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[2014] ZACC 20
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De Klerk v Griekwaland Wes Korporatief Bpk (CCT 187/13) [2014] ZACC 20; 2014 (8) BCLR 922 (CC) (19 June 2014)
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CONSTITUTIONAL
COURT OF SOUTH AFRICA
Case
CCT 187/13
In
the matter between:
MARTHINUS
DAVID DE
KLERK
.........................................................................................
Applicant
and
GRIEKWALAND
WES KORPORATIEF
BPK
.................................................................
Respondent
Neutral
citation:
De Klerk v Griekwaland Wes
Korporatief Bpk
[2014] ZACC 20
Coram:
Mogoeng CJ, Moseneke DCJ, Cameron J, Froneman J,
Jafta J, Khampepe J, Madlanga J, Majiedt AJ, Van der Westhuizen J and
Zondo J
Heard
on:
13 May 2014
Decided
on:
19 June 2014
Summary:
Section 8(g)
of the
Insolvency Act 24
of 1936
—
section 86
of the
National Credit Act 34 of 2005
—
debtor applying for debt review — purported debt-restructuring
proposal as act of insolvency — creditor granted
sequestration
order by lower court
Leave
to appeal — Court reluctant to determine factual issues —
lower courts concluded debtor is factually insolvent
— factual
insolvency is an independent basis for sequestration — debtor
lacks prospects of success
Leave
to appeal — not in the interests of justice to determine issue
that may be covered by statutory amendment
ORDER
On
appeal from the Full Court of the Northern Cape High Court, Kimberley
(hearing an appeal from Williams J):
1.
The application to amend the respondent’s
citation is granted.
2.
Leave to appeal is refused.
3.
The applicant is ordered to pay the
respondent’s costs in this Court.
JUDGMENT
VAN
DER WESTHUIZEN J
(Mogoeng CJ, Moseneke
DCJ, Cameron J, Froneman J, Jafta J, Khampepe J, Madlanga J, Majiedt
AJ and Zondo J concurring):
Introduction
[1]
This
is an application for leave to appeal against a final sequestration
order granted by the Northern Cape High Court in Kimberley
which was
upheld on appeal by the Full Court of that Division. The
application concerns whether a purported debt-restructuring
proposal,
in terms of
section 86(1)
of the National Credit Act,
[1]
sent
to a creditor on the authority of a debtor, is an act of insolvency
in terms of
section 8(g)
of the
Insolvency Act
[2
]
and
thus allows a creditor to initiate sequestration proceedings.
It also poses questions about the interests of justice and
whether
this Court should interfere with the factual findings of a lower
court.
Factual
background
[2]
The applicant (Mr de Klerk) concluded a
credit agreement with the respondent (Griekwaland). As security
for the debt, Mr de
Klerk registered a second bond over his farm.
[3]
Mr
de Klerk fell behind with his payments and approached a debt
counsellor, Debt Wise, who determined that he was over-indebted.
In June 2010 Debt Wise delivered a purported debt-restructuring
proposal (first proposal) to Griekwaland in terms of
section 86(1)
of
the
National Credit Act. The
first proposal stated that
Mr de Klerk owed R800 000
[3]
(excluding
interest) and provided for this debt to be paid off in instalments of
R1 066.01
[4]
over
157 months. These payments would not cover even the monthly
interest on the debt owed to Griekwaland, and would total
R167 364
only, falling far short of the outstanding debt.
[4]
Mr de Klerk’s total indebtedness (to
17 creditors) was recorded as being over R2 million, with
monthly instalments of
just over R40 000. The first
proposal provided for just under R15 000 to be paid each month
to all creditors.
Given his monthly living expenses, his income
did not allow for any greater payment.
[5]
On 5 August 2010 Mr de Klerk filed an
application in the Magistrate’s Court to make a further
debt-restructuring proposal
(second proposal), in which he again
indicated that he owed Griekwaland
R800 000,
but provided for payment terms more advantageous to some of his
creditors. In the founding affidavit, he stated
that he could
not meet his monthly financial obligations.
[6]
Griekwaland applied for Mr de Klerk’s
provisional sequestration on 10 August 2010, contending
that he owed approximately
R1 million (including interest).
