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SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy

 

 

IN THE HIGH COURT OF SOUTH AFRICA  /ES

(GAUTENG DIVISION, PRETORIA)

CASE NO:  57474/201 3

DATE: 15/12/15

NOT REPORTABLE

NOT OF INTEREST TO OTHER JUDGES

IN THE MATTER BETWEEN

PHILIP FOU RI E N.O.                                                                                        1^st APPLICANT

MOHERANE WI LLIAM HARRY  MATHIBETI  N.O                                          2^nd APPLICANT

(In their capacity as provisional liquidators of

ZETA CAPITAL (PTY) LTD [in liquidation])

AND

VINCENT TREVOR SMITH (ID no [....])                                                        1^st RESPONDENT

INGRID BELITA  SMITH (ID no [....])                                                           2^ndRESPONDENT

(Married in community of property to one another)

JUDGMENT

PRINSLOO, J

[1] What falls to be decided in this judgment, is whether or not a final sequestration order should be granted of the joint estate of the respondents, who are married in community of property to one another.

[2] The application for the provisional sequestration order  was  opposed  by  the respondents. The hearing took place early in June 2015 and on 9 June 2015, this court. through Dewrance AJ, granted the provisional  sequestration  order,  returnable on 16 July 2015.

[3] On an extended return date, 30 October 2015, the matter  came  before  me  on  an opposed basis. In reserving judgment, I again extended the rule until 18 December 2015.

[4] In his judgment culminating in the granting of the provisional sequestration order, the learned Judge comprehensively dealt with the underlying circumstances of the case. He also addressed relevant legal considerations. I do not propose embarking upon unnecessary repetition. The aforesaid judgment should be read in conjunction with this one.

Brief background notes, and su bmissions made in the founding  affidavit

[5] The  applicants  are  the joint  liquidators  of  a  company  Zeta  Capital  (Pty)  Ltd.  111

liquidation ("Zeta").

[6] The purpose of the application is to sequestrate the respondents on the basis that the joint estate is insolvent and also. through the first respondent committed an act or acts of insolvency, in terms of the provisions of section 8 of the Insolvency Act, no 24 of 1936.

[7] I add that the applicants, initially, only asked for the sequestration of the first respondent, because they were under the impression that he was married out of community to the second respondent. At a relatively late stage, the first respondent raised an argument in limine to the effect that he was married in community of property and that his spouse should have been joined to the proceedings. Such a joinder application was duly moved and granted, \veil before the matter was heard in June, when the provisional sequestration order was sought and granted.

[8] The second respondent played a passive role in the proceedings, and did not contribute any evidence which could have had an impact on the case of the applicants, or, one way or the other, could have contributed to the adjudication of this case.

[9] The applicant liquidators are. collectively, and in their aforesaid capacity, a judgment creditor of the joint estate of the respondents in the amount of R l 50 000,00 together with interest at the rate of 15.5% per annum from 1 April 2010 as well as two costs orders under case no 38557/2012 in this court ("the Zeta debt"). The costs orders aforesaid were both granted on an opposed scale, in opposed applications, one of which was granted on an attorney and client scale. When the founding affidavit was deposed to. the bills of costs had not yet been taxed but it was estimated that the costs would "easily" exceed an amount of R200 000.00.

[10] Before turning to the Zeta debt in greater detail. I make a few additional remarks about the background of the case, on a subject also duly considered by Dewrance AJ in his comprehensive judgment.

[11] Pursuant to an investigation conducted by the Financial Services Board ("the FSB"), Corporate Money Managers (Pty) Ltd ("CMM") and the companies forming part of the so-called "CMM group of companies" were placed under provisional curatorship on 28 April 2009 and the provisional order was confirmed on 18 June 2009. Three well-known, experienced. knowledgeable and respected  individuals,  widely recognised for their involvement in matters of this nature, were appointed as joint curators of the CMM group of companies.  I shall refer to them as "the curators".

[12] CMM was an "authorised agent" in terms of the Collective  Investment  Schemes Control Act 45 of 2002 ("CISCA").

