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[2014] ZAWCHC 14
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Crafford v Crafford and Another (19421/13, 19422/13) [2014] ZAWCHC 14 (13 February 2014)
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Republic of South Africa
IN THE HIGH COURT
OF SOUTH AFRICA
(WESTERN CAPE
DIVISION, CAPE TOWN)
Case
No’s: 19421/13 and 19422/13
Before: The
Hon. Mr Justice Binns-Ward
In the ex parte
application of
JACOBUS CORNELIUS
CRAFFORD
(ID No. …….)
and
HEIDI CRAFFORD
(ID No……...)
(for the voluntary
surrender of their joint estate)
and
In the ex parte
application of
CLAIRE ELIZABETH NAPIER
(ID
No…….)
(for
the voluntary surrender of her estate)
JUDGMENT
DELIVERED 13 FEBRUARY 2014
BINNS-WARD J:
[1]
Two
applications for voluntary surrender in terms of
s 4
of the
Insolvency Act 24 of 1936
came before me in the unopposed motion
court on 28 November 2013. The applicants in both matters
were resident in Cape
Town. They were, however, represented by
a Pretoria firm of attorneys, P.A. Markgraaf Attorneys (or Philip
Markgraaf Attorneys,
as the firm was referred to in places on the
papers). In order to meet the requirement of showing that the
surrender of the
applicants’ respective estates would be to the
advantage of creditors, the papers in both applications contained an
itemised
description of the applicants’ movable property that
would allegedly be realisable by a trustee, together with a sworn
valuation
by an appraiser confirming what the property might be
expected to fetch on a forced sale. On the face of the papers
the sworn
valuation would appear in each case to have been done by a
Pretoria-based sworn appraiser, Koop Styger of Status Valuations.
The intended effect of the evidence in both matters, taking into
account the sworn appraisals and the estimated costs of
sequestration,
was that the liquidation of the applicants’
respective estates might in each case reasonably be expected to
provide a dividend
of 21c in the rand to concurrent creditors.
[2]
The
Assistant Master filed reports questioning whether it would be to the
advantage of creditors to accept the surrender of the
estates.
He stated that in his experience concurrent creditors often refrained
from submitting claims in matters like this
for fear of being liable
to make a contribution to the costs of sequestration, and movable
property of the sort described in the
papers (used furniture and
appliances) often realised lower prices than their appraised value.
[3]
There
were a number of problems with the papers in both applications.
For present purposes I need mention only some of them.
According to the papers in the first application, the Pretoria-based
valuer had inspected the applicant’s motor vehicle and
household furniture in Cape Town on 21 October 2013 and then deposed
to an affidavit in Pretoria later the same day confirming
his
appraisal of their value. The papers in the second application
reflected that the sworn appraiser had inspected the property
of
those applicants in Cape Town on 24 October 2013 and, as in the
first mentioned case, deposed to an affidavit later the
same day in
Pretoria confirming his valuation. It struck me as inherently
improbable that an appraiser would travel twice
between Pretoria and
Cape Town in the course of a single week to assess the value of
estates containing such meagre assets.
I doubted that it would
be feasible for the sworn appraiser to carry on business in the
manner that the affidavits in both cases,
considered together, would
suggest. I was furthermore unable to discern how the expense of
flights to and from Gauteng had
been accommodated in the estimated
costs of sequestration set out in the supporting papers. The
other aspect of the valuations
that struck me as implausible was that
according to the tenor of the sworn appraisements the applicants
would appear to have acquired
relatively expensive and luxurious
household items, such as large screen televisions, surround sound
systems and dishwashers, within
the year immediately preceding the
applications, notwithstanding their allegedly penurious circumstances
and, in the one case,
extended history of loss of employment.
The goods were indicated in the sworn valuations as being one year
old.
[4]
I
was also struck by how much of the applicants’ liabilities in
both matters seemed to relate to loans obtained from credit
providers. These comprised both banks and certain business
entities that I suspected (correctly, as it turned out) were probably
micro-lenders. I could not understand how so much credit
could have been advanced to the applicants in the context of
their
circumstances as described on the papers had proper assessments, as
prescribed in terms of s 81 of the National Credit
Act 34 of
2005 (‘the NCA’), been undertaken. In that
connection the considerations discussed in
Ex parte
Ford and Two Similar Cases
2009 (3) SA
376
(WCC) concerning the undesirability of accepting the voluntary
surrender of insolvent estates when the interests of creditors who
had been ‘responsible credit grantors’ could be better
served if the applicants instead sought debt relief in terms
of the
NCA appeared to weigh in the balance against acceding to the
applications.
