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HIGH COURT OF SOUTH AFRICA

(GAUTENG DIVISION, PRETORIA)

(1) REPORTABLE:  NO.

(2) OF INTEREST TO OTHER JUDGES:  NO.

(3) REVISED: YES

                                                               CASE NO: 74895/2019 and 74896/2019

 

In the matters between:

TUHF LIMITED                                                                                                Applicant

and

KAREL TERBLANCHE SWANEPOEL                                                Respondent

 

AND

 

TUHF LIMITED                                                                                               Applicant

 

and

 

HERMANUS JOHANNES KRIEK                                                            Respondent

 

These two applications have been heard in a joint virtual hearing via Microsoft Teams in terms of the Directives of the Judge President of this Division dated 25 March 2020, 24 April2020 and 11 May 2020.  The judgment and orders are accordingly published and distributed electronically.

 

JUDGMENT

DAVIS, J

[1]          Introduction

This is the judgment in two sequestration applications launched by the same creditor as applicant in both applications with the same cause of action against two sureties of the same principal debtor. Both sureties delivered virtually identical opposing affidavits, both claiming that they are pensioners, that the houses they live in belong to their wives and that their respective estates are so devoid of assets that there are no advantage for creditors, should they each be sequestrated. The parties were all represented by the same respective firms of attorneys and counsel. Due to these facts the two applications were simultaneously heard and the parties consented to a single judgment being given.

[2]          The basis for the sequestration proceedings

The facts pertaining to the sequestration proceedings duly launched by the applicant in terms of the Insolvency Act 24 of 1936 (the “Act”) are by and large common cause:

2.1     During 2011/2012 the respondents were, as directors of a company called Credenda Property Holdings (Pty)Ltd involved in the development and refurbishment of certain immovable properties in Sunnyside, Pretoria. As part of the development and refurbishment, a shelf company, Comocap (Pty) Ltd (“Comocap”) was “obtained” by the respondents to acquire the immovable properties. The respondents each hold 25% shares in Comocap. The ultimate goal of the development was to develop properties with 192 “student beds”.

2.2     In April 2013 Comocap had an undertaking from the University of Pretoria that it would secure the occupation of 102 of the “student beds”. Armed with this, the respondents on 16 May 2013 obtained a loan from the applicant to Comocap in the amount of almost R 11, 3 million. Amongst other securities, the respondents each signed an unlimited suretyship in favour of the applicant for Comocap’s indebtedness.

2.3     At the end of 2014 the University apparently reneged on its undertaking to take up “student beds” in the development.  During January 2015, Comocap defaulted on its loan repayments to the applicant, resulting in the full outstanding amount of the loan becoming then due and payable.  In March 2015 the outstanding indebtedness of Comocap stood at R 9 288 988, 81. This lead to the applicant instituting proceedings for repayment in this court against Comocap and its sureties.

2.4     On 3 August 2015, this court granted an order in terms of which Comocap and its sureties were ordered, jointly and severally to repay the outstanding amount to the applicant. The executability of Comocap’s property was prevented by it being placed in business rescue. The business rescue practitioner has since opted for the liquidation of Comocap, but the application for liquidation is opposed and there is an application for the removal of the business rescue practitioner pending in this court. In fact, these proceedings have been dragging along for the past two years.

2.5     Repeated writs of execution issued against the respondents resulted in nulla bona returns. The respondents’ shares in Comocap are alleged to be virtually valueless in Comocap’s current state and due to the pre-emptive rights attached to the shares in favour of other shareholders of Comocap.

2.6     The Applicant is an unpaid judgment creditor and is armed with nulla bona returns, constituting acts of insolvency on the part of the repondents.  This satisfies sections 10(a) and (b) of the Act.  Apart from accusations against the business rescue practitioner and allegations that Comocap’s property may be sold for a substantial amount of money, allthough, it appears, for not enough to cover the whole of its outstanding liabilities which have over the past more than four years skyrocketed, respondents’ only defences  are that they are so hopelessly insolvent that they allege that the requirements set out in section 12(1)(c) of the Act have not been met. This is the section requiring a court to be satisfied that there is reason to believe that it will be to the advantage of creditors if a debtor’s estate is sequestrated.

[3]          The applicable legal principles:

3.1    The then local division of this court has held more than half a century ago in Meskin & Co v Friedman 1948(2) SA 555(WLD) at 559 that the  right to an investigation by a trustee which follows upon a sequestration is not sufficient in itself to constitute the “advantage” contemplated in insolvency legislation. The court found:

“In my opinion, the facts put before the Court must satisfy it that there is a reasonable prospect – not necessarily a likelihood, but a prospect which is not too remote – that some pecuniary benefit will result to creditors. It is not necessary to prove that the respondent has any assets. Even if there are none at all, but there are reasons to believe that as a result of an enquiry under the Act some may be revealed or recovered for the benefit of creditors, that is sufficient…”.

3.2    Shortly hereafter, in another division, a contrary view was expressed in Arbor Trading Company v Pillay 1949(4) SA 981(N) at 984 that:

“There is considerable authority for the view that the right of investigation under the Act is in itself an “advantage”… and that it is sufficient to make out a reasonable case for enquiry without showing that any material benefit to the creditors may result from the investigation”.