[13] The CMM Cash Management Fund ("the Fund") also forms part of the CMM group of companies and falls under the curatorship of the curators. The Fund 1s a CISCA-regulated Fund and \Vas managed by CMM. All this is common cause.

[14] What is also common cause. is that CMM lured investors to invest in the Fund and attracted large and numerous investments from investors. This is so because the CMM, contrary to other CISCA-regulated investments, offered very attractive interest rates.

[15] A few months before the curatorship order, the total amount invested through CMM amounted to approximately R4 billion. At the time when the CMM was placed under curatorship, this amount was reduced to approximately R 1,2 billion.

[16] CMM was able to offer these attractive rates because, in direct contravention of the stringent provisions of CISCA and contrary to the investor mandates, CMM and all those involved in the management of CMM, mero motu, transferred the majority of the money invested  in  the  Fund  to  so-called  "high  risk  segregated  portfolios". In certain instances, investors' money was invested directly in these segregated portfolios (I take the liberty to delve extensively and literally into the contents of the well crafted founding affidavit where these details, succinctly stated, are to be found).

[17] The money "invested" in the high-risk segregated portfolios were utilised to provide bridging finance and short-term loans to third parties. It is common knowledge that such loans are prime examples of high-risk investments.

[18] In most instances CMM made use of so-called Special Purpose Vehicles (''SPV's"). forming part of the CMM group of companies, to provide loans to third parties at an extremely high price.

[19] Im ortantly, one such SPY was CMM Corporate Finance (Pty) Ltd ("Corpfin"), which the first respondent  controlled.   This is admitted by the first respondent.

[20] Many of the loans (funded with Fund money) have not been repaid and it is the main responsibility  of the  curators  to ensure that  these debts are recovered,  m  that  the investors in CMM can be refunded. or at least partially refunded. The outstanding balance due to investors, as stated above, was, when this sequestration application was launched. approximately R 1,2 billion.

[21] The curators found that senior officials within CMM not only granted loans indiscriminately prior to the curatorship becoming effective, but also did so with the purpose of enriching themselves. This was admitted by a former CMM official who worked closely with the other CMM officials, including the respondent. The loans often entailed possible fraudulent transactions with co-operating third parties to whom the loans were made. This often included that such officials obtained a direct or indirect interest in the party to whom the loan was made.

Importantly, as far as the first respondent is concerned, he.  for example,  arranged loans for his companies, Zeta. in the amount of R950 000,00 ("the  Zeta  loan")  and Matika Investments ( Pty) Ltd  (also  i n  liquidation  - "Matika"),  in  the  amount  of R2 250 000.00 ("the Matika loan").

[22] Zeta and Matika were two of the CMM debtors who did not repay their loans. This ultimately resulted in the curators successfully applying for the liquidation of both Zeta and Matika, after negotiations for repayment failed.

[23] It is alleged in the founding affidavit that the curators also requested the South African Pol ice Services to investigate the fraud and theft perpetrated.  It is  not  clear  what became of those criminal charges. The curators also instituted civil proceedings against twenty one former CMM directors and officials, including the respondent. Who was cited as the 17^th defendant in an action based on the provisions of section 424 of the 1973 Companies Act. The action was aimed at recovering some of the monies that got lost as a result of the fraudulent conduct of the directors  and other  officials ("the 424 action").

The action was set down for hearing over a lengthy period of time, and during the course of the trial it was settled on the basis that the l st and 19th defendants accepted personal liability for payment of an amount of R860 million with interest. In the order that was made it was also noted that the claims against the 20th defendant and the first respondent in this case (lih defendant) \Vere withdrawn. Importantly, the court, noting the settlement, also gave declaratory relief in the following terms:

"It is declared that the businesses of Corporate Money Managers (Pty) Ltd, Miro Capital (Pty) Ltd, Four Rivers 307 (Pty) Ltd, Regent Group Capital (Pty) Ltd ... Escascape Investments (Pty) Ltd, CMM Finpro (Pty) Ltd and CMM Corpfin (Ptv) Ltd were carried on recklessly or with intent to defraud  creditors of the said companies."  (Emphasis added.)

As already indicated, Corpfin was the company that was controlled by the first respondent.

