INSOLVENCY

Facts: The appellant (Mr Du Plessis), a farmer, is the sole member of Full Circle, which owns the property. He leased various farms to conduct his business operations, one such farm being the property. The lease agreement in respect of the property was concluded for a period of 9 years until September 2027. Full Circle was subsequently liquidated in 2021. Mr Du Plessis was also provisionally sequestrated in March 2021. De Wet and Govender were appointed as provisional trustees of his insolvent estate. The liquidators of Full Circle were mandated by its creditors to realise the assets of the company. Acting in terms of that mandate, the liquidators sold the property to the De Klerk Familie Trust, represented by Mr and Ms De Klerk, without taking into consideration the lease agreement. Their case, in this regard, is that there was no valid lease in existence at the time of the sale, hence the property was sold free of any lease. This is what catalyzed the main application, which is the subject of this appeal. It is not in dispute that at the time that Mr du Plessis instituted the main application, he had been provisionally sequestrated.

Appeal: The relief Mr Du Plessis sought in the High Court was, in summary, granting him the power to institute action or application proceedings or oppose any action or application proceedings, and staying the transfer of the property. The counter-application was brought by Mr and Ms De Klerk, in their capacities as trustees of the De Klerk Trust. The High Court dismissed the main application and granted the counter-application. Mr Du Plessis sought an interim interdict restricting the transfer of the property to the second respondent, Mr De Klerk. Three issues arise for determination in this appeal: the appellant’s locus standi; the validity of the lease agreement; and the status of the sale of the property.

Discussion: Mr and Ms De Klerk were in agreement with the contention of Mr Majiedt, as well as the finding of the High Court that Mr du Plessis lacked locus standi to bring the main application, and to oppose the counter-application. While they did not, however, agree with the finding of the High Court that the counter-application had to be determined on an unopposed basis, they agreed with the court’s finding that the discharge of the provisional sequestration order did not remedy Mr Du Plessis’s lack of locus standi. In a similar vein to that argued by Mr Majiedt, Mr and Ms de Klerk were of the view that Full Circle’s non-compliance with section 3.3 of the mortgage bond rendered the lease agreement void and unenforceable. A further point made by Mr and Ms De Klerk, as well as by Mr Majiedt, is that, even if the court should find that the lease agreement was valid, the liquidators of Full Circle were entitled to sell the property to the De Klerk Trust, by virtue of the value that was realised from such sale. The lease would have been terminated upon the conclusion of that sale and was not enforceable by the appellant. Therefore, the further consequence of the sale is that the basis upon which the appellant approached the court for interdictory relief fell away.

Findings: Mr du Plessis was, upon the grant of the order for his provisional sequestration, divested of his estate; and all his property, both movable and immovable, belonged to and vested in his provisional trustees. He cannot therefore institute legal proceedings in his own name, without the knowledge and consent of the provisional trustees. Mr Du Plessis at no stage indicated that the trustees had approved of his initiating the main application or that they refused to so on behalf of his insolvent estate, and that he was, consequently, vested with locus standi. His argument that he derived his locus standi from his membership of Full Circle is not sustainable. The appellant failed to establish his locus standi to bring the application in his own name. The main application was instituted by Mr Du Plessis in July 2021, being after the lease had lapsed. Therefore, there was no valid lease in existence which would have founded Mr Du Plessis’ claim to a prima facie right for the interdictory relief that he claimed. On this score too, he has failed to make out a case for the relief he seeks. He also did not satisfy the other requirements for interdictory relief. It follows, therefore, that the sale of the property is unimpeachable.

Order: The appeal is dismissed with costs.

NAIDOO AJA (DAMBUZA JA, MOLEFE JA, SMITH JA and MJALI AJA concurring)

Facts: The first and second respondents’ marriage of some 28 years was dissolved by an order granted by court together with an order simpliciter for division of the joint estate. Attempts by the erstwhile spouses to agree on a division of the joint estate were unsuccessful and the appellant was appointed as the liquidator or receiver of the joint estate. Having done a preliminary investigation into the assets and liabilities of the joint estate, the appellant became aware of a family trust, known as the Ludan Trust, of which the erstwhile spouses and their three now major children are the beneficiaries. The appellant established that a loan account in the trust, in favour of both the erstwhile spouses, existed and after an investigation and consideration of the financial position of the trust, concluded that it was insolvent. The appellant thereupon launched an application to this court, principally for the sequestration of the trust, which was opposed in essence, by the second respondent.

