REPUBLIC OF SOUTH AFRICA aia IN THE GAUTENG HIGH COURT (LOCAL DIVISION, JOHANNESBURG) (i) seromanit(vo) CASE NO: 575/2014 (2) OF INTERESNTOOTHER JUD, (3) REVISED ~~ Date: // /a [ib iG VAN DER LINDE In the matter between INVESTEC BANK LIMITED APPLICANT and LE ROUX, CASPER JOHANNES RESPONDENT JUDGMENT VAN DER LINDE, J: Introduction [1] This is an application for the provisional sequestration of the respondent's, an attorney's, estate on the basis of s.8 (b) of the Insolvency Act 24 of 1936, often simply referred to as a nulla bona return. The three main issues were whether an act of insolvency had been shown, whether the sequestrationwould be to the advantage of the respondent's creditors, and whether the court should exercise its discretion in granting the relief sought. [2] Two interlocutory issues were whether the applicant's application for condonation for the late filing of its replying affidavit should be granted and, if 0, whether the respondent's application for striking out certain portions of the applicant's replying affidavit for constituting new matter should succeed. Since this type of procedural condonation inevitably invokes a consideration also of the metits, | propose starting with the latter. Has an act of insolvency been shown? [3] $.8(b) of the Insolvency Act provides as follows: "8 Acts of insolvency A debtor commits an act of insolvency- (os (b) if a court has given judgment against him and he fails, upon the demand of the officer whose duty it is tc execute that judgment, tc 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;..[4] Two points were argued by the respondent in this regard. The first was that the return of service’ did not prove the act of insolvency asserted in the founding affidavit, and the second was that in any event the return was stale. [5] The return of service reads as follows: “Retum of service:- Personal service rule 4(1)(a)(i) | certify that | have on the 25" day of July 2013 at 09:43 served the warrant of execution upon Casper Johannes le Roux personally, at 5 Park Street Randfontein being the employment address. The original was exhibited, at the same time a copy thereof was handed over and the nature and exigency thereof was explained. In satisfaction of the writ | demanded from the abovenamed the following amounts. Judgment debt. R8 372 518.47 plus further cost. The abovenamed informed us that he has no monies or attachable movable assets inter alia, wherewith to satisfy the judgment debt with cost or part thereof. No assets were either pointed out or could be found by me. Therefor this is a retum of nulla bona.” [6] The submission was that s.8(b) envisages two separate acts of insolvency; the first is committed when upon demand the debtor is not able to satisfy the judgment and is also not able to indicate sufficient disposal property to satisfy it. The second is committed when it appears from the return of service of the sheriff that he has not found sufficient }osal property to satisfy the judgment. * $43 (2) of the Superior Courts Act 10 of 2023 provides: “The return of the sheriff or o deputy sheriff of what hhas been done upon any process of a court, shall be prima facie evidence of the matters therein stated.”[7] It was submitted that in this case no act of insolvency was shown, for these reasons. First, the return does not evidence a demand by the sheriff to indicate disposable property sufficient to satisfy the judgment. Here the argument was that according to the return the debtor only said that he had no “movable assets’, whereas the section refers to “disposable” property, meaning both movable and immovable. Second, the argument was that although the return says that ‘no assets were ...pointed out’, thus using “assets” in potentially a both movable and immovable property sense, the return does not say that that was in response to a demand by the sheriff, and such a demand is a prerequisite for the commission of the act of insolvency. [8] Third, the argument was that the last line, “no assets ... could be found by me’, in any event does not constitute the second act of insolvency, because the words “disposal property” was required to be used by the sheriff, and they were not. [9] One may add, in favour of the respondent, that there is potentially another reason why the second act of insolvency has not been shown: it is that the second act of insolvency cannot be invoked unless the prerequisites for its invocation will have been satisfied. By that is meant that the sheriff does not have the free choice to invoke his or her own search powers unless personal service was first attempted but could not be effected. And if personal service could be and was effected, unless the sheriff has first demanded satisfaction of the debt and failing satisfaction, unless the sheriff has first demanded the indication of disposable properly sufficient to satisfy the debt. And if these two demands will have been made, unless the debtor will first have committed thefirst act of insolvency, by failing to satisfy the debt and failing to indicate sufficient disposable property to do so.” [10] These submissions all raise issues that are relevant for the relationship between three things: the contents of a nulla bona return; the functions of a sheriff who has a warrant which is not specifically directed at immovable proper ind whether in fact the legislature intended for the “or” in s.8(b) to be disjunctive or conjunctive — in other words, whether one is in fact dealing with two discrete acts of insolvency, as is currently accepted, or whether the ‘sub-section did not rather intend to establish only one composite act of insolvency.