After the 424 action was settled, as described, the applicants carried on with these sequestration proceedings against the respondents. Indeed. the answering affidavit was only filed in August 2014, some four months after the settlement of the 424 action. The application to join Ms Smith as the second respondent was only launched in September 2014.

More about the Zeta and Matika loans

[24] The present first applicant. Mr Fourie, is also a joint liquidator in the insolvent estate of Matika. As is the case with Zeta, he is in charge of the administration of the insolvent estate of Matika.

[25] On 30 November 201 1 a Commission of Enquiry, in terms of sections 417 and 418 of the old Companies Act ("the enquiry") was held in the insolvent estate of Zeta. The first respondent gave evidence at the enquiry during which he made the following admissions:

1. he sold a BMW 730d motor vehicle ("the BMW"), which was an asset in the estate of Zeta, for an amount of R l 50 000,00 which money he used to "defray expenses";

2. he did not have sufficient funds to repay the amount of R l 50 000,00 to the insolvent estate of Zeta;

3. he signed a personal  surety in favour of CMM for the Matika loan; and

4. his house was registered in the Geoflise Trust ("the trust") of which he is a trustee and beneficiary.

[26] Following the evidence gathered at the enquiry:

(i)       the liquidators issued an application against the first respondent  out  of  this court, under case no 38557/2012, for payment of the amount of R 1 500 000,00 together  with  interest,  relating  to  the   sale   of   the   BMW   ("the   BMW application"); and

(ii)       the CMM curators issued a summons against the respondent out of the South Gauteng High Court under case no 2010/32048572 for payment of the amount of R2 250 000.00 together with interest, relating to the respondent's suretyship in respect of the Matika loan ("the surety action").

[27] The first respondent defended both the BMW application and the surety action.

[28] On 10 October 2012, this court granted judgment against the first respondent in the BMW application for payment of an amount of R150 000,00 plus interest at 15,5% per annum from 1 April 2010 until date of payment and costs on a punitive scale as between attorney and client ("the BMW judgment").

[29] On 6 March 2013 the South Gauteng High Court granted judgment against the first respondent in the surety action for payment of an amount of  R2 250 000,00  with interest at 3% per month from 19 August 2008 to date of payment and costs on the punitive  scale as between attorney and client ("the surety judgment").

[30]  Following  the   BMW  judgment.   a warrant   of  execution   was   issued   and   on 16 November 2012 the Sheriff attached the respondents' movable assets. The Sheriff could only attach goods in the total estimated value of R l 8 800,00.

[31] It is common cause that the respondents do not own any immovable property.

[32] Soon after the movable assets were attached. the first respondent applied to this court for a rescission of the BMW judgment ("the rescission application").  The applicants, correctly, submitted in the founding affidavit that this was purely a tactical move on the part of the respondent to delay, frustrate and obfuscate the execution process with regard to the BMW judgment.

The applicants opposed the rescission application which was eventually enrolled in the opposed court for 30 September 2013. Shortly before the application was  to  be argued, the first respondent withdrew the application  and by order of the court of 30 September 2013 he was given leave to withdraw the application and costs were granted against him on the party and party scale.

[33] Following the surety judgment, the first respondent gave notice of his intention to make application for leave to appeal. When the founding affidavit in this application was deposed to in October 2013, the application for leave to appeal the March 2013 judgment. had not yet been enrolled. When the matter came before me two years later this was still the position.  In the founding affidavit the deponent puts it as follows:

"As the respondent conceded at the enquiry that he stood surety for the Matika loan, I submit that the respondent's prospects of success for leave to appeal are, to say the least, extremely slim. Having regard to the history of the respondent's actions to date. the application for leave to appeal is nothing but a further delaying tactic on his part."

lt was pointed out in the founding affidavit that the CMM curators received a dividend of some R l.6 million in respect of the Matika loan but the present applicant estimated that the debt in respect of the Matika loan. as at October 201 3, which would include attorney and client costs and the agreed interest, could be no less than approximately R3 million.

[34] Added to this, was the Zeta debt which had. with costs and interest. by October 2013 grown to some R500 000.00.

