Lemley v Lemley

• Jurisdiction: South Africa
• Judge: Pickering J
• Judgment Date: 02 April 2009
• Docket Number: 2038/08
• Hearing Date: 02 April 2009
• Court: South Eastern Cape Local Division

Pickering J:

This is the return day of a rule nisi which was issued by this court on 24 October 2008 in terms whereof the respondent was called upon to show cause to this court why a final order of sequestration should not be granted against his estate. The respondent does not oppose. Confirmation of the rule is, however, opposed by an intervening creditor, Absa Bank Ltd.

The application for the respondent's sequestration is a striking example of a so-called "friendly sequestration". (Compare EPSTEIN v EPSTEIN 1987 (4) SA 606 (C)).

Applicant is respondent's mother. She avers in her founding affidavit that respondent endured a number of personal crises during 2007, in consequence whereof he became divorced and also lost his employment. She accordingly assisted him, she says, from time to time

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"advancing funds to him to enable him to survive on a month to month basis". She does not provide any details thereof because, so she states in reply, her attorney was subject to severe time restraints in preparing the application. Be that as it may, she alleges that on 27 September 2008 she loaned respondent the amount of R2 500 "to assist him to pay his creditors". In proof thereof, she attaches the relevant bank deposit slip. She lists respondent's creditors at the time that she loaned respondent the aforesaid amount as follows:

"Absa mortgage bond	R650 000,00
WesBank HP Agreement	R408 750,40
Absa Credit Card	R 46 057,26
FNB Credit Card	R 21 376,34
American Express Credit Card	R 33 584,15
Blue Bean Credit Card	R 44 523,36
Absa HP Agreement	R 27 220,94."

Respondent's total liabilities amounted to R1 231 512,20 whereas, according to applicant, his assets amounted to R783 404,46. Quite how the amount of R2 500 was going to assist respondent in paying off these creditors is not apparent.

The next step in this saga followed as the night the day and, sure enough, on 30 September 2008 respondent addressed a letter to applicant in which he stated, inter alia, as follows:

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"Dear Mother

I refer to our numerous conversations regarding my financial situation and the money you lent me. I want to thank you for helping me where you could and for lending me money in an attempt to recover from this financial crisis that I find myself in. As you know I have really tried my best to pay you back the money that I owe you, but I now find myself in the position where I just do not have enough money to pay everything I have to pay. I asked you to lend me some more money in order to be able to pay everything at the end of this month, but this is not even enough. I cannot even come close to paying everything I have to."

The present application followed very shortly thereafter on the 2nd October 2008. It is not in dispute between the applicant and the intervening creditor that applicant's loan to respondent is prima facie evidence of a liquidated claim entitling her to apply for the sequestration of respondent's estate and that respondent's letter to her constitutes an act of insolvency in terms of section 8 of the Insolvency Act 24 of 1936.

The intervening creditor opposes the confirmation of the rule on the basis that the sequestration of respondent's estate

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would not be to the advantage of creditors. It has been held in a number of cases that the fact that a sequestration may be "friendly" will not preclude the grant of a sequestration order when the requirements of the Insolvency Act are generally satisfied but that the court should scrutinise such an application with particular care in order to protect the interests of creditors. (See EPSTEIN v EPSTEIN supra,; ex parte STEENKAMP AND RELATED CASES 1996 (3) SA 822 (W)). LEACH J VAN ECK v KIRKWOOD 1997 (1) SA 289 (SECLD) stated as follows at 290C-D:

"But as this is a "friendly sequestration" one must guard against there being collusion between the applicant and the respondent- see in this regard the remarks of Conradie J in Craggs v Dedekind; Baartman v Baartman & Another; Van Jaarsveld v Roebuck; Van Aardt v Borrett 1996 (1) SA 935 (C) at 937. Particular in a case such as this one must be careful to ensure that the 'friendly' creditor does not obtain an order which cannot be said to be in the interests of creditors and, accordingly, the allegations made in regard to this issue should be closely construed".

(See too VAN ROOYEN v VAN ROOYEN [2004]2 All SA, 485 (SE) at 489H-490E and ESTERHUIZEN v

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SWANEPOEL AND SIX-TEEN OTHER CASES 2004 (4) SA 89 (W). In Esterhuizen SATCHWELL J stated as follows at paragraph 8 with regard to "collusion" namely:

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