Mackay v Cahi

• Jurisdiction: South Africa
• Judge: Hofmeyr J, Erasmus AJ and Smuts AJ
• Judgment Date: 10 May 1962
• Citation: 1962 (4) SA 193 (O)
• Hearing Date: 26 March 1962
• Court: Orange Free State Provincial Division

Mackay v Cahi
1962 (4) SA 193 (O)

1962 (4) SA p193

Citation	1962 (4) SA 193 (O)
Court	Orange Free State Provincial Division
Judge	Hofmeyr J, Erasmus AJ and Smuts AJ
Heard	March 26, 1962
Judgment	May 10, 1962

Flynote : Sleutelwoorde

Insolvency — Compulsory sequestration — General insolvency of E debtor — Proof — Onus — Assets purchased under hire-purchase agreement — Listing of by debtor — Provisional order — Granting of — Notice to debtor necessary.

Headnote : Kopnota

Where a creditor in applying for an order of sequestration relies upon F the general insolvency of the debtor he must prove his allegation on a clear balance of probabilities.

The general insolvency of a debtor can be proved by indirect evidence, but such proof is not conclusive: it merely constitutes a prima facie case which shifts the onus of proof to the debtor to prove that his assets exceed his liabilities. Upon such proof being furnished the petitioning creditor in turn assumes the onus of proving that the figures relied upon by the debtor are unacceptable. The creditor in G support of his allegation should furnish the Court with a sworn appraisement of the debtor's assets.

Goods purchased by a debtor under a hire-purchase agreement should figure in the list of movables with an intimation of the terms under which they are held.

It is most undesirable. except perhaps in cases of extreme urgency, that a provisional order of sequestration should be granted without notice to the debtor where the ground relied upon is either the commission of an H act of insolvency in terms of section 8 (e) of Act 24 of 1936 or that the debtor is in fact insolvent. In considering the question whether or not an urgent application should be granted ex parte it would be most appropriate to scrutinise jealously the question whether the creditor has been reasonably diligent in protecting his interests prior to seeking extraordinary relief from the Courts. In exercising its discretion whether or not to assist the applicant the Court should be careful to guard itself against indulging creditors who have conducted their affairs in a slovenly and careless manner.

Per SMUTS, A.J.: A debtor in an application for provisional sequestration, who seeks by means of a statement of his assets and liabilities to rebut the prima facie evidence of insolvency furnished by inferential evidence of the

1962 (4) SA p194

nature contained in the petitioning creditor's petition, should state what the assets are and the value he places upon them. If he fails to place a value on any particular asset he runs the risk of that asset being ignored for the purpose of determining his solvency. A

Case Information

Appeal from a decision of DE VILLIERS, J. Facts not material to this report have been omitted.

H.J.O. van Heerden, for the appellant.

M.E. Kumleben, for the respondent.

Cur. adv. vult. B

Postea (May 10th).

Judgment

Hofmeyr, J.:

This is an appeal against the whole judgment delivered by C DE VILLIERS, J., on the return-day of a provisional sequestration order. The application was based upon an allegation that the appellant had committed acts of insolvency in terms of sec. 8 (c) and sec. 8 (e) of the Insolvency Act, 24 of 1936, as amended, or, alternatively, on the ground that the appellant's estate was in fact insolvent and that it D would, in any one of these cases, be to the advantage of creditors that the respondent's estate be sequestrated.

The learned Judge a quo based his judgment confirming the provisional sequestration order entirely on a finding that the appellant had been proved to be in fact insolvent. He refrained from expressing any opinion on the question whether or not any one of the alleged acts of insolvency had been committed.

E Mr. van Heerden, on behalf of the appellant, contended that the respondent, to whom I shall hereafter refer as the applicant, failed to prove that the appellant was in fact insolvent. He referred the Court to Ohlsson's Cape Breweries Ltd v Totten, 1911 T.P.D. 48 and de Villiers F v. Bateman, 1946 T.P.D. 126, in support of the proposition that general insolvency must in the circumstances of the application, be proved on a clear balance of probabilities.

He conceded that the insolvency of the appellant could be proved by indirect evidence but submitted that such proof could never be conclusive and could merely constitute a prima facie case which shifted G the burden of proof to the debtor to prove that his assets in fact exceeded his liabilities. Upon such proof being furnished the applicant, according to Mr. van Heerden, should in turn assume the onus of proving that the figures relied on by the respondent were unacceptable.

