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[2013] ZAWCHC 91
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Gobel v Gobel (6935/13) [2013] ZAWCHC 91 (28 June 2013)
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE HIGH COURT,
CAPE TOWN)
CASE NO: 6935/13
In the matter between:
MIMI MAGRIET GOBEL
.........................................................................................
Applicant
and
KLAUS GUSTAV GOBEL
..................................................................................
Respondent
Date of hearing: 11
June 2013.
REASONS FOR JUDGMENT
FURNISHED ON 28 JUNE
2013
DAVIS AJ
On 13 June 2013 I
dismissed an urgent application brought by the applicant for the
sequestration of the respondent’s estate
with costs on an
attorney and client scale. Due to time constraints I was not able to
furnish reasons at the time, and indicated
that reasons for judgment
would follow. These are the said reasons.
The applicant and the
respondent are currently engaged in divorce proceedings in which the
applicant claims,
inter alia,
payment of lifelong maintenance
from the respondent. Applicant launched this application on an
urgent basis on 6 May 2013 for
the provisional sequestration of the
respondent’s estate, together with interim interdictory relief
preventing the respondent
from encumbering or disposing of assets in
his estate in the event of the application being postponed. When the
matter first
came before me on 13 May 2013, the respondent opposed
the application and sought a postponement so as to afford him time
to prepare
answering affidavits. The respondent also opposed the
interim interdict sought by the applicant. I granted an order on 14
May
2013 postponing the matter and regulating the filing of further
papers. I also granted certain interim relief, albeit of a narrower
scope than that requested by the applicant, and indicated that I
would furnish reasons for so doing at a later stage.
The respondent opposes
the application for the sequestration of his estate on the grounds
that the applicant lacks the requisite
locus standi
as a
creditor, that he has not committed and act of insolvency, that he
is not insolvent, and that the application has been brought
for an
ulterior purpose and is an abuse of process.
The applicant alleges
that the respondent is indebted to her in an amount of at least
R 289 557.31 in respect of arrear
maintenance owing to her
in terms of an order in terms of rule 43 of the Uniform Rules of
Court, which was granted by this Court
on 8 December 2011 (‘the
order’).
More
particularly, she alleges that an amount of R 170 500.00
is owing to her in respect of short payment of the monthly
cash
portion of R 34 000.000 owing in terms of the order, and
that the balance is owing to her in respect of various
expenses
which the respondent was ordered to bear in terms of the order,
including,
inter
alia
,
monthly bond payments and rates and taxes owing on the matrimonial
home,
1
medical aid premiums,
reasonable medical expenses, educational expenses for the minor
children, reasonable repairs and maintenance
to the matrimonial
home, and salary and bonus for the full time domestic worker
employed in the matrimonial home.It is common
cause that the
respondent was obliged to pay amounts totaling some R 140 000.00
per month in terms of the rule 43 order.
The respondent alleges
that he complied with the order until and including July 2012, and
that in July 2012 he launched an application
in terms of rule 43(6)
(‘the July rule 43(6) application) to vary the order on
account of the fact that he could not comply
with the terms thereof
due to a material change in his circumstances. The applicant
challenged his application on the grounds
that his supporting
affidavit was unduly prolix, whereupon respondent withdrew the July
rule 43(6) application and replaced it
with a less voluminous
application in November 2012 (‘the November rule 43(6)
application).
The respondent seeks in
the November rule 43(6) application to have the order varied
retrospectively
with effect from 1 August 2012,
inter alia
by reducing the monthly cash maintenance payable from
R 34 000.00 to R 10 000.00, directing him to pay
the
wages of a domestic worker employed twice a week rather than
full time, placing certain limitations on the medical expenses
payable
for the applicant and the minor children, and doing away
with the obligation to fund the monthly bond payments and various
other
household expenses in connection with the matrimonial home.
The respondent alleges
that, since August 2012, he has paid reduced maintenance to the
applicant in the approximate sum of R 35 000.00per
month,
which exceeds the revised amount contemplated in the varied order
which he seeks. The respondent contends that, if he
is successful in
the rule 43(6) application, the effect will be to expunge any claim
which the applicant may have against him
for arrear maintenance
owing in terms of the order. These allegations are not disputed by
the applicant.
Locus Standi
Section 9(1) of the
Insolvency Act 24 of 1936 (‘the Act’) requires that an
applicant creditor shall have a liquidated
claim against the debtor
for not less than R 100.00.
