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[1995] ZASCA 39
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Court v Standard Bank of South Africa Ltd., Court v Bester NO (133/93, 638/93) [1995] ZASCA 39; 1995 (3) SA 123 (AD); [1995] 2 All SA 440 (A) (30 March 1995)
IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE DIVISION)
In the matter between
Case No 133/93
BARBARA KILROY
COURT Appellant
and
STANDARD BANK OF SOUTH
AFRICA
LIMITED Respondent
Case No 638/93
BARBARA KILROY COURT Appellant
and
LAMBERTUS VON WIELLIGH BESTER NO 1st
Respondent
BAREND JOHANNES VORSTER DURANDT NO 2nd Respondent
STANDARD BANK
OF S A LTD 3rd Respondent
SYFRETS BANK LIMITED 4th Respondent
CORAM: Joubert, Vivier, Eksteen, F H Grosskopf et
Nienaber JJA.
HEARD: 28 February 1995.
DELIVERED: 30 March 1995.
JUDGMENT
2
VIVIER JA:
The appeals in these two matters were heard together for
reasons which will become clear later. In case no 9245/91 ("the sequestration
proceedings") the appellant appeals to this Court against a final order for the
sequestration of her estate granted by Scott J in
the Cape Provincial Division
on 8 March 1993. The order was granted on the application of the respondent in
this appeal ("Standard
Bank"). The application was supported by an intervening
creditor, Syfrets Bank Ltd ("Syfrets Bank"), whose costs were ordered by
Scott J
to be paid out of the assets of the estate. The appeal was brought in terms of
sec 150
of the
Insolvency Act 24 of 1936
("the
Act") prior
to its amendment by
sec 1
of Act 129 of 1993. After the appellant had failed to lodge the record of
the proceedings in the Court appealed from by 7 June 1993,
as required by Rule
5(4)(c) of the Rules of the
3
Appellate Division ("the AD Rules"), case no 9716/93 was instituted in the
Cape Provincial Division. In that case the joint trustees
in the insolvent
estate ("the trustees") as first and second applicants, Standard Bank as third
applicant and Syfrets Bank as fourth
applicant, sought an order on notice of
motion declaring the appeal in case no 9245/91 to have lapsed and authorising
the trustees
to realise the immovable properties vesting in the insolvent
estate. The matter came before Brand J who granted the relief claimed.
With the
leave of this Court the appellant appeals in forma pauperis against the judgment
of Brand J and the orders granted by him.
The respondents in this appeal are the
joint trustees as first and second respondents (Barend Johannes Vorster Durandt
NO having
been substituted as second respondent for Marius van den Berg NO),
Standard Bank as third respondent and Syfrets Bank as fourth respondent.
There
is also before us an
4
application for condonation of the late lodging of the requisite copies of
the appeal record in the sequestration proceedings. This
application is opposed
by Standard Bank.
It is convenient to deal first with the application for
condonation. The background facts may be summarised as follows: The
sequestration
proceedings were launched on 11 July 1991. After answering and
replying affidavits had been filed an agreement was reached in terms
of which
the application for sequestration would be held over pending an attempt to sell
certain of the appellant's immovable properties
in order to pay her creditors.
The properties were not sold and the matter proceeded. A further set of
answering and replying affidavits
was filed and the matter eventually came
before Scott J ("the first hearing"). Having reserved judgment thereon the
learned Judge
on 14 September 1992 delivered judgment placing the appellant's
estate under provisional
5
sequestration. The judgment has been reported: Standard Bank of SA Ltd v
Court
1993 (3) SA 286
(C). I shall refer to this judgment as the first
judgment.
The return day of the provisional order was extended from time to time and
the appellant was allowed to file a further opposing affidavit.
On 24 February
1993 the appellant's biggest creditor, Syfrets Bank, applied to intervene, also
seeking a sequestration order. On
8 March 1993 the return day of the provisional
sequestration order was argued before Scott J, ("the second hearing"), the
appellant
appearing in person after her erstwhile attorneys had withdrawn. On
that day Scott J granted a final order of sequestration. I shall
refer to this
judgment as the second judgment.
On 31 March 1993 the appellant lodged a notice of appeal but she thereafter
failed to lodge the record within three months of
6
the date of the judgment appealed against, ie on or before 7 June 1993. On 13
May 1993, ie within the three month period, the appellant
requested Standard
Bank to agree to an extension of eight weeks for the lodging of the record and
she gave notice to the registrar
of this Court that she had so requested an
extension. Standard Bank's attorneys reacted in a fax on 18 May 1993 stating
that they
would in due course take instructions from their client. It was only
on 4 June 1993 that they notified the appellant that Standard
Bank would not
accede to her request. By then it was clearly too late to lodge the record in
time. It had not yet been lodged when
case no 9716/93 for an order declaring the
appeal to have lapsed was instituted on 10 August 1993.
The appellant's
explanation for the delay is the following. The day after the final order of
sequestration was granted ie on 9 March
1993 she asked Sneller Recordings
("Snellers"), the sole
7
contractors for the preparation of appeal records, for a quotation for the
preparation of the requisite number of copies of the record.
She only received
this on 26 March 1993. She was unable to raise the amount required and on 14
April 1993 she requested a quotation
for only one copy which was given to her
the following day. She then investigated the possibility of preparing the record
herself
and after being advised against doing so, she instructed Smellers on 30
April 1993 to prepare one copy of the record. She was then
informed that
Snellers required a deposit of R3 000,00 before they would start preparing the
record. After further negotiations Snellers
on 5 May 1993 agreed to commence the
preparation of the record upon payment of a deposit of R300,00, the balance of
R2 700,00 being
payable on a date to be arranged. Snellers undertook to have the
record available by 28 May 1993. The deposit was duly paid. On 6
May 1993 Mrs
Digue from
8
Snellers informed her that some of the documents in the case were missing and
had apparently been misplaced. The appellant consequently
on 7 May 1993, 25 May
1993 and 8 June 1993 addressed letters to the registrar of the Supreme Court in
Cape Town asking him to attend
to the incomplete record as a matter of urgency.
