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Groffler CC t/a Groffler Capital v Steenkamp and Others (27656/2010) [2010] ZAWCHC 362 (16 February 2010)

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JUDGMENT DELIVERED ON WEDNESDAY 16 FEBRUARY 2010

Baartman, J

[1] On 11 January 2011. Groffler CC t/a Groffler Capita! (the applicant) applied for the provisional sequestration of Wilhelm Steenkamp (Steenkamp), the first respondent in the sequestration application. The applicant had an unsecured, liquidated claim for payment of R4 920 000 against Steenkamp. At the time, Steenkamp was married to Jeanette Steenkamp (the second respondent). Steenkamp initially opposed the application but withdrew that opposition before the hearing.

[2] However. ABSA Bank (Absa)_! Steenkamp's secured creditor in respect of a due mortgage loan agreement made application to intervene in the sequestration proceedings in order to oppose the application. The applicant opposed the intervention application. I deal below with the intervention application as well as the application for a provisional sequestration order.

BACKGROUND

Facts relied on in the provisional sequestration application

[3] The applicant conducts business as a financier by providing bridging finance to property developers and in May 2008, had loaned to the applicant R1 500 000 and R7 000 000 on separate occasions. On 10 September 2008, the applicant and Steenkamp entered into a further loan agreement in terms of which the applicant loaned R750 000 to Steenkamp.

[4] Sarel Boshoff (Boshoff) deposed to the founding papers in the sequestration application and said that R4 920 000 was due in terms of the various loan agreements. Despite demand, the debt was outstanding for 120 days at the institution of sequestration proceedings. The applicant held no security for the debt.

[5] Steenkamp is the owner of the immovable property situated at Erf 34904, Bellville (the immoveable property). Boshoff alleged that Steenkamp had, in 2007. acquired the immoveable property for a purchase consideration of R10 500 000. In August 2007. Auction Alliance valued the property at R11 000 000 to R13 000 000. In June 2009. a prospective buyer, Lobari 73 CC. offered R14 500 000 for the property. That sale was not concluded because the prospective buyer could not obtain the required finance. On 3 September 2009, auctioneers Jesse Van der Merwe and Johan Klopper valued the property at approximately R14 500 000.

[6] In addition to the above valuations, the applicant obtained a current valuation from Vendu Cape Auctions, which valuation was done by Moses Gabe Langeveld (Langeveld) who valued the property at approximately R13 000 000 Langeveld based his evaluation on 'comparative market analysis 2010 value ..."

[7] In October 2008, Steenkamp indicated to the applicant that he was unable to repay the debt and pursuant to settlement negotiations agreed to sell the immoveable property to the applicant for R5 000 000. The applicant alleged that Steenkamp, in addition to the debt outlined, owed it a further R5 000 000 for an unrelated debt which amount would be offset against the purchase price. It follows that Steenkamp would have sold the immoveable property to the applicant for R10 000 000.

[8] However, that sale did not materialise because Absa had a bond registered over the immovable property in its favour and Steenkamp was in arrears with the bond repayments by R1 162 190.43. Absa's consent, as secured creditor, was necessary to conclude the sale. Absa refused.

[9] Boshoff said that the applicants attorney had on 1 December 2010 ascertained from Absa's attorney that the property was already sold and that the purchases price was less than the amount owing to Absa Boshoff therefore concluded that the purchase price was approximately R6 million to R6.5 million, an amount that in his opinion was much less than the actual value of the property.

[10] Consequently, Boshoff alleged that the Absa sale would prejudice Steenkamp's general body of creditors. He said that if sequestrated, a curator would be able to sell the immoveable property so as to benefit other creditors as well as Absa. He said that Absa would not be prejudiced by a sequestration order as it was a secured creditor. Advocate Daling, the applicant's counsel, stressed that the applicant was seeking a provisional order.

[11] The applicant further alleged that there existed a real possibility that a trustee would find other assets belonging to Steenkamp that could be liquidated to the benefit of the general body of creditors. This allegation was premised on the fact that in 2007, Steenkamp had been able to purchase a R10 000 000 property.

Absa's application and opposition

[12] The applicant conceded that Absa as a secured creditor had locus standi to intervene in these proceedings. However, the applicant disputed the authority of Petrus Jacobus Bosman (Bosman); the deponent to Absa's founding papers in the intervention application.

[13] Bosman, in Absa's founding papers, said that he was "...employed as a Legal Officer in the Legal Recoveries Department of Absa Bank Limited" and:

"I have been duly authorised to represent Absa in the Application for Intervention, with a view to opposing the main application as is apparent from the annexure attached hereto marked "Absa 1".

