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[2015] ZAWCHC 61
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Business Partners Limited v Tsakiroglou and Another (17827/2014) [2015] ZAWCHC 61 (13 May 2015)
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IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE DIVISION,
CAPE TOWN)
Case No 17827/2014
DATE: 13 MAY 2015
In the matter between:
BUSINESS PARTNERS
LIMITED
.........................................................................................
Applicant
(Registration number: 1……………)
And
KONSTANTINOS
TSAKIROGLOU
.........................................................................
First
Respondent
(I.D. No: 6…………………………)
SUSANNA MARGARETHA
TSAKIROGLOU
....................................................
Second
Respondent
(I.D. No: 6……………………….)
JUDGMENT
DELIVERED ON 13 MAY 2015
RILEY AJ:
[1] The applicant, Business Partners
Limited (‘BPL’), a registered credit provider and
financier instituted an application
for the provisional sequestration
of the first respondent’s estate on 8 October 2014.
[2] On 17 October 2014 first respondent
gave notice of his intention to oppose the application and on 28
October 2014 Katz AJ postponed
the hearing of the application to 17
March 2015 in the fourth division by agreement between the parties.
In terms of the order
of Katz AJ it was further agreed that:
1. First respondent will deliver his
answering affidavit by 28 November 2014.
2. Applicant will file his replying
affidavit by 19 December 2014.
[3] On 19 December 2014 first
respondent served and filed his answering affidavit together with the
confirmatory affidavit of his
attorney of record, Leon Jansen Van
Rensburg. On 27 February 2015 applicant served and filed applicants
replying affidavit and
on 4 March 2015 applicant served and filed its
service affidavit.
[4] On the 17 the March 2015 and before
the matter was to be heard, the first respondent urgently applied to
be allowed to file
and serve the affidavits of Margaret Ann Mackenzie
(“Mackenzie”) and Caryl Cindy Miller (“Miller”),
two
estate agents, in support of his opposition to this application.
According to the first respondent he deemed it necessary to have
their affidavits, together with the valuations prepared by them,
placed before the court as the applicant attempts to impugn the
municipal valuation filed in support of the main application which
reflected the market-value of his ‘residential home’
at
Llandudno , Western Cape as at 1 July 2012.
[5] He states further that even though
the estate agents provided him with the valuations on an earlier
date, they could only depose
to their affidavits late on 16 March
2015. No further explanation was provided as to why the affidavits
were deposed to at such
a late stage nor could Mr McClarty, who
appeared on behalf of the first respondent, explain why the
valuations, which were available
as at 4 December 2014, were not
attached to the first respondents answering affidavit which was
served and filed on 19 December
2014.
[6] Mr McClarty nevertheless urged me
to condone the late filing and to allow the affidavits on the basis
that should I not grant
the first respondent the relief sought, that
it would result in an injustice. To his credit Mr McClarty agreed
that considering
this proverbial eleventh hour developments, that
first respondent was prepared to agree to a postponement of the
application and
tendered the wasted costs of such postponement to
allow the BPL the opportunity to properly respond thereto.
[7] Mr Woodland, who was assisted by Mr
Cutler, vigorously opposed the granting of the application and
contended that the application
was not in good faith and that it was
calculated to ambush the applicant. He was however not prepared to
agree to a postponement
on the terms as proposed by the first
respondent. After hearing argument, and even though I was not
altogether satisfied with
the reasons advanced for the late filing of
the additional affidavits, I nevertheless in the interest of justice,
granted the first
respondents application.
Background and facts
[8] In terms of a loan facility
concluded on 22 June 2009, (“BPL”) loaned and advanced an
amount of R10 million to Target
Shelf 284 CC (‘Target Shelf’).
The first respondent is sued in his capacity as surety and sole
member of Target Shelf
in circumstances where Target Shelf is in
business rescue and it has not paid BPL’s claim.
[9] In terms of the loan facility,
Target Shelf was to pay interest for the first year and make a
so-called ‘bullet payment’
of the capital amount in 2010.
Certain payments were received but the ‘bullet payment’
was not made.
[10] According to BPL the full amount
owing by Target Shelf to it on the loan facility, is the amount of
R12 038 582-40 as at 25
September 2014. I accept that interest has
accrued substantially from that date.
