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[2012] ZAWCHC 201
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Body Corporate of the Peaks Sectional Title Scheme v Prinsloo NO and Another (7729/2012) [2012] ZAWCHC 201 (20 September 2012)
Republic of South
Africa
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE HIGH
COURT, CAPE TOWN)
Case No.: 7729/2012
In the matter
between:
THE BODY CORPORATE
OF THE PEAKS
SECTIONAL
TITLE SCHEME, NO: SS 230/2002
................................................................................
Applicant
And
DEAN ALAN PR1NSLOO
N.O. (ID NO: )
(in his capacity as
Executor of ESTATE LATE ROUMEN
MIRTCHEV
SPASSOV) (ID NO: )
.............................................................................................
First
Respondent
VESKA TIHOMIROVA
MEDJIDIEVA SPASSOVA
(ID
NO: )
..................................................................................................................................
Second
Respondent
JUDGMENT: 20
SEPTEMBER 2012
MEER
J.
Introduction
[1]
The applicant applies for the provisional sequestration of the
respondents’ estate. The basis of the application is a
claim in
an amount of R1 10,725.37 which the applicant contends that it has
against the respondents for levies owing to the applicant
as the Body
Corporate of the Peaks Sectional Title Scheme. The respondents oppose
the sequestration. In so doing they dispute the
applicant’s
claim against them, deny that the estate is insolvent and contend
that a sequestration will not render any benefit
to creditors.
Parties
[2] The applicant is
the duly registered Body Corporate of the Peaks Sectional Title
Scheme, NO: SS230/2002 ("‘the Peaks”).
The second
respondent and her husband, the late Roumen Mirtchev Spassov (“the
deceased’’), were joint owners
of a Sectional Title Unit
situated at the Peaks, namely Section 61, commonly known as flat 24
the Peaks, Paseta Street, Rosen Park,
Bellville, Cape (“the
immovable property”). They also owned an undivided share in the
common property. The first respondent
is the duly appointed executor
of the estate of the late Roumen Mirtchev Spassov (“the
deceased’). The deceased was
at the date of his death in July
2009 married to the second respondent in community of property.
Background Facts
[3] Default Judgment
was granted against the second respondent and her late husband on 8
December 2009 for payment to the applicant
of the sum of R33 256,91
together with interest at 15.5% per annum, from 19 November 2009 to
date of payment, plus costs on the
scale as between attorney and
client. The judgment, was granted in the Cape Town Magistrate’s
Court, is for outstanding levies
in respect of the immovable
property. The founding affidavit of Leigh Maingard a director of
Diamond Property Management, the Managing
Agents of the applicant,
contends that further levies have been incurred since the default
judgment was granted and that the respondents
are presently indebted
to the applicant in the sum of R110 725,37, which includes costs
incurred to date. The applicant holds no
security for the debt.
[4]
In pursuance of the judgment and recovery of arrear levies, the
applicant obtained an order in the Cape Town Magistrate’s
Court
in terms of Section 66(1 )(a) of the Magistrate’s Court Act No
32 of 1994 for the immovable property to be declared
specially
executable. A sale in execution was arranged to take place on 22
February 2011. The sale did not however proceed because
on 21
February 2011 notification was obtained that the second respondent
had published a notice (in the Government Gazette of 18
February
2011), for the voluntary surrender of the estate of the
respondents.
1
.
I
■* •
[5] On 22 February
2011 Maingard was informed by Mr Besselaar of Bisset Boehmke McBlain
Attorneys, who were winding-up the estate
of late RM Spassov, that a
substantial payment in respect of the arrear levies would be made.
[6] On 25 February
2011 Maingard wrote to Bisset Boehmke McBlain Attorneys confirming
the undertaking to make payment of the arrear
levies and costs in
consideration of the cancellation of the sale in execution. He
explained the calculation of the outstanding
balance and claimed a
total amount of R90 100,55. When no payment was forthcoming a letter
followed from Maingard’s attorney
dated 12 April 2011 stating
instructions had been received to arrange a new sale in execution.
The letter also informed that the
second respondent had refused
consent for a private sale of the property to realize funds to pay
the outstanding levies.
[7]
A response of 19 April 2011 from Bisset Boehmke McBain Attorneys
stated ...
"the
Estate
was not (and still is not) possessed of sufficient cash to pay
your
client's
claim at that time".