The act of insolvency committed, and the de facto insolvency of the respondents

[35] In the founding affidavit, the applicants make the following submissions about the insolvency of the respondents (at that stage they still only refer to the first respondent as "respondent" because Ms Smith had not by then been joined as a second respondent):

"8.1 I do not have knowledge of all the respondent's liabilities towards creditors, but his indebtedness relating to the Zeta debt (approximately R500 000,00) and the Matika debt (approximately R3 million) alone is in the order of R3,5 million.

8.2 As confirmed by the Sheriff s notice of attachment ... the respondent's movable assets are not worth even R20 000,00.

8.3 WinDeed searches conducted with the Registrar of Deeds confirm that the respondent does not own any immovable assets in his personal name.

8.4 It follows, I submit, that respondent does not have sufficient assets to cover either the Zeta debt or the Matika debt.

8.5 As aforesaid, and confirmed by the record attached as annexure PF5 hereto, the respondent admitted that he does not have money to pay the Zeta  debt,   which   during   the enquiry was   said   to   be   a   mere R150 000,00.

8.6 In the circumstances, I submit that the respondent committed an act of insolvency in terms of section 8(b), and possibly also section 8(g), of the Insolvency Act."

[36] In his comprehensive judgment of only about six months ago, Dewrance AJ, under the heading "Act of insolvency and insolvency", says the following:

"[63] As previously indicated, the Sheriff could not obtain sufficient assets to satisfy the BMW judgment. Section 8(b) of the Insolvency Act provides that:

'A debtor commits an act of insolvency -

(a)    ….

(b) if the court gives judgment against him and he fails. upon the demand of the officer whose duty it is to execute that judgment to satisfy it or to indicate to that officer disposable property sufficient to satisfy it or if it appears from the return made by that officer that he has not found sufficient disposable property to satisfy the judgment;

(c) …..

(d) …..

(e) …..

( f) …..

(g) …..

(h) …..    "

(My note: section 8(g), referred to by the deponent, supra, in the founding affidavit, provides: "if he gives notice in writing to anyone of his creditors that he is unable to pay any of his debts". I assume that the applicants introduced this subsection as representing a further act of insolvency because in the transcribed record of the enquiry the applicant stated that he did not have the money to pay this debt.)

"[64] During the hearing of this matter, respondents' counsel wisely and correctly conceded that the first respondent committed an act of insolvency. This is clearly an act of insolvency and there is no other way to construe it.

[65] The applicants also contend that the first respondent is hopelessly insolvent. They say so with reference to the BMW judgment and the surety judgment, which remains unsatisfied. Not so say the respondents. The first respondent says he is clearly solvent.  He does so on the basis of a 'balance sheet' attached to his answering affidavit. The balance sheet, which appears to be unaudited, suggests that his net worth runs into millions of rands. Much more than the BMW judgment and the surety judgment.

[66] For instance, the first respondent claims that his household goods and movable assets amount to R450 000.00. This is contrary to the valuations of the movable assets which the Sheriff attached and valued. He valued them at approximately R l 8 800,00. The other claims are for salary. legal costs and civil claims against the curators of CMM and CMM.  In short. he claims that his assets are worth R32 million.

[67] However, one thing stands out as a sore thumb.  He cannot and is not in a position to satisfy the  BMW judgment  and  the  surety judgment. In this regard, Mr Terblanche referred me to a passage by Innes CJ in the matter of De Waardt v Andrew & Thienhaus Ltd l 907 TS 727 at 733 where the following was said:

'Now, when a man commits an act of insolvency he must expect his estate to be sequestrated. The matter is not sprung upon him ... of course; the court has a large discretion in regard to making the rule absolute; and in exercising that discretion the condition of  a man's assets and his general financial position will be important elements to be considered.  Speaking for myself,  I always look with  great  suspicion upon, and  examine  very  narrowly,  the  position  of  a   debtor who says "I am sorry that I cannot pay mv 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.'  (The emphasis is that of the learned Judge.)

[68] I agree with the aforementioned passage.  The first respondent however much he protests that he is solvent, cannot pay what he owes. Any promise that he will eventually pay rings hollow. This is simply not good enough.

