent
cannot pay the debt, the inference arising from the request for time to pay the
amounts referred to in the letter as well as th e undertaking to pay the amount
by way of instalments, is that the respondent is unable to pay the debt.32
[74] In Standard Bank of SA Ltd v Court 1993 (3) SA 286 (C) at 132 the Court
said:
"A debtor who gives notice that he will only be able to pay his debt in the
future gives notice in effect that he 'is unable' to pay. A request for time to pay
a debt which is due and payable will, therefore, ordinarily give rise to an
inference that the debtor is unable to pay a debt and such a request contained
in writing will accordingly constitute an act of insolvency in terms of s 8(g).
30 Goldblatt’s Wholesalers (Pty) Ltd v Damalis 1953 (3) SA 730 (O) 732.
31 Paragraph 9 at 10-3
32 Standard Bank of South Africa Ltd v Court 1993 (3) SA 286 (C) at 293 B-C.
This is particularly so where the request is coupled with an undertaking to pay
the amount due and payable by way of instalments".
[75] A letter requesting instalments to pay debts in full serves as an indication that
a person cannot meet their debts through normal means, and is considered
written notice of inability to pay any debts under section 8(g) of the Insolvency
Act. Precedent for this interpretation is found in cases such as Chenille
Industries v Johannes Hendrik Vorster 1953 (2) SA 691 (O); Union Bank of
SA Ltd v Fainman 1939 WLD 303; Joosub v Soomar 1930 TPD 773; Lipworth
v Alexander & Barkhan 1927 TPD 785.
[76] Therefore, the respondent has committed an act of insolvency as
contemplated in section 8(g) of Act 24 of 1936.
OCTOBER 2021 LETTER
[77] The October 2021 letter reads as follows:
"The subject matter refers dated 3rd October 2021.
1. We acknowledge the [sic] receipt of your letter and excel sheet.
2. On instruction, our client still maintains the fact that payments
were paid to SARS on behalf of [the applicant]. All the requested
documents will be provided as soon as possible; our client is
busy putting the documents together.
3. However, for the sake of moving forward pending the finalisation
of the SARS issues, our client therefore propose [sic] settlement
of the following [sic]:
3.1 Payment of the amount of R10,907,928. 90 (ten million
nine hundred and seven thousand nine hundred and
twenty-eight rands and ninety cent) over 72 months. First
payment will be 31" of January 2022. Kindly note that the
settlement proposal should not be construed as an
admission that our client is liable for not paying to SARS.
But, for the purpose of avoiding back and forth which will
cost both parties [sic] time.
3.2 Once the SARS issues is [sic] resolved or sorted the
settlement agreement will be reviewed."(my underlining)
[78] The October letter is marked " without prejudice "; however, the respondent
does not claim that it is exempted from disclosure.
[79] In the October correspondence, the respondent therefore proposed to settle
the amount of R10 907 928.90 (Ten Million Nine Hundred and Seven
Thousand Nine Hundred and Twenty -Eight Rand and Ninety Cents) over a
period of 72 months. The initial payment was scheduled for 31 January 2022.
[80] This also constituted an act of insolvency in terms of section 8(g) of Act 24 of
1936. Even if the admission of a debt of R10 907 928.90 is protected from
disclosure, the act of insolvency is not.33
ACKNOWLEDGEMENT OF DEBT – MR PILLAY
[81] The acknowledgment of debt signed in favour of Mr Pillay, a creditor, on
18 October 2021 —approximately six weeks after the September 2021 letter
and one week after the October 2021 letter —together with correspondence
from the respondent to Mr Pillay, indicates that by 4 January 2022 the
respondent and Lopdale Energy (Pty) Ltd had paid at least R1 250 000.00 to
Mr Pillay, and even far more if one has regard to the payments made to Mr.
Pillay.34 The respondent does not state whether his estate was solvent when
these payments were made . It is furthermore clear from the respondent’s
answering affidavit that the respondent had requested an indu lgence for
himself to pay to Mr Pillay an amount of R500 000.00:
“When regard is had to the Applicant's Annexure "RA13" as mentioned in
paragraph 6.16 of the founding affidavit, being a letter dated 02 February
33 Absa Bank Ltd v Hammerle Group 2015 (5) SA 215 (SCA) at paragraph 13.
34 EM6 at 43-1
2022 to Pillay, in that letter, I had reque sted Pillay an indulgence to
renegotiate the terms of the agreement to allow me to pay R500 000.00 to
him instead of R1 500 000.00”. (my emphasize and underlining)
[82] The respondent denied committing an act of insolvency, arguing there's no
proof he dis posed of property to the detriment or preference of creditors. He
also states the applicant failed to specify the property or how it was disposed
of.