At that point he had not made any payments towards the debt or
interest since January
2009, although he contended that, despite his
inability to make the payments as they fell due, his assets exceeded
his liabilities.
This contention was based on an outdated
valuation of his farm which was not supported by any documentation.
Mr de
Klerk also counterclaimed R200 000 from Griekwaland for
its failing to perform in terms of two other contracts. He
later
escalated this to an amount just shy of R2 million.
Procedural
history
[7]
The
High Court provisionally sequestrated Mr de Klerk’s estate on
two grounds: the first proposal constituted an act
of insolvency
because it was an admission in writing of his inability to pay his
debts in terms of
section 8(g)
of the
Insolvency Act;
[5
]
and he was in any event factually insolvent, which is an alternative
statutory ground for sequestration.
[6]
The Court found that he was factually insolvent, in part because his
allegation that his assets exceeded his liabilities
was not supported
by any evidence. The High Court later, after further argument,
made this sequestration order final.
[8]
Mr
de Klerk unsuccessfully appealed to the Full Court. The Court
held that the debt-restructuring proposal was an act of insolvency.
He had argued that the proposal could not constitute an act of
insolvency because he did not send it himself.
[7]
The Court rejected this, as it found that the proposal had been
sent on his instruction. It also confirmed the finding
that Mr
de Klerk was factually insolvent.
[9]
The Supreme Court of Appeal dismissed Mr de
Klerk’s application for leave to appeal. He now turns to
this Court for
relief.
Amendment
of Griekwaland’s citation
[10]
As a result of an honest error, Mr de Klerk
inaccurately cited the respondent in his papers in this Court. On the
day of the hearing,
his counsel formally applied to amend the
respondent’s citation to “Griekwaland Wes Korporatief
Bpk”. Griekwaland
did not oppose the application.
There is no reason why the amendment should not be granted.
Issues
[11]
We must first consider whether this Court
has jurisdiction. Does this matter raise a constitutional issue
or an arguable point
of law of general public importance which ought
to be considered by this Court? If jurisdiction is established, is it
in the interests
of justice to grant leave to appeal, under the
circumstances of this case?
Jurisdiction
[12]
The
Constitution, as amended by the Constitution Seventeenth Amendment
Act,
[8]
provides that this Court
has jurisdiction to decide a matter which “raises an arguable
point of law of general public importance
which ought to be
considered by [the] Court”.
[9]
Mr de Klerk contends that the question before us raises such a
point. The constitutional amendment came into force
before he
filed his application. This Court has not yet determined the
full scope of its new jurisdiction, including its
possible
retrospective application.
[13]
The
question whether a notice concerning debt restructuring (under
section 86
of the
National Credit Act) is
or could be an act of
insolvency (under
section 8(g)
of the
Insolvency Act) is
of some
obvious significance. The answer may not be easy to find.
Courts have reached conflicting decisions.
[10]
Academic opinion regarding the interaction between the
Insolvency Act
and
the
National Credit Act is
not unanimous and writers appear to be
waiting for an appellate court to resolve the dispute.
[11]
It has been argued that there is a tension between the two Acts,
[12]
but there may not be. Any solution would need to engage with
the careful interpretive project of reading two statutes alongside
each other.
[14]
For
present purposes, I assume we have jurisdiction under the Court’s
amended powers. But should we reach the central
question?
Mr de Klerk was found to be factually insolvent. Furthermore, a
legislative amendment to the
National Credit Act, which
may address
the legal issue at the heart of this case, has just been passed.
[13]
The question which arises is whether it is in the interests of
justice for this Court to determine the issue in view of Mr
de
Klerk’s factual insolvency and the statutory amendment.
Factual
insolvency
[15]
The High Court (Williams J) and its Full
Court (Kgomo JP, Pakati J and Mamosebo AJ) were satisfied that, even
if the proposal sent
to Griekwaland by Debt Wise did not amount to an
act of insolvency, Mr de Klerk was factually insolvent. Because
this conclusion
was reached independently of the conclusion regarding
the act of insolvency – and is a distinct justification for
sequestrating
an individual’s estate – Griekwaland argues
that this Court should not grant leave to appeal. This is
because,
even if we find in favour of Mr de Klerk on the main legal
issue, there would still be a legitimate ground to order his estate
to be sequestrated and his appeal would be doomed to fail.