[11] BPL avers that its claim is
secured, proved and admitted by Target Shelf and by the business
rescue practitioners. It is not
in dispute that the claim is secured
by first mortgage bonds over the immovable properties of Target
Shelf.
[12] It is further not in dispute that
BPL and Target Shelf also concluded a royalty agreement at the time
when the loan facility
was concluded and that BPL has a claim based
on the Royalty Agreement, which calculated at 25 September 2014 stood
at R1 192 911-86.
In addition, BPL has two additional claims against
Target Shelf in terms of two invoices of R595 818-68 and R28 353-22
respectively.
[13] It is common cause that on 15 June
2009 the first respondent being the sole member of Target Shelf,
executed a written suretyship
in favour of BPL for the performance of
Target Shelf’s payment obligations to BPL. In terms of the
suretyship the first
respondent bound himself as surety and
co-principal debtor in solidum to BPL in an unlimited amount in
respect of a continuing
covering suretyship for any amount Target
Shelf owes BPL at any time. It was specifically agreed that first
respondent would not
be released from any liability even if BPL
enters into a further agreement with Target Shelf in respect of the
debt or if BPL agreed
to amend the terms and conditions of the debt
or if the debt or any part thereof is novated.
[14] It is common cause that Target
Shelf voluntarily commenced business rescue proceedings after first
respondent, as the sole
member of the close corporation, passed a
resolution to this effect on 20 August 2013.
[15] The following requires mention in
respect of the business rescue proceedings:
1. The business rescue proceedings
commenced when the resolution referred to hereinbefore was filed on
27 November 2013.
2. The business rescue practitioners
proposed a business rescue plan which according to BPL is nothing
more than a ‘disguised
liquidation’ simply providing for
the sale of immovable property owned by Target Shelf and wherein they
allegedly refused
to deal with the liability qua surety of the first
respondent.
3.BPL has described the purported
business rescue as an abuse of process.
4. When BPL executed its 100% voting
interest at the meeting of creditors of Target Shelf held on 21
February 2014, and voted against
the business rescue plan, the
business rescue practitioners informed BPL that they would bring an
application to court to declare
the vote ‘inappropriate’.
5. At the time of hearing argument in
this application, the aforesaid application had been launched and the
outcome thereof was
still pending.
6. BPL has raised serious issues and
concerns in regard to the business rescue plan which relate inter
alia to the fact that:
6.1 BPL had insisted on a
pre-condition of the approval of any business rescue plan that the
liability of the surety (i.e. the
first respondent) would remain in
respect of any shortfall.
6.2 The amended business rescue plan
still did not deal with all the concerns raised by Attorney
Veldhuizen on behalf of BPL
in his email of 6 January 2014;
6.3 The amended business rescue plan
still did not deal with the question of the liability of the surety
and issues relating to
a possible investigation of claims against
first respondent of reckless trading in terms of Section 141 of the
Companies Act No
71 of 2008. (‘the
Companies Act&rsquo
;)
6.4The amended business rescue plan
allowed the business rescue practitioners to charge wholly
inappropriate fees and it was in
any event flawed because there was
no substantiation for the reason why the business rescue
practitioners represent that the immoveable
properties will fetch
more on a sale during business rescue than on liquidation and in any
event a forced sale is envisaged after
120 days
[16] According to BPL it was justified
in rejecting the business plan due to the following facts and
circumstances:
a) Target Shelf, through the first
respondent, has conducted its affairs unlawfully;
b) The buildings on the immovable
properties owned by Target Shelf were erected illegally and amount to
reckless trading of the
business by Target Shelf.
c) First respondent has over a long
period of time failed to submit tax returns on behalf of Target Shelf
to SARS and he does not
appear to have kept the required books of
account in respect of the close corporation.
d) The business rescue practitioners
have failed to comply with their statutory duties and obligations to
investigate the affairs
of the close corporation and to report
reckless trading and fraud on the part of first respondent.
e) The business rescue practitioners
have made it clear that they do not intend to comply with their
statutory duties in terms of
s141
of the
Companies Act and
are
clearly acting in the interest of first respondent.
[17] It is not in dispute that the
business rescue practitioners had changed the registered address of
Target Shelf from Cape Town
to Pretoria and that without citing BPL
as a party, on an ex parte basis, launched an application in the
North Gauteng Division
to declare the vote by BPL, rejecting the
amended business plan, as inappropriate.
