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IN THE KWAZULU-NATAL HIGH COURT, DURBAN

REPUBLIC OF SOUTH AFRICA

CASE NO: 12723/09

In the matter between

ECONOCOM 686 CC Applicant

and

THE VIVIENNE EDMOND KESWELL FAMILY TRUST First Respondent

NEDBANK LIMITED Second Respondent

SHAMCHAND DOOKIE Third Respondent

ANISHA DOOKIE Fourth Respondent

THE SHERIFF (DURBAN NORTH) Fifth Respondent

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JUDGMENT

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1. On 9 September 2009 the Applicant launched urgent application for a provisional order to sequestrate the First Respondent on 10 September 2009 (with ancillary relief).

2. The ancillary relief was aimed at restraining the Third to Fifth Respondents from selling, in execution, certain immovable property owned by the First Respondent, on the basis that the advertisement for the sale in execution (set down on 10 September 2009) was defective and did not comply with the Rules.

3. The sale did not proceed and the ancillary relief has become academic.

4. The Third and Fourth Respondents, however, opposed the application for sequestration. The parties exchanged affidavits pursuant thereto. (The application is not opposed by the First Respondent, since it is, obviously, a friendly sequestration). (For the sake of convenience I shall refer to the First Respondent as the Trust and the Third and Fourth Respondents as the Respondents).

5. The affidavit in support of the application was made by Yusuf Mahomed Jakaria Suleman (“Suleman”) in his capacity as sole member of the Applicant. In his affidavit he claimed that the Trust was indebted to the Applicant in the sum of R22 500.00, arising from funds lent and advanced to the Trust early in 2007. In support thereof he relied upon four cash cheques drawn on the Applicant’s account to cash and, apparently, cashed by one Latib (the sole proprietor of Capital Air) on behalf of the Trust. He claimed that these funds constituted loans to the Trust to assist it with payments of rates, bond instalments and the costs of repairs to the Trust’s immovable property (its only asset). He went on to describe how, despite numerous promises, the debt was not settled and explained that this state of affairs was allowed to develop because he always enjoyed a close relationship with the Keswell family. He disclosed that, on 7 September 2009, he learnt that the Trust’s immovable property was about to be sold in execution on 10 September 2009 and that he, thereafter, immediately approached the Trust’s representative to make enquiries and demand payment. This, in turn, gave rise to a letter issued by Attorney Rodney Reddy in which it was disclosed that the Trust was unable to pay its creditors and that it was insolvent. That, according to him, gave rise to the application. He proceeded to explain, in general terms, that the sequestration of the estate of the Trust would be of benefit to the body of creditors. These were, generally, described in the following terms:

- Nedbank home loan : R 53 115.13

- The Dookies : R786 000.00

- Econocom 686 CC : R 22 500.00

- general creditors : R100 000.00

- arrear rates : R 80 000.00

6. The debt of the Dookies (the Respondents) is described as the amount owed as repayment for the purchase price of the immovable property purchased by the Respondents from the Trust (which sale was not proceeded with).

7. The founding affidavit demonstrates a fairly superficial approach and fails to disclose the litigious history involving the Respondents.

8. This history is fully described in the Respondents’ answering affidavits filed in opposition to the application.

9. Their affidavits disclose that they had purchased the property for R650 000.00 on 3 April 2007. They paid R600 000.00 to conveyancer Sunil Singh, provided a guarantee for the balance of R50,000.00 and paid the conveyancing costs. According to them it was agreed that R400 000.00 would be released prior to registration of transfer (on the basis that they were assured by Singh that transfer would take place within three weeks). Thereafter an amount of R355,074.84 was paid to the bondholder (the Second Respondent) to discharge the bond and, without their knowledge or authority, Singh, apparently, released a further sum of R200 000.00 to one Vivienne Edmond Keswell.

10. When, thereafter, transfer was not given and application was made therefor, the Trust raised various technical defences. In addition Vivienne Edmond Keswell (who happened to be the father of the trustee of the Trust) denied receipt of the aforementioned funds whilst Singh, in an affidavit exchanged in the course of that litigation, claimed that the balance of the funds was disbursed, at various times, to the Trust’s agent. In the circumstances (and because of the claim of non-compliance with the provisions of the Alienation of Land Act, 1981) the Respondents amended their Notice of Motion to obtain repayment of the purchase price.

11. The Respondents further point out that, at no stage during the previous litigation, did the trustee of the Trust file any affidavit.

12. Numerous adjournments later judgment was granted in favour of the Respondents. Since payment was not forthcoming, the property was attached in execution.

13. Relying upon various unsatisfactory features arising from the litigation, the Respondents contend that this application is an abuse of process and amounted to collaboration between the Applicant, the Trust and others, to frustrate payment to the Respondents. In other words, the Respondents claim that the application is not a bona fide application aimed at the sequestration of the Trust for the benefit of creditors.

14. When the matter was argued, the Respondents also challenged the Applicant’s claim on the basis that the loan, if established, was in any event not authorised by the Deed of Trust.

15. Whilst the fact that an application for sequestration may be a friendly one will not, itself, preclude the grant of a provisional order (provided that the requirements are satisfied), a Court should scrutinise such applications with particular care in order to protect the interests of creditors and to be satisfied that the application was not brought primarily for the relief of a harassed debtor.