3.3    More recently, this court’s then local division again referred to the decision in Friedman & Co v Meskin (supra) and found the following in Dunlop Tyres (Pty)Ltd v Brewitt 1999(2) SA 580 (WLD) at583E:

“It will be sufficient if the creditor in an overall view of the papers can show , for example, that there is reasonable ground for coming to the conclusion that upon a proper investigation by way of an enquiry under section 65 of the Act a trustee may be able to unearth assets which might then be attached, sold and the proceeds disposed of for distribution amongst creditors”

3.4    In Stratford and others v Investec Bank Ltd and others 2015(3) SA 1 (CC) the Constitutional Court added the following at par [44] to the adjudication of the concept of advantage to creditors:

“The meaning of the term “advantage” is broad and should not be rigidified”.

3.5    Section 10(c) of the Act expressly provides that at the current stage, namely where only provisional orders of sequestration are sought, the applicant only has to prove the facts which it believes engender the belief that there would be an advantage to it as the sole creditor of the respondents, on a prima facie basis  as opposed to the onus on a balance of probabilities as required at the stage where  final sequestration orders are sought, as provided for in terms of section 12(1)(c) of the Act, on which the respondents rely.

3.6    In the final instance, a court retains a discretion to order a sequestration, depending on the facts of the case. See, for example Firstrand Bank Ltd v Evans 2011(4) SA 597(KZD) at par [27].

[4]     Evaluation:

It is in the above context that the position of the respondents must be evaluated:

4.1     What is immediately striking of the opposing affidavits of the two respondents, is the fact that the affidavits are virtually identical to each other. There has been little attempt to personalize their opposition. The differences are minute and negligible: while Swanepoel refers to Kriek as the designer of the refurbishments, Kriek refers to himself in exactly the same terms, except in the first person. Where Kriek’s wife was already a pensioner at the time when the affidavits were deposed to, Swanepoel’s wife retired at the end of 2019. There is also a bald denial by Kriek regarding the allegation that his wife is not the owner of their matrimonial home whilst Swanepoel’s wife is the owner of their matrimonial home.  The only, and I stress only, other difference between the contents of the two affidavits, is the fact that Swanepoel was declared medically unfit in 2016 and receives PPS disability payments until the end of 2020 which Kriek does not receive. Apart from the fact that, notionally, two people might have identical circumstances, the contents of the affidavits which are so identical in two separate sequestration applications need to be approached with some circumspection.

4.2     The summary of the respondents’ position is that they are both pensioners and that they have, save for the 25% shares each in Comocap, no other assets. All movables in their matrimonial homes are owned by their respective wives. The both have bank accounts but failed to furnish copies or particulars thereof. They are both directors of multiple companies but allege that all these companies are dormant.

4.3     The fact that professional developers of multimillion Rand developments suddenly become virtually destitute when being called upon to make good their suretyships should raise an eyebrow.  The bald, vague and sketchy particulars of the respondents’ positions (to borrow from the language used in summary judgment proceedings), raise another proverbial eyebrow. In my view, even if a creditor might not be entitled to a full and frank disclosure of the position of a debtor in the position of the respondents prior to the launching of a sequestration application, then certainly a court would be entitled to candour once such an application has been launched. This was not displayed by the respondents, raising both the court’s eyebrows.

4.4     Furthermore, the respondents’ persistence with allegations of prospective sales of the properties of Comocap and their opposition to the liquidation of Comocap, coupled with their perceived reluctance to let go of their shares, although alleged to be without value, creates some uncertainty as to the actual value of the shares. Examination of this position or the taking control thereof by a trustee, might yield some prospect of recovery. Similarly, the allegation that all the companies of which the respondents are directors are dormant, calls for an enquiry. The applicant was also only able to ascertain the formal positions of directorships but cannot, without an enquiry, ascertain the position regarding shareholding in those companies.

4.5     A last point made by Adv Cooke who appeared on behalf of the applicant, was that, should it appear on the return day of provisional orders that there are in fact insufficient assets to constitute an advantage to the applicant as creditor, then the applicant would be in for the wasted costs and there would have been no prejudice for the respondents.

4.6     I am satisfied that the applicant has satisfied the onus on it as contemplated in section 10(c) of the Act. It is unfortunate that the state of the unopposed motion court roll in this Division is such that dates are only available in some seven months’ time. I considered ordering shorter return dates, but, in the circumstances of this case, longer dates might in any event be advisable.

[4]          Orders

The following orders are granted:

CASE NO 74895/2019

1.     The estate of the Respondent is hereby provisionally sequestrated.

2.     The Respondent and any other party who wishes to avoid such an order being made final are called upon to advance reasons, if any, why the court should not grant a final order of sequestration of the said estate on the 15^th March 2021 at 10h00 or as soon thereafter as the matter may be heard.

CASE NO 74896/2019

1.   The estate of the Respondent is hereby provisionally sequestrated.

2.   The Respondent and any other party who wishes to avoid such an order being made final are called upon to advance reasons, if any, why the court should not grant a final order of sequestration of the said estate on the 15^th March 2021 at 10h00 or as soon thereafter as the matter may be heard.

 

                                                                                          

                                                                                                N DAVIS

                                                                                 Judge of the High Court

                                                                              Gauteng Division, Pretoria

 

                                                                                               

 

Date of Hearing: 13 August 2020

Judgment electronically delivered:  20 August 2020

 

APPEARANCES:

For the Applicant:                    Adv.  M. J Cooke

Attorney for Applicant:            Schindlers Attorneys, Johannesburg

                                                          c/o Friedland Hart Solomon & Nicolson, Pretoria

 

For the Respondent:                    Adv. M Louw                

Attorney for Respondent:           Loock Du Pisanie Inc, Pretoria          

 

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