Appeal: The matter came up for hearing before the court a quo, and after having heard argument, the court dismissed the application with costs. The appeal is against that judgment and order and is with leave of the court a quo. The issue in this appeal concerns the fate of the family trust in the liquidation and division of the joint estate pursuant to the order of divorce.

Discussion: The appellant relies on section 8(c) of the Insolvency Act 24 of 1936 for the submission that the trust’s attempt to dispose of the properties with the intention to prejudice the trust’s creditors, and more particularly the joint estate, constituted an act of insolvency. Section 8(c) of the Act stipulates that a debtor commits an act of insolvency if he makes or attempts to make a disposition of any property which has or would have the effect of prejudicing his creditors or preferring one creditor above another. Counsel for the second respondent submitted that the passing of a resolution, which is then withdrawn, does not constitute a disposition, nor an "attempted" disposition. The court disagrees. An analysis of the conduct of the second respondent, who was always the controlling mind of the trust, reveals certain features preceding the signing of the resolution. The peculiar stratagem he devised obviously required careful planning. A prior meeting, as referred to in the heading of the resolution, was held and the proposal, one must assume, was tabled and discussed, resulting in the resolution being taken. The execution of the operative parts of the resolution was entrusted to Mashabane attorneys, from which the inference that some prior communication between them had been conducted, is justified.

Findings: The totality of the events warrants the inescapable inference, reasonably to be drawn, in the absence of either a response thereto, or explanation as to the second respondent’s intention in procuring the resolution, that an attempted disposition occurred, which would have prejudiced the creditors of the trust. All the requirements of the section have accordingly been satisfied. In finding that the trust was not insolvent, the court a quo did not consider the act of insolvency having been committed by the trust, which as counsel for the appellant correctly pointed out, had a fundamental impact on the determination of the application. The appellant has discharged the onus of prima facie proving factual insolvency and the trust’s inability to pay its debts. The approach adopted by the learned judge a quo, and the reasoning in support thereof, is unsustainable. The appellant established that the concurrent creditors, following upon the sequestration of the trust, would receive 80 cents in the Rand. The refusal of a sequestration order, would in the absence of another viable remedy, preclude the joint estate from recovering the loan or portion thereof from the joint estate, and will simply add yet another stumbling block in effecting and finalising the liquidation and distribution of the joint estate.

Order: The appeal is upheld. The order of the court a quo is set aside and replaced. A provisional sequestration order, placing The Ludan Trust in the hands of the Master of the High Court, is granted. The Ludan Trust and/or any interested party are called upon to advance reasons to court, if any, why the final sequestration of the Ludan Trust should not be ordered.

VAN OOSTEN J (MODIBA J and BOOYSEN AJ concurring)

Facts: Nexor purchased twelve cranes from Cranelink (now liquidated). The applicant (Zoomlion Capital) is a financier that provides financial assistance to purchasers of Zoomlion products in South Africa. Nexor required financing to purchase the twelve cranes and consequently concluded twelve instalment sale agreements with the applicant for the purchase of the cranes. The respondent was at all relevant times a director of Nexor and signed the instalment sale agreements as guarantor. Nexor defaulted on all the instalment sale agreements and failed to remedy its default, despite demand by the applicant. Nexor purported to terminate the instalment sale agreements and instituted a High Court action against the applicant and Cranelink, which was referred to arbitration. The applicant caused a letter of demand to be sent to Nexor in which it accepted repudiation of the instalment sale agreements. The applicant also instituted a counterclaim against Nexor and the respondent for damages flowing from the breach of the instalment sale agreements. The arbitration was resolved in favour of the applicant. Nexor's claim was dismissed and the applicant's counterclaim succeeded.