[83] Mr Pillay was paid at least R2 250 000.00 from the respondent’s Lopdale
business account in addition to payments made by Lopdale Service and
Investments and Lopdale Energy’s accounts in the approximate amount of
R12 550 000.00.35
[84] These payments were made at a time when the respondent had indicated that
he was unable to pay his debt of R1 777 000.00 to the applicant other than in
instalments of R100 000.00 per month and that he needed 72 months to pay
the amount offered in the October letter, namely R10 907 928.90.
[85] The respondent explai ned that the debt was between S. Pillay and Lopdale
Energy (Pty) Ltd, a separate legal entity. He only signed as surety, which
becomes relevant only if the debtor defaults, but that Lopdale Energy paid its
debt in full. The respondent asserted he did not c ommit an act of insolvency,
nor did he pay as surety; the company fulfilled its own obligation.
[86] The respondent annexed notifications of payments as Annexure EM6.36
[87] These notifications indicate that payments were received not only from
Lopdale Energy (Pty) Ltd but also from the respondent’s other legal entit y
Lopdale Services and Inv estments and from Mr. Edward Mwanandinai -
Lopdale Business’ Account.
35 EM6 at 43-1
36 43-1
[88] About R2 250 000.00 was paid by the respondent from his Lopdale Business
Account to Mr Pillay, which disadvantaged the applicant by giving preference
to Mr Pillay.
[89] This behaviour is an act of insolvency in terms of section 8(c) of Act 24 of
1936. This section stipulat es that a debtor is deemed to have committed an
act of insolvency if they make, or attempt to make, any disposition of their
property with the intent to disadvantage their creditors or to favour one
creditor over others.
[89.1] A disposition of property occurred at a time when the respondent
had stated that he was unable to settle his debt of R1 777 000.00 to
the applicant except by making monthly instalments of R100 000.00,
and that he would require 72 months (6 years) to pay th e amount
proposed in the October letter, specifically R10 907 928.90.
[89.2] Such dispositions effected and prejudiced the applicant.
[90] The applicant’s case is accordingly founded on acts of insolvency based upon
sections 8(c) and 8(g) of the Act and not on factual insolvency.
[91] In his answering affidavit, the respondent did not specify the value of his
assets and liabilities. This information was provided only in the supplementary
answering affidavit as Annexure EM1. 37 In his supplementary answering
affidavit he disclosed:
[91.1] Nedbank Home Loan and BMW Finance as his creditors;
[91.2] that he acts as a surety for Lopdale Services and Investment
(Pty) Ltd and for an FNB business overdraft on behalf of the
same company.
[91.3] that his liability as surety is R4 000 000.00, monthly serviced;
[91.4] his total personal and surety liabilities amount to
R8 000 000.00.
37 36-1
[92] The respondent submitted his individual balance sheet, labelled " EM1",38
which lists all his assets and liabilities. The net worth (equity) the respondent
recorded as approximately R145 021 256.52. However, t he respondent’s
assets and liabilities both amount to R153 201 256.52, indicating they are
equal and offset each other.
[93] On computing the respondent’s liabilities and equity as set out in EM1 it
became clear that the total amounts to R153 416 575.80 and not to
R153 201 256.52. Annexure “EM1” is accordingly incorrect an d is further
unsupported by a confirmatory affidavit of the accounting officer. Its
evidentiary value is in my mind questionable.
[94] The unresolved issue is further why the respondent, with assets of
R145 021 256.52, did not pay the amounts of R1 777 000.00 and
R10 907 928.90 as proposed.
[95] In De Waard v Andrew and Thienhaus Ltd 1907 TS 727 at 733 , Chief Justice
Innes held that the stance of a debtor who fails to settle their debts, yet
contends that his assets substantially outweigh his liabilities, is subject to
scrutiny.