.
. In addition, attorney Ken Bredenkamp expressed confidence in his
ability to enter into a payment arrangement with yourselves
on behalf
of the surviving spouse in respect of your client s claim, and we
trust that such arrangements have been finalized".
[8] On 5 May 2011
Maingard received an email from the second respondent's attorneys
offering to make payments of R6 000,00 per month
as from 5 June 2011.
A reply of 27 May 2011 from Maingard’s attorney stated that
concrete instructions from applicant were
still being awaited as to
whether any further steps in execution should be taken, and requested
that in the meanwhile payments
of R6 000.00 per month should
commence. The founding affidavit records that to date only one
payment in the sum of R5 000,00 was
made on 14 June 2011. Despite
numerous further telephone calls and emails to second respondents'
attorneys no further payments
were received.
[9]
There followed a letter dated 18 July 2011 to the applicant’s
attorney from HJ Pieterse. the erstwhile executor of the
estate,
indicating inter alia,
that
the estate is insolvent. The relevant section of the letter states:
"
After conducting certain investigations, some of which remain
ongoing, as to the solvency of the Estate the executor is currently,
on the available information, of the opinion that the Estate is
insolvent ”,
This
report is issued to you in terms of Section 34(1) of the
Administration of Estates Act
A'o
66/1965 as amended".
Annexed to the
letter are two schedules. Schedule A reflects the assets and
liabilities of the Spassov Estate. It records the Peaks
Sectional
Title levy account in the sum of R90 000.00 as a liability. Schedule
B reflects claims in favour of the estate which
are being
investigated. Annexirre A records that the liabilities exceed the
assets by JR.1,914 677.35 (one million nine hundred
and fourteen
thousand six hundred and seventy seven rand and thirty five cents).
[10] In the
answering affidavit filed on behalf of the respondents Dean Alan
Prinsloo, who is the current executor of the estate,
records his
shock that the erstwhile executor and first respondent’s legal
representatives sought fit to state that the estate
was insolvent.
Prinsloo points out that the erstwhile executor was at all material
times aware that the estate had substantial
claims against a third
party who had received shares from the late Mr Spassov (to thwart the
claims of his wife, the second respondent,
against him). The Reserve
Bank has caused the shares to be returned to South Africa where they
are now in the possession of a Mr
Simeon Kennev. These shares it is
contended are available, and are more than sufficient for the
purposes of settling the applicant’s
claims. He states that a
summons had been issued to recover the shares which are worth a
substantial amount of money and the first
respondent is entided to
dividend payments. As executor of the estate he has instituted an
interim interdict to prevent the possessor
of the shares from
disposing of them. The estate, he contends, has realistic prospects
of recovering the shares and far from being
insolvent, it is in fact
possessed of assets worth millions of rands.
[11] Maingard states
in reply that the shares do not form part of the assets in the estate
and accordingly may not be taken into
account in establishing the
value of the estate. According to him it is utterly contrived to
state that the estate is possessed
of assets worth millions of rands.
[12] On 30 August
2011 Maingard was informed (by first respondent’s attorney),
that the second respondent’s attorneys
had indicated that they
would sequestrate the estate for their client’s maintenance
claims. To date the second respondent
has not launched a
sequestration application. On 22 September 2011 a further letter was
addressed to the second respondent’s
attorneys by Maingard in
which he records that the non-payment of levies by the estate and the
surviving spouse is causing severe
prejudice to the applicant. No
response has been received to such letter.
[13] As to the
assets and liabilities of the respondents, the founding affidavit
records the only asset to be the fixed property
at the Peaks of which
the respondents are the registered owners in equal undivided shares.
The property was purchased on 17 July
2006 for R1 500 000.00 and
there is a bond in favour of Absa Bank Limited for that amount. The
market valuation of the property
as per a valuation obtained by the
applicant is reflected as R1 450 000.00. The founding affidavit
records the liabilities to amount
to approximately R1 610 725.37
being the bond of R1 500 000.00 plus the arrear levies of R110
725.37, plus estate agents commission
and VAT of R123 975.00, giving
a total liability of R1 734 700.00. Hie total liabilities less the
value of the property of R1 450
000.00, gives an amount of R284
700.30, which says Maingard is the amount by which respondents’
liabilities exceed their
assets.