Ebstein v Ebstein 1987 (4) SA 606 CPD.

16. In Craggs v Dedekind & Other matters 1996 (1) SA 935 CPD Conradie J warned that co-operation between debtor and creditor could easily turn into collusion and mentioned that a friendly Petitioner should present detailed evidence to satisfy a sceptical Court.

17. In Mthimkhulu v Rampersad & Another [2000] 3 All SA 512 NPD, Combrinck J dismissed a friendly sequestration on the basis that there was suspicion of collusion and, again, warned that these type of sequestrations often amounted to a strategy to assist debtors and delay sales in execution in circumstances where there was little concern for the benefit of creditors.

18. A final order of sequestration should not be granted where the sole or predominant motive of the Applicant is something other than the bona fide achievement of the sequestration of the estate. Procuring a suspension of legal proceedings constituted may be such a motive.

19. A Court is entitled in terms of its discretion in terms of the Insolvency Act, 1936 and by virtue of its inherent jurisdiction to prevent abuse of its process, to refuse an order for sequestration where it is shown not to be genuine and motivated by a desire to protect a debtor from a creditor.

Millward v Glaser 1950 (3) SA 547 WLD.

20. These remarks apply equally to applications for provisional or final orders of sequestration.

Esterhuizen v Swanepoel & 16 other cases 2004 (4) SA 89 WLD.

21. The same authorities also demonstrate that detailed evidence is required in a friendly sequestration, to satisfy a sceptical Court that the claim advanced is valid.

See also : Jhatam & Others v Jhatam 1958 (4) SA 36 NPD.

Amod v Khan 1947 (1) SA 150 N; 1947 (2) SA 432 NPD.

22. In spite of the existence of these well established principles, the Applicant’s founding affidavit not only lacks the detail required, but also reveals a surprising avoidance of information which must have been known (or could have been obtained) by Suleman. I say that because, in spite of opportunity to file a supplementary affidavit, Suleman accepted (or did not challenge) the Respondents’ allegations to the effect that he enjoyed a close relationship with the Keswell family, that his brother (Attorney Faizal Mahomed Jakaria Suleman) represented Vivienne Edmond Keswell in the previous proceedings and that, in those proceedings, the aforementioned Keswell was continuously referred to as “the Trust’s representative”.

23. To compound matters, various strange features arise upon consideration of the matter:

(a) in spite of the Applicant’s inaction over a long time, it suddenly jumped into action ostensibly for the benefit of creditors, a day before the property was to be sold in execution;

(b) in spite of claiming detailed knowledge of the property and being favoured with sufficient information to challenge the advertisement, Suleman claimed ignorance of much of the previous litigation and sought to avoid dealing with the facts described by the Respondents;

(c) in an endeavour to explain his belated action (the day before the sale in execution), Suleman claimed that he coincidentally learnt of the sale when, on the morning of 8 September 2009, he happened to be paging through an old copy of the Kwana newspaper;

(d) in support of the loans relied upon, Suleman put up no supporting evidence (save for the reference to the cheques) and unconvincingly explained that the cheques were cashed for the benefit of the Trust’s creditors, without, really, explaining why they were made out to Capital Air or bearer;

(e) in explanation of the Trust’s predicament, Suleman mentioned that it had fallen on hard times because the tenants that (had) occupied the property failed to pay rentals for at least three years and it was impossible to recover the arrear rentals, an explanation which, in itself, raises suspicion because Vivienne Edmond Keswell seemed, at the same time, to be the representative of the Trust and its tenant;

(f) Suleman’s desire to benefit creditors is unconvincing when it is borne in mind that the Second Respondent (the bank) enjoys the protection of its bond, that the local authority equally enjoys a measure of protection for its outstanding rates, that the sundry creditors remain unidentified and unspecified, and that, in spite thereof, Suleman was prepared to take the risk of the costs of sequestration exceeding the value of the Applicant’s claim.

24. I am also not satisfied that the debt (if it exists) was properly incurred. According to Suleman the funds were lent to the Trust (through its duly authorised representative), without indication of the identity or circumstances of authorisation. Mr Maharaj, appreciating the significance of this, made reference to clause 7 of the Deed of Trust, in terms of which a trustee was entitled under Power of Attorney to delegate his powers. Whilst it is, of course, possible that the representative (whoever he/she might be) was properly authorised, the singular lack of detail also on this issue, is unconvincing.

25. In view of the aforegoing I am not satisfied that this application is a bona fide application for the sequestration of the Trust and I, in fact, find that it has all the hallmarks of a frantic attempt made in collusion with the Trust to frustrate the Respondents’ claim for payment.

26. It is obvious from what I have said that there is a possibility of the Respondents being victims of fraud, theft or unethical conduct. This possibility should, in my view, be investigated by the relevant authorities.

27. In the circumstances I make the following Orders:

(a) the application is dismissed, with costs;

(b) the Registrar is requested to provide a certified copy of the application papers and this Judgment to each of the secretary of the Law Society of KwaZulu-Natal and the Director of Public Prosecutions (or his/her representative) to consider and investigate whether there is reason to take steps against any person implicated in the sale of the property (to the Third and Fourth Respondents) and the disbursement of funds pursuant thereto.

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ACTING JUSTICE MARAIS

KWAZULU-NATAL HIGH COURT, DURBAN

5 NOVEMBER 2009

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