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[2013] ZAWCHC 207
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Investec Bank Limited v Stratford and Another (10394/2012) [2013] ZAWCHC 207 (14 August 2013)
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REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE HIGH COURT, CAPE TOWN)
Case No: 10394/2012
In the matter
between:
INVESTEC BANK
LIMITED
.............................................................................................................
Applicant
(Registration No.
[...])
and
IVOR CHARLES
STRATFORD
.............................................................................................
First
Respondent
(ID. No. [...])
(Address: House
2[...] P[...] V[...] E[...], P[...])
(Marital
status: Married in community of property to SHEILA
MARGARET
STRATFORD)
ID. No. 4[...])
and
SHEILA
MARGARET
STRATFORD
................................................................................
Second
Respondent
(ID. No. 4[...])
(Address: House
2[...] P[...] V[...] E[..], P[...])
(Matital
status: Married in community of property to IVOR CHARLES
STRATFORD)
(ID.
No. 4[...])
and
CLEAN
NGOMA
.....................................................................................................................
First
intervening
Employee / Creditor
ERIC
DLOKOLO
.................................................................................................................
Second
Intervening
Employee / Creditor
ANDRIES
ADONIS
................................................................................................................
Third
intervening
Employee / Creditor
JUDGMENT
DELIVERED ON 14 AUGUST 2013
MANTAME,
J A.
INTRODUCTION
[1]
This
is an opposed application for the granting of the
final
order of sequestration. After granting of the
rule
nisi by
Cioete
AJ
,(
as
she then was) on 15 October 2012,. Respondents and intervening
parties filed a counter-application, seeking an order declaring
Section
9(4A)
of
the
insolvency Act, 24
of
1936
(“the Act") to be unconstitutional in so far as it does
not make provision for the service of a petition
on
employees who are not in a business operation of their
employer
,
but
in a domestic environment, being the Respondents in this regard.
B.
BACKGROUND AND
FACTS
[2]
Applicant lent and advanced some monies to First and Second
Respondents. Respondents acknowledged liability to the Applicant
and
signed some suretyship agreements as acknowledgement for the
obligations of his family trust and companies in the Pinnacle
Group
where Respondents heid shares. Applicant alleges that Respondents are
indebted to it in the sum of
two
hundred and forty million, thirteen thousand, two hundred and fifty
seven rand and ninety six cents (“R240 013 257.96’)
together
with interest
[3]
Respondents do not seem
to
be
disputing Applicant’s claim, but suggest that Applicant has a
liquidated claim against Respondent as contemplated by Section
9(1)
of the insolvency Act. Respondents contended that Applicants are
bound not to gain anything substantial from these sequestration
proceedings as they have assets worth no more than
seven
hundred and eighty thousand rand (“R780 000.00”).
This
amount is made up as follows: The amount of no more than
four
hundred thousand (“R400 000.00”)
will
accrue to the estate of the Respondents from the free residue of the
Stratford Trust, and the
amount
of
three hundred
and eighty thousand rand (“R380 000.00”)
will
be derived from the proceeds of the house in King Williams Town,
Eastern Cape, if sold, that is occupied by their domestic
worker and
owned by the Respondents. The Respondents contends that the dividend
would
be
much less and there would be no advantage to creditors, given the
amount of
seven
hundred and eighty thousand rand (“R780 000.00”).
No
other
assets were
disclosed
by the Respondents other than these assets.
[4]
When the rule
nisi
was
granted on 15 October 2012
,
Applicants
and Respondents were legally represented at all relevant times.
C.
ISSUES TO BE
DECIDED
[5]
This court is now called upon to decide on whether the petitioning
creditor has established a claim against the debtor; whether
the
debtor has committed an act of insolvency or is insolvent; whether it
would be to the advantage of the creditors of the debtor
if his
estate is sequestrated; furthermore if it would be just, fair and in
the interest of justice to decfare Section 9(4A) of
the insolvency
Act, 24 of 1936 to be unconstitutional in so far as it does not make
provision for the service of a petition on
employees who are not
employed in a business operation of their employer, being the
Respondents in this regard. The latter constitutional
challenge was
filed by the employees of the
Respondents
who are working as their domestic workers and had since been admitted
as intervening parties in these proceedings.
D.
APPLICANT'S
CASE
FOR
THE FINAL ORDER OF SEQUESTRATION
AGAINST
FIRST AND SECOND RESPONDENTS
[6] Mr. Manca for
the Applicant argued that this is a return day of a provisional order
of sequestration in terms of which the joint
estate of the First and
Second Respondents was placed under provisional sequestration in
terms of Section 10 of the Act The service
requirements as provided
for in the provisional order were complied with by the Applicant, and
this court is now left to consider
whether a final order should be
granted against First and Second Respondents,
[7]
Counsel for the Applicant submitted that Section
12(1)
of the
insolvency
Act provides as follows:
“
(
1)
if at the hearing pursuant to the aforesaid rule nisi the court is
satisfied that:
-
(a) the
petitioning creditor has established against the debtor a claim such
as is mentioned in subsection (1) of section nine;
and
(b) the debtor
has committed an act of insolvency or is Insolvent; and
(c)
there is reason to believe that it will be to the advantage of
creditors of the debtor If his estate is sequestrated, it may
sequestrate the estate of the debtor
.”
It
was therefore argued
that,
on any version, Applicant has satisfied all those requirements for
them to be granted a final order.
