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REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NO: 9137/2016

Not reportable

Not of interest to other judges

Revised.

30/10/2017

In the matter between:

Absa Bank Limited                                                                                                               Applicant

and

Appelcryn, Casper                                                                                                              Respondent

 

JUDGMENT

Van der Linde, J:

[1]    This is an application for a provisional order of sequestration of the respondent’s estate. The respondent is a farmer, and the applicant his bank. The respondent owns land, but it is all bonded to the applicant. The bank put up two certificates of balance, aggregating R10,611,977,89, as of 10 December 2015. The respondent admits this indebtedness. The respondent admits too that he is not able to pay the debt due to the applicant. He says he is not “currently” able to do so.

[2]    He points out however that the value of his two farms is R2,300,000 and R22,000,000 respectively. These are based on valuations that the applicant has annexed to its founding affidavit, and on which it relies. The same valuations reflect the respective forced sale values as R1,495,000 and R14,300,000, an aggregate of R15,795,000. This would leave a positive residue in the respondent’s estate of R5,183,022.

[3]    These valuations were dated some four years ago. In the applicant’s replying affidavit the debt to the applicant as of 21 February 2017 is stated to be R12,098,880. It is there contended that the respondent’s assets “cannot be valued for much more than R15,795,000.00 and his liabilities amount to at the very least an amount of R13,827,674.64.”

That would leave net equity in the respondent’s estate of R1,967,325.

[4]    The applicant’s case for the provisional sequestration of the respondent is his insolvency. That case is asserted in the founding affidavit where, as the cases have firmly said, it is required to be.[1] The assertion is, to be true, that the respondent is “factually and commercially” insolvent.

[5]    But commercial insolvency, another way of saying that a debtor cannot pay his debts as and when they fall due for payment, is no more than an onus-shifting device, which then burdens the debtor to show that his assets exceed his liabilities.[2] I agree with Ms Cirone for the respondent that it does not serve as a standalone ground for the sequestration of a debtor’s estate.[3]

[6]    This issue was put as follows by Fourie, J in the main seat of the Gauteng Division of the High Court, Pretoria:[4]

“[4] This brings me to the central issue to be decided:  has it been proven, at least prima facie, that the respondents’ estate is insolvent?  One may seek to establish factual insolvency either directly by adducing evidence of the debtor’s liabilities and of the market value of his assets at the date of the application, or indirectly by providing evidence of circumstances indicative thereof, e.g., the fact that debts remain unpaid, or that the debtor has sought a moratorium or that he has endeavoured to compromise with his creditors (Meskin, Insolvency Law, par 2.1.3).  However, a Court must be cautious to infer insolvency from such circumstances.  As was pointed out in Corner Shop (Pty) Ltd v Moodley 1950 (4) SA 55 (T) at p 60 the inability to pay a debt should not be taken out of its context, for it may be “consistent with a state merely of temporary financial embarrassment” or due to “commercial insolvency” in circumstances where a debtor’s liabilities do not exceed the value of his assets.”

[7]    On the evidence in this matter the respondent has, on the applicant’s own case, established that his assets exceed his liabilities. No question of discretion arises.

[8]    For the applicant Mr Meyer referred to Court v Standard Bank of SA Ltd; Court v Bester NO[5] for the proposition that a person is unable to pay his debts if he is unable to pay any one or more of his debts. But there the sequestration application was brought on the basis that the debtor had committed acts of insolvency, as well as that the debtor was factually insolvent.[6]

[9]    He referred too to Prudential Shippers SA Ltd v Tempest Clothing Co (Pty) Ltd and Others[7] for the proposition that a debtor proves his solvency by paying his debts. But there McEwan, J went further (emphasis supplied):

“It is clear that Levin has not paid the debts owed by him in terms of the deeds of suretyship. The main defences that he has raised have been rejected. One of the strongest proofs of solvency is that a man pays his debts and failure to do so gives rise to an inference that he is insolvent (see De Waard v. Andrew and Thienhaus Ltd., 1907 T.S. 727, per INNES, C.J. at p. 733; Hugo, N.O. v. Lipkie,  1961 (3) SA 66 (O), per POTGIETER, J. at p. 67H; Mars, loc. cit.). At the same time one must bear in mind the principle that the Court will not make an order for compulsory sequestration on the ground of general insolvency unless the facts are clearly proved (see, e.g., Bhyat v. Khurishi, 1929 T.P.D. 896 at pp. 900, 901; Union Government v. Milne,  1948 (3) SA 1153 (T); Corner Shop (Pty.) Ltd. v. Moodley,  1950 (4) SA 55 (T) at p. 59H).”

[10]What is more, in that case the learned judge went on to find that such a case had not been established. So too, in this case, the insolvency of the respondent has not been established, albeit that he concedes that he cannot pay his debts. The way remains open to the applicant, secured to the hilt, to obtain judgment and execute on its solid security. 

[11]In the result the consequence is inevitable.

The application is dismissed with costs.

 

 

WHG van der Linde

Judge, High Court

Johannesburg

 

For the applicant: Adv. GH Meyer                        

Instructed by:  Jay Mothobi Inc

9 Arnold Road

Rosebank

Tel: 011 268 3500

Ref: Mr Oliver/45627

 For the respondent:  Adv. P Cirone

 Instructed by:   Walter Niedinger and Associates

(C/O Charl Cilliers Attorneys)

1^st Floor, No. 1 Albury Park

Cnr Jan Smuts Avenue & Albury Road

Hyde Park

Tel: 011 325 4500 

 Date hearing: 24 October, 2017

 Date judgment: 31 October, 2017

 

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