[14] The answering
affidavit of Prinsloo contends that there would be no benefit to
creditors flowing from a sequestration because
the secured bond
holder’s claim would be in excess of the value of the property
on these figures. Prinsloo contends moreover
that a sequestration
would incur additional costs as opposed to a liquidation by him as
executor. In reply Maingard states that
on further investigation into
the financial status of the estate he has discovered that the second
respondent is also the registered
owner of an immovable property
situated at 43 Trichardt Street, Welgemoed. Bellville and attaches a
deeds office search in this
regard. It is to be noted that Schedule A
attached to the letter of 18 July 2011 of the erstwhile executor of
the estate reflects
this property as an asset in the Spassov Estate,
and records its value as R2 600 000.00 (two million six hundred
thousand rand).
[15] On the above
information the applicant contends that the respondents have
committed an act of insolvency within the meaning
of the Insolvency
Act and/or are insolvent in that they are unable to meet their
indebtedness to their creditors, and thus unable
to pay their debt to
the applicant.
[16] It would be to
the advantage of the creditors, contends the applicant if the
respondent were to be sequestrated and a trustee
appointed to
investigate and manage the affairs of the respondents. The
non-payment of levies and the considerable arrears which
are
increasing continually on a monthly basis, are causing severe
prejudice to the applicant as well as to the other owners in
the
building who will in all likelihood be compelled to pay a special
levy as a result of the respondents’ failure to pay
levies. It
is submitted that it would be just and equitable if the respondents
are sequestrated so as to put an end to their increasing
indebtedness.
[17]
To this Prinsloo, the executor responds that the flat has been let
and there is a monthly income which can be utilized for
the purposes
of paying the arrears and preventing further levies from increasing.
He denies that there is any need to put an end
to the increasing
indebtedness
of
the respondents. He does however state that it will take some time
for the arrears to be paid off. The replying affidavit counters
that
the respondents have furnished no proof that the flat has been let or
that there is a monthly income. Neither has any attempt
been made to
pay the arrears since reneging on the undertaking in May 2011 to pay
R6 000.00 per month.
[18]
In the light of the aforementioned background facts, Mr Cutler on
behalf of the applicant submitted that the applicant has
established
primu facie
that the three requirements for insolvency, as specified at
Section
10
of the
Insolvency Act No 24 of 1936
. It has shown, he argued, that
it has a liquidated claim of at least R100.00 as is specified at
Section 9 of the Act. that the
respondents have committed an act of
insolvency or are insolvent, and that there is reason to believe that
it will be to the advantage
of creditors if their Estate is
sequestrated. I commence with considering if the threshold
requirement of a liquidated claim has
been established.
Does the Applicant
have a liquidated claim as specified at
Section 9
of the
Insolvency
Act?
[19
] Mr Van Zyl for
the respondents disputed that the applicant had established prima
l'acie a liquidated claim in terms of section
9 of the Act, and
sought the dismissal of the application for this reason. A claim had
not been established, he argued, because
liability for the levies
claimed by the applicant had not accrued. Section 37(2) of the
Sectional Titles Act specifies, that liability
for contributions
levied, accrues from the passing of a resolution to that effect by
the Trustees of the Body Corporate. No resolution
by the Body
Corporate was passed and there is consequently, so the argument went,
no liability or accrued claim. There could accordingly
not have been
compliance with
Section 9(2)
of the
Insolvency Act and
the
establishment of a liquidated claim, and the sequestration
application, he submitted, must be rejected.
[20] Mr Cutler
conceded that no resolution had been passed in terms of Section 37(2)
of the Sectional Titles Act. He however submitted
that in view of the
admission of liability to pay the applicant’s claim (which
included untaxed legal fees and costs), as
per the letter from the
attorneys for the estate of 19 April 2011, and the further
unequivocal admissions of liability, (including
liability in respect
of the default judgment claim) without raising any dispute by the
first respondent’s erstwhile attorney
of record duly instructed
by the erstwhile executor, the first respondent had waived, abandoned
and/or pre-empted any right to
claim that the default judgment was
improperly taken. I note that an application for rescission of the
judgment granted by default
has already been launched. This aspect
can and no doubt will more appropriately be canvassed during those
proceedings and need
not be considered here.
