Fesi and Another v Absa Bank Ltd

• Jurisdiction: South Africa
• Court: Cape Provincial Division
• Judge: Lusu AJ
• Judgment Date: 29 September 1999
• Citation: 2000 (1) SA 499 (C)
• Hearing Date: 26 August 1999
• Docket Number: 8099/99
• Counsel: PA Botha for the applicants JC De W Du Plessis for the respondent

Lusu AJ:

This is an ex parte H application for the surrender of the joint estate of the applicants, who are married in community of property and profit and loss. Applicants aver that the substantive requirements for acceptance of the surrender have been met. Such requirements are:

(i)

that the applicant is indeed insolvent;

(ii)

that sequestration shall be to advantage of creditors; I

(iii)

that there is available realisable property of sufficient value to defray costs of sequestration from the free residue of the estate.

Respondent has intervened and opposes the application on the following grounds:

1.

That the notice of surrender was given with ulterior motive to prevent a sale in execution. J

Lusu AJ

2.

That applicants have failed to fully disclose their financial A position.

3.

That the applicants are not insolvent.

4.

That sequestration will not be to the advantage of creditors.

Mr P A Botha appeared for applicants and Mr J C de Wet du Plessis appeared for respondent. B

First applicant, who deposed to the founding affidavit, stated that applicants own erf 6788, Goodwood. The property is mortgaged to the respondent and the bond balance is R265 000. The house is presently rented out, whilst it is also put up for sale. The rentals have not been paid regularly, hence applicants have fallen in arrears with their bond instalments. The house is valued at R275 000. Their C movable assets are valued at R1 450. Their liabilities comprise the bond and four sundry creditors totalling R11 081,11. The free residue, excluding the R10 000 provision for sequestration costs, amounts to R1 450. This amount would settle the sundry creditors at R0,13 in the rand. R0,13 will be to the advantage of creditors. The figures are worked out as follows: D

(a)	Value of immovable property . . . . . . . . . . . . . . . . . . . . .	275 000
(b)	Movable property . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1 450
		276 450
(c)	Less bond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	265 000
		11 450
(d)	Less sequestration costs . . . . . . . . . . . . . . . . . . . . . . . .	10 000
(e)	Free residue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1 450
(f)	Due to creditors = 1 450 ÷ 081,11; = R0,13

In the opposing affidavit filed on behalf of respondent it is stated that respondent has a judgment against F applicants for the arrear instalments on the bond. The judgment was taken on 22 February 1999. The property was advertised for a sale in execution for 22 March 1999 but the sale was not proceeded with.

On 7 July 1999, and before receipt of the notice of surrender, G respondent instructed its attorneys to re-attach the property. The notice of surrender was given with the ulterior motive of preventing a sale in execution.

The deponent also states that applicants have failed to disclose the following material facts:

(a)

First applicant's salary with the Department of H Education.

(b)

That second applicant is employed as a pension administrator with the Old Mutual Insurance Co.

(c)

A monthly payment of R1 400 to Stannic which indicates that applicants possibly 'own' a vehicle. I

(d)

That the property rented out earns applicants rental of R2 500 per month from one Naomi Darby.

She further advises that the amount outstanding on the bond is, in fact, R257 160 and not R265 000 as alleged by applicants. She states that the estate is not insolvent and that, in any event, sequestration will not be to the advantage of creditors. J

Lusu AJ

The applicants reply that the payment to Stannic is in respect of a A vehicle 'belonging to' first applicant's sister, one 'Fikiswa', who has a contract with Stannic. They took over the use of and the payments for the vehicle by arrangement with Fikiswa and Stannic for the period when Fikiswa went overseas. They annex two letters to Stannic written by second applicant and Fikiswa in this respect. Apart B from this, the replies amount to an effective reassertion of the founding affidavit.

The respondent is the major creditor of the applicants. It is owed 95,87 per cent of the total debt. The other four creditors are owed 4,13 per cent.

In examining the application, the grounds of objection are taken in C their sequence.

A.

Ulterior motive

On 22 March 1999 the property (erf 6788 Goodwood) should have been sold in execution at the instance of respondent but the sale was not proceeded with. D

It would seem that all was well for the applicants until the sale of 22 March, when respondent was foreclosing on the bond, and that they started movement for the notice of surrender to be published (as it was) on 25 June 1999 in the Government Gazette and the local newspaper. E

The probabilities favour the assertion by respondent that the surrender is being made to prevent the sale and to avoid harassment by creditors. It is not acceptable that applicants should take that course. It is against the object of the Insolvency Act.

In the words of Holmes J (as he then was) in Ex parte Pillay; Mayet v Pillay 1955 (2) SA 309 (N) at 311E: F

'The machinery of voluntary surrender was primarily designed for the benefit of creditors, and not for the relief of harassed debtors.'

Mr Botha argued that the assertion that applicants wanted to prevent a sale in execution cannot stand. This was so because there was no sale pending when the application for surrender was made. G

Mr Botha's argument is without merit. Once a judgment is taken on a mortgage bond, the next step, surely, is to set the process for a sale in execution in motion. This must have been known to both mortgager and mortgagee.

B

Non-disclosure H

(i) The applicants did not disclose their present salaries in the replying...