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IN THE HIGH COURT OF SOUTH AFRICA

KWAZULU-NATAL LOCAL DIVISION,

DURBAN

Reportable

CASE NO.: 1041/2014

In the matter between:

RAJINDRA PRAKASH DEORAJ........................................................First Applicant

AMIE DEORAJ...............................................................................Second Applicant

and

SIMI MAHARAJ NO.......................................................................First Respondent

NICOLA CRONJE NO...............................................................Second Respondent

KERRY WYNDHAM (WOOD) COOK NO....................................Third Respondent

SHERIFF OF THE HIGH COURT

DURBAN NORTH.................................................................... Fourth Respondent

REGISTRAR OF DEEDS, PIETERMARITZBURG......................Fifth Respondent

NEDBANK LTD..........................................................................Sixth Respondent

GAP MANAGEMENT (PTY) LTD.........................................Seventh Respondent

RAJ RAMCHERET................................................................... Eighth Respondent

JUDGMENT

Heard on: 24 February 2014

Delivered on: 28 February 2014

JEFFREY AJ:

[1] The applicants seek an interim interdict restraining the joint trustees of an insolvent estate from alienating or otherwise dealing with certain immovable property pending the final determination of proceedings that the applicants intend to institute for a direction by the Court in terms of s 20(1)(c) of the Insolvency Act No. 24 of 1936 that the sheriff must proceed to transfer the property to them that was purchased on a sale in execution that was held before the execution debtor’s estate was sequestrated.

[2] During October 2012 the first applicant purchased the property on a sale in execution for R190 000.00. This sale was conducted by the sheriff at the instance of the execution creditor, the Peoples Bank Ltd, in execution of a judgment that it had obtained against the execution debtor. As I understood Mr Hollis, who appeared for the trustees with Ms Stridutt, the execution creditor is now, as he broadly submitted, ‘part of Nedbank’. In any event and since no dispute of fact arose on the papers or during argument concerning the sixth respondent’s status, I will assume, without deciding, that Nedbank Limited, who is cited as the sixth respondent, is the mortgagee of the property and hence a secured creditor in the execution debtor’s insolvent estate.

[3] The second applicant is the first applicant’s wife and, all things being equal, the registration of transfer of this property would have been registered in the applicants’ joint names.

[4] This, however, did not come to pass.

[5] After the date of the sale in execution, but before the transfer of the property could be registered in the names of the applicants - due to a delay which I will outline below - the execution debtor’s estate was provisionally sequestrated on 29 April 2013 and a final order of sequestration was granted 27 May 2013.

[6] The first, second and third respondents were duly appointed by the Master as the provisional joint trustees of the execution debtor’s insolvent estate on 13 June 2013 and their appointment was made final on 9 September 2013.  I will refer to the joint trustees collectively as the trustees.

[7] Soon after the sale in execution and during or about November 2012 and obviously oblivious to the future troubles that this property would bring to him, the first applicant, as he was then obliged to do, paid the 10% deposit of the purchase price to the sheriff and secured the balance of the purchase price that would have to be paid on registration of transfer. He also paid the sheriff his commission and he paid the conveyancing attorneys all their relevant fees and disbursements to enable them to attend to the registration of transfer.

[8] If all had gone as the applicants had anticipated, the sheriff would have caused transfer of the property to be given them shortly thereafter.

[9] But the applicants were informed by the conveyancing attorneys that they were unable to proceed with it because the eThekweni Municipality had refused to issue a rates clearance certificate. It transpired that there were structures on the property that had been built without approved building plans. The first applicant tried to remedy this by having the necessary plans prepared and retrospectively approved. But the municipality refused to accept his application because it required the application to be made not by him, but by the registered owner – namely, the execution debtor. This requirement proved impossible for the first applicant to achieve and this impasse eventually led to an application being made to this Court by the applicants for an order directing the sheriff to sign the necessary application to enable it to be submitted to the municipality for the approval of the plans.

[10] That order was granted on 3 September 2013 and, pursuant thereto, the applicants aver that the plans have been submitted to the municipality.  It has yet to make a decision.