Application: This is an opposed application in terms of section 9(1) of the Insolvency Act 24 of 1936 for the provisional sequestration of the joint estate of the respondents, who are married in community of property. The applicant brought the application in its capacity as a creditor of the respondent. It is alleged that the respondent is indebted to the applicant in the amount of R17,657,658.02, in respect of damages flowing from the breach of an instalment sale agreement which the respondent had signed as guarantor.

Discussion: In accordance with the arbitration award, the cranes were returned to the applicant. Ten of the twelve repossessed cranes have been sold by the applicant. It is alleged that the total amount due and payable by the respondent to the applicant in respect of those ten cranes, is R17,657,658.62. The repossessed cranes were sold by the applicant to an entity by the name of ZLT Tower Cranes. The applicant made use of the services of Mr Bates to assist it with the sale of the cranes. The involvement of Bates in the sale of the repossessed cranes is one of the main reasons why the respondents dispute the applicant's claim as creditor. The respondents contend that Bates has a "very close relationship" with the applicant. Bates was the sole director of Cranelink and is now a sales professional working at ZLT. Cranelink was represented by Bates when Nexor purchased the twelve cranes from Cranelink. The respondents dispute that the sale of the cranes was bona fide. The respondents contend that the sales of the cranes were not at arm's length and that ZLT colluded with the applicant to the detriment of the respondents.

Findings: Nothing was alleged which proves that the applicant and ZLT are not independent of each other. In fact, on the papers, ZLT and the applicant are two distinct and separate juristic persons. There are vague allegations about a "close relationship" between Bates and the applicant, but the exact nature of the relationship and how it affects the independence of the contracting parties are not stated. Nothing about the circumstances regarding the repossession, refurbishments and sale of the cranes as alleged by the applicant nor any of the allegations contained in the respondents' papers regarding the surrounding circumstances is suggestive of transactions which are not at arm's length. There is therefore no factual basis for the contention advanced by the respondents that the sales of the cranes were not bona fide. The existence of the debt is not genuinely disputed. The applicant has set out the assets of the respondents and their value, from which it appears prima facie that the respondents do not possess sufficient assets to discharge the debt owed to the applicant and that their liabilities exceed their assets. The applicant has succeeded in establishing that the respondents are factually insolvent.

Order: The joint estate of the respondents is placed under provisional sequestration in the hands of the Master of the High Court, Gqeberha. A rule nisi is issued calling upon all persons with a legitimate interest in the affairs of the respondents' joint estate to show cause, if any, on 28 January 2025, why the provisional order should not be made final.

APPELS AJ

Facts and issue: This appeal concerns the judgment of this court dismissing the appellant’s application for the final sequestration of the Trust. The respondents are the joint trustees of the Trust. This appeal is with leave of the Supreme Court of Appeal. The central issue is whether the trust is factually insolvent in that its liabilities exceed its assets, and if so, whether there is reason to believe that it would be to the advantage of the creditors that the trust is sequestrated.

Discussion: The appellant issued a writ of execution against the movable property of the Trust and the sheriff has attached movable property to the value of R188,000 in respect of the Parys property and R20,000 in respect of the Northcliff property. Realising that the value of the attached movable property would be insufficient to satisfy the debt, the appellant proceeded with an application and obtained an order declaring both immovable properties of the Trust especially executable. Both immovable properties of the Trust were placed under judicial attachment. The two judgments remained unsatisfied as a result whereof the appellant launched the sequestration proceedings and obtained a provisional order sequestrating the estate of the Trust. On the return day of the provisional order, the Trust filed its opposition to the order being made final. The Trust averred that its assets far exceeded its liabilities and that it owed the City of Johannesburg an amount of R286,507.98 as opposed to the R1,961,359.99 as alleged by the provisional liquidators. Further, the Trust averred that it owned a database which was worth R64,000,000.

Findings: The difference in the values given to the Parys property create a dispute of fact which cannot be resolved on these papers. The sheriff’s return stands as prima facie evidence unless it is rebutted by the respondent. However, the Trust has submitted an offer to purchase the movable on the Parys property for a sum of R14,000,000 which creates a vast difference in the value of the movable property as compared to that of the sheriff. The court a quo correctly found that, on the papers before the court, the appellant has failed to establish that the Trust was factually insolvent. The issue whether it would be to the advantage of the creditors that the estate of the Trust be sequestrated does not arise.