® [14] The difficulty for the respondent is whether they may be raised at all, In his answering affidavit the respondent said in paragraph 36: “The allegations herein (referring to paragraphs 11 to 22 of the founding affidavit) are admitted but the sequestration of me just because an act of insolvency was committed will not be just and equitable and due to my financial situation there will also be no advantage to creditors in my sequestration.” [12] In the founding affidavit at paragraphs 11 to 22 the deponent had asserted, amongst other things: that upon the sheriff's demand ‘of the judgment” the respondent said that he did not have sufficient property or assets and could ® gertelsmann etal, Mars The Law of Insolvency in South Africa, 8" Ed, p85, say thatit is only when the frst act of insolvency cannot be established that the second one may be committed. They ely on MT Steyn, J (as he ‘then was) in Rodrew (Pty) Ltd v Rossouw, 1975 (3) SA 137 (O} at 138 G. As pointed out in the text above, am not sure that i correct, because the debtor could easily commit both act. Is useful, inthis context, to refer also to the judgment of Thiclon J in Nedbank Ltd v Norton, 1987(3) SA 619 (NPD) at 6216 to 6228. The subsequent non-follow of Tt J by Goldstein J in Wilken and Others NNO v Reichenberg, 1999{1) SA 852. (W) 3 857£ to 8580 was ona dlferent point. Goldstein } agreed with Thirlon J that the sheriff actualy has to ask the debtor to indicate disposable property to sufficient to satisy the judgment. * This was so held by Matthew J in Kathrada Borthers v Amin; Kathrada Brothers v Patel, 1932 NPD 484 at 493 +0 494, The current, contrary, approach is exemplified by Vieyra 5 In Amalgamated Hardware & Timber (Pty) Ltd v Wimmers, 1964 (2) SA 542 [TPD) at 543H to 544A. For a case in which “or” was held to have a ‘conjunctive as opposed to its usual antithetic or disjunctive meaning, see Daniels J in Trust Bank van Afrika Bpk v Van der Westhuizen en Andere NNO, 1991{1) SA 867 (W).not point out such assets to satisfy the writ; that despite diligent search the sheriff could not find sufficient disposable property to satisfy the writ; that the sheriffs return, annexed, evidences these matters; and that the respondent had accordingly committed an act of insolvency as envisage by s.8(b). [13] The applicant submitted that the respondent's express admission of these matters precluded him from now attacking the return and the founding affidavit as not establishing an act of insolvency. Reliance was placed on the judgment of Heher JA in Wightman tla JW Construction v Headfour (Pty) Lid and Another, 2008 (3) SA 371 (SCA) at paragraph [13]. That paragraph deals with the effect of a bare denial in motion proceedings, and says that parties are bound to their affidavits. [14] In civil proceedings, be they action or application, the effect of an admission ~ certainly while it stands, and there was no application here to withdraw these ones — is that the court has no power to decide the issue. It has, by the parties’ agreement, not been placed before the court for its adjudication. [15] This is not only the consequence of the accepted law of procedure, but also of statute. 5.15 of the Civil Proceedings Evidence Act 25 of 1965 provides as follows: “15 Admissions on record It shall not be necessary for any party in any civil proceedings to prove nor shall it be competent for any such party to disprove any fact admitted on the record of such proceedings.” [16] Two observations are necessary. The first is that this section obviously applies to factual admissions only, and not to admissions of matters of aw. The second is that as regards matters of law, the pleadings in civilproceedings, be it action or application,’ define the issues between the parties. [17] As | have indicated, factual admissions can be withdrawn; there are rules that govern those instances. Legal admissions can be withdrawn, and there are rules (less stringent) that govern those instances. But unless and until that happens, facts and law contained in the affidavits stand, and cases are required to be decided on the basis of those. If that were not so, our trial and motion court practice will be adrift in a sea of uncertainty, where anyone can take any point she or he wishes, so long as it appears good in its own terms. [18] Take the