[5]
When
the matters were called I required the first of the aforementioned
issues, as well as certain other matters which it is not
necessary to
particularise, to be explained on affidavit. I postponed the
applications for a few days to allow for the submission
of the
required explanations.
[6]
At
the resumed hearing, on 3 December 2013, an affidavit by the
sworn appraiser was handed in, which purported to explain that
the
dates mentioned in the respective sworn valuations were erroneous.
The valuer’s explanatory affidavit, which was
filed in both
matters, read as follows:
I
the undersigned
KOOP
DE VRIES STYGER
Declare
under oath as follows.
1.
I
am the valuer who did the valuations in both the above applications.
2.
It
has been brought to my attention that the dates appearing on the
valuation certificates and the sworn affidavits in these applications
are the same dates.
3.
Upon
investigation it appears that the respective valuations were prepared
on the 21
st
October 2013 and the 24
th
October
2013.
The
same dates was (sic) inadvertently inserted on the valuation
certificates which is incorrect. The dates on the respective
valuation certificates should be 20 October 2013 being the date
of the valuations in both matters.
4.
I
failed to notice this mistake upon signature of the documents.
I was also informed by the Cape Town attorney
appearing for the applicants at the resumed hearing that the
applicants wished to
withdraw their applications to surrender their
estates.
[7]
I
was not satisfied by the explanation provided on affidavit.
While I could understand that the appraiser may have misdated
one of
his valuation reports, I considered it most unlikely that he would
have repeated the mistake three days later. Far
from assuaging
my concerns, the explanation tendered made me even more suspicious
that the court was being misled. I therefore
decided to refuse
leave for the withdrawal of the applications and to conduct an
examination in terms of
s 3(3)
of the
Insolvency Act. I
directed that Mr Markgraaf, Mr Styger and the applicants
should appear in person for that purpose on 27 January
2014.
[8]
On
21 January 2014 affidavits made by Mr Markgraaf and Mr Styger
were filed of record in which it was averred that they were
unable to
attend at the examination because of the inability of the applicants
to finance their travel expenses from Pretoria,
including airfare and
accommodation costs. Both persons indicated their willingness
to answer any questions the court might
have in writing. Mr
Styger stated that he was ‘more than willing to answer any
questions with regards to the valuation
by way of a further
Affidavit’.
[9
]
The excuses given for non-attendance at the
enquiry were unacceptable. Professionals who choose to become
involved in voluntary
surrender applications should be aware of the
provisions of
s 3(3)
of the
Insolvency Act
[1
]
and that they may be required to attend court to answer any questions
that the judge seized of the application may wish to direct
to them.
Their liability to attend such examinations does not depend on how
far their places of business might be from the
seat of the court.
[2]
[10]
When
the examination hearing was convened on 27 January 2014, Mr
Markgraaf was present, having wisely reconsidered the position
adopted in the affidavit filed on 21 January. Mr Styger,
however, was absent. Under questioning from the bench,
Mr
Markgraaf confessed that Mr Styger had not come to Cape Town to value
the applicants’ movable assets. Markgraaf
also confessed
that this had been to his knowledge when the applications had been
issued.
[11]
Mr
Markgraaf furthermore indicated that the matters had been referred to
him by an attorney in
eM[…] (
Witbank)
by the name of Esmeraldo. He said that he was acutely conscious
of his professional misconduct and that the matter
had weighed
heavily on his conscience since the court had indicated that his
presence was required at the enquiry. It was
for that reason
that he had presented himself for questioning notwithstanding the
affidavit he had filed on 21 January.
He undertook to
report himself to the Law Society for the Northern Provinces and
subsequently provided the court with confirmation
that he had done
so.
[12]
Mr
Crafford, the first applicant in one of the applications, then gave
evidence in which he confirmed that Mr Styger had not personally
inspected his movable assets for the purposes of valuation. He
thereby confirmed that the affidavits deposed to by Styger
on
21 October 2013 and 29 November 2013, respectively, had been
perjurious.