[14] However, the document annexed as Absa 1 was the applicant's notice of motion and annexures filed in support of the provisional sequestration application. The applicant pointed out the error and in response, Elizabeth Oberholzer (Oberholzer), Absa's attorney, went on oath and said that the notice of motion had been erroneously annexed in the haste to file Absa's application. Oberholzer annexed the document intended as Absa 1 to her affidavit. That document is a circular: 116/2008 dated 8 February 2008 from which the following appears:

"... The effect of the resolution is to withdraw the existing signing authorities document with immediate effect. ...

The new signing authorities must be implemented by all branches, departments and divisions in Absa Bank Implementation includes recording the names and employee numbers of individuals of the correct level who are authorised to sign documents. This list must be retained internally and kept up to date with personal changes;

It must be emphasised that the new resolution only specifies who is authohsed to sign documents binding Absa in agreements with third parlies and not who can approve transactions. Approval authorities are set out in the internal mandates belonging to each business area, and these are unaffected by the new resolutions. Employees must ensure that they obtain the necessary approval prior to the signing on behalf of Absa...

(2) This document does not authorise, or purport to authorise, the relevant employees to approve the entering into of the said transactions or the performance of the said acts.'

[15] Mr Daling submitted that that document did not support Bosman's allegation. Advocate Viviers. who appeared on behalf of Absa. submitted that in the absence of documentary proof. Bosman's evidence was sufficient to satisfy the onus on Absa.

[16] Henochsberg, on the Companies Act volume 2 Fifth Edition at 1023 said the following:

"... There must be evidence before the Court that the person purporting to represent the company has been authorised accordingly with regard to the particular proceedings (Mall (Cape)(Pty) Ltd v Merino Ko-Operasie Bpk 1957(2) SA 347(C) at 351-352 and numerous other cases., while in motion proceedings the best evidence would be an affidavit by an officer of the company annexing a copy of the relevant resolution of the boards such

evidence is not necessary in every case. Each case must be considered on its own merits and the Court must decide whether enough has been placed before it to warrant the conclusions that it is [the company] which is litigating and not some unauthorised person on its behalf.'

[17] Mr Viviers submitted that Absa had placed enough evidence before the Court in that Bosman had said on oath that he was employed as a Legal Officer in the Legal Recoveries Department and that he had been duly authorised to represent Absa in the application for intervention with a view to opposing the main application I agree.

[18] Mr Daling submitted that in the event of this Court finding that Bosman was duly authorised to institute these proceedings, which he did not concede, the applicant would have no other objection to Absa's application to intervene. I am of the view that Bosman was duly authorised, therefore, Absa's application to intervene succeeds.

Opposition to the provisional sequestration application

[19] In opposition to the provisional sequestration application, Bosman alleged that Steenkamp was indebted to Absa as described above and that on 20 July 2010 Absa had obtained summary judgment against Steenkamp for payment of R6 467 890.84 together with interest at 11 9% per annum from 20 February 2009 The debt remained unsatisfied.

[20] Therefore, Absa had arranged for the immovable property to be sold in execution, which sale was scheduled for 24 November 2010. However, on 6 November 2010. Peter Stephen Meiring (Meiring) offered R6 3 million for the property, which offer Absa had approved and Steenkamp had accepted Bosman estimated the costs associated with the auction as well as the accumulated interest due to Absa would amount to approximately R1 525 300.

[21] Bosman therefore alleged that even if the property was sold for R10.5 million, in line with Langeveld's valuation, the benefit to the concurrent creditors would be negligible. He said that Steenkamp had the following judgments noted in the Deeds Registry:

(a) Absa -R7 674 695.96

(b) Matthysen and Matta - R14 436

(C) CPB User-R50 930

(d) Nedbank card division - R55 997

(e) Nedbank Amex card division - R15 629

(f) Vodacom service providers - R42 502

(g) Discovery Health - R4 595

(h) Absa Bank - R43 519 (This claim is not related to the mortgage
debt in this matter)

(i) American Express - R14 819
(j) Nedbank Ltd-R53 041.

Total R7 970 163.96

[22] In an attempt to facilitate the transfer of the immoveable property, Meiring had, according to Bosman, already paid R300 521.36 in respect of municipal rates. Bosman said that Steenkamp was indebted to Meiring in that amount. In addition, Steenkamp had stood surety for the Wilhelm Steenkamp Familie Trust when it had obtained a loan from Absa The Trusts debt in terms of the loan was due, in the amount of R1 590 797.0. Steenkamp's debt arising from the surety was R652 797.00.