"The Court has a large discretion in regard to making the rule absolute; and in
exercising that discretion the condition of a man's assets and his general
financial positi on will be important elements to be considered. Speaking for
myself, I always look with great suspicion upon, and examine very narrowly,
the position of debtor who says, I am sorry that I cannot pay my creditor, but
my assets far exceed my liabilities'. To my mind the best proof of insolvency is
that a man should pay his debts - and therefore I always examine in a critical
spirit the case of a man who does not pay what he owes,"
38 36-1
[96] In ABSA Bank Ltd v Rhebo kskloof (Pty) Ltd & others 1993 (4) SA 436 (C) at
443D-F, the court examined the onus placed on the respondent to
demonstrate in the High Court that the debtor was “actually” insolvent, as well
as the approach to evaluating the evidence on this matter:
“… where … it is incumbent on [a debtor’s] unpaid creditor seeking to
sequestrate the former's estate to establish actual insolvency on the requisite
balance of probabilities, it is not essential that in order to discharge the onus
resting on the creditor if he is to achieve this purpose that he set out chapter
and verse (and indeed figures) listing the assets (and their value) and the
liabilities (and their value) for he may establish the debtor's insolvency
inferentially. There is no exhaustive list of facts from which an inference of
insolvency may be drawn, as for example an oral admission of a debt and
failure to discharge it may, in appropriate circumstances which are sufficiently
set out, be enough to establish insolvency for the purpose of the prima facie
case which the creditor is required to initially make out. It is then for the debtor
to rebut this prima facie case and show that his assets have a value
exceeding the sum total of his liabilities. … It is true that in the De Waard v
Andrews case the question of solvency or insolvency on the part of the debtor
turned on the commission of an act of insolvency but there is no good reason
to confine the language used in that case to those cases only in which an act
of insolvency is involved. ... That [the respondent] is actually insolvent was
sufficiently established and certainly so on an inferential basis where a precise
assessment of his assets and liabilities cannot be made” (my underlining)
[97] Other courts have found respondents factually insolvent based on their failure
to present rebuttal evidence, even without proof of an act of insolvency. For
instance, in Van Wyk Von Ludwig & Hanekom Inc v Ferguson [2001] 2 All SA
instance, in Van Wyk Von Ludwig & Hanekom Inc v Ferguson [2001] 2 All SA
592 (C) at paras 24 –28, although the respondent claimed in a further affidavit
that his finances had improved, the court noted:
“… he does not … elaborate to what extent his position has improved. He,
likewise, dismisses [the applicant’s] allegations of his assets and liabilities and
gives a terse and unconvincing response . He submits that his assets exceed
R13 million. He, however, does not specify how they are made up. This
information is peculiarly within the respondent’s knowledge. He does not take
the court into his confidence.” (my underlining)
[98] The respondent, despite being given a chance to clarify and substantiate his
estate, submitted annexure EM1, which is unverified and contains a
calculation error. At the hearing, his counsel sought to introduce further
documents to support the estate's value, even though there were previous
opportunities to do so in both the answering and supplementary affidavits. As
previously indicated, these documents were likewise not furnished to the
Applicant’s counsel prior to the hearing.
[99] No explanation has been offered in relation to the September and October
correspondence as to why the payment terms were not met, notwithstanding
the presence of a considerable estate.
[100] The respondent has not demonstrated transparency or candour in disclosing
the value of his estate. The details concerning the value of his estate are
uniquely within his knowledge. He has not refuted the applicant's established
prima facie case of insolvency.
DISPUTED DEBT:
[101] The respondent disputes the debt in both the answering and supplementary
affidavits, contending that debt determination is not the purpose of a
sequestration application, citing Badenhorst v Northern Construction
Enterprises Ltd 1956 (2) SA (T).
[102] The Acknowledgment of Debt specifies a capital debt of R6 797 715.60 under
clause 3.1, as well as an additional amount exceeding the capital debt. Clause
4, which states the cause of debt, is set out as follows:39
39 RA7 at 09-4
“4. THE CAUSE OF DEBT
[4.1] The Debtor adm its that he stole several million rand from the Creditor,
the total amount stolen being in excess of the Capital Debt.”
[103] Upon examination of the Acknowledgment of Debt executed between the
applicant and the respondent, it is clear from clause 4.1 tha t the respondent’s
liability extends beyond the capital debt (amount) owed.
[104] It is evident that any sum exceeding the capital debt constitutes an
outstanding payment obligation. This position contradicts the respondent's
affidavit, in which he claims no debt exists due to a payment of R7 100 000.00
under the AOD.
[105] The respondent’s admissions that he stole several million rand from the
applicant and that the amount is more than the capital debt is in itself telling.
These admissions contradi ct the respondent’s allegation in his answering
affidavit that he denies liability.40
[106] The respondent contended that:
[106.1] there is a factual dispute about the amount owed, which cannot
be settled in liquidation proceedings and that
[106.2] the applicant had properly initiated trial proceedings to address
this dispute.