Estoppel
[21] Mr Cutler
further argued that the erstwhile executor’s various
acknowledgments of liability for the applicant’s
claim were
irrevocably binding on the first respondent deceased estate and that
the first respondent was estopped from now denying
liability for the
applicant’s claim. Notwithstanding the failure of the applicant
itself to comply with section 37 of the
Sectional Titles Act, he
argued that it should be entitled to rely on estoppel
[22]
Mr Van Zyl attacked the admissions, submitting they were nothing more
than inadmissible and manifestly incorrect expressions
of opinion by
the erstwhile executor and should be disregarded. He called for the
admissions to be disregarded, relying on the
following extract from
Canaric NO
v
Shevil’s Garage
1932 TPD 196
at 199:
“
...
the Court may disregard an admission made in the pleadings where it
is clear ufler a full investigation that this admission
is contrary
to the facts and where injustice will result from an adherence to the
admission
[23] It has not been
made clear to me after a full investigation that the admissions made
by the erstwhile executor and attorneys
were contrary to the facts.
The respondents certainly have not proved that the admissions were
manifestly incorrect as contended
on their behalf. I note moreover
that since the erstwhile executor himself states in the letter of 18
July 2011, that the executor
is on the available information of the
opinion that the estate is insolvent, there is no substance in the
complaint that the admissions
are not confirmed on affidavit by the
erstwhile executor or that they are inadmissible hearsay. In the
circumstances the admissions
do not fall to be disregarded. This
being so I now turn to consider whether the respondents can be
estopped from denying liability.
[24] The
circumstances under which estoppel is raised in this case, pose the
question whether the applicant can invoke estoppel
when the applicant
itself did not comply with Section 37(2) of the Sectional Title Act,
and the taking of a resolution prescribed
therein. Put differently
can estoppel come to the rescue of a party who has acted contrary' to
a statute and who has thereby performed
an invalid act?
[25]
Mr Cutler argued that the plea of estoppel should prevail. He
submitted that public policy should preclude debtors like the
respondents from hiding behind a technical defence that no debt had
accrued because a resolution in terms of Section 37(2) of the
Sectional Title Act had not been passed. In support of this
submission he drew attention to the following extract from
Levi
and Others
v
Zalrut
Investments (Ply) Ltd
1986(4) SA 479
(W) at 487 F - H where Van Zyl J stated:
“
In
any event, even in the case of illegal or invalid acts, should there
be no considerations of public policy which militate against
the
recognition of estoppel, estoppel may still be raised. See Trust Bank
van Afrika Bpk v Eksteen
1964 (3) SA 402
(A) at 415-416 A (per
HOEXTER A.JA
as
he then was):
"The
doctrine of estoppel is an equitable one, developed in the public
interest, and it seems to me that, whenever a representor
relies on a
statutory illegality, it is the duty of the Court to determine
whether it is in the public interest that the represent
ee should be
allowed to plead estoppel. The Conn will have regard to the mischief
of the statute on the one hand and the conduct
of the parlies and
their relationship on the other hand."
[26]
The genera! principle is that estoppel is not allowed to operate in
circumstances where it would have a result which is not
permitted by
law. A defence of estoppel cannot be upheld if its effect would be to
render enforceable what the law, be it the common
law or statute law,
has in the public interest declared to be illegal or invalid. See the
Chapter on Estoppel by P J Rabie in Lawsa
Volume
9 (2nd Edition) paragraph 673. The principle finds firm and
unequivocal articulation by the Supreme Court of Appeal at various
passages in the case of City of Tshwane
Metropolitan
Municipality v RPM Bricks 2008 (3) SA (1) SCA. At paragraph 16, it
was stated by Ponnan JA:
"It
is settled law that a state of affairs prohibited by law in the
public interest cannot be perpetuated by reliance upon
the doctrine
of estoppel (Trust Bank van Afrika Dpk v Eksteen
1964 (3) SA 402
(A)
at 411H-4 HR), for to do so would be to compel the defendant to do
something that the statute does not allow it to do. In effect
therefore it would be compelled to commit an illegality (Hoisain v
Town Clerk. Wynberg
1916 AD 236).
"
At paragraph 23 D-F:
“
Estoppel
cannot, as 1 have already staled, be used in such a way as to give
effect to what is not permitted or recognised by law.