The respondent argues
that the effect of the November rule 43(6) application, which
preceded the present application, is that
the applicant does not
have a liquidated claim against the respondent inasmuch as the
quantum
of maintenance payable by him with effect from 1
August 2012 is as yet to be determined.He argues that the
applicant’s
alleged claim against him is at best conditional
and un-quantified, and does not, therefore, qualify as a liquidated
claim for
the purposes of section 9(1) of the Act.
The applicant’s
argument may be summarized thus: the order is valid until such time
as it is set aside, and that the applicant’s
claims based
thereon are fixed and unconditional. It is the respondent’s
right to pay a reduced amount which is conditional
upon the
retrospective variation of the order in the terms sought by him.
Accordingly, as in the case where a creditor relies
on a default
judgment which a debtor seeks to have rescinded, a provisional order
of sequestration ought to be granted and the
return day postponed
pending determination of the November rule 43(6) application. At
best the application ought to be postponed
pending the outcome of
the said application, with appropriate interim relief granted along
with the postponement.
As a starting point it
is necessary to consider the nature and purpose of rule 43, namely
to provide for the temporary regulation
of relevant
matters,including maintenance,
pending
the final determination of matrimonial proceedings. Rule 43 provides
for a speedy, inexpensive and robust assessment of
the issues on
motion proceedings.
2
Rule
43(6) allows for the Court to vary its decision under rule 43(5) in
the event of a material change taking place in the circumstances
of
either party or a child. The temporary nature of relief under rule
43 is underscored by the fact that orders granted in terms
thereof
are not subject to appeal.
The respondent has
applied for relief in terms of rule 43(6) with retrospective effect
from 1 August 2012. Counsel for both parties
accepted that it is
competent for the Court to grant retrospective relief in terms of
rule 43(6), and I could not find any authority
to the contrary. I
can see no reason in principle why a Court should be prevented from
granting a retrospective variation of
an interim maintenance order
in terms of rule 43(6), where the interests of justice so require,
having regard to the nature and
purpose of the sub-rule. Indeed the
order, which was granted on 18 December 2011, was made with
retrospective effect from 1 October
2011.
It is common cause that,
if the respondent is wholly successful in obtaining the relief which
he seeks in terms of the November
rule 43(6) application, the
respondent will not owe the applicant any amount in respect of
arrear maintenance. If he is partially
successful in reducing his
obligations in terms of the order, the applicant’s claim will
be reduced to the extent of his
success.
The position, therefore,
is that the amount which the respondent owes the applicant, if any,
depends on the outcome of the proceedings
which are pending in terms
of rule 43(6).
Mr.Studti, who appeared
for the respondent, referred me to the case of
Gilliatt
v Sassin
3
in
support of his contention that the applicant’s claim is not
liquidated. In that case the issue was whether or not the
applicant
creditor had a liquidated claim in circumstances where she relied on
an amount due to her as heir in terms of the first
and final
liquidation and distribution account in her late mother’s
estate, which the respondent, the executor, had misappropriated
out
of the estate.The respondent took the point that the estate account
had not yet been finally approved by the Master, and
that it was
possible that the Master might require amendments to the estate
account, in which case the amount due to the applicant
would be
subject to alteration. The court was called upon to determine
whether, in these circumstances, the applicant had a liquidated
claim entitling her to apply for the sequestration of the
respondent’s estate. Van Winsen J held that the claim was not
liquidated, reasoning as follows:
4
‘
To be
regarded as a liquidated claim the petitioner’s claim must be
fixed and determined. This Court, in the case of
Stephan
v Khan
1917 CPD 24
– a decision which has frequently been followed not
only in this Court but in other Courts – held that “liquidated
claim”, as those words are used in sec. 9(1) of the 1916
Insolvency Act, mean
a claim the amount of which has been determined
by a judgment of the Court, by agreement or otherwise.
Now, in the present case the amount
of the petitioner’s claim – and indeed whether she will
have a claim at all –
is conditional upon whether the account
in the estate of the petitioner’s late mother is accepted in
the form in which it
presently stands. The account has, however,
still to be advertised and objection may successfully be taken
thereto, which might
have the effect of reducing her claim or even
eliminating it altogether
. Mr.Meyerowitz stated that in any event
she had a
prima facie
claim to the amount appearing in this
account and that it was highly probable that an amount would
eventually be found to be due
to her which would be in excess of £
50. This may be so, but to my mind this does not go far enough to
satisfy the provisions
of
sec. 9(1)
, which require a liquidated
claim. The position appears to me to be analogous to the case of an
untaxed bill of costs. It has been
held that the amount of such a
bill cannot be regarded as constituting a liquidated claim.’
(Emphasis added.)