No reply was received to any of these letters. On 28 May 1993 Snellers notified
her that "a bundle of missing documents, about 400 in number", had been found
which needed to be sorted out. The attorneys for Standard
Bank were requested to
make their file available to Snellers in order to reconstruct the record from
these documents and their file
was handed to Snellers on 16 June 1993. Snellers
thereafter required some further documents which caused a further delay. On 1
September
1993 Snellers completed the preparation of one copy of the record
which the appellant uplifted the following day. On
9
10 September 1993 the requisite number of copies of the record were lodged
with the registrar of this Court and delivered to Standard
Bank's attorneys. The
record consists of nine volumes and runs to 755 pages. The application for
condonation was filed on 20 September
1993.
In my view it is clear from the
aforegoing that the delay in lodging the record was mainly due to the fact that
documents were mislaid
in the Cape Town Supreme Court. For that the appellant
can certainly not be blamed. I cannot accept, as has been suggested on behalf
of
Standard Bank, that the appellant was all along in possession of a fully
paginated and indexed copy of the Court's papers and
that she could have seen to
the preparation of the record herself. She denies this suggestion, the facts do
not support it and it
is highly unlikely. I accordingly accept that the delay in
complying with AD Rule 5(4)(c) was largely caused by
10
factors beyond the appellant's control.
Other factors usually weighed by this Court in considering a petition for
condonation under AD Rule 13 include the importance of the
case, the prospects
of success, the respondent's interest in the finality of the judgment, the
convenience of the Court and the avoidance
of unnecessary delay in the
administration of justice (per Holmes JA in Federated Employers Fire and General
Insurance Co Ltd and
Another v McKenzie 1969(3) SA 360 (A) at 362 F-G).
The
appeal is without doubt a matter of vital importance to the appellant. On the
other hand her creditors clearly have an interest
in the finality of the
judgment which is a factor militating against the granting of the indulgence
(per Trengove AJA in Mbutuma
v Xhosa Development Corporation Ltd 1978(1) SA 681
(A) at 686 F - 687 A). Two other factors mentioned viz the
11
convenience of the Court and the avoidance of unnecessary delay are not
important in the present circumstances. There is no or minimal
inconvenience to
the Court and the delay was not great and was largely beyond the control of the
parties.
In view of the fact that the other factors, either alone or cumulatively, are
not of decisive importance, it becomes necessary to
consider the appellant's
prospects of success on appeal.
The appellant, who appeared in person at the
hearing of this appeal, submitted that the application for sequestration was
fatally
defective for want of compliance with sec 9(3) of the Act in that when
the application was issued by the Registrar and served on
her it was not
accompanied by a certificate of the Master that security had been given. The
same point was raised at the first hearing
and rejected by Scott J (see the
first judgment at 288C-291G). The security certificate requirement of sec 9(3)
is presently to be
found
12
in sec 9(3) (b) which was inserted in the former sec 9(3) by sec 1
of Act
122 of 1993. The wording of the requirement has, however,
remained
unchanged.
Sec 9(3) (b) provides :
"The facts stated in the petition shall be confirmed by affidavit and the
petition shall be accompanied by a certificate of the Master
given not more than
ten 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 estate until
a trustee
has been appointed, or if no trustee is appointed, of all fees and
charges necessary for the discharge of the estate from
sequestration."
Sec 9(4) further provides that before a petition
is presented to the court, a copy of the petition and of every affidavit
confirming
the facts stated in the petition must be lodged with the Master or
designated officer who may report to the court on the petition.
In
13
terms of sec 1 of the Petition Proceedings Replacement Act 35 of 1976 the
reference in sec 9 to proceedings by way of petition must
be read as a reference
to proceedings by way of notice of motion. The relevant facts are the following:
The notice of motion and
founding affidavit were signed on 11 July 1991. The
bond of security was executed on the same day. Also on the same day the notice
of motion and founding affidavit (without the certificate) were filed with the
Registrar who issued the application and allocated
a case number to it. The
original papers and copies were immediately uplifted and copies were served on
the Master on the same day
ie 11 July 1991, together with the original bond of
security. A combined Master's report in terms of sec 9(3) and 9(4) of the Act
was issued by the Master on 12 July 1991. On 15
14
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
15
(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
16
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
17
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."
As was pointed out by Leon J in RSA Factors Ltd v
Hansen
1983 (4)
SA 873
(D & CLD) at 874 H, there is nothing
in sec 9(3) which provides
that the security must in any way relate
18
to the respondent's costs. The costs of opposition are not the costs referred
to in the subsection. The precursor to the present sec
9(3) (b) was sec 9(2) (b)
of Act 32 of 1916, which was similarly worded and required security to be
furnished "for payment of all
fees and charges necessary for the prosecution of
all sequestration proceedings until a trustee has been appointed, or if no
trustee
is appointed all fees and charges necessary for the discharge of the
estate from sequestration". In Sliom v Couzyn
1924 TPD 279
it was held (per
Tindall J) that the security required by the subsection is not security for the
costs of opposition incurred by
the respondent, but the costs of the Master and
the Sheriff. A similar view was expressed in Buirski and Herbstein v Estate
Hunter
and Another
1937 CPD 180
at 182 (per Van Zyl JP).