[16]
Counsel for Mr de Klerk conceded that
whether he was actually insolvent is a question of fact. He
submitted further that,
in order to reach the act-of-insolvency
enquiry at all, which is a matter of public importance, we need to
resolve the factual
insolvency question.
[17]
This
Court may in exceptional instances resolve disputes of fact,
including when it is necessary to do so in order to determine
the
legal claim before it.
[14]
Yet we are reluctant to exercise this power.
[15]
Lower courts are often better placed to resolve factual disputes.
The appellate function of this Court is thus seldom
used to determine
facts.
[18]
No exceptional circumstances exist in this
case. This Court should not lightly interfere with the factual
findings of the
High Court and the Full Court. Mr de Klerk
offered us no principled reason why we should. In any event, he
did not
persuasively argue why the High Court’s finding on
factual insolvency is incorrect.
[19]
If we cannot or should not interfere with
the finding that Mr de Klerk is factually insolvent, it would make
little sense for us
to address the relationship between
section 8(g)
of the
Insolvency Act and
section 86
of the
National Credit Act.
It
would make no difference to Mr de Klerk’s fate. There
are no reasonable prospects that he will be successful in his
opposition to the sequestration application.
The
amendment to the
National Credit Act
[20
]
Prospects
of success are not exhaustive of the interests of justice
enquiry.
[16]
Are there
other reasons to grant leave to appeal in this case? I think
not. Rather, there is a further reason
that militates against
doing so. A legislative amendment to the
National Credit Act
was
in process at the time of the application and was assented to by
the President less than a week after the hearing in this Court.
[17]
The Schedule to the National Credit Amendment Act amends
section 8
of
the
Insolvency Act by
inserting the following:
“
Debt
review
8A
A debtor who has applied for a debt review must not be regarded as
having committed an act of insolvency.”
This
insertion seems to be aimed at resolving the perceived tension
between the
National Credit Act and
the
Insolvency Act that
forms the
tangle at the centre of this case.
[18]
There would therefore be little benefit in attempting to clarify the
issue comprehensively in this case.
Conclusion
[21]
It is not in the interests of justice to
grant leave to appeal. There is no need to proceed to the key
question on the merits.
Costs
[22]
I see no reason to deviate from the usual
rule that costs follow the event.
Order
[23]
The following order is made:
1.
The application to amend the respondent’s
citation is granted.
2.
Leave to appeal is refused.
3.
The applicant is ordered to pay the
respondent’s costs in this Court.
For
the Applicant:
Advocate
J Steyn and Advocate D Greyling instructed by EG Cooper Majiedt
Attorneys.
For
the Respondent:
Advocate
R Moultrie instructed by Van de Wall & Partners.
[1]
34
of 2005.
Section 86(1)
provides:
“
A
consumer may apply to a debt counsellor in the prescribed manner and
form to have the consumer declared over-indebted.”
[2]
Section
8(g)
of the
Insolvency Act 24 of 1936
provides:
“
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”.
[3]
At
certain points Mr de Klerk has disputed this amount but he does not
seem to press the point in this Court.
[4]
There
is some confusion about this amount. Williams J’s first
judgment in the High Court noted a discrepancy: at some
points in
the papers, the amount was cited as R10 666.01, 10 times the
amount in the proposal. But the figure in the
debt-restructuring proposal is R1 066.01. Mr de Klerk
does not put an alternative figure forward in his papers.
[5]
Quoted
above n 2.
[6]
Sections
9
and
12
of the
Insolvency Act provide
that a debtor may be
provisionally or finally sequestrated on the basis of
either
an act of insolvency
or
factual insolvency.
Section 9(1)
provides that a creditor may
apply for an order against “a debtor who has committed an act
of insolvency, or is insolvent”.
Note that the terms
“actual insolvency” and “factual insolvency”
both refer to when a debtor’s
liabilities exceed her assets,
and are used interchangeably in the judgment.