Order: The appeal is dismissed with costs.

Facts and issue: The applicant, Taurus, is a bridging financier or provider of the so-called ‘bridging financial solutions’ to attorneys and their clients. The respondent, (Ms Muzila), is a legal practitioner and attorney of the court. She was suspended from practice by an order of court. Ms Muzila is said to have misappropriated millions of rands in trust funds. Taurus seeks urgent relief only against Ms Muzila, that her estate be placed under provisional sequestration in the hands of the Master. Taurus’ case is that by virtue of the applicable law: (a) the debt owing to it by Muzila Inc is payable by Ms Muzila; (b) Ms Muzila has failed to make payment, and, therefore, (c) Taurus is entitled to apply for sequestration of Ms Muzila’s estate due to liabilities exceeding assets in her estate.

Discussion: Taurus primarily relies on three agreements including the cession agreement. According to Taurus it complied with the terms and conditions or its obligations in terms of the agreements, including by making advances or payments to the claimants, and to Muzila Inc. Taurus says it provided bridging finance in the form of upfront cash payments against fees due to the law firm of Ms Muzila but which were still to be paid by the RAF. The funding by Taurus extended to the law firm is said to have assisted the law firm, among others, to pay for acquisition of medico-legal expert reports. The payments to the affected clients by Taurus were meant to serve as advances on their compensation for claims already settled with the RAF or finalised through a court process. Taurus complied with its obligations in terms of all three agreements by advancing monies to the affected clients and the law firm. Quite the contrary, the law firm breached the agreements by failing to make payment to Taurus in respect of the law firm’s own obligations and those relating to the ‘A’ Claimants. The law firm and/or Ms Muzila misappropriated the funds received, hence the suspension of Ms Muzila.

Findings: The amount of R5,788,313 has been certified in terms of the agreements with the law firm. Ms Muzila did not dispute the existence and constitution of the amount. But even if she did, the amount constitutes a liquidated debt due and payable to Taurus. This is so even if based on misappropriation of trust monies. Taurus, as a creditor, is owed a liquidated debt or claim of more than R100 (i.e. R5,788,313) and, therefore entitled to apply for an order for the sequestration of the estate of Ms Muzila. Ms Muzila’s liabilities, fairly estimated, are more than her assets, fairly valued. She is factually insolvent. The sequestration of Ms Muzila’s estate would advantage her creditors. With the requirements met, Taurus has succeeded in its pursuit of a provisional sequestration order against Ms Muzila.

Order: The estate of the respondent, Mashudu Fortunate Muzila be and is placed under provisional sequestration in the hands of the Master of the Gauteng Division, Pretoria.

Facts and issue: In the previous applications, the substantive relief sought became moot. The wasted costs were duly taxed. The Taxing Master issued an allocatur which determined that Mr Feng’s (respondent’s) liability to the HOA (applicant) was in the amount of R172,349.36. Mr Feng has not at any stage disputed his liability to the HOA. However, he has not made payment as required. The HOA was unable to execute the warrant because the attached properties estimated value was just R7,500. The HOA asserts that in these circumstances it has fulfilled the requirements in section 10 of the Insolvency Act 24 of 1936 and is entitled to obtain relief for the provisional sequestration of Mr Feng’s estate.

Discussion: The HOA alleges that it has a liquidated claim against Mr Feng, which is due and payable. Mr Feng raises a factual dispute. He contends that the return issued by the Deputy Sheriff is factually wrong. Mr Feng does not contend that he informed the Sheriff of the immovable properties in his portfolio. He also does not contend that the Deputy Speaker only spoke to him regarding movable property. Rather, he contends that this Court should make a factual finding that the Deputy Sheriff did not speak to him at all – i.e. the Deputy Sheriff failed to inform Mr Feng of the debt; the Deputy Sheriff failed to determine from Mr Feng whether he had any disposable assets and could settle the debt; the Deputy Sheriff failed to ask Mr Feng to point out any assets; and that Deputy Sheriff simply proceeded to walk around Mr Feng’s residence, drawing up an inventory of movable property. If Mr Feng’s factual allegations are accepted, then the HOA cannot sustain any case that it has proven the existence of an act of insolvency in accordance with the requirements.