19
These two decisions were not referred to in the Arnawil Investments case,
supra. In Melcost Investments (Pty) Ltd v Kruger 1968(2)SA
69(0) Klopper J,
following Sliom v Couzyn, supra, and Buirski and Herbstein v Estate
Hunter
and Another, supra, held (at 72 B) that the security referred to
in
sec 9(3) of the Act must be furnished before the provisional order
is
granted. In the first judgment Scott J approved of the
following passage in
Meskin, Insolvency Law, at 2-29 as
correctly stating the purpose of the
security requirement of sec 9(3).
"It is submitted that the intention is to ensure that there is a fund available
to meet the costs which as a result of the operation
of the process of
administration necessarily will be incurred in case it should transpire that no
trustee is appointed and the estate
is discharged from sequestration or,
although such appointment ensues, there is no, or insufficient, property from
which such costs
can be met."
20
The decision in the Arnawil Investments case and the
other
similar decisions in the Transvaal have not been followed
in the
other provinces. In the Mafeking Creamery case it was held
that the
certificate need not accompany service of the application on
the respondent.
In that case security had at the time of service in
fact been furnished and
the point was left open as to whether it was
necessary for security to have
been given at that stage. Zietsman
J pointed out (at 781 H) that the Act did
not require that
applications for a provisional order of sequestration be
served on the
respondent, and went on to say the following at 782 A-B :
"Dit is na my mening duidelik dat die nodige sertifikaat deur die Meester
uitgereik moet word en voor die Hof moet wees voordat 'n
voorlopige bevel
uitgereik kan word, maar aangesien betekening van die stukke op die respondent
nie 'n wetlike vereiste is nie is
dit my mening dat die betekening van 'n
afskrif van die aansoek op die respondent voordat die sertifikaat van die
Meester ontvang
is, en die versuim om op enige stadium daarna 'n afskrif van die
genoemde sertifikaat op die respondent te beteken, nie 'n versuim
is om aan
'n
21
bepaling van die Wet te voldoen nie en derhalwe nie noodwendig 'n fatale defek
tot die aansoek is nie."
In RSA Factors Ltd v Hansen, supra, the application
for a
provisional order of sequestration was served on the respondent without the
certificate which was riled the day before the hearing
and was before the Court
when the matter was heard. A point in limine that the application was fatally
defective for want of compliance
with sec 9(3) was dismissed. Leon J referred
(at 875H - 876C) to the long-standing practice in Natal to the effect that,
where an
applicant for a provisional order of sequestration relies upon a nulla
bona return or upon documentary evidence of an independent
nature which is
confirmatory of the allegations in the application, no notice need be given to
the respondent and an
22
order for provisional sequestration can be obtained ex parte.
The learned Judge went on to say the following at 876 B-D :
"Where, as here, a nulla bona return is relied upon, there was thus no need
in terms of the Natal practice for the application to
be served upon the
respondent at all before a provisional order of sequestration was obtained. And
in the case of such an application
the long-standing practice of the Natal
Provincial Division is that the security certificate need not be lodged with the
Court when
the petition is filed: it is sufficient if the security certificate
(which must not be stale) is lodged before the hearing."
A similar practice prevails in the Cape Provincial
Division
where, in terms of Court Notice No 59, promulgated on 8
March
1984, no notice of an application for a provisional order of
sequestration
need be given to a respondent if the applicant relies
on a nulla bona return
or an act of insolvency in terms of sec 8(g)
of the Act. An earlier Court
Notice No 44, promulgated on 6
23
November 1975, requires the applicant first to lodge his application for a
provisional order of sequestration with the Registrar (who
issues the
application and allocates a case number) before a copy of the papers are served
on the Master. In practice a copy of the
issued application and the original
bond of security are handed simultaneously to the Master who does not furnish a
separate certificate
and report but combines both in one document. In his first
judgment Scott J stated (at 289 C) that the practice in the Cape Provincial
Division was that the Master's report, incorporating the security certificate,
need not be served on the respondent. The learned
Judge held (at 291 E-G) that
all that is required by sec 9(3) is that the security must have been given
before the provisional order
is granted. The practice in the Cape
24
Provincial Division, followed in the present case, of lodging the Master's
report, incorporating the security certificate, with the
Court prior to the
application being set down for hearing, was, according to the learned Judge, not
contrary to the provisions of
sec 9(3) of the Act.
The Act does not expressly
require that notice of an application for a provisional order of sequestration
be given to the debtor or
that the papers in such application be served on the
debtor prior to the hearing. And in my view there is no implied requirement
to
be found in sec 9(3) (b) of the Act that the security certificate must be served
on the respondent before the hearing. With regard
to the purpose of requiring
the applicant to furnish security I prefer the view expressed in Sliom v Couzyn,
supra,
25
to that expressed in the Arnawil Investments case. I agree with what Leon J
said in the RSA Factors case (at 874 H) that there is
nothing in the subsection
to indicate that the security must in any way relate to the respondent's costs.