[18] This resulted in BPL having to
bring a counter application in terms whereof BPL sought leave to
intervene in the application
to declare the vote inappropriate and to
wind up Target Shelf.
[19] BPL accordingly avers that first
respondent is insolvent on the basis that BPL has a liquidated claim
against the first respondent
for an amount of not less than R12 038
582-40 and that first respondent’s liabilities exceed his
assets. Further, that even
though first respondent avers that his
assets are held in trust, that first respondent does not have any
other assets to speak
of. Although the first respondent alleges that
he holds his assets in the Europa Trust, which he controls and he
alleges that
Target Shelf is indebted to the Europa Trust, BPL avers
that this claim has not been accepted by the business rescue
practitioners,
nor is it clear on what basis the Europa Trust could
have a claim against Target Shelf.
[20] Since the first respondent has no
immovable properties registered in his own name, BPL avers further
that the respondent is
hopelessly insolvent and that it would be in
the interest of the general body of creditors if the first
respondent’s estate
were to be sequestrated so that:
1. an impartial trustee establishes a
concursus in order to preserve the first respondent’s estate
pending proof of claims
against it and the determination thereof by
the trustee;
2. the immovable property of the
insolvent be released for the benefit of the general body of
creditors and to ensure that the proceeds
be distributed in
accordance with the legal order of preference;
3. the trustee investigate the
machinery provided by The Insolvency Act to investigate the
circumstances of the first respondent
and in particular investigate
whether there are assets that may be discovered and realised for the
benefit of the general body
of creditors.
The Amended Business Rescue Plan
[21] An examination of the information
contained in the document titled ‘Amended Business Rescue Plan
prepared for Target
Shelf 284 CC’, reveals that the report was
prepared by business rescue practitioners, Jonathan Christian Beer
and Werner
Cawood, and is dated 13 February 2014. I deem it
necessary to highlight the following:
1. According to the business rescue
practitioners the strategy envisaged with the implementation of the
amended business rescue
plan is to create a situation in terms of
which the creditors ability to recover their debt is substantially
improved.
2. To create a better return for
creditors as opposed to immediate liquidation, the business rescue
practitioners being of the
view that they are required to sell the
properties at its real market values.
3. The properties referred to above
are a commercial property which has a value stated as R8,5 million
and two residential properties
respectively valued at R500 000-00 and
R400 000-00 in the pro forma liquidation and distribution account.
4. The close corporation is a
property owning entity and earns rental income through the rental of
the residential and commercial
properties.
5. The two residential properties
(which are flats) appear to be vacant currently and the CC is not
earning any rental income
thereon;
6. Only approximately 40% of the
commercial property is currently tenanted;
7. Financial distress was caused to
the CC due to:
7.1 Lack of sufficient rental income in
respect of all three properties;
7.2 Tenancy in the commercial building
is not optimal and the commercial property is leased on a month to
month basis.
7.3 The CC is involved in protracted,
unnecessary and complicated legal proceedings with the City of Cape
Town relating to a structure
erected at one of the flats which the
City alleges is illegal.
7.4 An order for the demolition of the
structure was granted on 4 December 2013.
7.5 Property values in Hout Bay
declined as a result of riots in the Hangberg area during 2010.
7.6 When comparing Hout Bay to
neighbouring suburbs, Hout Bay property prices are about 30% less for
similar value properties as
a result of visible squatter camps and
informal settlements in the area.
8. As a result of the aforegoing,
Target Shelf could no longer meet its financial obligations as and
when they became due.
9. The business rescue practitioners
indicate that they will assist in regularising the plans which has
resulted in the litigation
with the City of Cape Town.
10. They propose to market the
properties for a period of 120 days.
11. They envisage that creditors would
stand to receive an increased return to the value of R5 854 008-58
against the immediate
liquidation of the CC on the following basis:
a) in the event that the properties
are not sold in the initial sixty business days and are marketed for
a further sixty business
days: R11 765 640-76 (after business rescue
fees of R250 000-00 is deducted);
b) in the event of an immediate
liquidation R6 255 999-08 (after business rescue fees).
Arguments raised by first respondent in
opposition to the provisional liquidation application
[22] The first respondent has averred
that had the business rescue plan which was drafted by the appointed
business rescue practitioners,
been approved and implemented, it
would have resulted in the payment of applicant. According to the
first respondent the implementation
of the business rescue plan would
have resulted in a better return to creditors compared to a situation
where Target Shelf was
to be liquidated. Mr McClarty strongly
contended that should Target Shelf be liquidated, then only applicant
will be paid and
that only a limited dividend would be paid.