[107] The respondent's admission that the debt amount is disputed and should be
decided in court indicates acceptance of some indebtedness which is in line
with the signed AOD.
[108] The computation of the sum due and owing by the respondent’s attorney, as
set out in the September 2021 letter, further substantiates both the existence
40 Paragraph 18 at 21-5
of the respondent’s indebtedness to the applicant and the respondent's
recognition thereof.
[109] Based on the September 2021 letter, the respondent did not contest the
amount of R17 686 038.90; this figure was used by the respondent’s attorney
to calculate the respondent’s indebtedness at R1 777 000.00. Additionally, as
stated in the October 2021 lett er, the acknowledged amount is either
R10 907 928.90 or the difference between R10 907 928.90 and the amount
owed by the applicant to the South African Revenue Services (SARS).
[110] It is evident that there is a debt which significantly exc eeds R100.00 and is
easily ascertainable.
[111] If a debt is disputed it should however always be on reasonable and bona fide
grounds.
[111.1] "It is not sufficient for a respondent in a sequestration application
merely to dispute the claim of an applicant creditor. A claim must
be disputed on bona fide grounds" (SJC v TRC (10837/2016;
19689/2016; 17728/2021) [2022] ZAWCHC 256 (11 May 2022)
par 39).
[112] In these sequestration proceedings, there is no bona fide or substantial
dispute capable of impeding the Applicant. At most, the Respondent contests
the precise amount of the debt relied upon by the Applicant; however, such
contestation lacks reasonable grounds. "In other words, the applicant has
prima facie dis charged the onus of showing that it has an enforceable claim
upon which to base its application. The fact that the exact amount of that
claim is disputed, does not affect the position (cf. Re Tweeds Garages Ltd
[1962] 1 All ER 121)" (Prudential Shippers SA Ltd v Tempest Clothing Co
(Pty) Ltd 1976 (2) SA 856 (W) at 867). Aside from disputing the amount owed,
the Respondent does not present a substantive defence to the Applicant's
claim. The evidence indicates that the Respondent owes a debt to the
Applicant. Therefore, the Applicant has established a prima facie case that the
Respondent is indebted in the amount of at least R100.00.
[113] Whilst the respondent challenged the exact amount of the applicant's claim, it
is undisputed that the applicant is a creditor under section 9(1) of the Act.
ADVANTAGE TO CREDITORS:
[114] The responsibility to prove the existence of an advantage to creditors lies with
the sequestrating creditor at all times, even if it is evident that the debtor has
committed an act of insolvency - Wilkens v Pieterse 1937 CPD 165 . In
addressing this matter in Paarl Wine & Brandy Co Ltd v Van As 1955 (3) SA
558 (O), De Villiers J stated at 560:
“The fact that an act of insolvency has been committed is in itself not
necessarily material to the question whether sequestration will be to the
advantage of creditors. While some acts of insolvency, from their nature, tend
to show that sequestration will be to the advantage of creditors, as, for
instance, where the debtor has given preference and there is consequently
matter for investigation, other acts of insolvency, such as a nulla bona return,
provide no reinforcement for the contention that the sequestration will be to
the advantage of creditors.”
[115] The applicant has alleged that the granting of the sequestration order will be
to the benefit of the concursus creditorum.
[116] The Insolvency Act aims to liquidate an insolvent person’s estate and
distribute assets fairly among creditors according to set preferences. The
trustee is responsible for collecting, realising, and distributing these assets. To
protect the estate, sequestration transfers ownership from the debtor to the
Master, and then to the appointed trustee.
[117] It is not necessary for the applicant to demonstrate direct fin ancial gain, as
other benefits may exist, such as preventing the inequitable distribution of the
respondent’s assets among only certain creditors, facilitating the examination
of the respondent, or enabling a trustee to investigate the respondent’s
affairs41 in addition to the broader legal mechanisms provided by the
Insolvency Act.42 It should be noted, however, that the mere right to conduct
investigations or examinations does not, in itself, constitute an advantage to
creditors. Such rights become advantageous only when there is a reasonable
likelihood that the investigation will uncover or recover additional assets.
[118] In Standard Bank v Van Zyl 1999 (2) SA 221 (O) the applicant contended that
an insolvency interrogation was essential in the cir cumstances as there was a
reasonable possibility that additional assets could be located, which possibility
had to be pursued.