[11] The applicants took possession and control of the property shortly after the sale in execution but they were unable to occupy the house because of the dilapidated state it had fallen into. The first applicant, however, says he secured the property by chaining and locking the gate and allowed an acquaintance of his to occupy one of the outbuildings to keep an eye on the property. He also says that he expended a sum in excess of some R380 000.00 on security, renovation, upgrading and upkeep of the property. These allegations are disputed by the trustees at the level of questions being posed by them as to whether the expenses incurred or work done was necessary. But the trustees’ response is largely argumentative. I find, having regard to the inherent probabilities of this matter, that the applicants have expended money on the security, renovation, upgrading and upkeep of the property even although precise extent and cost thereof has not been accurately established.  In making this finding I have applied the usual approach in applications of this nature as laid down in Webster v Mitchell 1948 (1) SA 1186 (W) 1189 and qualified in Gool v Minister of Justice 1955 (2) SA 682 (C) 688D-E.

[12] During or about October 2013 the matter took a new turn. The applicants were despoiled by the execution debtor. This resulted in spoliation proceedings being brought against her. This application was unopposed and an interim order was granted by this Court on 1 November 2013 restoring possession of the property to them. The rule nisi was later confirmed on 2 December 2013.

[13] The first applicant alleged that it was only discovered during the spoliation application that the execution debtor’s estate had been sequestrated. But it is clear from the allegations in the trustees answering affidavit, confirmed by the conveyancing attorneys, that these attorneys became aware of the sequestration on 22 August 2013 and that they informed the second applicant of this on the same day. It was further alleged that the second applicant told the conveyancing secretary who spoke to her that the first applicant was bringing an application for ‘the purpose of submitting plans’.

[14] The first applicant went on to allege that on or about 4 November 2013, the applicants’ attorneys contacted the execution debtor who referred them to the trustees. The applicants’ attorneys wrote to the trustees who confirmed in reply on 18 November 2013 that the execution debtor’s estate had been sequestrated. The trustees added:

‘We are aware that your client purchased the property in execution however we have informed the bondholder that the trustees will not ratify that sale because a much higher price was achieved by Ian Wyles Auctioneers.’

Even if I accept the trustees’ version that the applicants were aware of the supervening sequestration of the execution debtor on or about 22 August 2013 during the course of the course of the application concerning the submission of the plans to the municipality and before the first spoliation application was instituted, the applicants conduct in bringing these applications cannot be criticised. It merely demonstrates, if anything, a commitment by them to their cause and their belief that eventually the property ought to be transferred to them. The trustees have drawn attention to the fact that, despite being invited to do, the applicants have not lodged a claim in the insolvent estate for their alleged improvements and expenditure in respect of the property. But, as I will point out again infra, the applicants are only prospective creditors of the insolvent estate – the first applicant was the execution purchaser in an ante-sequestration sale of execution of the property – and it would be premature for the applicants to lodge a claim with the trustees prior to a direction by the court as contemplated in s 20(1)(c). The trustees’ criticism of the applicants’ conduct does not persuade me that a negative connotation should be placed on the applicants’ motives in acting as they did or that any adverse inferences should be drawn as to the veracity of their allegations.

[15] The trigger for the present application occurred when applicants were again despoiled on 27 January 2014, this time by representatives of Gap Management (Pty) Ltd who informed the first applicant that they had been instructed by Nedbank Ltd, the bondholder, to secure the property, to performing some cleaning work and to place someone in attendance on the property, to inspect it once a month and to do gardening work. It seems, from what the first applicant was able to ascertain, that the execution debtor’s husband also had some involvement in this second spoliation.