Findings: Mr Feng’s factual allegations impossible to accept. Mr Feng’s factual allegations are contradictory. He starts by portraying an amiable interaction with the Deputy Sheriff, with the Deputy Sheriff sitting next to Mr Feng and commenting on the attractiveness of Mr Feng’s house. But moments later, Mr Feng contends there was almost no communication between him and the Deputy Speaker. There is no evidence that the HOA is the only creditor. It would be for Mr Feng to provide evidence that the HOA is his only creditor. He does not even make this averment. Mr Feng has frustrated the HOA’s ability to make good on the costs award that it was given. Mr Feng is the author of his own misfortune.

Order: The estate of the respondent is placed in provisional sequestration in the hands of the Master of the court.

Facts: The respondent was employed by the applicant as an accountant from 2014 to 2020 when he resigned. After his resignation, the applicant discovered that during the respondent’s employment he had misappropriated large sums of money. The respondent signed an acknowledgement of debt (AoD) admitting that he had stolen R6,797,715.60. He repaid this debt acknowledged by him. However, the amount stolen exceeded the debt admitted in the AoD. According to the founding affidavit the respondent owes R17,104,921.64. This is over and above the R6,797,715.60 and after the payment of R7,100,000 by the respondent. A reconciliation showed the amount due to the applicant as being R11,028,039.76.

Application: An application for the provisional sequestration of the respondent’s estate. The respondent denies that (i) he is indebted to the applicant; (ii) he has committed an act of insolvency; and (iii) it is to the benefit of his creditors that his estate is sequestrated. The respondent contended in the answering affidavit that several averments in the applicant’s affidavits fall to be struck out because they are irrelevant to the sequestration application, are vexatious, and scurrilous, and in some cases defamatory.

Discussion: The respondent admitted stealing several million from the applicant and that he had stolen more than R6,797,715.60. In the circumstances, the complaint that the averments relating to the theft are scandalous, vexatious and defamatory, is misguided. The averments sought to be struck out are relevant to how the debt arose, what acts of insolvency were committed, how they were committed, as well as why the respondent’s creditors will benefit from the sequestration of his estate. The respondent’s counsel argued that the applicant’s locus standi is based on the admission of a debt of R6,797,715.60 in the AoD, and with that debt having been paid, the applicant has not made out a case for the sequestration of the respondent’s estate. She argued furthermore that the non-variation clause in the AoD precludes the applicant from claiming anything more than R6,797,715.60.

Findings: The parties had not agreed that the AoD was in full and final settlement of any claim that the applicant may have against the respondent. The result being that the payment of the AoD discharged only that debt. As far as the non-variation clause is concerned, it does not assist the respondent. The claim for the balance of the money misappropriated by the respondent is not a variation of the terms of the AoD or the debt admitted therein. Apart from the applicant having established at least prima facie that the respondent has committed an act of insolvency, the applicant has prima facie established that the respondent is insolvent. The respondent stole several millions from the applicant and there was a substantial loan by a Mr Pillay to a company of which the respondent was director and sole shareholder. The applicant submits that a fair and equitable distribution of the respondent’s estate amongst his creditors by a trustee is to the advantage of the creditors. Furthermore, that an investigation by a trustee may uncover assets which can be liquidated to pay the respondent’s debts, thereby benefitting his creditors. This establishes prima facie an advantage to creditors.

Order: The respondent’s estate is placed under provisional sequestration.

HASSIM J

Facts and issue: The court a quo issued an order placing the estate of MD Trust under provisional sequestration. It also issued a rule nisi calling upon all the interested parties to show cause why the estate of MD Trust should not be placed under final sequestration. It further gave directives on how service should be effected on interested parties including, amongst others, SARS, the Master of the court and employees of MD Trust, if any, and by publication in the Daily Dispatch newspaper. There has been compliance with the orders relating to service. The applicants seek an order, in terms of section 12(1) of the Insolvency Act 24 of 1936, finally sequestrating the estate of the MD Trust.