[118.1] The court held that it was clothed with a discretion to establish
whether there would be an advantage to creditors. This
discretion required the Court to conduct an analytical
investigation and evaluation of all the relevant facts and
circumstances in order to decide which process or method was
the most advantageous for the creditors as a group. (At 225A -
B.)
[119] The applicant argued that it would be beneficial for all creditors if:
[119.1] the respondent had a substantial estate with a nett worth
amounting to R145 021 256.52 as alleged or even more.
[120] In this matter, the respondent has failed to fully and transparently disclose his
current assets and liabilities despite being given sufficient opportunity through
his answering and supplementary affidavits.
[121] Annexure “EM1” to the supplementary answering affidavit does not
substantiate the respondent's claim of solvency. The respondent has not
41 Pelunsky & Co v Beiles 1908 TS 370 372; Wilkins v Pieterse 1937 CPD 165 170.
42 Stainer v Estate Bukes 1933 OPD 86 90.
provided supporting documentation, such as a sworn statement of assets and
liabilities, to enable the Court to assess his financial status with confidence.
The accounting officer did not submit a confirmatory affidavit, and the
calculations of liabilities and equity contain inaccuracies as previously
mentioned. During the hearing, documentary evidence was presented to proof
the estate, however the applicant raised an objection which was upheld, for
reasons as explained here in before.
[122] The respondent states that he owns four immovable properties with a net
value exceeding R20 400 000.00, as well as shares and securities v alued at
approximately R145 021 256.52 . Based on this, creditors could benefit
financially if the respondent’s estate is placed under sequestration.
[123] In accordance with sections 80bis and/or 82 of the Insolvency Act 24 of 1936 ,
the trustee is authorised to assume control of the assets and may dispose of
them through private treaty.
[124] Furthermore, through the machinery of the Insolvency Act, the respondent's
trustee/s can:
[124.1] exercise the respondent's shareholding in an y company and, if
determined to be appropriate, realise the same for the benefit of
his creditors;
[124.2] call up any loan accounts in his companies;
[124.3] determine whether the respondent earns an income from his
directorships, which can be dealt with in terms of section 23(5) of
“the act;
[124.4] any shares held by the respondent in the companies can be
exercised on his behalf by his duly appointed trustees and
ultimately realized for the benefit of his creditors;
[125] Except as previously indicated, the respondent’s financial interests remain
unidentified and require further examination by a trustee. Such an inquiry may
elucidate the respondent’s true financial position. Accordingly, a trustee’s
investigation may uncover funds and assets pertinent to the interests of the
respondent’s creditors.
[126] Whilst investigating, the trustee will examine, among other matters, the
assets, business affairs, and any entities in which the respondent holds an
interest. Should any assets be identified, the trustee is obligated to assume
control over them to prevent their removal or disposition to the potential
detriment of creditors. The trustee must also implement appropriate measures
to safeguard the interests of the respondent’s creditors.
[127] An investigation will reveal the nature and extent of any assets for the benefit
of the general body of creditors.
[128] Payments were also made to Mr Pillay in terms of the acknowledgement of
debt signed with Lopdale Energy (Pty) Ltd 43 by another legal entity – Lopdale
Services and Inv estments and the respondent’s Lopdale business account.
These payments may warrant investigation. The payments also constituted
acts of insolvency as defined in section 8(c) of the Act, representing
dispositions made subsequent to the First Respondent’s expressed intention
to make payments outlined in the September and October 2021 letters, which
themselves qualify as acts of insolvency under section 8(g) of the Act. The
trustee possesses the authority to administer this process.
[129] In Dunlop Tyres (Pty) Ltd v Brewitt 1999 (2) SA 580 (W) at 583 the following
was stated in respect of an advantage to creditors:
“it will be sufficient that a creditor in an overall view on the papers can show
for example that there is a reasonable gr ound for coming to the conclusion
that on a proper investigation by way of an inquiry and section 65 a trustee
may be able to unearth assets which might then be attached, sold and the
proceeds disposed of for distribution amongst creditors.”
43 RA16 at 18-1
[130] This court must evaluate whether sequestration will result in some payment
which will benefit the body of creditors.