[7]
This
argument was based on the wording of
section 8(g)
of the
Insolvency
Act, above
n 2, specifically the words “
he
gives notice in writing” (emphasis added).
[8]
72
of 2012.
[9]
Section
167(3)(b)(ii).
[10]
See,
for example,
FirstRand
Bank Limited v Janse van Rensburg and a related matter
[2012]
2 All SA 186
(ECP);
FirstRand
Bank Ltd v Evans
2011 (4) SA 597
(KZD); and
Nedbank
Ltd v Maxwell
Case No 18027/2010, South Gauteng High Court, Johannesburg, 27
August 2010, unreported.
[11]
See
Boraine and Van Heerden “To Sequestrate or Not to Sequestrate
in View of the
National Credit Act 34 of 2005
: A Tale of Two
Judgments” (2010) 13
PELJ
84 at 107-9, 111 and 114; Chokuda “An Application for Debt
Review Does Not Constitute an Act of Insolvency:
FirstRand
Bank Ltd v Janse van Rensburg
”
(2013) 130
SALJ
5
at 5 and 14; and Otto
The
National Credit Act Explained
2 ed
(LexisNexis,
Johannesburg 2010) at 133 4
.
[12]
See,
for example, Steyn “Sink or Swim? Debt Review’s
Ambivalent ‘Lifeline’ – A Second Sequel
to ‘...
A Tale of Two Judgments’
Nedbank
v Andrews
(240/2011) 2011 ZAECPEHC 29 (10 May 2011);
FirstRand
Bank Ltd v Evans
2011 (4) SA 597
(KZD); and
FirstRand
Bank Ltd v Janse van Rensburg
[2012] 2 All SA 186
(ECP)” (2012) 15
PELJ
190 at 217; and Maghembe “The Appellate Division Has Spoken –
Sequestration Proceedings Do Not Qualify as Proceedings
to Enforce a
Credit Agreement under the
National Credit Act 34 of 2005
:
Naidoo
v Absa Bank
2010
(4) SA 597
” (2011) 14
PELJ
171 at 172 and 178.
[13]
National
Credit Amendment Act 19 of 2014
,
GN 389,
Government
Gazette
37665,
promulgated on 19 May 2014. This Act does not yet
seem to be in force, and shall come into operation on
a date fixed
by the President by proclamation in the
Gazette
.
[14]
Rail
Commuters Action Group and Others v Transnet Ltd t/a Metrorail and
Others
[2004]
ZACC 20
;
2005 (2) SA 359
(CC);
2005 (4) BCLR 301
(CC) at para 52.
See also Madlanga J’s judgment in
Mbatha
v University of Zululand
[2013]
ZACC 43
;
2014 (2) BCLR 123
(CC) at para 223.
[15]
See,
for example,
Minister
of Safety and Security v Van Niekerk
[2007]
ZACC 15
;
2008 (1) SACR 56
(CC);
2007 (10) BCLR 1102
(CC) at para 10.
[16]
See,
for example,
International
Trade Administration Commission v SCAW South Africa (Pty) Ltd and
Others
[2010] ZACC 6
;
2012 (4) SA 618
(CC);
2010 (5) BCLR 457
(CC) at para
41;
Radio
Pretoria v Chairperson, Independent Communications Authority of
South Africa, and Another
[2004] ZACC 24
;
2005 (4) SA 319
(CC);
2005 (3) BCLR 231
(CC) at para
19; and
De
Reuck v Director of Public Prosecutions, Witwatersrand Local
Division and Others
[2003] ZACC 19
;
2004 (1) SA 406
(CC);
2003 (12) BCLR 1333
(CC) at
para 3.
[17]
See
above n 13.
[18]
This
Court has affirmed that it will not issue a judgment in a matter,
the abstract, academic or hypothetical nature of which
would mean
that “our going into it can produce no concrete or tangible
result, indeed none whatsoever beyond [a] bare declaration”.
JT
Publishing (Pty) Ltd and Another v Minister of Safety and Security
and Others
[1996] ZACC 23
;
1997 (3) SA 514
(CC);
1996 (12) BCLR 1599
(CC) at
para 15. This is especially true when the relevant statutory
provision has been amended.