Had that been the intention,
one would have expected the Legislature to have
said so clearly, in the same way as it did in sec 125 of the Act which requires
the
insolvent who applies for his rehabilitation to furnish security "for
payment of the costs of any person who may oppose the rehabilitation
and be
awarded costs by the court". I accordingly do not think that sec 9(3) (b) can be
construed so as to extend the security to
the respondent's costs of opposition
to the sequestration application. The process of administration of the insolvent
estate follows
mainly upon the issue of the provisional order of
26
sequestration, and it is the costs necessarily incurred in that
process
which the subsection intends to cover. Ail that is thus required
by
the subsection is that security must have been given before the
matter
is heard and that the security certificate shall then accompany
the
application. In the Melcost Investments case, supra,
Klopper J put it thus (at 72 A-C) :
"Dit is duidelik dat sodra 'n voorlopige bevel van sekwestrasie verkry word,
masjinerie in werking gestel word wat onmiddellike kostes
meebring. Behalwe vir
die kostes wat deur die Weesheer aangegaan moet word, moet die Balju
of Adjunk-Balju ook kostes aangaan Dit is na my
mening dus duidelik dat die Wetgewer sekuriteit vir hierdie kostes verlang voor
enige bevel nog gemaak word, sodat gemelde persone
nie in 'n posisie geplaas kan
word, dat waar hulle ingevolge 'n Hofbevel verplig word om sekere handelinge te
verrig en in sekere
omstandighede dit dringend moet doen, dit gedoen word sonder
dat die nodige sekuriteit vir die kostes voorsien is
nie."
27
I am accordingly of the view that sec 9(3) (b) of the Act does not require
the security certificate to accompany the application either
when it is filed
with the Registrar or when it is served on the respondent and that the practice
in the Court a quo, followed in
the present case, does not conflict with the
provisions of the subsection. The point taken by the appellant that the
application
was fatally defective for want of compliance with the subsection
cannot therefore succeed.
Before I leave this aspect I should point out that
it was not contended by the appellant that in failing to serve a copy of the
security
certificate with the application on her prior to the hearing, Standard
Bank acted in breach of the Uniform Rules of Court Although
the Act does not
require that notice of an application for
28
a provisional order of sequestration be given to the debtor or that the
papers in such application be served on the debtor prior to
the hearing, each
Provincial Division has followed its own practice with regard to these aspects.
I have already referred to the
practice in Natal and the Cape Provincial
Divisions that no notice need be given to a debtor when the creditor relies upon
certain
specified grounds, for example upon a nulla bona return. The practice
would appear to be the same in the Transvaal. See Simross Vintners
(Pty) Ltd v
Vermeulen; VRG Africa (Pty) Ltd v Walters t/a Trend Litho; Consolidated Credit
Corporation (Pty) Ltd v Van der Westhuizen
1978 (1) SA 779
(T) at 783 E-G. For
the practice in the other Divisions see Gouws v Scholtz
1989 (4) SA 315
(NC).
The question will
29
then arise as to whether, if service of the papers prior to the hearing is
required in terms of the practice of a particular court,
service of the security
certificate in terms of the Uniform Rules is not also then required at some
stage prior to the hearing. The
point, as I have said, was not taken and in any
event service of the application in the present case was not necessary insofar
as
an act of insolvency in terms of sec 8(g) of the act was relied upon and the
final order of sequestration was granted on that basis.
This brings me to the
merits of the appeal against the final order granted by Scott J. On 11 July 1991
when the sequestration proceedings
were launched the appellant was indebted to
Standard Bank in an amount of not less than R559 537,18, for
30
which it held no security. By the time of the first hearing the debt had
increased to R713 032,77 and by the time of the second hearing
to R796 240,67.
On 24 March 1992 Syfrets Bank obtained judgment against the appellant in a
capital amount of Rl,5 m plus interest
in respect of a loan agreement concluded
on 3 June 1990. The loan was secured by a mortgage bond over the appellant's
immovable properties.
By the time of the first hearing this debt had increased
to Rl,8 m and by the time of the second hearing to more than R2 m by reason
of
the non-payment of interest. Other liabilities conceded by the appellant at the
first hearing were the amounts of R70 800,00 owing
in legal fees to a firm of
attorneys, R125 000,00 owing to a certain trust and R85 000,00 owing on lease
and instalment sale agreements.
Her
31
total undisputed debts as at the first hearing therefore amounted to
approximately R2,7 m.
The appellant's only assets of note are the farm
Goedeverwachting near Sir Lowry's Pass in the district of Somerset West ("the
farm")
and an industrial property known as Broadlands Industrial Park, Strand.
The farm has been subdivided into seven portions and the
industrial property
into three. I shall refer to the three latter portions together as the
industrial property. One of these, the
remainder of erf 5089, was sold in
October 1991 to one Doggett for R2 245 000,00. Doggett thereafter sought to
avoid the sale on
various grounds and protracted litigation followed which was
still unresolved at the time of the second hearing. There are six industrial
buildings, subdivided into twelve lettable components,
32
on the remainder of erf 5089. The other two subdivided portions of the
industrial property are erven 18859 and 12857.
At the first hearing Standard
Bank sought the sequestration order on the grounds that the appellant had
committed acts of insolvency
in terms of sections 8(c) and 8(g) of the Act and
that she was in fact insolvent as contemplated by section 10(b) of the Act.
Scott
J held, (at 294 E-F and 295 F-G of the first judgment) that both acts of
insolvency had been established. With regard to the question
of the appellant's
actual insolvency Scott J correctly pointed out (at 295 I) that this depended
upon the value placed on her immovable
properties. At the time Standard Bank's
valuer, Carroll, valued the farm at Rl 300 000,00 and the industrial property at
Rl 529 220,00
for a total of R2 829 220,00,
33
while the appellant's valuers placed a substantially higher value on the
properties. Scott J said in the first judgment (at 296 B)
that the mere fact
that Doggett was initially prepared to pay R2 245 000,00 for the remainder of
erf 5089 indicated that Carroll's
valuation may be over-conservative. The
learned Judge accordingly held that it had not been established that the
appellant was in
fact insolvent. In the second judgment Scott J confirmed his
previous finding that the appellant had committed an act of insolvency
in terms
of sec 8(g) of the Act. He accordingly did not find it necessary to reconsider
his finding that an act of insolvency in
terms of sec 8(c) (prejudicing or
preferring creditors) had been established or whether, in the light of new facts
placed before
him at the second hearing, the appellant was in fact
34
insolvent.