[13]
Mr Crafford
also explained how he and his wife had come to make their application
and what they had been led to understand
would be its effect.
He testified that his affairs had been under administration
(presumably in terms of ss 74 -74A-74W
of the Magistrates Court
Act 32 of 1944), but that this had not been satisfactory as creditors
had still been pressing for full
and immediate payment. He had
then approached a debt counsellor for relief in terms of the NCA.
The debt counsellor
had advised that his case was not suitable to be
dealt with in terms of the NCA and that he should rather apply to
surrender his
estate in terms of the
Insolvency Act. The
debt
counsellor had provided him with the contact details of an attorney
in Witbank called Esmeraldo. He was required to
pay Esmeraldo
the sum of R7 500 to deal with the voluntary surrender
application. Esmeraldo’s office had prepared
papers for
signature and had required him to make a list of his disposable
property. At the time he had signed the affidavit
forwarded to
him for deposition by Esmeraldo’s office, the purported
valuation by Styger had not been annexed. In other
words, he
signed the affidavit without the annexures referred to therein having
been attached or available to him. Crafford
said that he had
been led to understand by Esmeraldo’s office that the effect of
his voluntary surrender of his estate would
be that he would be
required to pay a monthly amount in reduction of his debts for a
period of three years, failing which the movable
property which he
had listed would be seized and sold.
[14]
Crafford
was confounded to hear that the court had been informed on 3 December
2013 that he and his wife wished to withdraw their
application to
surrender their estates. He said that no such instruction had
been given and that he had been awaiting the
outcome of the
application anxiously.
[15]
Ms Napier,
the applicant in the second case, told a similar story to that
related in Mr Crafford’s evidence. She
too had approached
a debt counselling practice conducted under the name of Payplan.
She was also advised ‘to go the
voluntary sequestration route’
and provided with the contact details of an attorney named Michael
Esmeraldo. She had
dealt mainly with Mr Esmeraldo’s
secretary over the telephone. She too was required to make a
payment of R7 500
to Mr Esmeraldo’s firm. She
testified that that she had paid the final R2 500 instalment
payment to the attorneys
on 7 January this year, which was a
month after I had been informed in court that the applicants wished
to withdraw their
applications. Ms Napier testified that
she had not given instructions for her application to be withdrawn;
she had in
point of fact been unaware that the matter had been
brought before court because she had not yet fully paid the fee
demanded by
Esmeraldo’s firm. She also confirmed that her
property had not been valued and that she had never given
Mr Esmeraldo
or his firm any instructions about the age of the
property listed in the sworn valuation that purported to relate to
her assets.
[16]
Voluntary
surrender applications seem to be the basis of something of a minor
cottage industry. My experience in this division
suggests that
the applicants in the vast majority of such applications are
represented by one of a very small number of firms of
attorneys which
appear to do this type of work. After the examination in terms
of
s 3(3)
had been conducted in the current matter I requested
the registrar to draw the files in all of the voluntary surrender
applications
made in this division during the fourth term of 2013.
All of the applications had been brought through the offices of only
four firms of attorney. Of the files to which I had reference
three other applications had been brought by applicants represented
by Mr Markgraaf, and in each case the sworn valuations submitted
in support of those applications had been made by Mr Styger.
Moreover, in each such case the arithmetical calculation of the
alleged advantage to creditors resulted in an estimated dividend
to
concurrent creditors of precisely 21c in the rand. That exactly
the same dividend was estimated in each of the five matters
identified reflects, in the context of the circumstances described
earlier, a coincidence that raises a strong suspicion that the
values
used were falsely determined to support a predetermined result.
[17]
The papers in most voluntary surrender
cases that have come before me in the unopposed motion court reflect
that the greater part
of the debt concerned has arisen out of credit
agreements within the meaning of the NCA and should therefore be
better amenable
to being addressed in terms of the debt
re-arrangement provisions of that statute, including the provisions
which permit of the
subordination or cancellation of obligations
undertaken by debtors in the context of reckless credit
extension.