Discussion: The respondents contend that the applicants have no authority to institute these proceedings because they were not authorised by the creditors or the Master.  On 7 December 2022, the applicants’ attorneys, Honey Attorneys sought, by way of a letter sent to all known creditors, sought consent to proceed with the sequestration proceedings and requested them to ratify all actions already taken by the applicants.  The respondents contend that no such authority was sought and obtained from the Master. The applicants rely for their authority to bring the application on the fact that they are joint trustees of the sequestrated estate of Johannes as they were appointed by the Master of the High Court in Bloemfontein. The certificate of tendered security by the Master was delivered. The court rejects the respondents complaint that there was no compliance with the legal requirements. Nel stated that First Rand Bank Limited instituted an action to recover its debt from the MD Trust. It obtained default judgment and thereafter the sheriff attached the property in question. A sale in execution was arranged to be held. Thereafter the FirstRand Bank Limited and Nel who was the only trustee remaining at the time, agreed to cancel the sale in execution subject to certain terms and conditions.  They entered into an agreement relating to payment terms of the debt between MD Trust and the First Rand Bank Limited.

Findings: The respondents admit the agreements and associate themselves with the actions of Nel. The applicants proved that the MD Trust committed an act of insolvency when it entered into the sale agreements, including the payment arrangement agreement with the First Rand Bank Limited, as envisaged in sections 8 (c) and 8(d) of the Act. The applicants contend that the MD Trust is factually insolvent in that it has one property valued at R4,175,000 but has liabilities to the value of at least R 4917,042.91. It is for this reason that they conclude that MD Trust is de facto insolvent in that some of its liabilities exceed the fair value of its assets. The respondents simply denied this and attempted to raise the issue of movable assets in the amount of R300,000. Even if that amount is considered there will still be a shortfall of about R600,000. The applicants proved that final sequestration of the MD Trust will be to the advantage of creditors.

Order: A final sequestration order be and is granted in terms of section 12(1) of the Insolvency Act 24 of 1936, sequestrating the estate of the MD Trust.

Facts and issue: Application for the provisional sequestration of the ADC Family. The applicants are the joint trustees of the insolvent estate. They investigated the circumstances of De Cerff’s insolvency and tabled their section 81 report at the second meeting of creditors. They identified a loan account of approximately R9,152,000 as an asset in favour of De Cerff in the ADC Trust. The insolvent’s concurrent liabilities amounted to approximately R14,659,000, of which R14,494,000 was due to Heinrich. Three other creditors were identified. Their investigations revealed that De Cerff had been insolvent since October 2009.

Discussion: The applicants contended that De Cerff’s insolvent estate is the main creditor of the Trust. They contend the trust is prima facie insolvent as its liabilities exceed its assets by over R3 million. The trust has concurrent creditors for about R1,096,437, and that payment to them would effectively amount to preferential payments. After their section 81 report, the applicants obtained further information, which was incorporated into the founding affidavit. In addition, Heinrich’s taxed costs arising from the anti-dissipation order decided in her favour was determined. She has a judgment debt of R212,331.64 against the trust. The applicants assert that the minimal value of De Cerff’s loan account in the trust is R7,200,420.32. The only asset of value was the Constantia property. The Trust's minimal liabilities amount to R3,531,961.20, plus capital gains tax, plus the loan amount admitted on behalf of the trustees plus Heinrich’s judgment debt, for a total of R5,639,282.80. The amount remaining from the proceeds of the sale of the Constantia property is R5,400,000.

Findings: The trust is insolvent, even without considering its other liabilities, like legal costs. The fact that a creditor holds security for his claim does not prevent him from applying for the debtor’s sequestration, even if the security value exceeds the claim amount. It is also apparent that the outstanding issues in the final sequestration of De Cerff’s estate, which includes whether the trust is a sham or the alter ego of De Cerff, concern the trust and would be a prelude to an unnecessary further application for its provisional sequestration. The applicants have satisfied the requirements for obtaining a provisional sequestration of the ADC Trust. The court is satisfied that the order thus granted will benefit the trust’s creditors.

