Ex parte Arntzen (Nedbank Ltd as Intervening Creditor)

• Jurisdiction: South Africa
• Citation: 2013 (1) SA 49 (KZP)

Ex parte Arntzen (Nedbank Ltd as Intervening Creditor)
2013 (1) SA 49 (KZP)

2013 (1) SA p49

Citation	2013 (1) SA 49 (KZP)
Case No	2333/2012
Court	KwaZulu-Natal High Court, Pietermaritzburg
Judge	Gorven J
Heard	September 13, 2012
Judgment	September 28, 2012
Counsel	JM White for the applicant.; LE Combrink for the intervening creditor.

Flynote : Sleutelwoorde B

Insolvency — Voluntary surrender — Disclosure — High level of disclosure required from applicant — Greater risk of abuse and risk that interests of creditors will be undermined in voluntary surrender applications than in 'friendly' sequestration applications — Insolvency Act 24 of 1936, s 6(1). C

Headnote : Kopnota

There is an even greater risk of abuse and a risk that the interests of creditors will be undermined in voluntary surrender applications than in 'friendly' sequestration applications. The need for full and frank disclosure and well-founded evidence concerning the debtor's estate is even more D pronounced. Voluntary surrender applications require an even higher level of disclosure than do 'friendly' sequestrations, if the court were to be placed in a position where it can arrive at the findings and exercise the discretion to accept surrender as set out in s 6(1) of the Insolvency Act 24 of 1936. (Paragraph [12] at 54B – F.)

Cases Considered

Annotations: E

Case law

Berrange NO v Hassan and Another 2009 (2) SA 339 (N): dictum at 354A – B applied

Collett v Firstrand Bank Ltd 2011 (4) SA 508 (SCA): referred to F

Craggs v Dedekind; Baartman v Baartman and Another; Van Jaarsveld v Roebuck; Van Aardt v Borrett 1996 (1) SA 935 (C): dictum at 937E – F applied

Ex parte Ford and Two Similar Cases 2009 (3) SA 376 (WCC): referred to

Ex parte Mattysen et Uxor (First Rand Bank Ltd Intervening) 2003 (2) SA 308 (T): referred to

Ex parte Pillay; Mayet v Pillay 1955 (2) SA 309 (N): dictum at 311 applied G

Ex parte Swart 1935 NPD 432: dictum at 433 applied

Ex parte Van den Berg 1950 (1) SA 816 (W): referred to

FirstRand Bank Ltd v Evans 2011 (4) SA 597 (KZD): referred to

MV Wisdom C: United Enterprises Corporation v STX Pan Ocean Co Ltd 2008 (3) SA 585 (SCA) ([2008] 3 All SA 111): referred to H

Mthimkhulu v Rampersad and Another (BOE Bank Ltd, Intervening Creditor) [2000] 3 All SA 512 (N): applied

National Director of Public Prosecutions v Basson 2002 (1) SA 419 (SCA) (2001 (2) SACR 712; 2002 (1) BCLR 419; [2002] 2 All SA 255): referred to

Phillips and Others v National Director of Public Prosecutions 2003 (6) SA 447 (SCA) I (2003 (2) SACR 410; [2003] 4 All SA 16): dictum in para [29] applied

Schlesinger v Schlesinger 1979 (4) SA 342 (W): dictum at 349A – C applied

Schwartz v Schwartz 1984 (4) SA 467 (A): referred to

South African Police Service v Public Servants Association 2007 (3) SA 521 (CC) ([2007] 5 BLLR 383): referred to. J

2013 (1) SA p50

Statutes Considered

Statutes A

The Insolvency Act 24 of 1936, s 6(1): see Juta's Statutes of South Africa 2011/12 vol 2 at 1-536.

Case Information

An application for voluntary surrender.

JM White for the applicant. B

LE Combrink for the intervening creditor.

Cur adv vult.

"

Postea (September 28). C

Judgment

Gorven J:

[1] This application is for an order sequestrating the estate of the D applicant by way of voluntary surrender in terms of the provisions of ss 3 to 6 of the Insolvency Act 24 of 1936 (the Act). It was brought on an ex parte basis. Nedbank Ltd (Nedbank) was granted leave to intervene as an interested party, being the major creditor of the applicant. It is not in issue that s 4 of the Act was complied with, save that the Act provides that the notice of surrender must be posted to the E South African Revenue Service (SARS), whereas the application, including the notice, was served at the offices of SARS. This is a formal defect as envisaged in s 157(1) of the Act. It was conceded that there had been substantial compliance and certainly no substantial injustice resulted. Nothing further therefore need be said on the matter.