[3]
Those provisions are intended for the benefit of not only the credit
receiver, but also for that of creditor providers who
have advanced
credit to the debtor responsibly because they fall to be preferred in
the scheme of debt re-arrangement over creditors
who have advanced
credit recklessly. In matters in which the major portion of the
debt concerned is credit agreement-related,
it is difficult to
conceive how accepting the surrender of the estate would be more
advantageous to responsible creditors than
debt re-arrangement under
the NCA. Thus the advice reportedly given to the applicants by
the debt counsellors in the two
matters currently before court is
difficult to understand other than in the context of the activity of
a network of contacts established
to generate business for the
attorneys firm in Witbank. The questions as to why debt
counsellors in Cape Town should be advising
debtors to proceed with
applications for the surrender of their estates in cases like these,
and providing details of a firm on
the other side of the country to
deal with the applications calls out for an answer. Did the
Cape Town debt counsellors involved
act as publicists for the Witbank
firm of attorneys gratuitously? I have my doubts, but whatever
the position, it cries out
for investigation. A copy of this
judgment will therefore be referred to the National Credit Regulator
in the hope that an
investigation will follow.
[18]
As mentioned, Mr Markgraaf has owned up to
his misconduct and, quite properly in the circumstances, reported
himself to the Law
Society. The conduct of Mr Esmeraldo also
merits investigation and a copy of the judgment and the transcript of
the examination
in terms of
s 3(3)
of the
Insolvency Act will
therefore be forwarded to the Law Society of the Northern Provinces
so that the necessary steps can be initiated.
[19]
The matter of the apparently perjurious
affidavits made by Mr Styger also needs to be followed up. Not
only are the strong
indications that the witness perjured himself a
matter that requires investigation by the appropriate authority and
possible criminal
prosecution, so too does the apparent attempted
fraud on the court. It is a grievous matter for any witness to
perjure him-or-herself,
but such conduct is especially egregious when
he or she does so in the context of purporting to discharge the
functions of an office
in which legislation and practice repose
particular trust. Sworn appraisers are ordinarily appointed by
the Masters of the
High Court in terms of
s 6
of the
Administration of Estates Act 66 of 1965
. They are specially
entrusted with functions in terms of a number of statutes, including
the
Insolvency Act, for
example.
[4]
The proper operation of the statutory provisions
concerned is obviously negated if sworn appraisers perjure themselves
and produce
false valuations. Their role, for the assistance of
the courts, in litigation matters is also expressly provided for in
some
court practice notes.
[5]
That the questions that have arisen concerning Mr
Styger’s alleged conduct in the current matters need to be
properly investigated
and effectively dealt with if the public
interest in the proper administration of justice is to be adequately
served is axiomatic.
A copy of the judgment, together a
copy of the transcript of the examination in terms of
s 3(3)
of
the
Insolvency Act, will
therefore be forwarded to the Director of
Public Prosecutions in Gauteng and, because it is assumed that Mr
Styger is an appraiser
appointed in terms of the
Administration of
Estates Act, also
to the Master of the High Court, Pretoria.
[20]
A copy of the judgment and transcript
will also be forwarded to the Chief Executive
Officer of the National Credit Regulator so that the role played by
the debt counsellors
approached by the applicants may be investigated
and that any action consequently shown to be indicated may be taken.
[21]
Both
applications for voluntary surrender are dismissed; and the registrar
is directed to forward copies of the judgement and transcript
of the
examination in terms of
s 3(3)
of the
Insolvency Act to
the
responsible parties referred to in para [18]
-
[20], above.
A.G.
BINNS-WARD
Judge of
the High Court
[1]
Section 3(3)
of the
Insolvency Act provides
s.v.
‘Petition for acceptance of surrender of estate’:
‘
Before accepting or declining
the surrender, the court may direct the petitioner or any other
person to appear and be examined
before the court.
’
[2]
There is no provision in the Act for the payment
of witness fees and expenses to persons required to attend at an
examination
in terms of s 3(3). It may be that the
witnesses might enjoy a claim against the applicant’s estate
in such
matters, but that is not something that I need to determine.
[3]
See
s 83
of the
National Credit Act.
[4
]
See
ss 4(4)
and
69
(1) of the
Insolvency
Act. See
also, for example,
s 27(2)
,
38
(1) and
43
(2) of
the
Administration of Estates Act and
s 118
of the
Tax
Administration Act 28 of 2011
.
[5]
See para 15.14.4.2 of the North Gauteng Division
Practice Manual and para 10.14.4.2. of the South Gauteng Division
Manual.