Order: The estate of the ADC Family Trust is placed in provisional sequestration under the Master of the High Court.

Facts: Four applications were enrolled for hearing on the unopposed roll. The commissioner for SARS was the applicant in all four matters. Two of the applications were for the liquidation of companies and the other two for the sequestration of the joint estate of Mr and Mrs Shabangu and the Roux Shabangu Family Trust (the Trust) respectively. This judgment concerns only the two sequestration applications. Mr Shabangu and the Trust filed affidavits as directed by the court. SARS answered regarding Mr Shabangu and the Trust. In a nutshell, what transpired was that disputes were raised on the SARS system as to the veracity of the amounts upon which the applications had been brought. This was done in respect of the two companies and Mr Shabangu by resubmitting returns for previously unchallenged assessments and in so doing procuring a recalculation and new tax assessment.

Application: The applicant seeks to place the estate of the respondent under provisional sequestration. In respect of the applications for the sequestration of the estate of Mr Shabangu and the Trust, it was not placed in issue that there was a debt due, that it was unsatisfied and that acts of insolvency had been committed. The basis upon which the two applications were opposed was a legal one, that there would be no advantage to the creditors of Mr Shabangu or the Trust if the sequestration orders sought were to be granted.

Discussion: It was argued on behalf of both Mr Shabangu and the Trust that despite the indebtedness and acts of insolvency, the court should find that the issue of a provisional order for their sequestration should not be granted as there was no advantage to creditors in doing so. The argument rested on two legs. The first was that SARS had immense powers in terms of the Tax Administration Act 28 of 2011 (TAA) and that as it was a preferent creditor, it ought to use the TAA to procure payment. An order for the sequestration of the estates of Mr Shabangu and the Trust was a last resort until they had exhausted the measures afforded to them by the TAA and complied with it. They could not until they had done so, proceed with a sequestration application, nor it could not be said there was any advantage to creditors. The second leg was that since preservation orders relating to the assets of both had been granted in favour of SARS in terms of section 163 of the TAA, there was in fact no advantage to creditors if the orders sought were to be granted. Having regard to the provisions of section 10(c) of the Insolvency Act 24 of 1936, it was argued by SARS that the “reason to believe” that the sequestration would be to the advantage of creditors should be interpreted as contemplating something less than establishing a prima facie case.

Findings: It is the case for SARS that Mr Shabangu is in control of a complex corporate structure of which the Trust is a part and that through this control, despite the non-payment of his debts, he continues to enjoy what was argued was a lavish and luxurious lifestyle. Having regard to the fact that both the assets of Mr Shabangu and the Trust are subject to preservation orders in terms of section 163 of the TAA, it is somewhat inexplicable that Mr Shabangu has been able to finance and maintain such lifestyle in circumstances where the source of his funds is unknown and undisclosed by him. There is nothing before the court to explain this. It is not in dispute that the assets of both Mr Shabangu and the Trust are subject to a section 163 preservation order. Despite all his assets and those of the Trust being placed under curatorship and SARS having squarely raised his lavish lifestyle in its founding papers, Mr Shabangu failed to deal with the allegations or to disclose the source of the funds from which his lifestyle is financed. Having regard to these facts alone, that there would be an advantage to creditors for the granting of the order sought. Notwithstanding the granting of a preservation order, Mr Shabangu and the Trustees of the Trust have simply ignored it. The blatant disregard for the preservation order is egregious and makes plain the necessity for the granting of an order for provisional sequestration.

Order: The estate of Ngwane Roux Shabangu, the first respondent, is placed under provisional sequestration in the hands of the Master. The estate of the Roux Shabangu Family Trust is placed under provisional sequestration in the hands of the Master.

MILLAR J

Facts and issue: The applicants launched an application for the sequestration of the respondent’s estate in terms section 9 of the Insolvency Act 24 of 1936. The applicants, namely two petition creditors, rely on separate agreements concluded with the respondent, who is the sole director of the company.  Both claims are amounts which are due and payable for services rendered at the company’s special instance and request.