[23] Bosman said that the immoveable property was in a state of neglect and therefore Meiring s offer was market related. In support of that allegation he annexed an evaluation from Auction Alliance dated 25 January 2011. from which it appeared that Jared Gottschalk (Gottschalk) had done the valuation on behalf of Auction Alliance and had found that:

"... open inspection of the above property I notice this property is in need of renovations and maintenance. The areas of concern are the cracks throughout the home in particular the lower level of the home and damp has caused the plaster to erode away from the wall

There was a major water leak from one of the upper level bathrooms., .general maintenance is required as the property has been neglected for an extended time., based on all of the above, it is our opinion that the market value of the subject property is between R7 000 000.00 and R8 000 000.00. Considering the current economic conditions a value of R7 500 000.00 will be applied."

[24] Bosman criticised Langeveld's valuation because, so he said, Langeveld was only authorised to value properties in disthct of Cape Town, and not in the district of Bellville. Therefore, Mr Viviers submitted that I should disregard Langeveld's valuation for the purpose of this application. However, Mr Daling pointed out that the restriction on Langeveld was only in respect of valuation done in terms of the Administration of Estates Act 66 of 1965 and because his valuation in these proceedings was not in terms of that Act, it could be considered. I accept that the valuations in these proceedings were not done in terms of the Administration of Estates Act and therefore I can have regard to Langeveld's evaluation. I deal below with the competing valuations done in respect of the immoveable property

[25] Bosman alleged that since June 2006. the following offers had been received in respect of the immoveable property;

(a) On 6 June 2009 an offer for R14.5 million from Lobari 73 CC. which offer failed because Lobari was unable to obtain the required finance.

(b) On 6 November 2009. Meiring offered R8.5 million for the property, which offer Steenkamp refused. Absa had no input in that process

(c) In February 2010. Meiring offered R7.5 million for the property which offer Steenkamp found unacceptable.

(d) On 14 September 2010, the AGH Familie Trust offered R5.4 million for the property. Absa refused that offer because it was less than the current valuation.

(e) On 8 November 2010, Meiring offered R6.3 million for the property. As indicated above, that offer found favour with both Steenkamp and Absa.

[26] Boshoff was concerned that the trustees were unlikely to uphold the latest offer. He said that;

".. In my experience, in matters of this nature, especially if the trustees are in possession of a valuation much higher than the offer received, it is most likely that they will not up hold such an offer. In the premises, and assuming that a sequestration order is granted, I have reason to believe that the trustees would not ratify the present sale of the property to Meiring, given the present value of the property; the Nett proceeds of a further sale under forced circumstances would be insufficient to settle the indebtedness of the insolvent estate to Absa "

THE APPLICABLE LEGAL PRINCIPLES

[27] It is so that an applicant need not show actual advantage to creditors but need only establish that there is reason to believe that the sequestration would be to the advantage of creditors. In the matter of London Estates (Pty) Ltd v Nair 1957(3) SA 591(D). the Court said the following about reason to believe:

'...'reason to believe', in my opinion is constituted by facts giving rise to such belief. Clearly they need not show advantage on a balance of probabilities - that would constitute proof, not belief. When do they give rise to such belief I respectfully adopt what was said by Roper, J in Meskin and Co v Friedman 1948(2) SA 555(W) at page 559.... the facts put before the Court must satisfy it that there is reasonable prospect - not necessarily a likelihood, but a prospect which is not too remote that some pecuniary benefit will result to creditors.' As all the relevant facts are usually not known, it would be extremely difficult to won\ with any more exacting standard

Facts indicative of a prospect which is not too remote, that some pecuniary benefit will result to the creditors, may include the fact that a substantial estate exists... if no substantial estate is shown to exist, circumstances may yet establish a reasonable prospect a prospect that is not too remote, that concealed assets will be found or others recovered. The mere fact that sequestration enables an investigation of the insolvent's affairs is not sufficient... there must be additional facts establishing that not too remote possibility."

[28] Van Reenen, J called this test "less demanding evidentiary norm" in the matter of Vincemus Investments (Pty) Ltd v Laher (Absa Bank as intervening creditor)[2008] JOL 22629 (C). Mr Daling submitted that the authorities envisaged an advantage to the general body of creditors not only one or some of them. I agree. I have indicated above that this is an application for Steenkamp's provisional sequestration. In this respect, section 10 of the Insolvency Act 24 of 1936 provides

"If the court to which the petition for the sequestration of the estate of a debtor has been presented is of the opinion that phma facie:

(a) The petitioning creditor has established against the debtor a claim such as mentioned in subsection (1) of section 9; and

(b) The debtor has committed an act of insolvency or is insolvent; and

(c) There is reason to believe that it will be to the advantage of creditors of the debtor if his estate is sequestrated, it may make an order sequestrating the estate of the debtor provisionally."