I proceed to consider the learned Judge's finding that the
appellant had committed an act of insolvency in terms of sec 8(g) of the
Act in
a letter dated 5 June 1991 which she wrote to Standard Bank. The subsection
reads :
"8. A debtor commits an act of insolvency -
(g) if he gives notice in writing to any one of his creditors that he is unable
to pay any of his debts."
The letter in question is a lengthy one, consisting of some
five
typed pages. It is addressed to the manager of Standard
Bank's Matador Centre
branch where the appellant had her account
and is headed "Bridging finance :
overdraft facilities". It
commences by referring to the fact that the
appellant has
35
approached Syfrets Bank to consent to a second mortgage bond
being passed
to secure her indebtedness to Standard Bank. It
proceeds to set out details
of the appellant's immovable properties
and the steps which have been taken
to develop and market the
properties. It is pointed out that it will take
some time to sell the
properties. Then follows the passage relied upon by Standard Bank
as constituting written notice of inability to pay. It reads :
"We are asking you therefore, to allow us a period of grace in which to realise
the sale of the above assets and accordingly discharge
our obligations to your
bank. We note that at present you have an unsecured overdraft and venture to
suggest that now that Syfrets
has advised the writer of its agreement to the
registration of a second mortgage bond in favour of Standard Bank, the Bank
extends
the bridging finance to the writer, for a maximum period of six (6)
months, and secures the bridging loan by means of the registration
of the second
bond as agreed."
36
The request for a period of grace is repeated in the penultimate paragraph
which reads :
"In the event that the Bank does not wish to register the second mortgage bond
and extend the bridging finance to the writer, it
is requested that a period of
grace be allowed whilst the writer replaces this finance with bridging from
another source."
Sec 8(g) quoted above may mean "unable to pay
any single
one of his debts" or it may mean "unable to pay all his debts".
This ambiguity was cleared up by the amendment (by sec 5 of Act
16 of 1943) of the Afrikaans version to read :
"8(g) as hy aan enigeen van sy skuldeisers skriftelik kennis gee dat hy nie
in staat is om een of ander van sy skulde te betaal nie."
Before its amendment the relevant part of the Afrikaans version
read "om sy skulde te betaal nie" which clearly meant all his
37
debts. As the Afrikaans version was the signed one, the English version until
the amendment must be taken to have meant "unable to
pay all his debts". The
amending provision inserted into the Afrikaans version makes it clear that the
proper interpretation of sec
8(g) now is that the notice need relate only to an
inability to pay any single one or more of the debtor's debts. (Optima
Fertilizers
(Pty) Ltd v Turner
1968 (4) SA 29
(D & CLD) 29 at 32 F - 33
A).
Whether a particular notice is such as to constitute an act of insolvency
within the meaning of sec 8(g), depends on a construction
of its contents, read
as a whole. The question when considering the letter is not whether the debtor
is in fact unable to pay or
whether he is solvent or insolvent. Inability to pay
must
38
be distinguished from unwillingness to pay. If the debtor is merely saying
that he is unwilling to pay, the letter does not constitute
an act of
insolvency. Construing the written notice involves deciding how the reasonable
person in the position of the creditor receiving
the notice would understand it.
To such a reasonable person must be attributed the creditor's knowledge at the
time of the relevant
circumstances. (Barlow's (Eastern Province) Ltd v Bouwer
1950 (4) SA 385
(EDLD) at 390 E-H; Optima Fertilizers (Pty) Ltd v Turner, supra,
at 33 A-D; Du Plessis en 'n Ander v Tzerefos
1979 (4) SA 819(0)
at 834 F-H and
the first judgment at 291 H - 293 E).
In the present case it is clear that
the appellant had received letters of demand from Standard Bank before she wrote
the letter of
39
5 June 1991 and that the debt was then due and payable. The letter of 5 June
1991 does not, of course, expressly say that the appellant
cannot pay, and she
has submitted that she was merely expressing her unwillingness to pay and that,
had she been pressed, she could
have raised the money and paid her debt to
Standard Bank. I cannot agree with the submission. The tenor of the letter, read
as a
whole, is clearly to the effect that the appellant cannot pay her debts
unless she is given time to pay and is granted "bridging
finance" for a period
of six months. It is made clear that the immediate realisation of the immovable
properties is not possible
and will in fact take time, and it is for this reason
that Standard Bank is asked for time to pay and to provide additional finance
or
at least to allow a period of grace so that finance can be
40
obtained from another source.
It is thus clear from the letter that the
appellant was not at the time in a position to realise sufficient assets to pay
the debt.
At the time Standard Bank's claim was of the order of R550 000,00 and
it knew that the appellant's properties were mortgaged in favour
of Syfrets Bank
to the extent of approximately Rl,5 m. I accordingly agree with the Ending of
Scott J (at 294 E-F of the first judgment)
that in the circumstances the only
inference to be drawn from the letter is that she was unable to pay. The letter
thus constitutes
an act of insolvency within the meaning of sec 8(g) of the
Act.
As I have said, Scott J did not find it necessary on the extended return
day of the provisional sequestration order to
41
reconsider, in the light of new information placed before him, whether the
appellant was in fact insolvent. It will be recalled that
Carroll valued the
farm at Rl,3 m and the industrial property at Rl 529 220,00 for a total of R2
829 222,00 as against admitted debts
at the time of the first hearing of
approximately R2,7 m. Carroll's valuation was supported by other valuers.