[23] He contended further that in
voting against the business rescue plan at the meeting of creditors
and by intervening in the
application by the business rescue
practitioners to set aside the vote by BPL and by launching a
counter-application seeking the
liquidation of Target Shelf, that the
conduct of BPL was prejudicial to the first respondent.
[24] In his view the first respondent
is thus to be released from his obligations as surety due to the
prejudicial conduct of BPL.
[25] I now turn to deal with BPL’S
contentions against the ‘defences’ raised by the first
respondent to the provisional
sequestration application by BPL. At
the outset I mention that I do not propose to deal with them in any
particular order.
[26] Mr Woodland contended that the
allegation by the first respondent, that if BPL had not opposed the
business rescue proceedings
in respect of Target Shelf, that it would
in all likelihood have paid the amounts due to BPL, as spurious and
without merit. In
support of his contention he submitted that BPL has
a liquidated claim in excess of R12 million against Target Shelf
arising from
monies loaned and advanced to it in terms of a loan
facility granted during 2009. This he argued, is in addition to
other monies
owed by it to the applicant. He emphasized that the
loan amount referred to hereinbefore is secured by way of first
mortgage bonds
registered over Target Shelf’s immovable
properties in favour of BPL and that BPL has a claim against the
first respondent
by virtue of his position as co-debtor under the
suretyship.
[27] I agree with Mr Woodland that in
terms of
Section 128(1)(a)
of the
Companies Act, BPL
as ‘the
affected person’, and as the principal creditor of Target Shelf
CC, holding 100% of the voting interest, was
and is completely within
its rights to vote against the adoption of the business rescue plan.
On the evidence before me it is clear
that BPL will not agree that
the business rescue practitioners dispose of the immovable property.
There is further no basis on
the facts upon which I can find that BPL
was not entitled in terms of
S152
of the
Companies Act to
vote
against the adoption of the business rescue plan, considering inter
alia the legitimate concerns and issues raised by BPL
hereinbefore
and the problems highlighted by the business rescue practitioners
themselves in respect of the properties.
[28] There is merit in Mr Woodland’s
contentions that even were the proposed business rescue plan to be
implemented, that
the amount expected to be realised by the business
rescue practitioner would have been insufficient to pay BPL’s
proved claim.
In any event, it appears that all that the business
rescue practitioners are in fact proposing amounts to, what has in my
view,
correctly been described as ‘a liquidation under the
guise of a business rescue plan’. In these circumstances, BPL
was in my view fully entitled to refuse to accept the proposed
business plan. Accordingly I am satisfied that the first respondent
cannot rely on the alleged prejudicial conduct of BPL.
[29] Where the respondent has, as in
the case of the first respondent, bound himself as surety and
co-principal debtor to BPL, the
law is clear that he has undertaken
the obligations of the co-debtor. His obligations are similar in
scope and nature as that
of Target Shelf and he is accordingly
jointly and severally liable for the payment of the debts of Target
Shelf.
[30] Accordingly, unless the parties
have agreed otherwise, a surety’s debt becomes enforceable as
soon as the principal debtor
is in default, subject however, to the
surety’s right to claim that the principal debtor first be
excussed. If a surety
has bound himself as a co-principal debtor
(as in the present case), his debt becomes enforceable at the same
time as the principal
debt. See Prof. J.G. Lotz in Joubert, The Law
of South Africa – Vol 26 para 161 and Millman & Another NNO
v Masterbond
Participation Bond Trust 1997(1) SA 113 CPD.
[31] As the law stands, BPL is
therefore completely within its rights to proceed against the first
respondent for the full amount
of the indebtedness and was not
obliged to look to Target Shelf for payment first. The position in
our law is that once first
respondent has paid the debt of Target
Shelf to applicant, he is at liberty to proceed against Target Shelf,
but only once he has
paid the debt of Target Shelf to BPL. I pause
to mention at this stage, that in terms of Clause 3.1 of the
suretyship, first respondent
as surety and co-principal debtor,
renunciated the benefit of excussion. It follows that the contentions
on behalf of the first
respondent that BPL ought first to look to
Target Shelf for payment cannot succeed.