present matter. There were two persons present when the writ was executed: the sheriff and the respondent. The sheriff rendered a factual version of what had occurred in his return. The deponent to the applicant's founding affidavit gave a version which adumbrated on what had occurred, The respondent admitted the factual rendition given by the deponent to the founding affidavit. He also admitted the sheriff's return. And he conceded that all of that legally established acts of insolvency for the purposes of s.8(b) of the Insolvency Act. [19] Had he not done that, and had he instead denied the inferences that the applicant's deponent had sought to draw from the sheriff's return, the applicant could have taken up the matter with the sheriff. The sheriff might have given him a fuller version of what actually had occurred. Or the sheriff may not have done so. The applicant may in the latter event have decided * Cloete, JA in Transnet Ltd v Rubenstein, 2006(2) SA 591 (SCA) at [28]; and again in Min of Land Affairs and ‘Agriculture and Others v D & F Wevell Trust and Others, 2008 (2) SA 184 (SCA) at [43].not to take any chances, and may have re-issued the writ, and caused it to be served again. [20] Given the defence actually raised, nothing might have changed except of course, the wastage of costs and of time, But whether or not anything would have changed is beside the point. The point is that the other litigant, the applicant, would have been in a position to have re-arranged its affairs had the respondent taken a different tack and not made the admissions and concessions. The applicant will have been deprived irrevocably of that ability if the respondent were permitted now to argue points not covered by the pleadings. [21] The consequence for this matter is that the respondent's attack on the issue of whether an act of insolvency has been shown is not available. [22] The next point is whether the return of service is stale. The facts are that the writ was served on 25 July 2013, and the application for sequestration was issued on 14 January 2014, nearly but not yet six months later. In their loose- leave publication Joffe at al, High Court Motion Procedure: A Practical Guide, LexisNexis, the authors say® that where the nulla bona relied upon is older than six months, the applicant must provide proof that there has been no material alteration in the respondent's financial position in the interim. [23] The rationale for such a rule is not clear. The arms-length creditor/applicant will have little access to or knowledge of the debtor's affairs. And when the matter comes before the court the debtor will have had an opportunity to resist the application by, if it applies, showing that she or he has assets to satisfy the judgment. And if she or he does not have assets to satisfy the judgement, Fatp as.then the applicant's difficult burden of showing no improved financial position would in any event have been discharged. [24] Certainly the legislature in s.8(b) of the Insolvency Act did not require the nulla bona return to be younger than seven months; how then could the courts legitimately impose the limitation? The only explanation for the rule could be that it is simply a rule of practice, and adjunctive to another rule of practice, and not adjunctive to a statute, which in view of the constitutional separation of powers it could never be. [25] One such explanation could be that it is only if the application is not served on the respondent, and a provisional order is thus sought without notice to the respondent, that such a requirement makes sense and, perhaps more importantly, could be imposed by a court. Then one rule of practice (younger than seven months) is imposed to ameliorate another rule of practice (no notice to the respondent in cases of nulla bona), and no issues of offending separation of powers arise. [26] In Abell v Strauss, 1973 (2) SA 611 (W) at 6138, relied on by Joffe at al, Irving Steyn J dismissed an application based on a return that was “some seven months old” on the basis of dicta in Bhyat v Khurishi, 1929 TPD 896. | return to Bhyat below, but point out that MT Steyn J in Rodrew (ibid) at 139 B to C, also referred to by Joffe at al, in turn also referred to Bhyat. [27] Bhyat was concemed with whether there had been justified reliance on 8.8(g) of the Insolvency Act 32 of 1916, whereby an act of insolvency was committed when the debtor suspended payment of his or her debts. A provisional order had been obtained without notice to the respondent, and Feetham J remarked by the way that notice ought to have been given. The10 judge dismissed the application however on the basis that neither the act of insolvency nor factual insolvency had been shown. There was no statement that a nulla bona return had a use-by date in this context. [28] The editors of the report, however, referred to Kennedy and Parr v Heiman Bros., an unreported case decided on 18 November 1929 in the TPD, in which Tindall, J had remarked that it had always been the practice in that division to give notice to the debtor of a sequestration application unless the petitioner was relying on a nulla bona return. [29] It may be apposite to point out here that in this division the practice directive now requires personal service in all sequestration applications.” [30] Importantly, however, that was not always the case. It was, until relatively recently, a practice of substantial vintage, as the unreported Heiman Bros. evidenced, that an application for a provisional order of sequestration based ‘on a nulla bona return did not need to be served on the respondent.