The manner in which such indirect evidence should be dealt with is well H illustrated in Bhyat v Khurishi, 1929 T.P.D. 896, referred to by Mr. van Heerden. FEETHAM, J., as he then was, concluded, after considering the figure submitted by the debtor as his estimate of the value of his assets and liabilities and the criticism of these figures by the applicant, that he was left in the dark as to the actual position. The applicant did not attempt to state what the actual position of the debtor was and the learned Judge was asked to infer that the debtor was insolvent from the fact that he had failed to pay some creditors, including the applicant, that he had asked the creditors for time and that he had taken steps to assign his estate.

1962 (4) SA p195

Hofmeyr J

FEETHAM, J., held that, in the circumstances, there might be grounds for suspicion, 'even strong suspicion', that the respondent was insolvent but that the facts were not clearly proved. The most cogent piece of indirect evidence was disposed of in an instructive passage on pp. 901 and 902 of the judgment:

A 'It does not appear to me that, because he took steps to assign his estate, I can conclude that he was necessarily insolvent. I think it would be very dangerous to draw such an inference, and I do not think, under the circumstances described, such an inference can be drawn.'

The circumstances surrounding the contemplated assignment of the B debtor's estate were that he had made an agreement with his most important creditors that they would give him time and some of these creditors sought to depart from that agreement. Upon being consulted one of the debtor's principal creditors advised him to assign his estate and he took certain steps in that direction. There were also certain admissions alleged to have been made by the debtor but since they were C denied by him FEETHAM, J., placed no reliance on them and discharged the provisional sequestration order.

The learned Judge a quo approached the matter substantially in accordance with the principles contended for by Mr. van Heerden and I am in entire agreement with him that no more than the usual onus which is D to be discharged in all civil cases rested upon the applicant in this case. In principle there was no objection to his finding that the applicant had, despite the apparent surplus of assets over liabilities shown by the appellant in his 'rough balance sheet', discharged the onus of proving that the appellant's liabilities in fact exceeded his assets. That such a finding on proper facts would be competent is implicitly E recognised in the judgment of FEETHAM, J., in Bhyat v Kurishi, supra.

The attack on the judgment involves the weighing of the inferences to be drawn from the indirect evidence placed before the Court by the applicant against the figures submitted to the Court by the appellant indicating a credit balance of assets over liabilities.

F Since the present matter must be decided purely on affidavit this Court is in as good a position to decide it as the Court of first instance. Although an appellate tribunal should not seek anxiously to find reasons adverse to the conclusions of the Judge of first instance, it is, nevertheless, its duty to overrule a conclusion of the Court a quo if it is convinced that the decision of that Court was wrong. (See G Rex v Dhlumayo and Another, 1948 (2) SA 677 (AD) and Mine Workers' Union v Brodrick, 1948 (4) SA 959 (AD) at p. 970).

Before proceeding to a consideration of the issue I pause to refer to the oft-cited dictum of INNES, C.J., in de Waard v Andrew and Thienhaus, 1907 T.S. 727 at p. 733:

H 'Speaking for myself I always look with suspicion upon and examine very narrowly, the position of a debtor who says 'I am sorry that I cannot pay my creditor, but my assets far exceed my liabilities'. To my mind the best proof of solvency is that a man should pay his debts; and therefore I always examine in a critical spirit the case of a man who does not pay what he owes.'

This is probably the high-water mark of authority in favour of inferential proof of insolvency. The statement does not amount to saying that the payment of a person's debts is the only manner of proving his solvency. Such payment is, with all due respect, merely proclaimed

1962 (4) SA p196

Hofmeyr J

somewhat rhetorically to be the best manner of demonstrating solvency.

In applying this dictum in any particular case due attention should be paid to the warning sounded by ROPER, J., in Corner Shop (Pty.) Ltd. v. A Moodley, 1950 (4) SA 55 (T) at p. 60, where he pointed to the fact that in the de Waard case the Court was dealing with an application in which an act of insolvency had been clearly proved but the Court was asked to exercise its discretion not to sequestrate because it was alleged by the debtor that he was in fact solvent despite the nulla bona return. According to ROPER, J., the scepticism of the CHIEF JUSTICE was B in the circumstances justified but should be limited to the type of case out of which it arose.

The factum probandum is the cold objective fact that the applicant's liabilities exceed his assets. It was no doubt because...