[8]
Applicant’s counsel submitted that, Respondents in answering to
Applicant’s claim, couched their affidavit in a
rather strange
way, Respondents failed to deal with the issues raised by the
Applicant and rather alleged that,
"for
the purposes of this application
,
I
will accept the
Applicant’s allegations and reserve my rights to deal with them
at a later stage.”
In
essence, that amounts to a bald denial. Counsel submitted that this
position was
dealt
with
in
Wightman t/a
JW
Construction
v
Headfour
fPtv) Ltd
&
Another
[2008] ZASCA 6
;
2008 (3) SA 371
@ [13]
:~
“
[13]
A real,
genuine and bona fide dispute of fact can exist only where the court
is satisfied that the party who purports to raise the
dispute has in
his affidavit seriously an unambiguously addressed the fact said to
be disputed.
There
will of course be instances where a bare denial meets the requirement
because there is no other way open to the disputing
party and nothing
more can therefore be expected of him. But even that may not be
sufficient if the fact averred lies purely within
the knowledge of
the averring party and no basis is laid for disputing the veracity or
accuracy of the averment.When the facts
averred are such that the
disputing party must necessarily possess knowledge of them and be
able to provide an answer (or countervailing
evidence) if they be not
true or accurate but; instead of doing so, rests his case on a bare
or ambiguous denial the court will
generally have difficulty in
finding that the test is satisfied.
I
say,
“
generally”
because factual averments seldom
stand apart from a broader matrix of circumstances, all of which
needs to be borne in mind when
arriving at a decision. A litigant may
not necessarily recognise or understand the nuances of a bare or
general denial as against
a real attempt to grapple with all relevant
factual allegations made by the other party. But when he signs the
answering affidavit,
he commits himself to its contents, inadequate
as they may be, and will only in exceptional circumstances be
permitted to disavow
them. There is thus a serious duty imposed upon
a legal adviser who settles an answering affidavit to ascertain and
engage with
facts which he direct disputes and to reflect such
disputes fully and accurately in the answering affidavit if that does
not happen
it should come as no surprise that the court takes a
robust review of the matter.
”
in
essence, Applicants Counsel argued that Respondents has failed to
properly deny
ihe
allegations made by the Applicant, but instead
opted
to make generalisations and did not deal with the actual issues
raised.
[9]
Mr. van Rensburg for the Respondents and intervening parties
submitted
that
in terms of Section 12(1)(b)
of
the insolvency Act, Applicant needs to convince the court
that
there is reason to
believe
that a final order will be to the advantage
,
of
creditors. If this requirement has not been
fulfilled,
the
rule nisi
has
to be discharged. The onus to grant a final sequestration order is
higher pitched than the onus on the rule
nisi,
where
the court upon presentation with the petition for the sequestration
of the estate of the debtor, is of the opinion that prima
facie
,
the petitioner has established a claim against the debtor; a debtor
has committed an act of insolvency or is insolvent and that
there is
reason to believe that it will be to the advantage of the creditors
that the debtor's estate be provisionally sequestrated.
In any event,
even if the Applicant has satisfied all the requirements for a final
sequestration, the court still retains its discretion
to refuse the
final order. The tenor of the fact
is
to obtain pecuniary
benefit
for creditors. If it is found that the sequestration proceedings were
instituted for other motives, the court may refuse
to grant
the
order. It is therefore Respondent’s submission that even the
rule nisi
should
never have been granted
as
the
Applicants
failed to satisfy the requirements
as
mentioned above.
As
a result, the application should be dismissed and
the
rule
nisi be
discharged.
[10]
Applicant argued that there has been a series of transactions made by
the First Respondent during the period leading to his
provisional
sequestration,
and
assets
belonging to the First Respondent or his entities that
might
form part of the
free
residue in
the
Respondents
estate.
If a final order is granted, those assets
will
need
to
be
investigated by a duly appointed trustee. These include, but not
limited to:-
10.1
A payment of twenty eight million rand (R28
000
000.00
)
made
on 12 March 2009 to PPM in all likelihood was transferred to First
Respondent or entities controlled by him;
10.2 A payment of
six million rand (R6 000 000.00) made on 15 May 2009 from PP1 to
“Ivor C Stratford investments” (as
there is no registered
company with that name). The money might have been diverted to First
Respondent personally;
10.3
The fact or allegations that First Respondent was a director af PPM
and was a 50% shareholder of PPM and such entity was controlled
by
him;
10.4
Erf 6[...] Ho
ut
Bay
sold
by Respondents on 4 June 2011 for one million, seven hundred and
fifty thousand rand (R1 750 000.00) and the proceeds need
to be
investigated;
10.5
Erf 4[...]
Gonubie
sold
by Respondents in February 2012 for eight hundred thousand rand (R800
000.00) and the proceeds need to be investigated;
10.6 Erf 1[...] King
Williams Town that is valued at three hundred and eighty thousand
rand (R380 000,00) and is unbonded, belonging
to the Respondents;
10.7
The actual value of the Stratford Trust as per
Applicants
allegations
.
Respondents
alleges that such trust is not worth more
than
four hundred
thousand
rand (R400 000.00);
10.8
A payment made by First Respondent to Marie
May
Kolsch
amounting
to
one hundred and thirty thousand rand
(R130
000,00);
10.9
An
investigation to be conducted to all twenty-four
(24)
legal entities the
Respondents
are associated with.