Jonathan Smiedt, who
was instructed by the appellant's major creditors during
March 1992 to sell one of the industrial subdivisions, erf 12857, at a public
auction, stated in an affidavit sworn to on 6 July 1992 that not a single bid
was received at the auction and that the property market
had since become
depressed so that erf 12857 would not fetch more than R150 000,00 if then sold
at a sale in execution. Smiedt later
also valued the farm on
42
behalf of Syfrets Bank and placed a value on it of Rl,2 m as at 10 February
1993. The second industrial subdivision, erf 18859, was
valued on behalf of
Syfrets Bank by Israel Jacobs at R250 000,00 as at February 1993. The third
industrial site, the remainder of
erf 5089, was valued by David Newham on behalf
of Syfrets Bank at R905 000,00 as at 30 January 1993. It will be seen,
therefore,
that Smiedt's valuation of R150 000,00 for erf 12857; Jacobs's
valuation of R250 000,00 for erf 18859; Newham's valuation of R905
000,00 for
the remainder erf 5089 and Smiedt's valuation of Rl,2 m for the farm all
supported Carroll's valuation. The provisional
trustees reported in an affidavit
filed before the second hearing that the trial against Doggett had started on 1
February 1993 and
that after evidence had been led for about
43
two weeks it had been postponed to 17 May 1993. By the time of the second
hearing Syfrets Bank had notified the provisional trustees
that it was no longer
prepared to support the litigation against Doggett. Apart from the uncertainty
surrounding the outcome of this
litigation the purchase price of R2,245 m was
not a cash price, as Scott J correctly pointed out in his second judgment. In
all the
circumstances it would seem that Scott J should not have allowed the
sale to Doggett to influence him in concluding in his first
judgment (at 296
A-C) that Carroll's valuation was too conservative.
Subsequent to the granting of the provisional order of sequestration the
provisional trustees on 23 November 1992 addressed a circular
to creditors
advising that the appellant's total
44
liabilities had increased to R3 488 000,00. According to information supplied
by the appellant herself, claims of concurrent creditors,
apart from that of
Standard Bank, now amounted to R950 000,00, some R700 000,00 more than the
amount previously disclosed by the
appellant. By the time of the second hearing
the appellant's total debts exceeded R3,6 m. In a further opposing affidavit
filed on
1 March 1993 the appellant claimed that she could realize a total
amount of R3 235 000,00 from the sale of her immovable properties.
This figure
included the amount of R2 245 000,00 from the disputed Doggett sale. The other
prospective sales were, as one of the
trustees pointed out in his affidavit,
either subject to unacceptable conditions or made provision for transfer and
payment at some
future date which would
45
result in unacceptable delays. Scott J therefore correctly concluded in his
second judgment that were the properties to be disposed
of immediately on the
open market and on the usual terms and conditions, they would inevitably realise
very much less than the sum
mentioned, namely R3 235 000,00. The appellant had
made no payment in reduction of her debt to either of her major creditors since
April 1991, despite the fact that Syfrets Bank had, on 24 March 1992, obtained
judgment against her in respect of the amount owing
to it and had issued a writ
of execution against her immovable properties. In my view the appellant was
clearly insolvent at the
time of the second hearing.
The appellant next
submitted that Scott J erred in holding in the second judgment that the
sequestration of her estate would be
46
to the advantage of creditors. There is no merit in this submission. By the
time of the second hearing the appellant's financial position
had steadily
deteriorated over the previous two to three years. Accumulating interest on the
bond holder's claim had continued to
erode the residue available to concurrent
creditors. The appellant had had sufficient time to realise her assets and to
pay her creditors.
She had not done so and had failed to pay the interest on the
capital amounts. There was still a reasonable prospect of a substantial
payment
being made to the general body of creditors, although such prospect was fast
diminishing.
For these reasons the application for condonation must be refused on the
ground that there are no prospects of success in an appeal
against the final
order of sequestration.
I proceed to deal with the appeal in case no 9716/93.
For
47
convenience I repeat the facts which are relevant for a consideration of the
issues raised in this appeal. The final order of sequestration
was granted on 8
March 1993 and on 31 March 1993 the appellant duly lodged a notice of appeal in
terms of AD Rule 5 (1). In terms
of AD Rule 5 (4) (c) the appellant was required
to lodge with the Registrar of this Court six copies of the record and to
deliver
the requisite number of copies to Standard Bank within three months of 8
March 1993 or "within such further period as may be agreed
in writing" (Rule
5(4) (d)). On 13 May 1993, ie within the three month period, the appellant
requested Standard Bank's attorneys
to agree that the three month period for the
lodging of copies of the record be extended by eight weeks. On 4 June 1993
Standard
Bank's attorneys advised the appellant that the
48
request for an extension was refused. At that time Standard Bank's attorneys
were fully aware of the fact that Snellers were having
difficulties in preparing
the record and that a delay was inevitable. The preparation of the record had
not been completed by the
time the application for an order declaring the appeal
to have lapsed was launched on 10 August 1993. The application was opposed
by
the appellant and the affidavits and annexures filed in that matter run to 661
pages. The matter came before Brand J who granted
an order declaring the appeal
in the sequestration proceedings to have lapsed and authorising the trustees to
sell the immovable
properties vesting in the insolvent estate. The learned Judge
also ordered that the attorney and own client costs of the joint trustees,
Standard Bank and Syfrets Bank be costs in the administration of the
49
insolvent estate and that such costs be treated as costs of realisation of
the immovable properties in terms of sec 89 of the Act.