To my mind the facts in
Gilliatt v Sassin
are on all fours with those in the present
case and the reasoning of Van Winsen J is equally apposite in this
instance. It matters
not, in my view, that we are dealing with a
court order in this case as opposed to an estate account in
Gilliatt
v Sassin
. As I see it, the essential principle, which applies in
both cases, is that where the amount of the claim, or indeed its
very
existence, is subject to alteration and therefore uncertain, it
cannot be said to be liquidated for the purposes of section 9(1)
of
the Act.
Mr. Morrissey, who
appeared for the applicant, relied on the cases of
Kemp
v Fourie Jnr
5
and
Benade
v Boedel Alexander
6
in
support of his argument that the pending application in terms of
rule 43(6) does not divest the applicant of
locus
standi,
and
is solely relevant to the exercise of the Court’s discretion
whether or not to grant the relief sought.
In
Kemp
v Fourie Jnr.
7
the Court was seized
with the return day of a provisional order of sequestration. The
provisional order had been granted on the
strength of a default
judgment, in respect of which an application for rescission, which
had been launched
after
the granting of the
provisional order, was pending. It emerged that the respondent had
previously sent letters to the applicant
demanding the rescission of
the default judgment on the basis that the claim was disputed, and
that the applicant had failed
to disclose this fact in his founding
affidavit. The respondent took a point
in
limine,
asking
the Court to discharge the provisional order on the ground that the
applicant had failed in his application to disclose
material facts
which might have influenced the Court in arriving at its decision.
Fischer J declined to discharge the provisional
order as he was of
the view that the letters sent by the respondent had not evinced a
serious intention to bring an application
for rescission. He ordered
that the sequestration application should be postponed to enable the
application for rescission to
be heard. He made the following
remark, however, which is significant for present purposes:
8
‘…
if
at the hearing of the application for [provisional] sequestration it
had appeared that the validity of the judgments on which
the
application was founded was challenged, and that there was a serious
intention to reopen the matter,
the
Court would not have prejudged the issue by granting the provisional
order
.’
(Emphasis added.)
In
Benade
v Boedel Alexander
9
the
Court was likewise seized with the return day of a provisional order
of sequestration which had been granted on the strength
of a default
judgment. The period allowed for bringing an application for
rescission had not yet lapsed, and the respondent requested
an
extension of the return day of the provisional order in order to
give her an opportunity to make application for the rescission
of
the default judgment.
The
Court granted the postponement on the basis of the procedure
followed in
Kemp
v Fourie Jnr.
10
Unlike the situation in
this case, in
Kemp
v Fourie Jnr.
11
and
Benade
v Boedel Alexander
12
the
Court was faced with the situation where the question of rescission
of the default judgment on which the creditor’s
claim was
founded, only arose after the provisional order of sequestration had
already been granted. The question of the effect
of a pending
rescission application on the
locus
standi
of
the applicant was not considered in these cases.
In
Van
den Bergh v Kyriakou,
13
however,
the Court dealt pertinently with effect of a pending application for
rescission of the judgment claim on the
locus
standi
of
an applicant for provisional sequestration. In that case the Court
was similarly seized with the return day of a provisional
order of
sequestration granted on the strength of a default judgment. On the
day following the granting of the provisional order
of
sequestration, the respondent applied for the rescission of the
default judgment, and therescission application was still
pending on
the return day.
The
applicant had failed to disclose in its founding affidavit that he
had been unsuccessful in enforcing his claim in an earlier
action,
which had been defended by the respondent, and in which the
magistrate had granted absolution from the instance.The applicant
sought a postponementof the sequestration proceedings in order that
the rescission application could be heard and determined.
Caney AJ
came to the conclusion that the request for a postponement ought to
be refused and the provisional order of sequestration
discharged. He
reasoned as follows in this regard:
14
‘
I come to
this conclusion because the petitioner has not established, as he is
required to do the terms of sec. 12 (1)(a) of the
Insolvency Act to
do, that he has such a claim as is required by the terms of section
9(1). The question whether the respondent
is or is not indebted to
him in the sum he claims is in dispute in the magistrate’s
court and is as yet undecided.’
In the light of the
decision in
Gilliatt
v Sassin,
15
which
I consider binding on me, and that of
Van
den Bergh v Kyriakou,
16
which
I consider to be correct and persuasive, I am unable to accept Mr.
Morrissey’s submission that the pending rule 43(6)
application, which has the potential to reduce, if not expunge, the
applicant’s claim against the respondent, is irrelevant
to the
question of the applicant’s
locus
standi.