[69]   Accordingly, I am satisfied that the first respondent committed an act of insolvency as contemplated by section 8(b) of the Insolvency Act and that the respondents are insolvent."

[37] I find myself in respectful agreement with the findings and conclusions of the learned Judge.

[38] Turning briefly to the belated answering affidavit offered by the respondents, I have to confess that I found it difficult to read the document and to get a clear grasp of the reasoning behind it.

It seems to be little more than a diatribe of argumentative and vexatious allegations against the CMM curators. The present applicants are then painted with the same brush.  Here is an example:

"4.The applicants, as I will set out more fully below. are practically, taken by their own conduct, and in law, the agents of the curators on (sic) Corporate Money Managers (Pty) Ltd ('CMM'). They utilise the same attorneys as the curators and the knowledge and actions of both their principals, as well as that of their joint agents, are the actions and knowledge of the applicants;

5. I will also show that the applicants and the curators collude, especially being advised and represented by the same legal representatives and in the context of the material misrepresentations that they commit, for a common unlawful purpose;"

[39] In the opposing affidavit, the respondents also express indignation at the fact that the sequestration application was initially placed on the unopposed roll. As explained on behalf of the applicants, this was done because, although a notice of intention was filed. no opposing affidavit was forthcoming .  In terms of the Practice Directive. The applicants  were  then  obliged  to  enrol  the  matter  m  the  unopposed  court.    The respondents express their indignation as follows:

"3.  I wish to state from the outset that the attempt to re-enrol this matter on the 'unopposed' role ( sic) of the above Honourable Court constitutes and ( sic) abuse of the process of the court, and the attempt further, to rely on evidence that had since either become irrelevant, and/or constitutes a material misrepresentation of the facts and circumstances, scandalises the court and should respectfully be met with competent censure.

9. The very step of placing  this  application  on the  unopposed  roll  is. firstly. a manifestation of the dishonest and disrespectful attitude of the curators and the  applicants towards my rights, their duties, the due process of law, and ultimately the rule of law."

[40] At the end of the opposing affidavit the first respondent (then still the only respondent, before his wife was joined) makes the following astonishing statement:

"45. I am advised that no need exists in these circumstances, objectively speaking, for me to proceed to deal seriatim with the applicants' averments. I deny any specific avem1ent in the application and the supplementary affidavit that is not strictly consistent with my answers set out above."

[41] In the replying affidavit to this overdue and somewhat unusual answering affidavit. the applicants. firstly. record that the second respondent did not file any notice of intention to oppose or an opposing affidavit within the prescribed time periods so that the replying affidavit only addresses allegations contained in the (then) first respondent's answering affidavit to which I have referred. The applicants, correctly, assumed that the allegations made in the answering affidavit apply equally to the financial position of the second respondent.

[42] In the replying affidavit, the deponent, correctly, sums up the situation as follows:

"The answering affidavit is replete of irrelevant, vexatious and abusive matter and a separate application will be made to strike out such objectionable matter. Despite sweeping and general contentions to the effect that the first respondent is in fact solvent and that the application for his sequestration constitutes an abuse of the process of court, the first respondent has deliberately elected not to answer the specific allegations made in my founding affidavit. I submit that this is because he is unable to do so. As I will demonstrate in this affidavit, the applicants are entitled to an order sequestrating the first respondent and his wik and such an order should be granted."

[43] Devvrance AJ also considered the stance adopted by the respondents which appears to be an argument that this sequestration application amounts to an abusive process. The learned Judge, correctly, stated that it was difficult to establish with sufficient particularity the grounds for this contention but he dealt with the legal position as it applies to abuse of process.  He rejected the contentions of the respondents.

[44]  As I indicated. the  learned Judge also considered  the submissions by the respondents that they are not  factually  insolvent  but  worth  many  millions  of rand.   This he also rejected before finding that an act of insolvency had been committed  and that the respondents are insolvent.

[45] The learned Judge also considered and rejected an apparent submission by the respondents that they were somehow "redeemed" when the curators withdrew their claims involving section 424 of the Companies Act against the first respondent after that action was settled, as I described. The applicants do not in any way rely on the 424 action to found this application and there appears to be no overlapping whatsoever between the two processes.