[32] In Absa Bank Ltd v Davidson
2000(1) SA 1117 SA Olivier JA held at 1124I – 1125A that:
"As a general proposition
prejudice caused to the surety can only release the surety (whether
totally or partially) if the
prejudice is the result of a breach of
some or other legal duty or obligation. The prime sources of a
creditor's rights, duties
and obligations are the principal agreement
and the deed of suretyship. If, as in the case here, the alleged
prejudice was caused
by conduct falling within the terms of the
principal agreement or the deed of suretyship, the prejudice suffered
was one which
the surety undertook to suffer."
[33] I am of course mindful that our
law has long since recognised what is referred to as the Badenhorst
principle, which holds
that where a respondent disputes his or her
liability on bona fide grounds, that it is improper for an applicant
to seek to recover
a disputed debt by sequestration proceedings,
rather than by the usual action procedure. See Investec Bank Ltd v
Ceris 2002(2)
SA 111(C) at 116 A – B and Kalil v Decotex (Pty)
Ltd and Another 1988(1) SA 943(A) at 976 A – B. I agree with
Mr Woodland
that The Badenhorst principle does however not amount to
a ‘get out of jail card’ for someone in the position that
first respondent finds himself in.
[34] It is now settled that South
African law of suretyship, does not recognise a so-called prejudice
principle to the effect that
if a creditor should do anything in his
dealings with the principal debtor which has the effect of
prejudicing the surety, the
latter is released from his obligations.
[35] Mr McClarty has placed reliance on
the judgment of Investec Bank Ltd v Bruyns 2012(5) SA 430 (WCC) for
the proposition that
where the creditor (in this matter BPL)
intentionally caused its claim to become unenforceable and its
payment to be delayed contrary
to the provisions of the
Companies
Act, the
claim against the surety becomes unenforceable. In my view
the judgment of Rodgers AJ (as he was then) in Investec Bank Ltd v
Bruyns supra does not support the first respondent’s case.
Rogers AJ in fact held that the obligations of the company as
principal debtor are not extinguished or discharged and their
validity is in no way impaired by the business rescue. The court
held further that with the consent of the business rescue
practitioner or the court; the obligations may be enforced.
[36] If I apply the aforesaid
principles to the present matter I am not persuaded that BPL has
committed a breach of its duties
under either the loan or other
agreements with Target Shelf or the deed of suretyship. As I have
already found, BPL was within
its rights to vote against the adoption
of the business rescue prior in respect of Target Shelf. I agree
with Mr Woodland that
the attempt by first respondent to place
reliance on the alleged prejudicial conduct of BPL is misplaced and
amounts to what is
commonly referred to as a ‘red herring’.
In my view this argument on behalf of the first respondent is but a
last ditch
attempt at clutching at straws to stave off the inevitable
and can accordingly not succeed.
[37] It was further contended on behalf
of the first respondent that BPL has to satisfy the requirements of
section 10(b) of the
Insolvency Act in this application. According
to Mr McClarty there has to be clear proof presented to the court
that first respondent
is actually insolvent. He submitted further
that first respondent has not committed on act of insolvency.
[38] According to the first respondent,
the fact that he does not have immovable property registered in his
name, should not lead
to the automatic conclusion that his
liabilities exceed his assets. Mr McClarty contended that since
first respondent is the sole
member of Target Shelf that he would be
entitled to any excess assets which enures to him after the payment
of debts and that the
combined values of the commercial and
residential properties would be more than sufficient to settle BPL’s
debt.
[39] He argued that if the court took
into account first respondent’s loan account in the Europa
Trust which he avers is worth
at least R7,5 million and the December
2014 valuations, i.e. R19 million and R21 million in respect of the
Llandudno property,
then it could never be argued that first
respondent was actually insolvent.
[40] It is trite law that a creditor
who has a liquidated claim for not less than R100-00 or two or more
creditors, whose liquidated
claims together amounts to not less than
R200-00, or such creditor’s duly authorised agents, may bring
an application for
the sequestration of a debtor.
[41] It is further a generally accepted
principle of our law that sequestration proceedings are not designed
for the resolution
of disputes as to the existence of the debt.