[16] The bondholder seems to have been informed by the trustees that they had repudiated the sale in execution because an offer for R600 000.00 for the property had been received by them and they had sent this offer to the bondholder for consideration. In the circumstances, it would be reasonable for the bondholder to attempt to preserve its security. In a letter from the trustees dated 28 January 2014 addressed to the applicants’ attorneys, the trustees said:

‘The trustees have indeed repudiated the sale in execution for the following reasons: The sale price achieved was not in any way close to the value of the property (and) the price achieved was not in the best interest of creditors. Your client being a purchaser at a sale in execution is surely alive to the risks when purchasing in a sale in execution (sic). As you have been made aware we had instructed Ian Wyles Auctioneers to market the property and an offer is being considered by the bondholder.’

Moreover, it is clear from the trustees’ answering affidavit that they are intent on selling the property to a third party and that they are hoping to achieve a higher price than the R190 000.00 hammer price achieved at the sale in execution when the property was sold to the first applicant. They confirmed in their answering affidavit that the offer being considered by the bondholder is for an amount of R600 000.00.

[17] This application before me is the result of this latest event.

[18] The applicants adopted a two-pronged approach. First, to remove the sixth, seventh and eighth respondents from the property; and second, to claim interlocutory relief pendite lite against the trustees prohibiting them from alienating or otherwise dealing with the property pending the finalisation of proceedings in terms of s 20(1)(c) which are still be instituted by them, as I have described above.

[19] On 30 January 2014 I issued rule nisi granting the applicants interim relief against the sixth, seventh and eighth respondents only. These respondents did not oppose the application and the rule as against them was confirmed when the matter came before me on the return date, 12 February 2014.

[20] As against the trustees, the application was postponed until 12 February 2014 and an undertaking given by them was recorded that they would not to alienate or otherwise deal with the property until the matter was dealt with on 12 February 2014. On that day it was again postponed to 24 February 2014 with certain directions regarding the delivery of heads of argument and costs were reserved. It was also recorded that the aforementioned undertaking had been extended accordingly.

[21] The matter was argued before me on 24 February 2014 and I am indebted to counsel for their helpful heads of argument and comprehensive arguments that they presented.

[22] The well-known requirements that must be established before an interim interdict is granted are: (a) a prima facie right even if open to some doubt; (b) a well grounded apprehension of irreparable harm if the interim relief is not granted and the ultimate relief is eventually granted; (c) that the balance of convenience is in favour of granting the interim relief; and (d) the absence of any other satisfactory remedy. To these requirements must be added, as Plewman JA said in Hix Networking Technologies v System Publishers (Pty) Ltd and Another [1996] ZASCA 107; 1997 (1) SA 391 (AD) 399A, the fact that the remedy is a discretionary one where the Court has a wide discretion.

[23] As a starting point, in Fourie and another NNO v Edkins 2013 (6) SA 576 (SCA) para [13] at 579E-G, Shongwe JA restated the legal principles applicable to matters of this nature as follows:

‘… upon sequestration of a debtor’s estate, which estate includes all his or her property, including property under attachment or the proceeds thereof in the hands of the sheriff, first vest in the master and thereafter in the trustees upon their appointment. This includes immovable property sold in execution but not yet transferred at the date of sequestration.’

[24] Sections 20(1)(c) provides that as soon as the sheriff, whose duty it is to execute any judgment given against the execution debtor, becomes aware of the sequestration of the execution debtor’s estate, he must stay that execution ‘…unless the court otherwise directs.’ And, as Shongwe JA pointed out in Fourie supra para [15] at page 580C-D: ‘This simply means any interested party (including the execution purchaser) may approach the court to direct otherwise. Logically the interested party must place facts before the court to persuade it to direct otherwise.’

[25] It is correct, as Mr Hollis submitted, that the effect of a sequestration order is to establish a concursus creditorium and thereafter nothing can be done by any of the creditors to alter the rights of other creditors.

[26] But as I have said supra the applicants are not creditors of the insolvent estate. They are the execution purchasers. At most, they are merely prospective creditors at this stage. They will only become creditors if a direction is not made by the Court in terms of s 20 (1)(c) directing the sheriff to continue with the transfer of the property to the applicants and if they decide to lodge a claim with the trustees after considering the probabilities of receiving a dividend in that event.