I find that, inasmuch as
the quantum – and indeed the very existence – of the
applicant’s claim is undecided
pending outcome of the rule
43(6) application, the applicant has failed to establish a
liquidated claim as contemplated in section
9(1) of the Act. The
application therefore falls to be dismissed on this ground alone.
I would in any event be
inclined to dismiss the application as an abuse of process on the
basis that the applicant was aware that
her claim against the
respondent is the subject of a dispute pending before this Court in
another matter. I deal with this aspect
below.
Act of Insolvency /
De
Facto
Insolvency
In the light of the
conclusion which I have reached regarding
locus standi
and
abuse of process, it is not necessary for me to deal at length with
the questions of whether or not the respondent has committed
an act
of insolvency or is actually insolvent. The following brief
observations will suffice for the sake of completeness.
The applicant relies on
a number of statements made by the applicant under oath in the July
and November rule 43(6) applications,
contending that these
statements constitute acts of insolvency in terms of section 8(g) of
the Act. In essence the statements
convey that the respondent is
unable to comply with the order due to a material change in his
financial circumstances, that he
cannot continue to fund the
maintenance payments as he has depleted his access to funds and
cannot incur further loans, that
he is unable to meet the
obligations imposed on him in the order without selling certain
immovable properties, and that his financial
situation is
deteriorating every month.
I doubt whether a
statement in an affidavit deposed to in support of an application
for variation of an interim maintenance order
in terms of rule 43(6)
qualifiesas an act of insolvency in terms of section 8(g) of the
Act. I consider that there is much to
be said for the view that the
word ‘debt’, as used in section 8(g) of the
Act,contemplates an obligation which is
both final and undisputed,
and that the temporary nature of an order in terms of rule 43, which
is by its nature variable depending
on financial circumstances and
need, therefore lacks the element of finality to qualify as a ‘debt’
for purposes
of section 8(g). In the same way that a liquidated
claim is required to found an application for sequestration, it
seems to me
that the debt referred to in section 8(g) must likewise
be certain and not subject to dispute, failing which the inference
of
inability as opposed to unwillingness to pay cannot be drawn.
In the present case the
respondent asserts that he is not able to fund interim maintenance
payments on the level originally ordered.
While he explicitly
concedes his inability to pay the amount originally stipulated in
the order, his case is that he should not
be obliged to pay that
amount, and that his altered circumstances warrant the amendment of
the order to provide for a lesser
amount which he is able to pay. To
my mind a reasonable person in the position of the applicant would
not understand the respondent’s
statements in support of the
rule 43(6) applications as notice of inability to pay a debt, but
rather as an indication that the
respondent is unwilling to pay as
he disputes his obligation to pay in terms of the order and seeks a
variation thereof, as expressly
catered for in terms of rule 43(6).
I do am not persuaded,
therefore, that the respondent has committed an act of insolvency as
contemplated in section 8(g) of the
insolvency act.
As regards the question
of whether or not the respondent is
de facto
insolvent, it is
common cause that the respondent’s assets exceed his direct
liabilities by almost R 5 000 000.00,
and that the
decisive factor is the value to be placed on the extent of his
suretyship liabilities and the value of hisconcomitant
rights of
recourse against the principal debtors.
The respondent has
signed five deeds of suretyshiptotaling some R 13 455 000.00
in respect of amounts owed by various
entities in which he has an
interest. The main suretyship liabilities, for present purposes,
are:
an amount of
R 4 500 000.00 in favour of Absa Bank Limited
(‘Absa’) in respect of a mortgage loan
in favour of the
C J Trust, secured by a bond over the matrimonial home held in the
name of the C J Trust;
an amount of
R 4 100 000.00 in favour of Investec Bank Limited
(‘Investec’) in respect of a mortgage
loan in favour of
Sunflox6 CC (‘Sunflox’) secured by a bond over Unit 240
Pearl Valley (‘Unit 240’),
held in the name of Sunflox;
an amount of
R 2 500 000.00 in favour of Nedbank Bank Limited
(‘Nedbank’) in respect of a mortgage
loan in favour of
Sunflox secured by a bond over Unit 18 Pearl Valley (‘Unit
18’), held in the name of Sunflox.
It appears from a report
compiled by Mr.Gemmel, the respondent’s accountant, that the
liabilities of the C J Trust exceed
its assets by some
R 3 000 000.00 and that Sunflox is in provisional
liquidation, and that its liabilities exceed
its assets of R19
million by some R 5 million.