Accordingly, if a claim is disputed on bona fide and reasonable
grounds, an order
ought not to be granted. In matters like the
present, the court must be prima facie of the opinion that the
applicant has established
the elements set out in sections 10(a), (b)
and (c) of the Insolvency Act. This principle is endorsed by Corbett
JA in Kalil v
Decotex (Pty) Ltd and Another 1988(1) SA 943 at 976
when after placing reliance on the judgment of Trollip J in
Provincial Building
Society of South Africa v Du Bois 1966(3) SA 76
(W), he held that all that was required by the applicant was to
establish a prima
facie case of insolvency on a balance of
probabilities.
[42] In the present matter I am not
persuaded that the claims made by BPL are disputed on bona fide and
reasonable grounds. In
my view the following facts and circumstances
read together with what I have already found hereinbefore point to
the inescapable
conclusion that the first respondent is in fact
actually insolvent:
42.1 The first respondent is
substantially indebted to BPL in the amount of R13, 855 666-16;
42.2 The first respondent has no
meaningful assets. It is not in dispute that first respondent owns
no immovable property. He
appears to own a jeep with an estimated
market value of R50 000-00 and unspecified movables consisting of
household items which
he avers is valued value at R100 000-00.
42.3 First respondent avers that he
has an interest in the Europa Trust but has for reasons of his own
elected not to present financial
statements and or documentary
evidence to show to this court his real interest therein, if at all,
in the Europa Trust. Considering
the fact that all the indications
are that first respondent is unable to pay his debts, one would have
expected that he would have
made full and proper disclosure of his
‘real’ financial interest in the Europa Trust to this
court and not attempt
to hide behind an alleged interest in the
trust. The first respondent’s failure to play open cards with
this court regarding
his interest in the Europa Trust leads me to
conclude that he is deliberately concealing assets from his
creditors. First respondent
also avers that he has other business
interests, none of which he says bear mention in this application.
Surprisingly he avers
that the value thereof far exceeds any amount
BPL could ever claim from him. This assertion boggles the mind. If
it is so, that
he does have these other business interest, of which
the value allegedly far exceed any amount BPL could ever claim from
him,
it is illogical and incomprehensible that he does not place
details thereof before the court particularly considering the
severity
of the situation that he finds himself in. It must have
been very easy for him to provide this court with details about these
other business interest which would give credence to his assertion
that he is in fact solvent. His failure to provide evidence
of these
business interests, leads me to conclude that they do not exist, and
or that he is deliberately hiding them from his creditors.
42.4 It is not in dispute that first
respondent is also indebted to Investec Bank in the amount of R4 630
397-45 arising once again
from a suretyship concluded in favour of
Investec. It is further common cause that Investec instituted legal
proceedings against
first respondent and others on 29 May 2013 in
this court. It is instructive to note that Target Shelf is the 5th
defendant in
that matter. Investec Bank avers in its summons that
first respondent, the Europa Trust and Target Shelf and the other two
defendants
are liable jointly and severally for the payment of the
debt.
42.5 The first respondent has raised
more questions than given answers in regard to the evidence that he
presented relating to
the valuations that he wishes this court to
attach to the properties. There is merit in Mr Woodland’s
contention that this
court must view the valuations presented by
first respondent with scepticism. On close scrutiny of the
valuations and the evidence
as a whole the following emerges:
42.5.1 Although first respondent in
his affidavit in opposition to the application states that the value
of the commercial property
is R15 000 000 – 00, the pro forma
liquidation and distribution account, as prepared by the business
rescue practitioners
state the value as R8 500 000-00;
42.5.2 First respondent states that the
combined value of the two residential properties (i.e. the two
sectional title units in
the Panarama Hills sectional scheme at Hout
Bay is R3 000 000-00, whereas the pro forma liquidation and
distribution account, as
prepared by the business rescue
practitioners, state the combined value of these units as R900
000-00;
42.5.3 All the aforesaid properties
have been on the market for several years and they have not secured
any offers anywhere near
the value stated by first respondent and or
his estate agents or even the mortgage bond indebtedness.
42.5.4 What is cause for great concern
is that although first respondent initially seeks to use a municipal
valuation in respect
of the Llandudno’s property, showing its
value at R15 500 000-00, it appears that on 30 April 2013 he
(representing the Europa
Trust) objected to the aforesaid valuation
on the basis that:
a) the property value is far lower
than that attributed by the City of Cape Town;
b) the property is negatively
affected by the busy road, difficulties with access and is a security
risk;
c) the current market value of the
property is R4 500 000-00 with an offer having been received in the
amount of R3 000 000-00.