“For example, it is up to the court to assess whether the sequestration will
result in some payment to creditors as a body: that there is a substantial
estate from which the creditors cannot get payment, except through
sequestration, or that some pecuniary benefit will redound to creditors.”44
[131] It would be advantageous for all creditors if the transfer of capital to Mr Pillay
were subje cted to investigation. There will be the advantage of a full
investigation of the respondent ’s affairs under the very extensive powers of
enquiry given by the Act. (Meskin & Co v Friedman 1948 (2) SA 555 (W) at
559)
[132] In Hillhouse v Stott; Freban Inves tments (Pty) Ltd; Botha v Botha 1990 (4) SA
580 (W) at 585C-D Leveson J held:
“To return to the proposition made by Roper J in the Meskin case supra, the
Court need not be satisfied that there will be advantage to creditors, only that
there is reason to believe that that will be so. That in turn, in my opinion, leads
to the conclusion that the expression ‘reason to believe’ means ‘good reason
to believe’. The belief must be rational or reasonable and, in my opinion, to
come to such a belief, the Court must be furnished with sufficient facts to
support it.”
[133] There is ‘good reason to believe’ that a trustee will be able to ascertain and
investigate the value of the respondent’s estate and any dispositions made.
COURT EXERCISE DISCRETION:
44 Stratford and others v Investec Bank Ltd and others 2015 (3) SA 1 (CC) par [45] at 19.
[134] Even if the court is satisfied that the three facta probanda enumerated in the
Insolvency Act45, namely:
[134.1] a claim of at least R100.00,
[134.2] an act of insolvency of insolvency and
[134.3] reason to believe that it will be to the creditors advantage, have
been established on a balance of probabilities,
it still has a discretion, which must be judicially exercised, to grant a final order
or not to do so.46 Each case turns and must be decided upon its own facts.
[135] Sequestration is a discretionary remedy and, in each case, the court's
overriding judicial discretion must be exercised in the light of the facts and
circumstances proved in the affidavits.47
[136] With regard to the meaning of advantage to creditors the courts have
repeatedly cited the dictum in Meskin & Co v Friedman (1948 2 SA 555 (W)
559) that there must be “ a reasonable prospect - not necessarily a likelihood,
but a prospect which is not too remote - that some pecuniary benefit will result
to creditors ”. In Meskin, the court discussed the concept of “ indirect”
advantages (see also Stainer v Estate Bukes 1933 (OPD) 86 at 90 ), referring
to benefits that are not inherently pecuniary, such as the abi lity to investigate
the affairs of the insolvent under the statutory powers of enquiry. The court
clarified that the right to investigation does not constitute an advantage per se
(see also London Estates (Pty) Ltd v Nair 1957 3 SA 591 (N) 592 at para 559;
Mamacos v Davids 1976 1 SA 19 (C) 22 at paras 21F -22C). Instead, this right
serves as a potential mechanism for securing material benefit for creditors, for
instance through the recovery of improperly disposed property or the
45 Section 12 (1)(a) – (c) of Insolvency Act 24 of 1936.
46 Trust Wholesalers & Woollens (Pty) Ltd v Mackan [1954] 2 All SA 74 (N) ; 1954 2 SA 109 (N)
113; Julie Whyte Dresses (Pty) Ltd v Whitehead [1970] 3 All SA 303 (D) ; 1970 3 SA 218 (D)
113; Julie Whyte Dresses (Pty) Ltd v Whitehead [1970] 3 All SA 303 (D) ; 1970 3 SA 218 (D)
219; Terblanche v Offshore Design Co (Pty) Ltd 2001 1 SA 824(C) 828. Cf Port Shepstone
Fresh Meat & Fish Co (Pty) Ltd v Schultz 1940 NPD 163 in which the court expressed the view
that if an applicant has proved an act of insolvency, and there is reason to believe that
sequestration will be to the advantage of creditors, very special considerations are necessary to
disentitle the applicant to his or her order.
47 Julie Whyte Dresses (Pty) Ltd v Whitehead 1970 (3) SA 218 (D) 1970 (3) SA 218 (D); [1970]
3 All SA 303 (D) 304.
disallowance of questionable or collusive claims. The decision in Meskin
further establishes that it is not necessary to demonstrate the existence of
assets in the insolvent estate. Rather, it is sufficient to show a reasonable
prospect that an investigation pursuant to the Insolvency Act may lead to the
discovery of assets for the benefit of the creditors (Meskin supra para 559).
[137] It has been established that, in applications for compulsory sequestration, an
advantage to creditors is generally demonstrated when the petitioning cr editor
shows that the debtor possesses a substantial estate available for
sequestration and that creditors are unable to secure payment by any means
other than sequestration (see Hill & Co v Ganie 1925 (CPD) 242 245; Trust
Wholesalers & Woolens (Pty) Ltd v Mackan 1954 2 SA 109 (N) 111;
Realizations Ltd v Ager 1961 4 SA 10 (N) 11; Mamacos v Davids supra par
20C).