In
Millman
and Another NNO v Masterbond Participation Bond Managers (Pty) Ltd
(under Curatorship) and Others (‘Millman’)
17
it was held that, in
determining whether the liabilities of a surety and co-principal
debtor exceed his assets, the obligations
undertaken by him as
surety and co-principal debtor must be included amongst his
liabilities, and that, to the extent that an
amount is recoverable
pursuant to a right of recourse, a corresponding amount must be
taken into account as an asset.
In
Absa
Bank Ltd v Scharrighuizen, (‘Scharrighuizen’)
18
Griesel
J referred to
Millman
and observed that:
19
‘
This
dictum
makes it clear that the value of the right of recourse which must be
taken into account as an asset will be determined in each
particular
instance by ‘the extent to which an amount is recoverable
pursuant to the right of recourse.’
He went on to say that,
in the case where the principal debtor is insolvent, a surety who
has discharged the principal debt may
exercise a right of recourse
by proving a claim against the estate of the principal debtor, and
that the extent of the surety’s
right of recourse is entirely
dependent on the anticipated dividend (if any) to be expected from
the insolvent estate of the
principal debtor.
20
Where, however, the
surety has
not
discharged the principal
debt, as is here the case, he has only a notional right of recourse
against the estate of the principal
debtor. Griesel J said of such a
right that:
21
‘
(It) is at
this stage both conditional and unliquidated and cannot be proved
against the estates of the principal debtors in terms
of
s 48
of the
Insolvency Act. As
a potential claim its value is, at best, nebulous
in view of the desperate financial position of the various principal
debtors.’
Mr. Morrissey submitted
that it would be fair, based on the information contained in the
Gemmelreport of, to work on a projected
dividend of 50 cents in the
rand in respect of Sunflox and 76 cents in the rand in respect of
the C J Trust. On this basis he
arrived at a figure of
R 7 492 946.00 to be ascribed to the value of the
respondent’s notional rights or
recourse in respect of the
suretyships. The result of that exercise is that the respondent’s
suretyship liabilities exceed
the value of his rights of recourse by
some R 5.5 million, and his total liabilities exceed his assets
by some R 545 000.00.
I cannot fault Mr.
Morrissey’s calculations or the logic of his argument. It
seems to me that it must be accepted that,
on the papers before me,
the respondent appears
prima facie
to be insolvent at this
point in time.
The particular
circumstances of this case, however, are such that I would exercise
my discretion against granting an order for
the provisional
sequestration of the respondent’s estate, for the following
reasons.
The asset deficit on the
papers of R 545 000.00 is relatively small. The
calculation assumes a scenario where the respondent
discharges the
suretyship liabilities and then makes a concurrent claim against the
insolvent entities in respect of his right
of recourse. While this
is technically correct, it ignores the practical reality that, in
the present case, the respondent is
illiquid and unable to pay his
suretyship liabilities without the sale of the underlying assets.
While the relevant financial
institutions might be entitled in
theoryto sue respondentand take judgment against him as co-principal
debtor,
22
the fact of the matter
is that they will be forced to execute against the bonded properties
to recover the amounts owing. If the
value of the relevant
properties is sufficient to discharge the principal debts, that will
be the end of the matter.
In the case of the C J
Trust, the value of the matrimonial home appears to be somewhere
betweenR 5.5 million and R 6.3
million, which exceeds the
respondent’s suretyship liability in the amount of R 4.5
million.It appears from the papers
that Absa is about to commence
legal proceedings against the C J Trust for non-payment of the bond
installments. There is no
indication as to whether or not Absa
intends to simultaneously institute action against the respondent as
surety.
In the case of Sunflox,
Absa and Nedbank, as secured creditors, stand to be paid in full
from the proceeds of the two Pearl Valley
properties. Unit 240 was
recently valued at approximately R 6.75 million and Unit 18 at
approximately R 6.2 million
by Pearl Valley Properties. The
respondent alleges that, even on a forced sale basis, the two Pearl
Valley properties are expected
to yield 75% of market value. This is
not disputed by the applicant. Thus the expected yield from Unit 240
is R 5.062 500.00,
which exceeds the bond of R 4.1
million, and the expected yield from Unit 18 is R 4.65 million,
which comfortably exceeds
the bond of R 2.5 million.
I therefore consider
that there are good prospects that the respondent’ssuretyship
liabilities will be considerably reduced,
if not entirely
discharged, from the proceeds of the sale of the relevant mortgaged
properties in the not too distant future
– in the case of
Sunflox because a liquidation is already underway, and in the case
of the C J Trust because Absa is on
the point of foreclosing on the
bond. If and when that happens, the respondent’s financial
situation will improve markedly
and his balance sheet will reflect
that he is solvent.