[46]  As I pointed out, the learned Judge also considered the "balance sheet" submitted by the respondents to suggest that they are not insolvent.  He rejected their contentions as I have described.

[47] In their comprehensive replying affidavit, the applicants also, in compelling fashion. deal with the items in the "balance sheet" such as it is. and I briefly summarise their submissions:

(i)                The alleged household  goods and movable assets of R450 000,00:

There are no supporting documents relating to these  alleged  assets.  The Sheriff's return declaring the value of what  could  be  attached  to be about R l 8 800,00 is self-explanatory. In the enquiry, the first respondent said that during the previous three years he had hardly been working. that he could not afford to pay for statements from his bank and that he had no medical aid.

(ii)                An  alleged  salary claim  of some R8 million against the CMM  group:

The existence of this claim is denied. In any event, at best, it is a contingent asset which is not recognised in financial statements  as it  is an income  that may never be realised. Not only must the first respondent obtain an order in his favour but the payment of the claim. if it exists is dubious because Bakkes (the first defendant in the 424 action who was declared to be personally liable, in terms of the settlement. for payment of the amount of R860 million) is insolvent, CMM is insolvent and the CMM group does not exist as a juristic entity.

(iii)             Alleged  legal costs of R750  000.00:

The court made no order in favour of the first respondent. There is no such claim. The applicants only know about costs orders made against the first respondent.

(iv)              Alleged  profit  shares amounting to some R 7.2 million:

It is denied that this forms part of the joint estate.  There is an affidavit by one L J Roux declaring that "fifty percent (50%) of the capital appreciation of the shares in T&W Management (Pty) Ltd would accrue to Mr  Smith and would be paid to him when Greensignal  Partners  received  any  value  or sold/exchanged the shares for monetary value".  This is not yet  due  and payable and does not form an asset in the joint estate. There is no independant and motivated valuation of these alleged shares.

(v)                Work done for Afsef R400 000.00.

If this amount is due and payable it may well form an assets in the joint estate. to the benefit of creditors.

(vi)              Alleged contractual obligation of R2. 7 million  from Afsef:

A salary still to be earned is not due and payable and not an asset in the joint estate. There is no indication that this amount can  be  recovered  and,  if  so. when this will occur.

(vii)            Alleged  pending  civil claims of R32 million:

It is denied that the alleged claim for damages is an asset in the respondents' estate. This also refers to the CMM dispute. The vague damages claim has not been formulated, l et alone instituted and cannot be considered as an asset.

(viii)          A total claim of R230 000,00 in respect of a bank balance is admitted.

(ix)              When the replying affidavit was deposed to, the Zeta claim in itself, with interest, amounted to more than R252 000,00  and the Zeta costs had been taxed  in amounts  of  more  than  R240 000,00  (the  action)  and   almost R54 000,00 (the appeal).

(x)                There are also indications of a damages claim instituted against the first respondent by one Mr Manana coming to some R99 million.

[48] Against this background. the applicants submit, correctly 111 my view, that the respondents are hopelessly insolvent.

[49] The respondents reiterate that the sequestration application is based on a judgment and two costs orders which are unassailable.

[50] The applicants pertinently record that the respondents deliberately avoid dealing with clear allegations pertaining to their assets and liabilities. They repeat that the outcome of the 424 action is of no relevance to this application.

[51] Against this background, it is clear. on the overwhelming probabilities, that the respondents are factually insolvent, quite apart from the fact that an act of insolvency was also committed.

Advantage  to creditors

[52] This is a short summary of submissions made in this regard in the founding affidavit:

(i)                 even though the respondents do not own sufficient disposable movable assets or immovable property, the first respondent must have substantial assets hidden away (on the probabilities). He stood at the helm of Corpfin and was, as such, involved in transactions that amounted to many millions of rands.