[138] The advantage to creditors requirement plays a central role in the exercise of
the court’s discretion . Courts focus on creditors’ interests i n assessing this
requirement because the Act mandates it for sequestration applications.
[139] I have addressed the benefit to creditors, as well as the reasons why it aligns
with the interests of the creditor group. Importantly no creditor should obtain
any undue advantage over other creditors. In this case, significant capital
sums were distributed to Mr. Pillay. Further investigation and examination of
both the insolvent party and relevant witnesses may uncover ass ets that have
been disposed of, potentially resulting in a benefit for the creditors.
[140] The respondent directed my attention to Chenille Industries v Vorster 1953 (2)
SA 691 (O) , in which the court exercised its discretion to decline
sequestration. The decision was made after the debtor submitted independent
evidence indicating the solvency of their estate, even though there was an act
of insolvency and all other requirements for a sequestration order were met.
of insolvency and all other requirements for a sequestration order were met.
[141] The aforementioned case is distingui shable from the present matter, as the
respondent's claim of solvency is based on Annexure “ EM1”, which lacks
substantiation and appears to be inaccurate. The respondent has managed
and disclosed his estate with insufficient transparency, a nd supporting
documentation was presented solely at the hearing, notwithstanding the prior
submission of both an answering affidavit and a supplementary answering
affidavit.
[142] In my considered view, the interests of justice are most effectively served by
the court exe rcising its discretion to grant a final sequestration order. Issuing
such an order would be advantageous to the creditors, as it would activate the
relevant provisions of the Insolvency Act to enable an investigation of the
estate for their benefit.
PENDING CRIMINAL CASE
[143] Whilst judgment was pending in the provisional sequestration application, a
combined summons (case number 2024 -112995) was served on the
respondent. The summons advances claims against the respondent and two
additional defendants relating to the same debt that is the subject of both the
sequestration and related criminal proceedings. Counsel for the applicant
stated that action proceedings were initiated to prevent the applicant's
(plaintiff’s) claim from becoming prescribed.
[144] The respondent a lleged that the funds were deposited into his account
following approval from certain directors of the applicant, who were aware of
the intended purpose of the payment. He also claims that the applicant has
not fully disclosed to the court the extent of his responsibilities, stating that his
role was limited to being an accountant with viewing rights only.
[145] The respondent also stated that depositing funds into his bank account
required authorisation from two company directors with p ayment authority.
According to the applicant's standard operating procedure, all transactions
and transfers of funds from its account had to be authorised by two
individuals.
[146] I was referred to Gilfillan t/a Grahamstown Veterinary Clinic and Another v
Bowker 2012 (4) SA 465 (ECG) , in which the respondent contested the
granting of a final order of sequestration on the basis that such an order could
be detrimental to her position in ongoing criminal proceedings.
[146.1] The applicant in the aforesaid matter had filed theft charges
against the respondent with the South African Police Service
(SAPS). In Standard Bank of South Africa Ltd v Johnson 1923
CPD 303, as referenced in Gilfillan t/a Grahamstown Veterinary
Clinic and Another v Bowker, the court indicated that a
provisional order of sequestration should be set aside if criminal
proceedings are pending. The court stated:
"It seems to me that danger might arise if the provisional order
were allowed to stand and the matter be postponed. T he sum of
£5,525.00 forms part of the amount involved in the criminal
proceedings, and I do not think that I can make the order final. If
I did, I would really find that Johnson owed the money whereas
the matter is in dispute in the criminal proceedings. J ohnson
denies his indebtedness, and says that in view of the criminal
proceedings, he cannot go into the matter.”
[147] The court however in Gilfillan t/a Grahamstown Veterinary Clinic and Another
v Bowker 2012 (4) SA 465 (ECG) with reference to Cilliers et al Herbstein &
Van Winsen: Civil Practice of the High Court of South Africa 5 ed vol 1 at 314
stated that: There is no rule of law which precludes civil proceedings
continuing in circumstances where there is a pending criminal prosecution.
[148] This matter is distinguishable from the one before me in that the respondent
did not allege that the final sequestration order will prejudice him in the
criminal proceedings.
[149] I agree with Goosen J that an applicant in seeking final relief must on a
balance of probabilities meet the requirements for a final sequestration order.
