Standard Bank of SA Ltd v Court

• Jurisdiction: South Africa
• Citation: 1993 (3) SA 286 (C)

Standard Bank of SA Ltd v Court
1993 (3) SA 286 (C)

1993 (3) SA p286

Citation	1993 (3) SA 286 (C)
Court	Cape Provincial Division
Judge	Scott J
Heard	August 20, 1992; August 24, 1992; August 25, 1992; September 3, 1992
Judgment	September 14, 1992

Flynote : Sleutelwoorde

Insolvency — Compulsory sequestration — Practice — Security — Master's certificate in terms of s 9(3) of Insolvency Act 24 of 1936 that security given — Whether certificate needs to be served on respondent — Practice C in Cape Provincial Division that Master's report incorporating security certificate need not be served on respondent and is to be lodged with Court prior to application being set down not contrary to provisions of s 9(3).

Insolvency — Compulsory sequestration — Act of insolvency — Notice to creditor by debtor 'that he is unable to pay any of his debts' — Insolvency Act 24 of 1936, s 8(g) — Whether notice amounts to one in D terms of s 8(g) of Act — Approach of Court to determination of such question set out — Court to consider how notice would be understood by reasonable person in position of creditor to whom notice addressed.

Insolvency — Compulsory sequestration — Act of insolvency — Notice to E creditor by debtor 'that he is unable to pay any of his debts' — Insolvency Act 24 of 1936, s 8(g) — Whether debtor 'is unable' to pay — Request for time to pay a debt will ordinarily give rise to inference that debtor unable to pay debt and, if in writing, will constitute such an act of insolvency — Unwillingness to pay, where debtor could pay if pressed, F would not amount to inability to pay and therefore not an act of insolvency under s 8(g) of Act — Where there is a request for time, Court to consider content of written statement together with circumstances to which it is permitted to have regard to determine whether act of insolvency established.

Headnote : Kopnota

G The practice in the Cape Provincial Division in applications for provisional orders of sequestration that the Master's report (incorporating his certificate that sufficient security as required by s 9(3) of the Insolvency Act 24 of 1936 has been given) need not be served on the respondent and is to be lodged with the Court prior to the application being set down for hearing is not contrary to the provisions of s 9(3) of the Act.

In determining whether a notice by a debtor to a creditor constitutes an H act of insolvency in terms of s 8(g) of the Insolvency Act 24 of 1936 (ie 'a notice in writing to any one of his creditors that he is unable to pay any of his debts'), the tenor of the notice must, of course, be construed as a whole and not according to the words relied upon, viewed in isolation. It is well established that the approach to be adopted in determining whether or not a written notice constitutes a notice of inability to pay in terms of s 8(g) of the Act is to consider how the I notice would be understood by a reasonable person in the position of the creditor to whom it is addressed. It would also seem clear, particularly in cases of doubt, that to such a reasonable person must be attributed the knowledge of the relevant circumstances which would have been known to the creditor at the time.

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 J a request contained in writing will accordingly constitute an

1993 (3) SA p287

A act of insolvency in terms of s 8(g) of the Insolvency Act 24 of 1936. 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 pressed, then the notice will not constitute an act of insolvency. In B each case where there is a request for time, the inquiry, therefore, is whether the content of the written statement, viewed together with the circumstances to which it may be permissible to have regard, is such as to negative the inference arising from the request for time to pay and to justify the conclusion that the debtor would be able to pay at once if pressed to do so. C

Case Information

Application for a provisional order of sequestration. The facts appear from the reasons for judgment.

I G Farlam SC (with him G W Woodland) for the applicant.

J C Marais for the respondent.

D Cur adv vult.

Postea (September 14).

Judgment

Scott, J.:

This is an application for a provisional order of sequestration. It was launched in July 1991, but after the filing of answering and E replying affidavits the matter was not proceeded with and an agreement was entered into in terms of which certain immovable property owned by the respondent was to be sold in order to pay the respondent's major creditors, including the applicant. By the beginning of July 1992, the person appointed to sell the property had not yet succeeded in doing so and the applicant, as it was entitled to do, withdrew from the agreement. F

On 24 July 1992 an order was granted by this Court permitting the applicant to file further founding papers. This it did and in due course a further set of answering and replying affidavits was filed. The matter was duly set down for hearing on 20 August 1992, ie more than a year after the application was first launched. G

In July 1991 the respondent was indebted to the applicant in an amount of not less than R559 537,18. There is some dispute between the parties as to the precise rate of interest which the debt bears, but the amount referred to above is the amount calculated at the rate alleged by the respondent, namely 2,5% above the prime overdraft rate. It is common cause H that the respondent has made no payments in respect of her indebtedness to the applicant since some time prior to the institution of these proceedings and by 15 August 1992 the debt had increased to R713 032,77. The applicant is the respondent's major 'concurrent' creditor. The respondent's principal assets are two immovable properties, a farm known as 'Goedeverwachting' and an industrial property. The subdivision of the I farm into seven separate erven has been approved, while the industrial property has already been subdivided into three separate erven. Syfrets Bank is the respondent's largest creditor. Its claim, which at present amounts to the sum of approximately R1,8 million, is secured by a bond over all the respondent's properties.

In its original founding affidavit the applicant relied solely on a J letter

1993 (3) SA p288

Scott J

A dated 5 June 1991, addressed to it by the respondent, as constituting an act of insolvency within the meaning of s 8(g) of the Insolvency Act 24 of 1936. In its subsequent 'founding' papers the applicant introduced two further grounds for the relief it sought. They are: first, that the respondent has committed an act of insolvency in terms of s 8(c), in that B since the commencement of proceedings she has made certain substantial payments for and on behalf of her insolvent husband which have had the effect of prejudicing her creditors or of preferring one above the other; and, second, that she is in fact insolvent as contemplated by s 10(b) of the Act. All three grounds are contested by the respondent. I shall in due course deal with each in turn.

C Before doing so, however, it is necessary, first, to consider a point which, although referred to as a point in limine, was raised for the first time after I had heard full argument on the merits of the application and had reserved judgment. The point taken by Mr Marais, who appeared for the respondent, is that the application is fatally defective for want of D compliance with the provisions of s 9(3) of the Act in that when the application was issued by the Registrar and served on the respondent it was not accompanied by a certificate of the Master that security had been given. The question that has to be decided is whether the certificate must accompany the application when it is issued and served or whether it is sufficient if it is lodged with the Registrar prior to the hearing.

E The relevant part of s 9(3) reads:

'. . . (T)he facts stated in the petition shall be confirmed by affidavit and the petition shall be accompanied by a certificate of the Master given not more than ten days before the date of such petition that sufficient security has been given for the payment of all fees and charges F necessary for the prosecution of all sequestration proceedings and of all costs of administering the estate until a trustee has been appointed, or if no trustee is appointed, of all fees and charges necessary for the discharge of the estate from sequestration.'

Section 9(4) of the Act makes provision for the Master to report to the Court any relevant facts. The subsection reads:

G 'Before such a petition is presented to the Court, a copy of the petition and of every affidavit confirming the facts stated in the petition shall be lodged with the Master, or, if there is no Master at the seat of the Court, with an officer in the public service designated for that purpose by the Master by notice in the Gazette, and the Master or such officer may report to the Court any facts ascertained by him which would appear to him to justify the Court in postponing the hearing or in H dismissing the petition. The Master or the said officer shall transmit a copy of that report to the petitioning creditor or his agent.'

As regards the...