To sum up, itappears
that the respondent’s financial situation is in flux at this
point in time and is likely to settle
and improve in the next few
months. It seems to me that his liquidity problems are due in no
small measure to the acrimonious
divorce and concomitant lack of
co-operation and sound financial management between the parties. The
respondent’s ability
to earn a living would likely be impaired
were his estate to be sequestrated. In all the circumstances I
consider that it would
be premature and unduly prejudicial to
respondent to grant a provisional order for the sequestration of the
respondent’s
estate at this stage. Were it not for the
conclusion I have reached with regard to
locus standi
and
abuse of process, I would have been inclined to postpone the
application for a number of months pending further developments
relating to the sale of the relevant bonded properties owned by
Sunflox and the C J Trust.
Abuse of Process
It is trite law that
sequestration proceedings are not designed for the resolution of
disputes at to the existence or non-existence
of debts, and that it
is an abuse of the process of the court to resort to such
proceedings to enforce payment of a claim which
is disputed on
bona
fide
and
reasonable grounds.
23
The applicant was well
aware, long before this application was launched, that the
respondent had applied in terms of
rule 43(6)
for a retrospective
variation of the order upon which her claim is based, and that the
outcome of the
rule 43(6)
application could have the effect of
substantially reducing, if not entirely expunging, her claim for
arrear maintenance. The
applicant did not make full disclosure of
these facts in her founding affidavit
24
in circumstances where
it was incumbent upon her to have done so. This omission alone
amounts to an abuse of process.
In my view it was both
premature and inappropriate, in these circumstances, for the
applicant to make use of sequestration proceedings
in an attempt to
enforce payment her claim for arrear maintenance.There were more
suitable remedies at the applicant’s
disposal for this
purpose.In
Kook
v Kook
25
My
burgh J expressed the view that the enforcement of maintenance
orders
pendentelite
does not lie in the
field of insolvency proceedings but in contempt of court
proceedings. It was open to the applicant to issue
a writ of
execution against the respondent for the amount of the arrear
maintenance, or to launch contempt proceedings against
respondent
based on his failure to comply with the order.
If the applicant was
genuinely concerned about the apparent delay in finalizing the
November
rule 43(6)
application, she could have brought matters to a
head by taking one of these steps.It is evident from the papers,
however, that
the applicant has not yet filed an affidavit in answer
to the November
rule 43(6)
application, and appears to be in no
hurry to do so. That being the case she can hardly be heard to
complain that the applicant
is delaying the finalization of the
November
rule 43(6)
application.The fact of the matter is that she
deliberately chose to resort to the drastic remedy of sequestration
rather thanmaking
use of one of the conventional remedies available
to her for the enforcement of maintenance claims.
It is well established
that it is an abuse of process to make use of sequestration
proceedings where the sole or predominant motive
or purpose of the
applicant is something other than the
bona
fide
achievement
of the sequestration of the debtor’s estate for its own sake,
but for some ulterior motive.
26
It is common cause that
the applicant has hitherto held the view that the respondent is a
wealthy man of means, and that his professed
inability to comply
with the order was due to ‘unwillingness to pay rather than an
inability to do so’. The bringing
of this application
represents a
volt face
on the part of respondent which calls
for an explanation. The applicant says in this regard:
‘
I have
historically treated his allegations of financial impotence with
scepticism because they fly in the face of certain of his
conduct
which suggests that he is a man of means. However,
if
it is so
that
his financial position is as dire as
he
says it is, then his estate must be sequestrated.
After reflection, and based on an
objective review of the respondent’s financial position, I
brought my application to sequestrate
him.’ (Bold emphasis
added.)
This explanation strikes
me as hollow and contrived. The applicant does not say when and how
she conducted the ‘objective
review of the respondent’s
financial position’ which made her change her mind about his
financial situation. The
founding affidavit does not disclose any
new information which came to light which persuaded her to alter her
views in this regard.
The applicant’s attempt to rely on the
fact that the respondent is selling certain of his assets is
opportunistic and does
not avail her. It is clear from the papers
that the respondent has made no secret of the fact, and the
applicant has been aware
for some time, that he intended to sell
certain assets so as to reduce debts and free up funds. As far back
as July 2012, the
respondent stated as followsin an affidavit:
27
‘
At the
previous
Rule 43
hearing I stated under oath that the Respondent and
I needed to liquidate assets in order to reduce our collective debts,
as well
as those of the entities which we have an interest in, which
would release funds to maintain ourselves and reduce monthly
liabilities.
I was hopeful that the aforesaid would indeed happen but
to date hereof no substantial assets have been liquidated and I am
unable
to obtain further funds to adhere to the
Rule 43
order.’