[11]
Counsel for the Respondents argued that, in the best case scenario,
Respondents
have
assets
worth
no
more than seven hundred and eighty thousand
rand
(R780 000.00) and, that cannot be an advantage to the general body of
creditors. Further the costs of sequestration will amount
to a
substantial sum and will reduce this amount of seven hundred and
eighty thousand rand (R780 000.00). After the investigations
have
been conducted there will be nothing left to distribute to the
creditors. Mr. van Rensburg conceded though that Respondents
have
already had two
j
udgments
from RMB. Judgments of nineteen million, one hundred thousand\ five
hundred and three rand and ninety-two cents
(
“
R19
100 503.92”)
dated
27 June 2011 and
one
million eight hundred and four thousand, eight hundred and eight rand
and sixty four cents (“R1 804 808.64")
dated
5 May 2011. Mr. van Rensburg further admitted that Applicant has a
claim against Respondents, but Respondents do not owe Applicant
an
amount of
two
hundred and forty million, thirteen thousand, two hundred and fifty
seven rand and ninety six cents (
“
R240
013257.96”)
plus
interest, Respondents do not
allege
exactly
as to how much they owe Applicant.
[12]
Further, Mr. Manca submitted that there is evidence to prove
that
there
are
assets in Respondent's estate to the value of seven hundred and
eighty thousand rand (R780 000.00), made up of the value of
Erf
1[...]
King Williams Town -and its
valuation
is
three
hundred and eighty thousand rand (“R380 000.00
”
)
and
four
hundred thousand rand (
a
R400
000.00”) from
the
Stratford’s Trust Respondents had interests in many companies
which he claims they are either dormant or liquidated. Respondents
have made no mention of the dividends they may receive from the
liquidated companies. Respondents disposed of two immovable
properties
at the time Respondents were insolvent and distributed the
proceeds to his creditors and donated some to churches. These
proceeds
need to be
investigated
as it has been stated above. Large amounts of monies were paid to
Merle, a company that was used by Respondents to
own and develop
properties. Nothing was said about these properties and where they
are. Merle apparently made some bond repayment
on behalf of PPM.
These are the issues that need to be Investigated. Besides,
Respondents have not come to the fore about their
true status of
their financial affairs. They only responded on allegations that were
put by Applicant before this court.
E.
PRESCRIPTION
OF APPLICANTS CLAIM
[13]
Mr. van Rensburg
furthermore
argued
that the transactions as mentioned above in paragraph 9 are
irrecoverable, pursuant to the provisions of the
Prescription Act 68
of 1969
. in essence, whatever claim
Applicant
has,
based on those transactions have prescribed. Such prescription
occurred even before a provisional order was granted. Even if
that
was
not so, First Respondent has
given
adequate explanation
to
the disposal of such amounts.
[14]
In
response to the point of prescription raised by Respondents, Mr Manca
submitted that there is no question of claims prescribing
in this
regard.
In
Duet and Magnum
Financall
Services CC (ín liquidation) v Koster
2010(4)
SA 499[D],
where
it was held - “
Prescription
commences to run no later than date of appointment of liquidators”
this could never be an issue as the final sequestration has not been
granted and as trustee has not been appointed.
F.
NON COMPLIANCE
WITH SECTION 9(4A) (a) (ii) AND
(b)
OF THE ACT
[15]
I
t
was Respondents submission that prior to the granting of the
provisional order, Applicant
should
have
complied
with
the provisions
of
sub-sections
9(4A)
(a) (li) and
(b)
of
the Act
Reference
was made
to
Gunaudoo and
Another
v
Hannover
Reinsurance Group Africa (Pty)
Ltd
and Another
2012 (6)
SA
537
(SCA),
w
here
it
was
held
that, the intention of
the
Legislature was to only make this provision
applicable
to
empfoyees
of the debtor, emp fayed in a business of the latter. This section
was amended to ensure that employees of debtors facing
sequestration
or winding-up were notified of the proceedings - Section 9 (4A) of
the insolvency Act was inserted to require that
notice be given to
the debtor's employees before a provisional order was granted and the
amended Section 11 (4) provided for service
of a rule
nisi
on
the
employees.
[16]
Further, Mr van Rensburg argued that when Handley enquired from
Respondents whether they had a domestic worker, the response
was in
the
affirmative.
At the time Respondents did not disclose to Handley that
there
were other employees as Handley did not ask
about
further
employees
.
M
r
van
Rensburg
contended that Handley was compelled to make full enquiries in
order
to comply with the peremptory legal requirements of service on
the
employees. At the time he had three domestic employees, that is, Mr
Eric Dlokolo ~ the gardener,
Mr
Andries Adonis
-
the handyman and Mr Clean Ngema - a domestic worker.
[17]
I
n
response to such allegations, Applicant contended that although the
provision does not require a copy of the petition to be furnished
to
employees of the debtor who are not employed in a business operation
of the debtor, Applicant did
in
fact
furnish a copy of its petition to the First and Second Respondent's
domestic employees in accordance with the provision. In
Berrange NO v Hassan and
Another
2009(2)
SA 339 (N)
353,
it
was
held
that the word
‘
furnish
'
implies
a form
of
informal
service.