42.5.5 First respondent requested the
City of Cape Town to reduce the valuation to R3 000 000-00. If first
respondent’s
assertions to the City of Cape Town is to be
believed, then I am not sure what weight, if any, the first
respondent wishes me to
place on the further valuations provided by
Mckenzie and Miller. In the alternatively I must conclude that either
the first respondent
was deliberately dishonest when he made the
submissions to the City of Cape Town or he genuinely believes that
the property is
only worth R3 000 000-00.
42.5.6 As I have said the immovable
properties have been on the market for a number of years and have not
secured any offers near
the value stated by the first respondent to
cover the mortgage indebtedness in favour of BPL. I am not persuaded
that a situation
will arise in the near future where offers will be
secured which will come close to covering the mortgage indebtedness
in favour
of BPL. On the contrary, the evidence shows that Auction
Alliance valued the commercial property at R4,1 million in the event
of a forced sale, and R5,8 million in the open market. This is
substantially less that the value submitted by first respondent.
[43] The reality is that the immovable
properties cannot be sold until the business rescue practitioners
have regularised the building
contraventions in respect of the
immovable properties. On the evidence the business rescue
practitioners are required to apply
to have the building plans in
respect of the immovable properties approved in terms of the Building
Regulations & Building
Standards Act 103 of 1997. No evidence
has been placed before me as to what progress if any has been made in
this regard.
[44] In addition it is not clear why
first respondent felt it necessary to obtain further valuations and
or to place same before
the court unless he had no confidence in the
initial valuations he relied on. It is not unreasonable to find that
the first respondent
uses certain valuations of the property as and
when it suits him.
[45] Considering the version presented
by first respondent that there is a difference of R7.5 million due to
him after deduction
of the amounts due to creditors and the fact that
he boldly asserts that he has loans and claims against the Europa
Trust exceeding
the amount of R7.5 million, it seems to me that on
his own version the Europa Trust is insolvent in that its liabilities
clearly
exceed its assets.
[46] I am further not persuaded that
the business rescue practitioners will be able to collect a
substantial VAT claim from SARS
considering that Target Shelf has not
filed tax returns for 2008, 2009, 2010, 2011, 2012 and 2013 and that
SARS are claiming the
amount of approximately R133 3 38-80 which
claim is likely to increase if Target Shelf eventually submits its
annual tax returns
for the above periods. What is clear is that
there is a substantial indebtedness to SARS.
[47] In conclusion I find that it is
clear that the first respondent has unrealisticly overstated the
values of the properties in
an attempt to bolster his claims of
solvency. The evidence presented by first respondent in regard to
the valuations are unreliable
and conflicting. First respondent’s
purported interest and or benefits which he avers accrues from the
Europa Trust is unsubstantiated
and not supported by evidence. The
de facto situation is that first respondent is in fact actually
insolvent and he is unable
to pay his debts.
[48] I am satisfied that BPL has
overwhelmingly demonstrated that there are indeed reasonable grounds
for concluding that upon a
proper investigation of the first
respondents affairs, a trustee may discover or recover assets for
disposal for the benefit of
creditors. In particular, a trustee may,
on investigating the Europa Trust and the affairs of Target Shelf,
find that first respondent
has sheltered and or dealt with his assets
in those vehicles and may well be able to recover these assets for
the benefit of creditors.
[49] Accordingly it is essential that a
trustee be appointed so that the first respondent’s assets can
be realised and distributed
to creditors in order of preference. In
all the circumstances, it must therefore follow that I must grant a
provisional sequestration
order in favour of BPL is entitled to the
relief as set out in the Notice of Motion.
[50] In the result I make the following
order:
1. That the estate of the first
respondent is placed under provisional sequestration.
2. That a rule nisi be issued calling
upon the first respondent to show cause, if any, to the above
Honourable Court on 26 June
2015:-
2.1 why the first respondent’s
estate should not be placed under final sequestration; and
2.2 why the costs of this application
should not be costs in the administration of the first respondent’s
insolvent estate.
3. Directing that the order be served
on:
3.1 the first respondent at No. [1…
V…..] Road, [L………], Cape Town, Western
Cape;
3.2 the South Africa Revenue Service
at [2…… [H…..] Avenue, Cape Town;
3.3 the employees of the first
respondent, if any; and
3.4 all registered trade unions
representing the employees of the first respondent, if any.
RILEY, AJ