First Rand Bank Limited v Janse van Rensburg

• Jurisdiction: South Africa
• Judge: Goosen J
• Judgment Date: 17 January 2012
• Docket Number: 3846/2011; 3847/2011
• Court: Eastern Cape Division
• Hearing Date: 10 January 2012
• Citation: 2012 JDR 0030 (ECP)

Goosen J

[1]

The applicant moved for a provisional order of sequestration against each of the respondents in two separate unopposed applications before me. The respondents are married to each other out of community of property. In each application reliance was placed on section 8(g) of the Insolvency Act (Act 24 of 1936, as amended) it being alleged that the respondents had committed an act of insolvency by applying, in terms of section 86 of the National Credit Act (Act 34 of 2005, hereinafter the NCA), for debt review in terms of the NCA.

[2]

Although the applications were moved separately, the legal and factual issues raised in the matters are identical. I have therefore prepared a single judgment dealing with these issues.

[3]

The applicant is a registered credit provider in terms of the NCA. During or about 2002 the applicant lent and advanced funds to a close corporation, Niqua Juices CC (hereinafter the Corporation), in which each of the respondents holds a 50% membership interest. The application papers disclose that the close corporation is indebted to the applicant in the sum of R638,790.22. This is evidenced by a certificate of balance certified by the Commercial Recoveries Manager of the applicant. It is apposite to note that the papers contain no averments regarding, or documents supporting, the existence of the debt due by the Corporation other than that it is due.

[4]

On 20 February 2002 each of the respondents entered into a Deed of Suretyship in respect of the indebtedness of the Corporation to the applicant. The applicant further obtained security for the suretyship liability by way of a general covering bond

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Goosen J

over an immoveable property owned by the respondents. The covering mortgage bond provides security in an amount of R600,000.00 together with an additional amount of R120,000.00 [1] .

[5]

In each instance the applicant's application for a provisional sequestration order is founded solely upon the alleged commission of an act of insolvency in terms of section 8(g) of the Insolvency Act. In this regard it is alleged that each of the respondents has made application for an order in terms of section 86(7)(c) of the NCA for a declaration of over-indebtedness (as envisaged by the NCA). In confirmation hereof the applicant relies upon a consumer profile report issued by a Credit Bureau, in which it is reported that the respondents have applied for debt review.

[6]

The credit bureau reports reflect merely that the consumer (the relevant respondent) has applied for a debt rehabilitation or to be placed under debt review with a registered debt counsellor. No further details regarding the application for debt review are supplied, save that the application was made on the 23rd of March 2011.

[7]

At the hearing of the applications I requested counsel to address me on the question as to whether an application for debt review constitutes an act of insolvency and whether the applicant has established that an act of insolvency in terms of section 8(g) of the Insolvency Act has been committed.

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Goosen J

[8]

Mr De Vos, who appeared for the applicant in both matters, submitted that an application to be placed under debt review in terms of section 86 of the NCA constitutes an act of insolvency in terms of section 8(g) of the Insolvency Act. He further argued that the available evidence establishes that such an application was in fact made and accordingly that each of the respondents has thereby committed an act of insolvency entitling the applicant to move for the sequestration of their respective estates.

[9]

In support of his submissions Mr De Vos referred to the judgment of Wallis, J (as he then was) in First Rand Bank Limited v Evans [2] , in which consideration was given to the question whether notice of the fact that the respondent was under debt review constitutes an act of insolvency as envisaged by section 8(g) of the Insolvency Act.

[10]

In the Evans matter the application for a provisional sequestration was opposed. The applicant in that matter relied upon a letter addressed by the respondent to the applicant in which the applicant's attention is drawn to the fact that the respondent had been placed under debt review. The learned judge, in dealing with the content of the letter addressed to the applicant states the following [3] :

"[14]

The letter states that Mr Evans is under debt review. That means that he must have applied for debt review in terms of section 86(1) of the NCA. The purpose of his application was to obtain a declaration that he was over-indebted because that is always the purpose of applying for debt review. In terms of section 79(1) of the NCA:

'A consumer is over-indebted if the preponderance of available information at the time a determination is made indicates that the particular consumer is or will be unable to satisfy in a timely manner all the obligations under all the credit agreements to which the consumer is

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Goosen J

a party, having regard to that consumer's (a) financial means, prospects and obligations; and (b) probable propensity to satisfy in a timely manner all the obligations under all the credit agreements to which the consumer is a party, as indicated by the consumer's history of debt repayment.'

It follows from this statement of what constitutes over-indebtedness for the purposes of the NCA that a debtor who informs his creditor that he has applied for, or is under, debt review is necessarily informing the creditor that he is over-indebted and unable to pay his debts.

[15]

The proper approach to adopt in determining whether a letter such as this constitutes a notice of inability to pay in terms of section 8(g) is to consider how it would be understood by a reasonable person in the person of a creditor receiving the letter. In construing it the knowledge that the creditor would have of the debtor's circumstances must be attributed to the reasonable reader."

[11]

The learned judge then proceeded to deal with particular facts known to the applicant regarding the respondent's financial circumstances and his history of servicing such obligations at the time that it received the letter from the respondent. He then went on to state [4] :

"[20]

The requirements of section 8(g) are satisfied when the notice given by the debtor to the creditor conveys that the debtor is at present unable to pay his or her debts. The debtor's willingness to attempt to pay the debts in the future is not relevant. As Scott, J pointed out in Standard Bank of SA Ltd v Court, supra, '…..' 'a debtor who gives notice that he will only be able to pay his debt in the future gives notice in effect that he is 'unable' to pay. A request for time to pay a debt which is due and payable will, therefore, ordinarily give rise to an inference that the debtor is unable to pay a debt and such a request contained in writing will accordingly constitute an act of insolvency in terms of section 8(g). This is particularly so where the request is coupled with an undertaking to pay the amount due and payable by way of instalments …. A distinction must, however, be drawn between an inability to pay and an unwillingness to pay. If a reasonable person in the position of the creditor to whom the notice is addressed would understand the notice to mean that while the debtor was unwilling to pay his debt forthwith he could nonetheless do so if...