(ii)              The WinDeed  searches conducted  confirmed  that  the trust  is the  registered owner   of   the   property   occupied   by   the   respondents   and   their   family. Investigations have indicated  that this property  is very  valuable  and worth between R4 and RS million.  Even taking into account the bonds registered over the property, the net value could be in the region of R 1,5 million.  The respondents are beneficiaries of the trust.  It is likely that the trust is nothing other than the first respondent's alter ego.

(iii)             On  the  probabilities,  the  first  respondent  had  sufficient  funds  to  pay   his counsel to represent him in the 424 action which lasted many days  before it was  ultimately  settled.  There was  no  costs  order  in  favour  of   the  first respondent following the settlement. which I have described.

(iv)             The first respondent is known to maintain an exceptionally high standard of living and is also continuously engaged in unnecessary and  extremely costly litigation which require s substantial funding.

(v)              It is important for trustees to take control of the joint estate because the first respondent is not only wasting his estate on meritless and costly litigation, but there is a real concern that the first respondent is attempting to conceal assets. Because of his astuteness and experience in investment and financial matters, there is a real danger that he has the ability to dispose of assets to the disadvantage of creditors.

(vi)            The machinery to be found in the relevant insolvency legislation, will  allow the trustees to search for hidden assets and bring them within the ambit of the respondents' estate to be realised in favour of the creditors.

[53] Dewrance AJ, when considering  these  submissions  made  by  counsel  for  the applicants, also found that there was reason to believe that the sequestration will be to the advantage of the creditors. I do not consider it necessary to repeat the observations made in this regard by the learned Judge.

The court's discretion to grant a sequestration order

[54] Dewrance AJ referred to the following passage in Smith Law of Insolvency 3^rd edition p65:

"If the court, i n the case of a provisional order, is prima facie of the opinion and i n the case of a final order, is satisfied that there are three facta probanda, and enumerated in sections 10 and 12 respectively of the Act, have been established, it is empowered but not obliged to provide either a provisional or final order of sequestration as the case may be.   The court has an overriding discretion to be exercised judicially upon consideration of all the facts and circumstances of the particular case.   The discretion has been referred  to as 'large' or 'wide' but  be that as it may, the discretion is not to be exercised lightly. Accordingly, to paraphrase the words of Broom J, when a sequestrating  creditor  has  proved  an  act  of  insolvency  and  there  is  reason to believe that the sequestration will be to the advantage of the   creditors,  very special   considerations   are   necessary    to   disentitle    him     to   his   order." (Emphasis added.)

[55] The learned Judge also quoted instances, listed by the author Smith, where courts have refused to grant final sequestration orders.  None of these apply to the present case.

[56] In his address before me. counsel  for the respondents,  Mr Meyer,  indicated  that  the scope of his argument was very narrow, and it was solely to ask me in the spirit of justice and truth to consider  my  discretion  and exercise thereof  (clearly  in favour  of the respondents).

Mr Meyer asked me to consider only one authority, namely the case of Truter v Degenaar 1990 1 SA 206 (TPD).

The principle there considered had to do with the prov1s10ns of rule 22( 4) of the Uniform Rules of Court (which provide for the suspension of judgment on a claim pending the decision of the counter-claim in the case of actions). The court held that although these provisions are limited to actions only, it did not amend the existing law which was applicable to both actions and motions. For the sake of brevity, I refer only to the concise summary in the English headnote. relating to the judgment which was reported in Afri kaans.  The learned Judge held that in terms of the aforesaid existing law, the premise was that claim and counter-claim (application and counter­ application) should be adjudicated pari passu and that where the claim/application was unopposed judgment thereon was suspended pending finalisation of the unliquidated counter-claim/counter-application. The court has a discretion to depart from the Rule. The discretion is not limited to cases where the counter-claim/counter­ application is frivolous or vexatious and instituted merely to delay judgment on the claim/application. The discretion is wider and the good reasons which would move a court to exercise it in favour of a plaintiff/applicant are not capable of pre-definition.

[57] If I understood counsel correctly, it would be in the interests of justice to stay the sequestration proceedings pending the outcome of a host of claims, which I already referred to and attempted briefly to summarise, which the respondents allegedly have against other parties. They have no claim against Zeta. The claim of Zeta (enforced by the applicant liquidators) is unassailable.