Invalidity must
therefore follow uniformly as the consequence. That consequence
cannot var\> from case to case. "Such transactions
are either
all invalid or all valid. Their validity cannot depend upon whether
or not harshness is discernible in a particular
case" (per
Marais JA in Eastern Cape Provincial Government & others
v
Contractprops 25 (Fly) Ltd20U1 (4) SA 142 (SCA) paragraph [9])... "
And further at
paragraph [24] H-J:
“
The
approach advocated by the learned Judge, if endorsed, would have the
effect of exempting courts from showing due deference to
broad
legislative authority, permitting illegality to trump legality and
rendering the ultra vires doctrine nugatory. None of that
would be in
the interests of justice. Nor. can it be said, would any of that be
sanctioned by the Constitution, which is based
on the rule of law,
and at the heart of which lies the principle of legality."
In
the matter of
Philmatt (Pty) Ltd
v
Mosselbank Developments CC
[
[1995] ZASCA 154
;
1996] 1 All SA 296
(A) at 304 i-j Grosskopf JA stated:
“
Generally,
where a statute requires that certain formalities have to be complied
with in order to render a transaction valid, a
failure to comply with
such formalities cannot be remedied by estoppel (see Rabie, The Law
of Estoppel in South Africa, 106, and
authorities there referred to).
"
See
also
Slrydom
v
Land-en Landboubank van SA
1972 (1) SA 801
(A) at 803H to 804D, in which Rumpff JA similarly
held that estoppel will not be permitted if by doing so a result
would be achieved
which is contrary to the intention of the
legislature;
Stand 242 Hendrik
Potgieter Road Ruimsig (Ply) Lid and another v Gobel NO and others
[2011] 3 All SA 549
(SCA) at paragraph 23 where Lewis JA similarly
endorsed the principle that estoppel cannot operate to allow a
contravention of
a statute.
The
above statements, by the Supreme Court of Appeal, which take
precedence over the
dicta
in
Levi
supra
relied upon by the applicant, are not qualified by considerations of
equity.
Christie,
in The Law of Contract in South Africa Sixth Edition
at page
409 aptly states:
“
The
equities surrounding the estoppel (“the conduct of the parties
and their relationship") should be taken into account,
but no
matter how strong these equities the court cannot nullify the
statutory provision”.
The
statutory provision at Section 37 (2) of the Sectional Title Act
cannot be nullified by the equities surrounding the estoppel
or the
conduct of the parties in the instant case. The statutory provision
is designed to ensure that any action for the claiming
of levies by
the Body Corporate is sanctioned by the trustees. The section clearly
states that liability for such levies accrues
from the passing of
such a resolution and thereby protects sectional title holders from
claims for levies which have not been approved
by the trustees.
Should the application of estoppel be allowed a result would be
achieved which is contrary to the intention of
the legislature. See
Strydom supra; See
also
Farren v Sun Services SA Photo
Trip Management
(Pty) Ltd
[2003] 2
All SA 406
at paragraph 18.
[28] In the light of
all of the above the defence of estoppel cannot prevail against the
failure by the applicant to comply with
the statue.
[29] Mr Cutler
argued in the alternative that even if the applicant’s reliance
on estoppel did not succeed, the applicant
was entitled to a claim
for legal fees under Management Rule 35 (1) promulgated under the
Sectional Tiles Act. In terms of such
Rule an owner in a Sectional
title Scheme is liable for all legal costs incurred by the Body
Corporate in recovering arrear levies.
No resolution was required for
the recovery of such fees so the argument went. I do not agree. Given
that the legal expenses flow
from a claim for levies which had not
accrued in the absence of a resolution, such expenses in my view had
similarly not accrued.
[30] It follows from
my finding that the applicant is precluded form invoking the defence
of estoppel and my rejection of its alternative
claim for legal
expenses, that the applicant has not shown it has a claim for
outstanding levies that had accrued or a claim for
legal expenses.
There has accordingly not been compliance with
section 9
(2) of the
Insolvency Act in
that the first threshold requirement for ihe
granting of a provisional sequestration, namely prima facie proof of
a liquidated
claim of at least R100 against the respondents has not
been established. 1 am accordingly on the papers before me unable to
grant
the application.
I order as follows:
1. The
application is dismissed with costs.
Y.S. MEER
Judge of the High
Court
1
In
terms of
Section 4(
I) of the
Insolvency Act No 24 of 1936
the
publication of the Notice of Surrender would have made the sale of
the attached property unlawful.