Brand J considered
that the Court had jurisdiction to entertain the application as the Appeal Court
had not yet become seized with
the matter. The learned Judge further held that a
failure to comply with AD Rule 5(4) (c) causes the appeal to lapse and that AD
Rule 5(4A) (b), previously AD Rule 5(4) bis (b), which was relied upon by the
appellant, does not apply in the present circumstances.
In view of the
conclusion which I have reached that Brand J erred in granting the orders which
he did it is not necessary to decide
whether the Court a quo had jurisdiction to
entertain the application.
AD Rules 5(4) and 5(4A), insofar as relevant, provide
as
50
follows :
"5(4) After an appeal has been noted in a civil case the appellant shall -
(a)
(b)
(c) in all other cases within three months of the
date
of the judgment or order appealed against or an
order granting leave to appeal; or
(d) within such further period as may be agreed to in
writing by the
respondent,
lodge with the registrar six copies of the record of the
proceedings in the
court appealed from and deliver
such number of copies to the respondent as
may be
considered necessary
(4A) (a) If an
appellant who has withdrawn his appeal has failed to lodge the record of the
proceedings in the court appealed from,
or if an appellant is in terms of
paragraph (b) deemed to have withdrawn his appeal, a respondent who has noted a
cross-appeal may,
within 20 days of the date of receipt by the respondent or his
attorney of notice of withdrawal by the appellant or of the date upon
which the
appellant is so deemed to have withdrawn his appeal, as the case may be,
51
notify the registrar in writing that he desires to
prosecute the
cross-appeal, and such respondent shall
thereupon for the purposes of
sub-rule (4) be deemed
to be the appellant,
(b) If an appellant has failed to lodge the record within the period prescribed
and has not within that period applied to the respondent
or his attorney for
consent to an extension thereof and given notice to the registrar that he has so
applied, he shall be deemed
to have withdrawn his appeal."
AD Rule 5 (4) bis which, as I have said, was the forerunner
of
the existing Rule 5 (4A), was introduced by way of amendment
in 1969. Before
this Rule was introduced it was held in two earlier
decisions of this Court
(Vivier v Winter; Bowkett v Winter
1942 AD 25
and Bezuidenhout v Dippenaar
1943 AD 190)
that,
even though not
expressly so stated in the Rules, an appeal lapses
on failure to comply with
either of the Rules relating to the lodging
52
of copies of the record or security for the costs of an appeal. In the former
of these decisions the appellant had noted an appeal
but failed to furnish
security in terms of the then existing Rule 7. The respondents brought an
application in this Court for an
order that the appeal be discharged with costs.
It was held (per De Wet CJ) that even though the Rules did not specifically say
that
on failure to comply with the provisions of the Rule the appeal would
lapse, it was clear that that was implied, so that there was
no necessity for
the respondents to have brought the application. No order was consequently made
on the application. In Bezuidenhout's
case, supra, the appellant failed to
comply with both former Rules relating to the lodging of copies of the record
and security for
the costs of the appeal. In refusing an application
53
for condonation Centlivres JA said (at p 192) that:
"[I]n view of the fact that the appeal has already lapsed, the Court should not
grant the applicant any form of relief if it is satisfied
that there is no
reasonable prospect of the appeal succeeding."
The introduction
of AD Rule 5 (4) bis in 1969 was followed the next year by the decision of this
Court in Santam Verseke= ringsmaatskappy
Beperk v Pietersen
1970 (4) SA 215
(A).
In that case the appellant failed to lodge the record as required by the then AD
Rule 5 (4) (c) and applied for condonation
for his failure to do so. It was
contended on behalf of the respondent that an application for condonation could
not be entertained
as the appellant was "deemed to have withdrawn his appeal" in
terms of Rule 5(4) bis (b). This sub-rule is identical to the present
Rule 5(4A)
(b).
54
This Court held that sub-rule (4) bis (b) should be read together with
sub-rule (4) bis (a) and should be confined to those cases
where the respondent
has noted a cross-appeal. It was held (at 217 C-G) that the sole reason for the
insertion of sub-rule (4) bis
(b) was to fix the commencing date of the period
within which the record is to be lodged by the respondent who has noted a
cross-appeal
in those cases where the appeal has not actually been withdrawn.
The operation of the sub-rule was thus confined to those cases where
the
respondent has noted a cross-appeal.
There is some uncertainty as to the
circumstances in which the provisions of the present Rule 5(4A) (b) will apply,
more particularly
whether it is to be confined to those cases where a
cross-appeal has been noted. In United Plant Hire (Pty) Ltd v
55
Hill and Others
1976 (2) SA 697
(D & CLD) Kumleben J held that the
provisions of AD Rule 5(4) bis did not apply in the circumstances of that case.
In that case
the applicant for relief had been the unsuccessful plaintiff in a
trial action against the first three respondents who had obtained
a court order
compelling the fourth respondent (the taxing master) to tax their bills of
costs. The applicant had noted an appeal
against this order to this Court but
had failed to lodge copies of the record or to furnish security within the
prescribed periods.
The first three respondents thereafter proceeded to have
their bills of costs taxed despite the fact that an application for condonation
was served on them the day before the taxation. The applicant thereafter applied
for a declaratory order that the taxation of the
bills of costs was invalid and
of no force
56
and effect. It was submitted on his behalf that his appeal did not
lapse
upon the expiration of the prescribed period and that it only
lapsed when it
was removed from the roll. Reliance for this
submission was placed on the
following passage of the judgment of
De Villiers JA in the Pietersen case, supra, at 217 F-G:
"Subreël (4) bis (b) is slegs ingevoeg om in 'n geval waar die appèl
nie daadwerklik teruggetrek is nie, die datum te
bepaal waarvandaan die periode
van 21 dae en die periodes genoem in subreël (4) (a) en (b) bereken moet
word. Dit was nooit
bedoel om in 'n geval soos die onderhawige van toepassing te
wees nie. In so 'n geval, d w s in 'n geval waar 'n appellant nie betyds
die
stukke ingehandig het nie, loop hy wel die gevaar dat die appèl van die
rol geskrap kan word maar hy is altyd geregtig
om vir genoegsame redes aansoek
om kondonasie van sy versuim te doen in terme van die bepalings van Reël
13."