To my mind the
applicant’s words, ‘if his financial position is as dire
as
he
says it is, then he must be sequestrated’are
carefully chosen and cynical. They reveal that the applicant herself
does
not hold the
bona fide
view that the respondent is
insolvent. The respondent alleges – and it is nowhere denied –
that the applicant has
rejected a number of divorce settlement
offers involving millions of rands on the basis that the amount
offered by the respondent
is too low. Were the applicant genuinely
of the view that the respondent is insolvent and unable to meet her
demands, she would
not be holding out for a more generous divorce
settlement.
On 3 April 2013, in the
context of ongoing divorce settlement negotiations, and
approximately one month before the present application
was launched,
the applicant sent an email to her attorney, which she copied to the
respondent, in which she stated as follows:
‘
I am
instructing you to continue with the sequestration procedure tomorrow
4 April 2013 after 12 noon, should our offer not be met.
Three years of negotiating a
reasonable settlement with the other side will come to an end. We are
too far apart.
Klaus is who he is, he will not
change. My parents and I have peace with this decision.’
(Emphasis added.)
To my mind the fact that
this letter was copied to the respondent is indicative of an attempt
to bully the respondent into giving
in to her demands using the
threat of sequestration as a weapon. The applicant candidly admits
that she would not have brought
the present application if the
divorce had been settled and the respondent had complied with the
terms of the settlement.
In all the circumstances
the conclusion is inescapable, in my view, that the applicant’s
objective in launching the present
application was not a
bona
fide
attempt to bring about a sequestration of the respondent’s
estate for its own sake, but a tactical manoeuvre aimed at
pressuring
the respondent into settling the divorce on her terms.
The application was therefore brought for an ulterior motive, and
falls
to be dismissed as an abuse of process.
The Interim Order
granted on 14 May 2013
In her notice of motion
the applicant sought an order that, in the event of the
sequestration application being postponed, the
respondent be
prohibited from encumbering or disposing of his assets. This relief
was opposed by the respondent.
Mr.Studti referred to
the case of
Knox
D’Arcy Ltd and Others v Jamieson and Others
28
(‘Knox
D’Arcy)
andargued
that the applicant was not entitled to the interdictory relief
sought as she had failed to show that the respondent
was getting rid
of funds, or was likely to do so, with the intention of defeating
the applicant’s claim.
In
Knox
D’Arcy
the
Court was dealing with an application for an anti-dissipation
interdict pending the outcome of an action for damages, where
the
applicant asserted no proprietary or quasi-proprietary interest in
the respondent’s assets. It was held that in these
circumstances an applicant is required to show an intention on the
part of the respondent to defeat the claims of creditors.Grosskopf
JA stated in this regard that:
29
‘
(T)he effect
of the interdict is to prevent the respondent from freely dealing
with his own property to which the applicant lays
no claim. Justice
may require this restriction in cases where the respondent is shown
to be acting
mala
fide
with the intent of preventing execution in respect of the applicant’s
claim. However, there would not normally be any justification
to
compel a respondent to regulate his
bona
fide
expenditure so as to retain funds in his patrimony for the payment of
claims (particularly disputed ones) against him.
I
am not, of course, at the moment dealing with special situations
which might arise, for instance, by contract or under the law
of
insolvency.’
The applicant did not
make out a case in her founding affidavit that the applicant’s
conduct in disposing of certain of
his assets was
mala
fide.
It
was apparent from the contents of an annexure to applicant’s
own papers that the respondent had for some time been contemplating
the sale of assets with a view to reducing debts and releasing
funds.
30
The applicant’s
claim lay in respect of arrear maintenance owing to her in terms of
a Court order. In that respect her case
differs from that of
Knox
D’Arcy
, where the applicant had not yet obtained judgment
in respect of his claim for damages.To my mind a claim for arrear
maintenance
owing in terms of a Court order, albeit that an
application to vary the order is pending, may be considered one of
the special
situations contemplated by Grosskopf JA, where justice
requires that a respondent be compelled to retain funds in his
patrimony
for payment of the claim, particularly where the
maintenance of minor children is involved.
A further relevant
consideration was that the interdictory relief was sought against
the backdrop of an application for the sequestration
of the
respondent’s estate on the basis of his actual insolvency.The
applicant voiced the concern that, given the respondent’s
precarious financial situation, he would use the funds to pay his
more pressing creditors. To my mind the context of insolvency
proceedings likewise constituted a special situation justifying
relief aimed at compelling the respondent to preserve assets
in his
estate.