Ms Handley, the candidate attorney who served the papers in the
main
application on First
and
Second Respondents, asked whether they had any employees. The
response from the Respondents was that they had a domestic worker
and
Handley proceeded to leave a copy of the petition on the kitchen
table at the Respondents residence as there was no notice
board at
the premises. At
all
times
the first intervening employee, who was employed by the Respondents
as a domestic
worker,
had access to the kitchen table
.
It
therefore follows
that
the gardener and the handyman fails within a definition of a
'domestic worker’ In terms of the Basic Conditions
of
Employment
Act.
[18]
It is Applicants submission fhat there is no requirement that a
debtor’s employees should actually receive the notice
of
application; that a
petition
must
be directly drawn to the attention of the employees or that the said
employees be advised personally of the
application
and its consequences
.
Similarly
,
the Respondents did not inform their employees that a copy of the
application
was
left on the kitchen table for them. If this court finds that there
was compliance or at least substantial compliance with Section
9
(4A), the constitutional challenge
raised
by
the Respondents will fall away, and there would be no reason for its
determination.
G.
THE
CONSTITUTIONAL CHALLENGE BY THE INTERVENING
PARTIES
[19]
Mr van Rensburg for the intervening parties argued that the exclusion
of domestic employees from the protection contemplated
by
the
provision of Section
9(4A)
of the Act renders the said sub-section to be unconstitutional on the
basis of race and gender discrimination. Such inherent
discrimination
could be found in provisions of Section 9(4A) of the Act.
It
was
argued that the first point of departure was the consideration of
this issue by the Constitutional Court in
City
Council of
Pretoria
v Walker
1
998(2
)
SA 363 (CC)
,
where it was held that the intention to discriminate whether directly
or
indirectly
is
irrelevant as both situations are covered by Section 8 of the
constitution which deals with Equality. Reference was given to
the
whole host of authorities and Mr van Rensburg went on to analyse the
situation, in his case to be involving domestic workers,
in their
situation, such discrimination involves race and gender, and
inevitably affected their rights. Domestic workers are, by
virtue of
the meaning ascribed to Section 9(4A) by the Supreme Court of Appeal
in
Gungudoo
(supra),
excluded
from the protection by law, as employees referred to were those in
the business sector.
[20]
The
intervening parties' contention is that the
lack
of
notice of the
sequestration
proceedings
amounts
to an
unconstitutional
breach of
their
fundamental right
to
fair
labour
practises
as their employment
was
effectively
terminated
and lost employment without
any
prior notice. Had they
been
given notice prior the hearing of the provisional orden they would
have sought legal assistance and opposed the application.
The issues
that are now before the
court
could
have been raised then and perhaps they could have been able to
retain
their
employment. If all else failed, they could have had reasonable time
to seek other employment opportunities elsewhere. Such
unfair and
unconstitutional practise could not be justified in this democratic
and constitutional society. Even though Handley,
the candidate
attorney, left a copy on the table for the First intervening
Party
,
the
papers were never brought to the attention of the intervening
parties; even if they found them, there is no indication that
they
were meant for them and there is
nothing
in
the papers themselves indicating that the consequences of the
sequestration could affect their rights. Domestic workers are not
schooled in legal matters and have no
financial
means
to obtain legal assistance, regardless of their economic situation;
it
is
therefore paramount that they be advised about the process as it
impacts on their
fundamental
rights
.
A
proper case has been made by the
intervening
parties, and therefore
this
court should
not
grant an order in terms of
Section
12(2)
of
the insolvency Act and discharge the rule
nisi
and
further declare Section 9(4A) of the insolvency Act to be
unconstitutional.
[21]
in turn, Mr Manca for the Applicant submitted that the Respondents
predicated constitutional challenge is on the interpretation
of
Section 9(4A) by the SCA in
Gungudoo
judgment.
The
provision requires a petition to be furnished only to those employees
of the debtor who are involved in the debtor's business
concern
(“business employees”) and not a debtor’s domestic
employees. The constitutional issue raised by Respondents
does not
fail to be determined in circumstances where there was compliance
with Section 9(4A). This issue can be decided without
reaching a
constitutional point, in any event, Section 9(4A) does not infringe
the rights of the intervening employees as alleged
by the Respondents
and no case has been made out for the declaration of invalidity
sought Although the provision does not require
a copy of the petition
to furnish to employees of the debto
r
who
are not employed in a business
operation
of the
debtor
,
the
Applicant in
fact
did
furnish
a copy of the petition to the First and Second Respondents’
domestic employees in accordance with the provision. Respondents
in
their own version do not dispute that a copy of the petition was
left
on the
kitchen
counter or table. Counsel submitted, furnishing a copy of the
petition to the employees by leaving it on a kitchen table
was a
better and more accessible option than the one envisaged in Section
9(4A) (aa) (ií) and (bb). In those two scenarios,
a copy of
the petition is affixed in a notice board inside the debtor’s
premises
or
is
affixed to the front gate of the premises, in circumstances whereby
sub-section (aa) nor (bb) were unachievable, because of the
nature of
the premises, a kitchen tabie Is the most accessibie place to any
domestic worker. There is no provision requiring the
employees to
actually receive the application; or the petition be directly drawn
to the attention of the employees or that employees
be personally
advised of the appiication for sequestration and the consequences
thereof.