[27] Mr Hollis submitted that the applicants had failed to establish a prima facie right and that the balance of convenience did not favour the granting of an interim interdict pendente lite.

[28] The applicants had failed to establish a prima facie right, as I understood his argument, because no evidence was adduced by the applicants that the price of R190 000.00 reached at the sale in execution was a market related price. He referred to an appraisement that the trustees had obtained from Mr John Wyles who placed the market related value of the property at R650 000.00 and stated that its municipal value was R850 000.00. It was common cause that Mr Wyles report was hearsay. It is, however, unnecessary for me to determine whether or not this appraisement should be admitted in evidence because, as I have said supra there is the uncontested evidence before me that the trustees have received an offer of R600 000.00 for the property and that this offer is being presently being considered by the bondholder. On the balance of probabilities, therefore, this offer certainly places the current market value of the property as being at least R600 000.00 which is a good deal higher that the forced sale price of R190 000.00 achieved at the sale in execution.

[29] Mr Hollis submitted, that the overriding consideration as whether a Court should make a direction in terms of s 20(1)(c) is whether it would be in the interests of creditors to do so.  As Shongwe JA said in Fourie NO supra para [16] at 580G-H: ‘My considered view is that any interested party must show that it would be in the interests of the body of creditors (concursus creditorium) to direct otherwise than staying the execution sale.’ But it is also, with respect, instructive to consider the approach of the courts in considering an application in terms of s 20(1)(c). This was referred by Kuper J in Unie Spoorweg Begrafnisgenootskap v Druker NO 1961 (1) SA 266 (W) 268D where he said: ‘The question to be determined is whether on the facts of the instant case I should exercise my discretion in favour of the applicant. The discretion is clearly one that should be exercised only in exceptional cases and then only if the interests of other creditors of the estate will not be adversely affected.’

[30] On the evidence, the trustees’ report that is before me and to which I have referred supra, discloses that the only asset in the insolvent estate is the immovable property. The summary of liabilities also discloses that these consist of the bondholder’s claim of R878 940.59 and the claims of concurrent creditors which are stated to be the sum of R1 410 940.00. It is clear, based on this evidence, that once the bondholder, being the secured creditor, has been settled out of the proceeds of sale of the property there will be nothing left for distribution among the concurrent creditors. If in due course the Court directs that the sale in execution should proceed, the bondholder will be the only creditor that will benefit from the proceeds of the sale in execution. If, on the other hand, the direction is not made the bondholder will also be the only creditor that will benefit from the proceeds of the sale of the property if the offer of R600 000.00 presently under consideration is accepted by the trustees. In the latter event, the applicants will have a concurrent claim for improvements and expenditure to the property and their prospects of any dividend being paid to them will be remote at best, but probably non-existent.

[31] The bondholder appears to be the only creditor whose interests will be affected if the Court directs that the sale in execution should proceed.  Yet the bondholder was also the execution creditor and it was previously content cause the property to be sold in execution and to abide by the sale to the first applicant.  It was only as a result of the delay in the process of registration and the subsequent supervening insolvency of the execution debtor that the bondholder now has the prospect of a greater amount being realized for the property.

[32] The applicants were bona fide possessors of the property and they bona fide believed that they were entitled to occupy the property pending the formality of the passing of transfer particularly when they made improvements to and incurred expenditure on the property.  It goes without saying that if the Court does not direct that the sale in execution should proceed, this will be prejudicial to the applicants.  It will no doubt cause them hardship and, it seems on the facts presently before me, that this will be singularly inequitable and unjust.

[33] It is accordingly probable once the aforementioned factors and circumstances are taken into account, that the Court approached for a direction in terms of s 20(1)(c) may find that exceptional circumstances do exist and that it may find that if the execution is directed to proceed that this will not be adverse to the interests of the ‘general body of creditors’ – which, in reality in this instance, consists of only one secured creditor, the bondholder.  But, of course, that will be an issue for that Court to decide on all the evidence that is placed before it.