Truter v   DeRenraar   has   nothing   to   do   with   a   sequestration   application. A sequestration application is based on a construction  provided  by  statute.  The applicant only has to establish the three required facta probanda namely a claim in excess of the statutory minimum (R l 00,00 in this case), that the respondent has committed an act of insolvency and that there is reason to believe that the sequestration will be to the advantage of the creditors. As emphasised by the learned author Smith. when these have been established. "very special considerations are necessary to disentitle (the applicant) to his order".

Conclusion

[58] In all the circumstances, and for the reasons mentioned, I am satisfied that a proper case has been made out for the provisional order to be confirmed and for a final sequestration order to be granted against the joint estate of the respondents.

Costs

[59] Counsel for the applicants. Mr Terblanche SC. assisted by Ms Fourie,  in comprehensive heads of argument. suggested that the respondents' counsel and attorney should be called upon to show cause why they should not be ordered to pay the costs of the opposition of the application de bonis propriis, on a scale as between attorney and client and inclusive of the costs of two counsel.

[60] Counsel submitted  that  the  scurrilous,  defamatory  and  unwarranted  attacks  in  the heads of argument delivered on behalf of the respondent deserves censure. The same applies to the affidavits delivered on behalf of the respondent. I have already briefly referred  to extracts from these affidavits.

Counsel also referred to a contemptuous attack on Dewrance AJ in a supplementary answering affidavit filed on behalf of the respondent. It was submitted that the opposition to the application is vexatious and without merit. With that I agree. I \vas reminded by counsel that the respondents have not even attempted to show cause why a final sequestration order should not be granted.  With that I also agree.

[61 ] At the commencement of the proceedings, I was placed in possession of a judgment by my brother Murphy handed down a few days before the matter came before me. That judgment dealt with a contempt of court application featuring the present first respondent as a second applicant against the three CMM curators, seeking to hold the latter in contempt. The learned Judge held that the contempt application was woefully defective and unfounded and "none of the relevant, vexatious and misplaced averments in the affidavit alter that fact". The application was dismissed and paragraph (d) of the order reads as follows:

"The applicants' legal representatives, Ms Sandra Lilian de Jager of De Jager Du Plessis, and Adv H S J Meyer are ordered to pay the costs of the application de bonis propriis on a scale as between attorney and own client, such costs to include the costs of employing two counsel, jointly and severally, the one paying the other to be absolved".

[62] At the commncement of the proceedings. Mr Meyer told me that he had only received the judgment of Murphy J shortly before the hearing before  me and was not in a position to respond thereto. Moreover, the submission by counsel for the applicants that I should call upon counsel and attorney of the respondents to show cause why they should not be ordered to pay the costs de bonis propriis, was only contained in supplementary heads of argument delivered to me the day before the hearing. If I were to grant this order the proceedings will be further delayed because it will foreshadow a further hearing on a return date which, no doubt, will be vigorously contested from both sides. It will lead to even more costs.

[63] Although the suggestion of a special punitive costs order is. in my view, not without merit, I have, after due reflection. decided to refrain from making such an order for the reasons I have mentioned.

[64] I am also alive to the fact that the legal representatives of the respondents have already been saddled (and punished) with a special punitive order in the contempt proceedings.

[65] In the result. it seems to me that the usual order should be made, namely that the costs will  be  costs in the  sequestration. This is also  what  counsel  for  the  applicants contended for in their original heads of argument.

The order

[66] I make the following order:

1.       A final sequestration order is granted in respect of the joint estate of the first and second respondents.

2.       The costs which are to include the costs of two counsel where applicable, will be costs in the sequestration.

57474-2013

W R C PRINSLOO

JUDGE OF THE GAUTENG DIVISION, PRETORIA

HEARD ON:  30 OCTOBER 2015

FOR THE APPLICANTS:  F H TERBLANCHE SC ASSISTED BY H R FOURIE

INSTRUCTED BY:  ROESTOFF & KRUSE ATTORNEYS

FOR THE RESPONDENTS:  H S J MEYER

INSTRUCTED BY:  DE JAGER DU PLESSIS & ASSOCIATES

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