[22]
Besides First and Second Respondents have not made an explanation as
to why they did not inform their employees that a copy
of the
application
had
been left for them on the kitchen table. An Applicant in any
application must first exhaust the possibilities of relief through
indirect application of the Bill of Rights before relying directly on
the Bill of Rights. The SCA in
Gungudoo
judgment
did not interpret the provision with reference to any of the
constitutional rights relied upon by the Respondents. Mr Manca
agreed
with Respondents
though
that
domestic
workers
,
as defined in the Basic Condrtions of Employment Act, 75 of 1997,
“BCEA” are vulnerable employees who require the
protection of the law. But in this instance, there is no basis for
the contention that Section 9(4A) infringes the intervening
employees
'
constitutional
rights and
as
such, has not made out a case sought in their counter application.
[23]
It was Applicant's argument that the nature of
a
person’s employment in a business or
in
a
domestic context does not involve any personal attributes or
characteristics and cannot
impair
one's
human dignity. The Respondents have not
established
an
unfair discrimination in terms of Section 9(3) of the constitution.
Regarding
the
Respondents contention that no legitimate governmental purpose is
served by the differentiation between business empfoyees and
domestic
employees, Counsel for the Applicant made reference to the SCA
judgment of Gungudoo
(supra)
at
paragraph 41 that,
"the purpose
of the relevant provisions of the LRA, Insolvency Act and 1973
Companies Act, which were adopted as a package,
was to ensure that
where a debtor conducted business, notice of sequestration or
windlng-up proceedings must be given to employees
of the business
”.
[24]
The issues relating to fair labour practices relating to
employer
and
employee are dealt with in Section 23(1) of the Constitution.
Domestic employees are furthermore protected by numerous legislation
provisions, for instance, the BCEA, the Sectoral Determinatíon
7: Domestic Worker Sector; and the LRA. Any limitation to
any rights
is contained in Section 36 of the Constitution.
By
all
means, the intervening parties are protected by the law.
[25]
Further,
the intervening parties filed a counter application after
having
been
granted leave to do so. They have failed to put substantial ground on
which
the final
order
should not
be
granted.
Besides allegations, that if they
have
been made aware
a
bout
the provisional
sequestration
,
they
would
have opposed the granting of such order.
However,
they
have
not
put any grounds
on
which they would have
opposed
the granting of such an order. The intervening
parties
rely exclusively on
the
fact that there
was
non-compliance
with the
provision
of service on them and that
Section
9(4A) inherently discriminates them.
As
such Section 9(4A) should be
declared
unconstitutional. In the eyes of the Applicant, this
is
a matter that could be decided without
reaching
a constitutional
point
and as such this counter application should be
dismissed
with costs. If
for
whatever reason
,
this court is not amenable to grant that order,
it
would
be
appropriate
for
this
court to use the
powers
in
terms of Section 17
2
of the
Constitution
to
make
an
order that is just and equitable.
[26] Third and
Fourth Respondents were further joined in these proceedings as
interested parties. Third Respondent elected to oppose
the
constitutional challenge of Section 9(4A) by intervening parties.
Fourth Respondent decided to abide by the decision of this
court
[27]
Ms Mangcu-Lockwood for the Third Respondent submitted that the reason
why the Minister of Justice and Constitutional Development
opposed
this matter, is because of the
dicta
in
Van Der Merwe v
Road Accident Fund and Anothe
r
(Women’s
L
egal
Centre Trust) as Amicus Curiae
2006
(4) BA
230
,
“
where it was held that
where a constitutional validity of legislation is an issue
,
the Minister
responsible for its administration must be party to the proceedings.
The Ministers' view and evidence ought to be heard
and considered.
The courts should not pronounce on validity of legislation without
benefit of hearing the organ of state concerned
on purpose pursued by
legislation, its legitimacy, factual context
,
impact of its
application and justification
,
if any, for
limiting entrenched right The views of state organs are also
important when considering whether
;
and on what
conditions,
to
suspend any
declaration of invalidity..."
[28] The intervening
parties’ case is that the SCA’s interpretation of Section
9{4A) of insolvency Act in Gungudoo (supra)
renders the provision
unconstitutional and in conflict with various provisions of, but not
limited to the constitution, fair labour
practices and the right to
access to courts,
[29]
Third Respondent disputes the aflegations by Mr Van Rensburg that
domestic workers are excluded from protection
by
Section
9(4A). Besides their protection being afforded by Section 9(4A),
Section 23(1) of the Constitution states that everyone
has a right to
fair labour practice. The LRA and BCEA were effectively promulgated
to give effect to Section 23. The protection
of the domestic
employees is provided for in the LRA, BCEA and the Sectoral
Determination in instances where there is an order
of sequestration.
There is no basis by the intervening parties to allege that their
right to fair labour practices is infringed.
[30] Counsel for the
Third Respondent further submitted that the intervening party's main
contention was- that they did not have
an opportunity to oppose the
granting of a provisional order, but have not detailed the
allegations as to how this opportunity
would have changed their
circumstances.
[31]
It was further argued by Third Respondents
'
counsel
that the correct approach to a constitutional challenge was
summarised in
Harksen
v Lane NO and Others
1398/1)
SA 300 CC
.
that if there is differentiation
on a specified ground, then discrimination will have been
established, if not established, It will
depend upon whether the
ground is based on attribute and characteristics which have the
potential to impair the fundamental human
dignity of persons as human
beings or to affect them adversely in a comparably serious manner
.