F [2] The test for voluntary surrender applications is set out in s 6(1) of the Act which, apart from requiring compliance with s 4, provides as follows:

'If the court is satisfied . . . that the estate of the debtor in question is insolvent, that he owns realisable property of a sufficient value to defray all costs of the sequestration which will in terms of this Act be payable G out of the free residue of his estate and that it will be to the advantage of creditors of the debtor if his estate is sequestrated, it may accept the surrender of the debtor's estate and make an order sequestrating that estate.'

[3] There is no dispute that the estate of the applicant is insolvent. That H leaves two issues for determination before the discretion granted by s 6(1) can be exercised. The first is to determine whether the applicant owns realisable property sufficient to defray all costs of the sequestration, and the second is to determine whether the sequestration of the I applicant's estate will be to the advantage of creditors.

[4] Both of these aspects require the court to be satisfied. The applicant must discharge the onus to satisfy the court on a balance of probabilities. In particular, the test relating to advantage to creditors is more strictly framed than that for the provisional sequestration of a debtor's estate, which only requires the court to be of the opinion that prima facie there J is reason to believe that it will be to the advantage of creditors if the

2013 (1) SA p51

Gorven J

estate is sequestrated. [1] It is also more strictly framed than that for the A final sequestration of a debtor's estate which only requires the court to be satisfied that there is reason to believe that it will be to the advantage of creditors if the estate is sequestrated. [2] In s 6(1) the court must be satisfied that it will be to the advantage of creditors if the debtor's estate is sequestrated. B

[5] Courts have long required an applicant in voluntary surrender applications to make a full and frank disclosure. [3] This arises at least in part from the stringent test referred to above. It is quite clear that, without a full and frank disclosure, the court cannot be 'satisfied' as to C the above two criteria in particular. The required high level of disclosure is also affected, in no small measure, by the fact that the application is ordinarily brought on an ex parte basis, as is the present one. There is ample authority that applications brought on that basis require the utmost good faith. [4] The principles were succinctly stated by Le Roux J in Schlesinger v Schlesinger [5] in a rescission application as follows: D

'(1)

in ex parte applications all material facts must be disclosed which might influence a Court in coming to a decision;

(2)

the non-disclosure or suppression of facts need not be wilful or mala fide to incur the penalty of rescission; and

(3)

the Court, apprised of the true facts, has a discretion to set aside the formal order or to preserve it.' E

[6] In voluntary surrender applications the need for full and frank disclosure is accentuated by the fact that, despite the practice of such applications being brought on an ex parte basis, they do not fulfil the criteria for true ex parte applications. In true ex parte applications the F

2013 (1) SA p52

Gorven J

A applicant is the only person who is interested in the relief which is being claimed. In such applications, notice only to the registrar of the court is required. [6] In voluntary surrender applications, on the other hand, creditors, to name only one category of persons, have a very real interest in the outcome of the application. For them the outcome of the B application spells the difference between the prospect of recovering the applicant's full indebtedness and the prospect that recovery will be reduced by virtue of sequestration.

[7] This is presumably why, in voluntary surrender applications, notice to creditors is required. Unlike the situation where the creditor is cited as C a respondent in an application, however, service of the application papers is not required. [7] Neither do creditors have the same time available to decide whether or not to oppose the application. Two forms of notice are given to creditors. First, the notice of surrender in the statutory form which advises of the date of the application and the date from which a D statement of the applicant's affairs will lie for inspection at the relevant office or offices, must be published in the Government Gazette and a newspaper circulating in the district in which the applicant resides. The publication must take place not more than 30 days and not less than 14 days from the date of the application. Secondly, the notice of surrender giving the same information must be delivered or posted to E each creditor whose address is known, within seven days of publication in the Gazette. Depending on when they receive the posted or delivered notice, and depending on whether the applicant has published only 14 days prior to the application, creditors may only be left with a few days to inspect the statement of the applicant's affairs so as to decide F whether or not to intervene in the application.

[8] From this it is clear that in voluntary surrender applications creditors are required to be more alert, proactive and must respond more quickly in assessing whether or not to intervene, than if they had been a party to the application. If they wish to form a clear view of the application, they G need to inspect the statement of affairs and, if this does not provide sufficient detail, to locate and inspect the application itself, all within a limited time period. This contrasts with the position in a normal application where the...