Investec Bank Ltd and Another v Mutemeri and Another

• Jurisdiction: South Africa
• Judge: Trengove AJ
• Judgment Date: 25 September 2009
• Citation: 2010 (1) SA 265 (GSJ)
• Docket Number: 09/22247
• Counsel: A Subel SC (with JE Smit) for the applicants. H de Kock for the respondents. PA Venter for the amicus curiae.
• Court: South Gauteng High Court, Johannesburg

Trengove AJ:

Introduction

G [1] The applicants apply for the sequestration of the common estate of the respondents who are said to be married in community of property. The respondents raise a range of defences. Most prominent among them is their contention that the applicants' claims against them are based on 'credit agreements' within the meaning of the National Credit Act 34 of 2005 H and that the application for their sequestration is barred under it.

[2] The respondents applied to a debt counsellor for review of their debts in terms of s 86 of the NCA. The debt counsellor is Mr Barry Kotze. He accepted the respondents' application, gave notice to all their credit providers, concluded that they appeared to be overindebted and applied to the magistrates' court for their debts to be restructured in terms of ss 86 and 87 of the NCA. His application I to the magistrates' court was launched on 15 May 2009 but is only enrolled for hearing on 11 August 2010, that is, almost a year from now. The respondents' case is that until then, no legal proceedings may be instituted against them for enforcement of the applicants' claims under the credit agreements, and that J their application for sequestration constitutes proceedings of that kind.

Trengove AJ

[3] When this application for sequestration first came before this court A for hearing on 25 August 2009, the respondents applied for a postponement. Beckerling AJ refused their application but stood the matter down until 28 August 2009. On that day the debt counsellor sought, and was granted, a postponement to enable him to launch an application for leave to intervene as a party to the proceedings. He has, since then, made such B an application. The applicants oppose his application for joinder. They made it clear, however, that they had no objection to him making submissions as a friend of the court but that he lacked standing to be admitted as a party to the proceedings. I accordingly heard the debt counsellor, both on his application for joinder and on the merits of the application. C

[4] Although logic suggests that I should determine the debt counsellor's application for intervention at the outset, it would make no practical difference when I do so because I have already heard him on his application for D intervention and on the merits of the application for sequestration. It will, in the circumstances, be more convenient to deal with his application for intervention at the end of this judgment because the reader will by then be better acquainted with the subject-matter of this case and the debt counsellor's interest in it.

[5] I turn to consider the grounds upon which the respondents and the E debt counsellor submitted that the application for sequestration should be dismissed.

The respondents' marriage

[6] The respondents were married in Zimbabwe. The applicants alleged F in their founding affidavit that the respondents were deemed to be married in community of property. Their allegation seems to be borne out by declarations the respondents made in some of their loan agreements with the applicants. It is the basis on which they seek the sequestration of the respondents' joint estate.

[7] The respondents did not dispute the allegation that they were G deemed to be married in community of property and did not challenge the competence of the application for sequestration of their joint estate in their answering affidavits. Their counsel, however, submitted an argument that, according to the law of Zimbabwe, their marriage is one H out of community of property. But this is not a contention open to the respondents in the face of their implied admission on the papers that they were married in community of property and in the absence of any evidence to the contrary.

The applicants' claims I

[8] It is common cause that the applicants have substantial liquidated claims against the respondents. In an earlier application of which I shall say more later, the respondents admitted their indebtedness to the applicants in unambiguous terms: J

Trengove AJ

A 'I entirely agree with the Applicants on the following: -

•

That Second Respondent and I are indebted to the two Applicants,

•

That our bond account fell into arrears,

•

That the Applicants are entitled at law to enforce payment by instituting legal proceedings and that they may seek an order declaring the property in question specially executable.'

B [9] In this application the applicants give details of their claims against the respondents and then summarise them as follows:

'As at 27 August 2008, the respondents were indebted:

52.1

to the second applicant as concerns the loan agreements and as concerns the mortgage bonds bearing account number C 226105/003, in the amount of R2 041 506,20 together with interest thereon at the rate of prime minus 1,65% (prime currently 15,5%) equivalent to 13,85% from 27 August 2008 to date of payment, calculated daily, compounded monthly;

52.2

to the first applicant as concerns the credit card agreement in respect of account number 10010776829, in the amount of D R118 723,47 together with interest thereon at the rate of prime less one per centum being 14,5% as at 27 August 2008; and

52.3

to the first applicant as concerns the indebtedness of RAH in the amount of R500 000 together with interest thereon.'

[10] The respondents did not take issue with any of the details of the E applicants' claims, except to deny that the third claim was one for R500 000. It is a claim under a suretyship in terms of which the respondents stood surety for the debts of RAH Products (Pty) Ltd. It appears from a certificate of indebtedness, issued by the first applicant's recoveries manager, that the respondents' debt under the suretyship is only R337 503 plus interest from 27 May 2008. Subject to this qualification, F however, the applicants' claims against the respondents are common cause.

The respondents' insolvency

[11] In their founding affidavit the applicants alleged that the respondents G had committed various acts of insolvency in terms of s 8(g) of the Insolvency Act 34 of 1936 and, by inference, that their liabilities in fact exceeded their assets.

[12] This inference was never seriously denied and has subsequently been fully borne out by the respondents' application to the debt H counsellor which they had confirmed on oath. They said in that application that they had assets of only R4 million and liabilities of R17,8 million. This evidence more than suffices to establish, prima facie at least, that the respondents are in fact hopelessly insolvent.

Advantage to creditors I

[13] In their founding affidavit the applicants contended that the sequestration of the respondents' estate would be of advantage to their creditors for a variety of reasons which may be reduced to two fundamental grounds. First, the respondents are the owners of immovable property. The applicants did not adduce any evidence of the value of this property J and did not place any particular value on it. The applicants secondly said

Trengove AJ

that a trustee would be able to determine whether the respondents had A disposed of their assets to third parties. They advanced some evidence from which it might be inferred that the respondents might have done so.

[14] This evidence should also now be seen in the light of the respondents' statements, confirmed on oath in their application to the debt counsellor, about the assets and liabilities in their estate. As already B mentioned, they claim to have assets of R4 million and liabilities of R17,8 million. Their assets include three immovable properties on which they placed values without substantiating them.

[15] The respondents submitted that the applicants have not shown any advantage to creditors because the property values upon which they rely C have not been proved by expert evidence. They relied for this submission on para F4.2 of the Gauteng High Court Practice Directives Manual which reads as follows:

If the existence of adequate advantage to creditors depends on the extent to which a specific asset will contribute to the free residue, D evidence of a person with appropriate skill must prove what price can be expected on an expeditious sale which is not delayed in order to obtain a satisfactory negotiated price.'

[16] But this rule of practice must be seen in context. As a matter of law, an applicant may generally rely on an admission, by the respondent, of any fact upon which the applicant's case is based. But the weight of such E an admission depends entirely on the circumstances in which it is made. It may be conclusive in some circumstances and wholly unpersuasive in others. An example of the latter is a self-serving 'admission' made by a respondent in a 'friendly' application for his or her sequestration. Such an admission made by a respondent, of the value of his or her property, in order to show advantage to creditors, often carries so little...