If
differentiation
amounts to “discrimination
”
does
it amount to
u
unfair
discrimination"? If it is to be on a specified ground, then
unfairness will be presumed if on an unspecified groundunfairness
wifi have to be established by the Complainant The test of unfairness
focuses primarily on the impact of the discnminatbn on the
Complainant and others in his or her situation, if at the end of this
stage of the inquiry
,
the
differentiation is found not to be fair
;
then there will be
no violation of Section 8(2).
[32]
Section 9(4A) differentiates between employees employed in the
business operation of an employer facing sequestration and those
who
are not. However, such differentiation does not amount to unfair
discrimination as it meets the criteria for justifiability
under
Section 36 of the Constitution. The intention of the legislature when
drafting Section 9(4A) of the insolvency Act did not
include
domestic
worker
in its
ambit
This
was acknowledged by the SCA in
Gungudoo
judgment .
As
the
name
Insolvency
Act suggests,
it
deals
with insolvencies and not domestic circumstances. So the relief
sought in the counter-application is inappropriate. Be that
as it
may, there is adequate protection of domestic worfcers in the context
of an employer’s insolvency. Besides, a copy
of the petition
was
left
on
the kitchen table of First and Second Respondents home on
29
May
2012
after First and Second Respondents received their own petitions.
There is no reason given by First and Second Respondents why they
failed to advise the intervening parties of
the
petition
for provisional sequestration. They are in daily contact with the
intervening parties and are better
placed
to notify
them
of
the implications of such
a
petition since they have an employment relationship with their
employees.
[33]
Finally, Third Respondent’s counsel submitted that the giving
of notice on the part of
creditors
is
most
costly and onerous as
it
appears
on
Section 9 of the Insolvency Act The order sought by the intervening
parties would introduce more administrative and cost burdens
on the
side of the creditors. That was borne by the report filed by the
South African Law Reform Commission, ("SALRC”)
on the
Review of the law.
[34]
SALRC further did not support a recommendation that any application
for provisional or final liquidation (or sequestration)
must be
served upon a union (or workers).
“
Even
if the proposal is practical, the costs involved (which must be paid
before workers can receive anything from the insolvent
estate) may be
astronomical and do not seen to be justified “
H.
ANALYSIS OF
EVIDENCE
AND
APPLICABLE LEGISLATION
[35]
I
n
my
analysis, I will first deal with the application for
the
granting of a final
order.
According to the Applicant, since they satisfied all the requirements
stipulated in Section 10 of the Insolvency Act there
is no reason why
Section 12 of the said Act should not be granted as they further
complied with such section. Respondents on the
other hand dispute
that
there
was
any compliance by the Applicant for the final order to be granted.
[36]
It seems the Respondents do not dispute the fact that Applicants have
a claim against them; and they have committed an act
of insolvency.
The only dispute is whether the fínal order of sequestration
would be to the advantage to creditors. After
analysing
the
evidence by both parties J am not convinced by the Respondents
argument that its estate is worth
seven
hundred and eighty thousand rand (“R780 000.00’)
and
it cannot be said to be advantageous to the creditors as this would
amount to a dividend of no more than two cents (0,02 cents)
in a
rand. I tend to agree with
Applicant
that
Respondents
have been engaged in numerous business entities and have been
involved in several transactions and if the final order
is granted,
these transactions and entities will need to be investigated by a
trustee. Respondents seem to
be
opposed
to the investigation by a trustee on the basis that such
investigation will bear no favourable distribution to the creditors
but rather will deplete further the insolvent estate of the
Respondents and there is nothing further to be investigated. In my
mind
,
if
there is nothing to hide, why is First Respondent not upfront to this
court about all the information relating to the business
entities
that Respondents are linked with. To this end, Respondents
have
failed to explain-their financial status
to
this
court
.
The
only
explanation
that came forth is
the
explanation of the transactions
that
were raised by Applicant in their founding papers. As a businessman
who was involved in property investments and other businesses,
he has
not volunteered information on his drawings from those businesses,
other
than
ihe
ones that were liquidated.
[37]
A person in the stature of the First Respondent who went
international with his businesses besides property business he was
involved in South Africa cannot be said to be worth
seven
hundred and eight thousand rand (
“
R
780 000.00").