® [31] It was in this context that Boruchowitz, J, writing for a full court of this division in an unreported judgment, referred to by Mr Nel for the respondent, Seaways (Pty) Ltd t/a South African Express Line v Rubin (81419/2010)[2013]ZAGPJHC 118 (24 May 2013), pointed out that a nulla bona return, whether recent or not, is sufficient to establish an act of insolvency for the purposes of s.8(b) of the Insolvency Act. “I take comfort from the fact that Goldstein J was also unable to find the passage in Bhyat that Iving Steyn J had in mind: see Wilken ibid at 860 A to B. Other judges have found similar difficulty; see Walls (ashe then was) in First Rand Bank Ltd v Evans, 2011 (4) $A 597 {KZO) at [29} ” Paragraph 10.16.1. * simross Vintners (Pty) Ltd v Vermeulen; VRG Africa (Pty) Ltd v Walters t/a Trend Litho; Consolidated Credit Corporation (Pty) Lid v Van der Westhuizen, 1978 (1) SA 779 (T) at 783, per Coetzee, J {as he then was) Reliance is expressly placed on Heiman Bros.i [52] The leamed judge, in my respectful view, relegated the whole issue of staleness of a nulla bona return to its rightful place: that it might be relevant in the exercise of the court's discretion not to grant a provisional sequestration order.® [33] In this case, where there was personal service of the application for provisional sequestration on the respondent, and where his defence on the facts is that he has no assets at all, there appears to be no role at all for the potential staleness of the nulla bona return, The respondent, for the rule to have had any role, would have had to have argued that the applicant ought to have placed more recent evidence before the court to show that the respondent's position had not changed from him having no assets. But the respondent has done so himself? [34] It follows that in my view the argument conceming the potential staleness of the nulla bona return must fail. That leaves the issue of advantage to creditors, and exercise of discretion. | deal with them together. Advantage to creditors? And discretion? [35] The respondent's case in its answering affidavit is that he has no assets, has had none since 2010, and that he can hardly come by on his monthly income of R15 000. He explains that the provenance of the indebtedness is his suretyship for the indebtedness of a private company through which he and two others had acquired fixed property then worth R18m, assisted by a loan from the applicant on security of the property and the suretyships of the three joint venturers In Evans ibid [30] Wallis J (as he then was) relegated its potential role to a “marginal” case,12 [36] The three fell out, the loan was not repaid, and the applicant sued for its money. It attached its security, but since according to the applicant the property was worth R20m, the applicant could easily recover full repayment of the debt by realising the security. Yet the applicant has never tried to sell the property, according to the respondent. [37] In reply the applicant disclosed that the property was put up for sale sold by the sheriff by public auction on 9 November 2012, a year and nine months before the respondent asserted in his answering affidavit that the applicant had never tried to sell the property. No bids were received, and the applicant bought it in for R2.1m. [38] The respondent also answered the applicant’s assertions that he was interested as member in five juristic entities, each of which owned fixed properties at some stage, and most of which still owned fixed properties. On his case, three of these have since been either deregistered or wound up, and of the remaining two he has resigned without retaining any interest. [39] These assertions are challenged in reply. The applicant says that in the case of Zimzeni 150 CC the respondent is wrong in saying that it was finally deregistered on 16 July 2010. Its CIPC searches have revealed that as of 15 November 2013 this CC was still active and owned four fixed properties. [40] In the case of Aeterno Investments 168 (Pty) Ltd, the applicant says that its searches revealed that as of 15 November 2013 it too was still active, owning four fixed properties, despite it having been finally deregistered, according to the respondent, on 16 July 2010, [41] In both these two disputed cases, the evidence relied on by the respondent is a CIPC search which indicates that