[34] I should also add that the prima facie right that the applicants must establish is a prospective right. This right will become extant only once the Court directs that the execution should continue. The absence of an extant right, however, does not mean that the applicants cannot be granted an interim interdict pendente lite.  On the contrary.  The majority judgments in Airoadexpress (Pty) Ltd v Chairman, Local Road Transportation Board, Durban and Others [1986] ZASCA 6; 1986 (2) SA 663 (AD) are authority for the principle that the Court has the power to come to the aid of a litigant who cannot as yet assert the existence of an extant right but can show a prima facie case for obtaining relief in the future whereupon that right will vest in him: see also Antares International Ltd and Another v Louw Coetzee & Malan Inc and Another 2014 (1) SA 172 (WCC) paras [45] – [47]. In Airoadexpress Kotzé JA at 676A-D, referred to the Court’s inherent power to grant pendente lite relief to avoid injustice and hardship where a prima facie case for the prospective relief has been established.  Kotzé JA said that a strong prima facie case had been established by the applicants in that matter: at 673H-674A.  But, as Goldstone J (as he then was) observed in Radio Islam v Chairperson, Independent Broadcasting Authority 1999 (3) SA 897 (W) 904F-G, the passage in Airoadexpress regarding a ‘strong’ prima facie case did not mean that a strong prima facie case was a prerequisite in all matters were interim relief sought was based on a prospective right.  It was merely on the facts in Airoadexpress that a strong prima facie case had been established in that case.

[35] It seems to me that if the Court does not intervene the applicants will be remediless.  I am satisfied that the applicants are threatened with irreparable loss if they are not afforded the opportunity of bringing such an application and indeed the balance of convenience favours the relief being granted as sought by the applicants.

[36] With regard to costs, Mr Stewart submitted that if the interim relief sought is granted in favour of the applicants, the trustees should be directed to pay the costs of the application jointly and severally.  I do not agree.  I did not understand Mr Stewart to suggest nor does the evidence establish that the trustees should be personally liable to pay the costs because they were male fide in their conduct in this matter and they should pay the costs de bonis propriis: cf Williams Hunt (Vereeniging) Ltd v Slomowitz and Another 1960 (1) SA 499 (T) 502A-E.

[37] In the result I grant the following order:

1. THAT, pending the final determination of an application to be instituted by applicants within 10 days of the date of this order for a direction in terms of s 20(1)(c) of the Insolvency Act, No. 24 of 1936, that the fourth respondent be directed proceed with the execution under case no. 2051/2004 and shall transfer the immovable property sold by him at a sale in execution held on 25 October 2012 and described as Erf 250 Duikerfontein, Registration Division FU, situate in the Durban Entity, Province of KwaZulu-Natal, in extent 4047 square metres, to the applicants and ancillary relief:

(a) the first, second, and third respondents are interdicted and restrained from selling, alienating, transferring, mortgaging, hypothecating, encumbering or dealing with the said property in any way whatsoever; and

(b) the fifth respondent is interdicted and restrained from transferring, mortgaging, hypothecating or encumbering the said property or allowing or permitting the transfer, mortgage, hypothecation or encumbrance of the said property to any other person or in favour of any other person or allowing it to be dealt with in any way whatsoever by the first, second and third respondents.

2. THAT the first, second and third respondents in their capacities as the joint trustees of the Insolvent Estate A Ramcheret No. D76/2013, shall pay the costs of this application, including the costs that were reserved on 12 February 2014.

JEFFREY AJ

APPEARANCES

Counsel for the applicants: Mr M E Stewart

Applicants’ attorneys: Biccari Bollo Mariano Inc

Ref. K Norhmore/sp/DD1071

Tel. 031 566 6769

Counsel for the 1^st, 2^nd & 3^rd

Respondents : Mr N D Hollis SC with him Ms D Stridutt

1^st, 2^nd & 3^rd Respondents’

attorneys : Maistry & Motsime Inc

Ref. Y Maistry/jm/02-S.M/001

Tel. 031 305 5059

Date of hearing : 24 February 2014

Date of judgment : 28 February 2014

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