In rejecting the argument, Kumleben J, held (at 700 F -
701 A) that the statement in the quoted passage that failure to
57
comply with AD Rule 5(4) created the risk that an appeal may be struck from
the roll, did not form part of the ratio decidendi of
the decision in the
Pietersen case. This was that sub-rule (4) bis (b) did not apply at all to the
circumstances of that case and
that it related solely to the lodging of the
record by a respondent in a cross-appeal and had no bearing upon the right of an
appellant
to seek condonation in terms of Rule 13. Applying the decisions of
this Court in the cases of Vivier, supra, and Bezuidenhout, supra,
to the
circumstances of that case, Kumleben J held (at 701 C-D) that the appeal had
lapsed when the time for the filing of the record
had expired and that the bills
of costs were consequently validly taxed. The application was dismissed with
costs.
58
In Waikiki Shipping Co Ltd v Thomas Barlow and
Sons (Natal) Ltd
1981 (1) SA 1040
(A) the respondent had granted the appellant an extended period
within which to lodge the record. On the last day of the extended
period the
appellant delivered a record to the Registrar of this Court who refused to
accept it as he considered the copies of the
record tendered as not complying
with the provisions of AD Rule 5. The copies were uplifted and retendered to the
Registrar after
the expiry of the extended period. The appellant applied for an
adjournment of the appeal which was refused. The Court instead granted
an
application by the respondent striking the appeal off the roll. It was held (per
Wessels JA) that the extended period became the
"period prescribed" within the
meaning of AD Rule 5(4) bis (b) (at
59
1048 E). After referring with apparent approval to the cases of Vivier and
Bezuidenhout the Court found it not necessary to decide
whether the appeal had
lapsed because of the appellant's failure within the prescribed period to file a
complete and acceptable record
(at 1049 D-E). It was held that whether or not
the appeal had so lapsed the appellant still required condonation for its
failure
to lodge a proper and complete record before the expiry of the extended
period, which condonation the appellant had not applied for
(at 1050 A). It
would seem from the judgment that the Court considered that AD Rule 5(4) bis (b)
might be of wider application than
was held in Pietersen's case. (Cf S v Adonis
1982 (4) SA 901
(A) at 907 D-G.) In the Waikiki Shipping case, supra, Wessels JA
said (at 1049 D) that the circumstances in which this
60
sub-rule will apply, more particularly with reference to the dictum in
Pietersen's case at 217 D-G, might well be reconsidered by
this Court on a more
appropriate occasion. After careful consideration I am not persuaded that the
decision in the Pietersen case
limiting the application of Rule 5(4A) (b) to
those cases where a cross-appeal has been noted, is clearly wrong. (Cf
Bloemfontein
Town Council v Richter
1938 AD 195
at 232 and Catholic Bishops
Publishing Co v State President and Another 1990 (1)SA 849 at 866 G-H.)
The principles stated in the Vivier and Bezuidenhout decisions, supra, were
re-affirmed by this Court in Moraliswani v Mamili 1989
(4)SA 1(A) where
Grosskopf JA said at 8 B-D:
61
"[T]here is strong authority for the proposition that failure to comply with
Rule 6 causes an appeal to lapse, and that condonation
by this Court is needed
to revive it."
What is stated in the above passage applies
equally to an appellant's failure to lodge the record within the period
prescribed. This
means that in the present case the appeal lapsed when the
appellant had by 7 June 1993 failed to lodge the record as required by
AD Rule
5(4) (c) and that an application for condonation was required to revive it. No
such application had been brought by the time
the proceedings in case no 9716/93
were launched. Once the appeal had lapsed the joint trustees were free to sell
the immovable properties
vesting in the insolvent estate, unless, of course, the
appellant took the initiative and moved for
62
an interdict against such sale. In the circumstances of the present case, and
in the absence of a prior dispute necessitating a declaratory
order, there was
therefore no necessity for the proceedings before Brand J to have been
instituted and the learned Judge should have
made no order on the application
before him. The statement by De Wet CJ in Vivier's case, supra, at 26, that the
applicants in that
matter could have taken steps in the Court below to have the
action dismissed, is no authority for granting an order declaring the
appeal to
have lapsed, as Brand J, seemed to think.
With regard to the costs of the
application Brand J should have made no order as to costs save to order that the
joint trustees' costs
be costs in the administration of the insolvent estate,
such
63
costs to be treated as costs of realisation of the immovable properties in
terms of sec 89 of the Act.
In the result the following order is made:
1. In case no 9245/91 the application for condonation of the late lodging of the
record is refused and the appellant is ordered to
pay Standard Bank's costs
relating to the application for condonation and the appeal, such costs to
include the costs of two counsel.
2. In case no 9716/93 the appeal is upheld with costs. The judgment of the Court
a quo is altered to read:
"No order is made on the application save that the costs of the first and second
applicants are ordered to be costs in the administration
of the insolvent
estate, such costs to be treated as costs of realisation of the immovable
properties in terms of sec 89 of the Act."
W
VIVIER JA.
JOUBERT JA) EKSTEEN JA) F H GROSSKOPF JA)
NIENABER JA) Concur.