a deregistration process was somehow2B connected to the annual return. One knows that under Companies Regulations 40(2), if a company has failed to file an annual return two years in succession, the commission may demand that it does so, failing which the commission may deregister the company. But that is a process that takes time, since as appears from Companies Regulation 40 generally, much opportunity is afforded the company to cure its default. [42] Against this background the following factors weigh with me. [43] First, the threshold for advantage to creditors is relatively low in arms-length sequestrations. Cameron JA (as he then was) said in Commissioner, South African Revenue Services v Hawker Air Services (Pty) Lid, 2006 (4) SA 292 (SCA) at [29], that the court need only be satisfied that there was reason to believe, not even a likelinood but a prospect not too remote, that as a result of investigation and enquiry assets might be uncovered that will benefit creditors. [44] Second, | am unconvinced that the respondent has made a clean breast of his position in circumstances where he would fully have appreciated how important it was to have done so. For instance, why has he not explained the identity of his employer? Why has he not annexed any evidence substantiating his income level? Why not annexe returns of income to the SARS or other extraneous proof? What has happened to the assets of the juristic entities in which he admits having had an interest at some stage? [45] Third, in exercising a discretion | weigh up the unenviable position of the applicant who cannot without a provisional order scale the stone wall put up by the respondent, against the inconvenience caused to the respondent by a Provisional sequestration order. if he has assets that can be availed, they will4 ‘out. In the meantime, he will be able to practice as an attorney, and he will be able to build up a new estate, and so start with a clean slate. Condonation for the late replying affidavit? Striking out? [46] It will have been seen from the above that in my view the merits of the application for a provision sequestration are good. Should the condonation be granted? The replying affidavit was served on 21 November 2014, after the replying affidavit had been served on 9 July 2014. That is a delay of some four months. [47] The explanation is that the applicant had to embark on searches to be able to respond to what the respondent had said about the juristic entities .I am not convinced that the explanation is good. But a considerable amount of water has passed under the bridge since 21 November 2014, least of all not the passage of time, now some fourteen months later. Any conceivable prejudice suffered by the respondent must have long since been obliterated. [48] | accordingly grant the condonation application but make no order as to costs on it, {49] The striking out appiication was brought on 7 January 2016, some thirteen months after the replying affidavit was served. The application is based on new matter in reply. The reason for requiring that a case be made out in the founding papers, is that the respondent is otherwise prejudiced in the manner set out in the iconic Triomf Kunsmis (Edms) Bpk v AE & Cl Bpk en Andere, 1984(2) SA 261 (W). The headnote says: “The Court does have a discretion ‘to allow new matter to remain in answering affidavits’, but in the case of tho disclosure of a new cause of action in a replying affidavit which replaces the existing cause of action it is difficult fo conceive of circumstances which would15 not have the inevitable consequence that the proceedings, as at that stage, have to be dismissed. Theoretically it might be accepted that the discretion Still exists, but a judicial exercise thereof would require extraordinary facts and confirmation thereof on affidavit.” [50] Here one is not dealing at all with that kind of case. Here, if indeed the evidence does constitute new matter — a matter which is debatable — any Prejudice could have been redressed by the respondent applying to put up a fourth set of affidavits. That was not done, and the sense is created that the decision not to do so, particularly give the length of time before the application was launched, was self-serving. It is difficult in these circumstances to find any prejudice having been suffered by the respondent; I can find none. [51] | accordingly dismiss the application for striking out with costs. Conclusion [52] | grant a provisional sequestration order returnable on 18 April 2016, in terms of the draft that | have initialled, dated and marked “X”. moll, WHG van der Linde Judge of the High Court For the applicant: Adv. JE Smit (0824681755) FSE Attorneys Applicant's Attorneys 19 Bompas Road Dunkeid West Johannesburg Tel (011) 341051016 Ref Mr G Edelstein For the respondent: Adv. GJ Nel (0824969206) DRSM Attomeys Respondent's Attorneys 38 Bolton Road Chr Fourth Ave Rosebank Tel (not supplied) Ref Mr Le Roux Date of hearing: 8 February 2016