No
explanation was afforded by him to the allegations by Applicant
amongst others that
First
Respondent was a director of PPM and his trust was a 50% shareholder
of PPM
and
was
corporate
controller of PPM;
an
amount
of six million rand (R6 000 000.00) was paid to Ivor C Stratford
Investment which proved to be a nonexistent company. The
amount of
twenty eight million rand (R28 000 000.00) paid to PPM was admitted
by First Respondents but no full explanation was
given regarding its
disbursement; and four million, one hundred and fifty one thousand
and seven
rand
(R4
151
007.00)
that
was paid to Gloria Jean Coffees (a coffee shop owned by PPM); a nine
million rand (R9 000 000.00) that was paid to TC Stratford
Family
Trust; a six million and six thousand, one hundred and fifty eight
rand and
forty
four
cents
(R6 006 158.44) that was paid to PPM; a three million rand (R3 000
000,00) that was paid to Clifton Trust controlled by Mervyn
Key, and
amount of one million,
five
thousand and
ninety
three, seven hundred and twenty six rand and ninety two cents (R1 593
726.92)
that
was paid to IC Stratford Family Trust; an amount of one and a half
million rand (R1 5000 000.00) that was paid to Newport Finance;
an
amount of five hundred and thirteen thousand, five hundred and
seventy nine rand and fifty eight cents (R513 579.58) that was
paid
to Kovacs Investments 43 (Pty) Ltd, and amount of four thousand, four
hundred and one, three hundred and
forty
eight
rand
and two cents (R441 348.02) that was paid to CJC; an amount of two
hundred thousand, five hundred and twenty seven rand and
fifty cents
(R200 527.50) that was paid
to
operational
expenses; an
amount
of six thousand and thirty two
thousand,
six hundred and sixteen rand (R632 616.00) that was used by PPM to
pay salaries and an amount of three thousand three
hundred and three,
seven hundred and three rand and seven cents (R333 703.07) that was
paid to Imperial Bank on
behalf
of
Kovacs;
an amount of one hundred and ninety four thousand, six hundred
a
nd
fifty six rand and ninety four
cents
(R194 656.94) paid to Annford investments and amounts of three
thousand, six hundred and nine thousand, six hundred and sixty
one
rand and thirty cents (R369 661.30) and sixty two thousand, seven
hundred and fifteen rand and seventy cents (R62 715.70) paid
to GJG,
First Respondent has failed to give an account of these transactions.
I am in agreement
with
Applicant that if First Respondent
lent
this
monies to
PPM,
surely he has a claim against PPM and that would constitute an asset
to his estate. For instance an explanation that an amount
of nine
million rand (R9 000 000.00) was paid to Strafford Trust, and four
and a half million rand (R4.5 million) was paid to Merla
Management
Consultants (Pty) Ltd in my view was insufficient. If was never
disputed that First Respondent was the
sole
shareholder
in
this
company. Similarly
,
a claim from this company would constitute an asset to his estate, it
is not disputed that his four and a half million rand (R4,5
miílion)
was paid
to
Merla
towards a bond over a property registered in the name of PPM.
[38]
This court
was
made aware of these
different
entities and transactions
by
Applicant It is common cause that First Respondent conducted
businesses internationally, and this court is not aware of what
loss
or benefit did he incur on those enterprises more especially that
First Respondent conducted his
personal
affairs
using various corporate entities. Further monies
paid
to
First Respondent's son and daughter,
it
is not dear whether
they
were
l
oans
from PPM. Those amounts, if claimable, could prove to be an asset to
Respondents estate. Furthermore, the proceeds of Erf 6[...],
Hout Bay
and Erf 4[...] Gonubie properties if properly investigated could
prove to be favourable to Respondents estate.
[39]
It is a long established principle that the court
may
make a final order of sequestration if it is satisfied that such
sequestration will be to the advantage to creditors. The facts
that
have been put before this court by Applicant proved that
there
are prospects that some pecuniary benefit would result to creditors.
It
appears that First Respondent, in his insolvent estate, has made
transactions and they need to be investigated. Respondents have
tried
to explain as to how the funds from those transactions were
disbursed. Even though that is the
case
,
a
trustee would be able to unearth and confirm if such disbursement was
justifiable.
[40]
Respondents have
taken
a
point that prior to the granting of the provisional order, Applicant
should have complied with provisions of sub-sections 9(4A)
(a)
(ii)
and (b) of the Insolvency Act. The petition was not served
to
their
domestic employees. This compliance is compulsory and Jack thereof
must cause the rufe
nisi
to
be discharged. This
also
led
to
the
intervening parties in
the
form of domestic
employees
challenging the constitutionality of sub-section 9(4A) (a)
(ii)
and
(b)
as it indirectly discriminate on them.
[41]
Before
deciding on the granting of the final order,
I
will
first
deal with the allegations by the Respondents that the domestic
workers were not served with a petition prior to the granting
of the
provisional order. Compliance
with
the provision
is
compulsory
and Jack thereof must cause the
rule
nisi to
be
discharged Applicant submitted that there was compliance with Section
9(4A). Further this issue could be decided without reaching
a
constitutional challenge.
[42]
Section
9(4A) (a) (ii) requires a copy of the petition to be furnished to the
debtor’s
employees-
"(aa) by
fixing a copy of the petition to any notice board to which the
petitioner and the employees have access inside the
debtors premises;
or
(bb)
if there is no access to the premises by the petitioner and the
employees, by affixing a copy of the petition to the front
gate of
the premises
,
where applicable,
failing which to the front door of the premises from which the debtor
conducted any business at the time of the
presentation of the
petition.
”
It
seems to me the Respondents and intervening parties have interpreted
the statute abundantly more than what the legislature intended.
There
is no provision that the petition must be served to each and every
domestic employee, or that the petition must be directly
drawn to the
attention of the employees; or that employees must be personally
advised of an application for sequestration of such
an application.
As submitted by Applicant and Third Respondent,
the
Labour
Relations
Act
and
the Basic Condition of Employment Act, were all promulgated pursuant
to a right
to
fair
labour
practices. Under no circumstances can the intervening parties cfaim
that they were discriminated against. The petition was
left for the
employee/s on the day First and Second Respondents were served with
their petition. Handley asked the Respondents
whether they had any
employees. Respondents advised fhat they had a domestic
employee
.
They
were not
upfront
about
the number of employees
they
had from the onset
instead
of advising Handley about the
employees
Respondents elected to advise about a domestic employee.