The evidence before me
showed that the respondent had sold his interest in Darling Golf and
Country Estate for R 700 000.00,
but that the proceeds of
the said sale had not yet been received. Given the brief period for
which the interim relief would operate,
I considered that the
balance of convenience clearly favoured the granting of the interim
relief sought, but only to the extent
of the quantum of the
applicant’s claim.
31
For these reasons I
considered it appropriate, on 14 May 2013, to grant interim relief
which was significantly narrower in scope
than the relief sought by
the applicant and was calculated to operate only until the
finalization of the sequestration application,
which was due to be
heard on 11 June 2013. I therefore made an order directing that:
‘
On receipt
by respondent of the proceeds of the sale of his interest in Darling
Golf and Country Club Estate (Pty) Ltd, the respondent
shall place
R 290 000.00 of such proceeds in trust with his attorneys,
such proceeds to be held in an interest bearing
account pending the
determination of the sequestration application or the rule 43(6)
application, whichever is finalized first.’
Costs
Mr.Studti argued that,
in the event of my concluding that the application was an abuse of
process, it would be appropriate for
me to grant costs on the
attorney and client scale, both as a punitive order and with a view
to affording the respondent a fuller
indemnification for his costs.
Mr. Morrissey did not strenuously oppose the granting of attorney
and client costs in the event
that I made that finding; indeed he
appeared to concede that such an order would be appropriate in that
event.
There is ample precedent
for the granting of attorney and client costs against a litigant in
circumstances where there has been
an abuse of process.
32
I have found that the
application was an abuse of process on two scores, namely that the
applicant’s claim was, to her knowledge,
disputed,
and that the application
was brought for an ulterior motive. The respondent was put to
unnecessary expense in resisting the application.
In all the
circumstances I consider it both fair and appropriate to grant costs
on the scale of attorney and client, as requested.
Conclusion
In the result I ordered
that the application be dismissed with costs, such costs to be paid
on the scale of attorney and client.
_______________________
D.M. DAVIS, AJ
Acting Judge of the High
Court
1
The
matrimonial home is occupied by the applicant and the minor children
born of the marriage.
2
See
Levin v Levin
1962 (3) SA 330
(W) at 331D;
Taute v
Taute
1974 (2) SA 675
(E) at 676 C – D;
Grauman v
Grauman
1984 (3) SA 479
F.
3
1954
(2) SA 278
(C).
4
A
t
280A –D.
5
1939
OPD 188.
6
1967
(1) 648 (O).
7
Supra
n 5.
8
At
p 193.
9
Supra
n 6.
10
Supra
n 5.
11
Supra
n 6.
12
Supra
n 5.
13
1954
(4) SA 151
(N).
14
At
152 H – 153 A.
15
Supra
n 3.
16
Supra
n 13.
17
1997
(1) SA 113
(C) at 123 B - C.
18
2000
(2) SA 998
(C).
19
At
para [23].
20
At
para [25] and [27].
21
At
para [28].
22
It
is assumed, for present purposes, that the respondent bound himself
as surety and co-principal debtor in favour of Absa, Investec
and
Nedbank, as is ordinarily the case in standard form suretyships
prepared by these financial institutions.
23
See
Badenhorst v Northern Construction Enterprises Ltd
1956 (2)
SA 346
(T) at 347 – 348;
Kalil v Decotex (Pty) Ltd and
Another
1988 (1) SA 943
(A) at 980 B – D;
H
ü
lse-Reutter
v HEG Consulting Enterprises (Pty) Ltd
1998 (2) SA 208
(C) at
218 E – 220 B;
Investec Bank Ltd v Lewis
2002 (2) SA
111
(C) at 116 C – F; Meskin
Insolvency Law
para 2.1.5
and cases cited at footnotes 9, 9B and 9C.
24
The
applicant’s references to the pending November rule 43(6)
application are oblique and self-serving. There is no pertinent
disclosure of the retrospective nature of the relief sought and the
potential effect thereof on the applicant’s claim.
25
1974
(2) SA 657
(T) at 660 A - B.
26
Meskin
Insolvency
Law
para 2.1.5 and cases cited at footnotes 2 and 9A.
27
In
support of the July rule 43(6) application.
28
[1996] ZASCA 58
;
1996
(4) SA 348
(A).
29
At
372 H – I.
30
Annexure
MMG 12.
31
See
Knox D’Arcy Ltd and Others v Jamieson and Others
1994
(3) SA 700
(W) at 710 H – I.
32
See
A C Cilliers
Law of Costs
para 4.18, and particularly the cases
cited at footnotes 4 and 9.