[29] Mr Viviers submitted that the applicant had to put up evidence to enable a court to form the opinion that there was reason to believe that it would be to the advantage of creditors if a debtor's estate was sequestrated. He submitted that in these proceedings "the crisp" issue for decision was the value to be placed on the immoveable property in a "forced sale'. I agree.

[30] There exists a dispute in respect of that value which can be resolved on the papers. The applicant relied on Langeveld's valuation in terms whereof the property was valued at approximately R13 million but would fetch R10.5 million in a forced sale. On the contrary. Absa relied on the 2010 Auction Alliance valuation in terms whereof the property was valued at R7.5 million and R6 million in the event of a forced sale.

[31] I have indicated above that I accept that Langeveld was competent to value the property for purposes of these proceedings I have to determine "to what extent the opinion advanced by the experts was founded on logical reasoning and how the competing sets of evidence stand in relation to one another, viewed in light of the probabilities." {See Louwrens v Oldwage 2006 {2) SA 161{SCA) at 175 para 27)

[32] Auction Alliance blamed a marked deterioration in the upkeep of the property as reason for the lower valuation. Oberholzer annexed photographs to her affidavit in support of that allegation. The photographs depicted the property on 26 January 2006 during an inspection. The following appears from the photographs:

(a) Damp and mould on some walls:

(b) Broken wooden panels.

(c) Damp on the balcony;

(d) Cracked concrete;

(e) The pool in a state of neglect.

[33] As indicated above, Auction Alliance had in 2011 reduced its earlier valuation because the property "... required general maintenance". I find the R3 million reductions in value within 24 months in the circumstances of this matter unnecessarily pessimistic. The property is situated in a sought after estate and is probably the largest on the estate. It appears from the papers that the exclusive free standing multi-storey dwelling on the property consists of:

(a) The ground floor:

A double volume entrance hall, lounge, dining room. TV room, guest toilet, kitchen-open plan with built-in cupboards and appliances, scullery, servants quarters with en suite.

(b) A lower ground level

Two large bedrooms with full en-suite bathrooms, bar area with built-in cupboards, theatre room, living room, stoep with braai facilities and jacuzzi.

(c) The upper level:

A main bedroom with dressing room and large en-suite bathroom plus separate toilet, two large bedrooms with full en-suite bathrooms, study with built-in cupboards and sunroom.

(d) Garden cottage:

A living room and open plan kitchen, two bedrooms with en-suite bathrooms.

(e) One double garage and two triple garages and a landscape
garden with paved driveway and pathway.

[34] Although Langeveld described the defects as minor, he attached a depreciation value of R500 000 to its presence. In the context of this property. I suppose "minor*' is not inappropriate. Langeveld based his valuation on "competitive market analysis 2010 values." (See Net v Lubber 1999 (3) SA 109 at B-C). I am persuaded that his valuation is realistic in the circumstances of this matter.

[35] I am persuaded that even in the currently depressed property market the Auction Alliance valuation is unnecessarily pessimistic. I am of the view that there is reason to believe that the property could fetch a higher price than the one currently being offered by Meiring.

[36] I am satisfied that the applicant has placed evidence before me indicating that there was reason to believe that it would be to the advantage of the general body of creditors to grant the provisional order sought.

[37] The applicant also alleged that there was reason to believe that an investigation by a trustee might lead to the discovery of further assets. Mr Dating submitted that Steenkamp's involvement with the Trust should also be investigated. In my view the evidence does not support that allegation. (See the London Estates matter above)

[38] It is not in dispute that Steenkamp committed an act of insolvency.

COSTS

[39] In a separate note, handed to me after the hearing and with the agreement of Mr Daling. Mr Viviers submitted that Absa's opposition related to:

"...the issue of whether the Court's discretion should be exercised against the applicant, and .. .has placed material before the court in respect of such opposition, which not only merited serious consideration ...in exercise ...of...discretion ...but assisted ..."

[40] He submitted that the costs occasioned by the intervention application should be costs in the sequestration should that relief succeed. I agree.

ORDER

[41] I. for the reasons mentioned above, make the following order

(a) ABSA Bank Limited (Pty), the Intervening Creditor, is given leave to intervene in these proceedings.

(b) The first respondent. Wilhelm Jacobus Steenkamp, is placed under provisional sequestration in terms of the rule nisi issued in the order annexed hereto marked "X"

Baartman, J

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