Handley proceeded to leave a copy of the petition on the kitchen
table at the Respondents premises. For the Respondents to argue
that
the domestic employees were not "served” with the petition
is rather absurd. Respondents have not explained to
this court as to
what
happened
to
the
copy
of
the
petition
that
was left for the
domestic
employee/s by Handley. Furthermore, i
f
they felt
strongly
that their domestic employees should be advised or else observed from
their employees that they are concerned about the
pending provisional
sequestration proceedings, they should have explained same to their
employees and more especially if these
proceedings would have a
potential
negative
impact on their employment for
them
to weigh their options. Strangely, these workers have not lost their
employment up until the date
of
the
hearing
of this matter. The intervening parties have not taken this court
into their confidence as to on what basis were they going
to oppose
the granting of the provisional order. On that basis alone, I see no
reason for the discharge of the
rule
nisi.
In
any event, Handley
furnished
a
copy of the petition by ieaving it
on
the Respondent's kitchen table
.
The Act requires
“
a
copy of the petition to be furnished” to
the
debtor's employees. The provision was complied with even better by
Handley by leaving the copy on the kitchen table, other than
leaving
it outside the house (either
in
a
notice board or gate as required by the Act),
Gungudoo
(supra)
was decided correctly by the SCA
in
that
a petition needed
to
be furnished only to those employees of the debtor who are involved
i
n
the debtor's business concern, and not a debtor's domestic employees,
in my view, the domestic employees were furnished with a
copy of the
petition.
[43]
1 agree
with
Applicant
that the
constitutional
issue raised by the Respondents does not
fall
to be determined
in
circumstances where Applicant has complied with Section 9(4A). The
intervening parties have not established an unfair discrimination
in
terms of Section 9(3) of the constitution. No case has been made by
the intervening parties for the declaration of this section
invalid.
In any event, Section 9(4A) does not infringe the rights of the
intervening parties and there is no reason whatsoever
to declare it
unconstitutional.
[44]
In my judgment, I have reason to believe that there would be
advantage to creditors in terms of Section 12(1) of the Act if
proper
investigation is conducted by the trustee, more assets are likely to
be uncovered and come to light. For instance in
Meskin
& Co
v
Friedman
1948(2)
SA
555(W)
at 561
-
Rogers J heJd that “
In
the circumstances of this case
,
I
consider
that there is a reasonable prospect that investigation under the
Insolvency Act may result in the discovery of assets which
will be
available to creditors, and them are the further advantages conferred
by the sections of Insolvency Act to which I have
referred. There is,
therefore, reason to believe that sequestration will be to the
advantage of creditors.. ”
[45]
I accept that Respondents are indebted
to
Applicant
in
the sum of two hundred and forty million, thirteen thousand, two
hundred
and
fifty
seven
rand and ninety six cents (R240 013 257.96), together with interest.
Respondents have not disputed this claim and come up
with a different
amount I am therefore satisfied that if a proper investigation is
conducted by the trustee, a substantial amount
and or assets could be
uncovered from the estate of First and Second Respondents.
[46]
Regarding the submission by
Mr
Van Rensburg that Applicants claim has
prescribed
and
cannot
be enforced, such argument is unfounded as it is trite law that
prescription start to run once the final order has been granted.
[47]
In the result,-I make
the
following
order;
47.1.
A final order is
granted
,
placing
the
joint estate of Ivor Qharies Stratford and Sheila
Margaret
Stratford
under sequestration in the hands of the Master;
47.2. Costs would
be costs in the sequestration;
47.3. The
counter-appiication by the intervening parties is dismissed;
47.4 No order as to
costs on the counter-appfication.
MANTAME, J
IN THE HIGH COURT
OF SOUTH AFRICA
(THE WESTERN CAPE
HIGH COURT, CAPE TOWN)
Cape Town: On
Wednesday, 14 August 2013
Before the
Honourable Ms Justice Mantame
Case No: 10394/2012
In the matter
between:
INVESTEC BANK
LIMITED
............................................................................................................
Applicant
and
IVOR CHARLES
STRATFORD
.............................................................................................
First
Respondent
SHEILA MARGARET
STRATFORD
................................................................................
Second
Respondent
THE MINISTER OF
JUSTICE AND
CONSTITUTIONAL
DEVELOPMENT
...............................................................................
Third
Respondent
THE MINISTER OF
LABOUR
...........................................................................................
Fourth
Respondent
and
CLEAN
NGOMA
.....................................................................................................................
First
Intervening Employee
/
Creditor
ERIC
DLOKOLO
................................................................................................................
Second
Intervening Employee / Creditor
ANDRIES
ADONIS
...............................................................................................................
Third
Intervening Employee / Creditor
COURT ORDER
HAVING HEARD THE
LEGAL REPRESENTATIVES OF THE PARTIES AND HAVING READ THE DOCUMENTS
FILED OF RECORD;
IT IS ORDERED:
1. A final order is
granted, pfacing the joint estate of Ivor Charles Stratford and
Sheila Margaret Stratford under sequestration
in the hands of the
Master;
2. Costs would be
costs in the sequestration;
3. The
counter-application by the intervening parties is dismissed;
4. No order as to
costs on the counter-application.
BY ORDER OF THE
COURT
COURT REGISTRAR
Van Rensburg & Co
c/o 247 BBM
Attorneys
CAPE TOWN