This involves evaluating whether:
[149.1] the applicant has a liquidated claim over R100 against the
respondent,
[149.2] whether the respondent is insolvent or has committed an act of
insolvency, and
[149.3] whether granting sequestration would benefit creditors.
[150] The evaluation is based upon the evidence presented in a case.
[151] Goosen J stated that the prosecution in a criminal trial i s required to prove
each element of the alleged offence beyond a reasonable doubt using
admissible evidence. Additionally, the findings in a civil case are not binding
on other courts, even if similar evidence is presented.48
[152] In determining whether to grant the final sequestration order, it is not
necessary to determine the dispute regarding the exact amount owed by the
respondent. It suffices that the applicant possesses a liquidated claim
exceeding R100.
[153] The respondent 's acknowledgment of the misappropriating of funds
constitutes a liquidated claim (see Irvin & Johnson Ltd v Basson 1977 (3) SA
1067 (T)). Furthermore, the respondent has admitted to owing in excess of the
capital debt. Both the September and October 2021 letters indicate that the
amounts acknowledged by the respondent are greater than R100.
CONCLUSION
[154] Having considered all the evidence the applicant has on a balance of
probabilities established the requirements for a final sequestration order in
terms of section 12 of the Act.
48 Gilfillan t/a Grahamstown Veterinary Clinic and Another v Bowker 2012 (4) SA 465 (ECG)
[154.1] There is an admitted debt (excess) of more than R100, which is
admitted in the AOD.
[154.1.1] Clause 4.1 provides as follows:
“4. THE CAUSE OF DEBT
[4.1] The Debtor admits that he stole several million
rand from the Creditor, the total amount stolen
being in excess of the Capital Debt.
[154.2] The applicant committed acts of insolvency in terms of section 8(g)
and section 8(c) of the Act.
[154.2.1] The evidence indicates that, in a letter dated 6
September 2021, that the respondent acknowledged that
the amount of R1 777 000.00 was owed to the
applicant.49 (section 8(g) Paragraph 9 thereof states:
“9. Our client is willing to settle the amount
outstanding of R1,777,000.00. However, he can
only afford an amount of R100,000.00 (One
Hundred Thousand Rand) Monthly due to the
Covid-19 Pandemic and the current looting unrest,
which has affected our client business.”
[154.2.2] In the October 2021 letter, the respondent
acknowledges a debt of R10 907 928.90 , less any
amounts paid to SARS. The assertion that repayment of
R10 907 928.90 can only be made in instalments over
72 months is regarded as an act of insolvency in terms
of s ection 8(g) of the Act. While the admission of the
debt may be protected from disclosure, the act of
insolvency itself is not.50
[154.2.3] Mr Pillay was paid at least R2 250 000.00 from the
respondent’s Lopdale business account in addition to
payments mad e by Lopdale Service and Investments
49 RA8 at 10-1
50 Absa Bank Ltd v Hammerle Group 2015 (5) SA 215 (SCA) para 13
and Lopdale Energy’s accounts in the approximate
amount of R12 550 000.00.51
[154.2.3.1] These payments were made at a time
when the respondent had indicated that he
was unable to pay his debt of R1 777
000.00 to the applicant other than in
instalments of R100 000.00 per month and
that he needed 72 months to pay the
amount offered in the October letter,
namely R10 907 928.90. (section 8(c))
[154.3] It will be to the advantage of the creditors if there is a final
sequestration. More so because there was a disposition of amounts
to Mr Pillay at a time when the respondent in terms of the September
and October 2021 letters proposed payments over 72-month
periods.
[155] The respondent failed to rebut the applicant's prima facie case of insolvency,
which was based on acts of insolvency. Furthermore, the respondent did not
manage or disclose his estate w ith sufficient transparency, a nd supporting
documentation was provided only at the hearing, despite the prior submission
of both an answering affidavit and a supplementary answering affidavit.
[156] In my considered opinion, the interests of justice are be st served by the court
exercising its discretion to grant a final sequestration order. The issuance of
such an order would benefit all the creditors by invoking the pertinent
provisions of the Insolvency Act, thereby facilitating an investigation of the
estate for their advantage.
Order:
[1] The estate of the respondent is placed under final sequestration
51 EM6 at 43-1
_________________
S VAN ASWEGEN
ACTING JUDGE OF THE HIGH COURT
PRETORIA
For the Applicant: Adv R Peterson instructed by
Glover Kannieappan Inc
For the Respondent: Adv HL Kelaotswe
instructed by Alabi Inc Attorneys