Discussion: The asset liability calculation shows that the applicant’s claims a combined value of R829,340.19, together with the bond registered over the respondent’s immovable property in favour of First Rand Bank in the amount of R2,876 000 shows that the respondent is insolvent as her liabilities exceed her assets in the amount of R110,340.19. Given the undisputed nature of the applicants' claims and the reasonable inference of the respondent's insolvency, it would be to the advantage of her creditors if her estate is sequestrated as further claims by the various creditors of Concorde may undoubtedly be imminent. The respondent may likely be liable for additional sureties signed on behalf of the company (under liquidation). It is highly likely that the shortfall will substantially increase. The applicants’ reasonable valuation of the respondent’s immovable property constitutes prima facie proof that there exists sufficient evidence that it would be to the advantage of the respondent’s creditors if her estate is sequestrated.

Findings: The applicants have satisfactorily demonstrated on a prima facie basis, that the respondent is factually insolvent and or has committed an act of insolvency, and that there is reason to believe that sequestration will be to the advantage of the respondent’s creditors. The applicant has demonstrated that the respondent has committed an act of insolvency. A proper case was made out for the granting of a provisional sequestration order.

Order: The first respondent’s estate is placed under provisional sequestration.

Facts: The applicant (Prudential Authority) applied for the sequestration of the Dlaminis. The application was founded on two grounds. The first was that they had committed an act of insolvency by failing to comply with a directive issued by the Authority in terms of section 83(1) of the Banks Act 94 of 1990 directing them to repay money they had obtained by carrying on the business of a bank in contravention of that Act. The second was that, in terms of section 84(1A)(a), the Dlaminis were factually insolvent. Following the section 12 directive by the Governor, and the subsequent inspection of the Dlaminis’ affairs, they were found to have obtained money by conducting the business of a bank without being registered as a bank and without being authorized to do so. The TVI scheme was held by the court, in Kruger v Joint Trustees of the Insolvent Estate of Paulos Bhekinkosi Zulu [2016] ZASCA 163, to have amounted to the unlawful carrying on of the business of a bank and a pyramid scheme in contravention of the Banks Act. The High Court dismissed the application on the basis that the Authority had failed to show that the Dlaminis were prima facie insolvent and relied further upon the exercise of its discretion.

Appeal: This is an appeal against the judgment and order of the KwaZulu-Natal Division of the High Court, in which it dismissed the appellant’s application for the provisional sequestration of the joint estate of the first and second respondents in terms of sections 83(3)(b) and 84(1A)(c) of the Banks Act 94 of 1990. The issues are, first, whether sections 83 and 84 of the Banks Act require proof of factual insolvency for the sequestration of a person under those sections, or whether mere proof of non-compliance with a directive issued under section 83 is a sufficient ground for sequestration. Secondly, whether the court may interfere with the High Court’s discretion to refuse the application.

Discussion: It was submitted on behalf of the Authority that the High Court erred in dismissing the application for the provisional sequestration of the Dlaminis on the basis that the Authority failed to establish that the Dlaminis were prima facie insolvent. This was not the only basis of its application. The Authority based its application both on section 83(3)(b) and section 84(1A)(c) of the Banks Act and, so it contended, either of the two sections was sufficient to found a case for the sequestration of the Dlaminis’ joint estate. The High Court did in fact err in dismissing the application. It is common cause that the Authority’s application was founded on sections 83 and 84 of the Banks Act. The Dlaminis failed to repay the amount within the period stipulated in the repayment directive. They also did not challenge the directive by way of review despite being entitled to do so. Therefore, the Dlaminis were, in terms of section 83, deemed to have committed an act of insolvency. There is no public policy reason for reading the sections so as to limit the power of the Authority to seek sequestration as contended for by the Dlaminis. On the contrary, the whole purpose of the provisions is to ensure that people who have contravened the Act should be held accountable to repay the monies unlawfully obtained. Public policy requires that the Authority ought to be properly empowered to secure this objective, not hamstrung by having to establish two bases for sequestration, as suggested by the Dlaminis.

Findings: The High Court misdirected itself in exercising its discretion against the granting of the sequestration order. The evidence established that the Dlaminis obtained money through their participation in the TVI scheme which entailed carrying on the business of a bank without being authorized to do so. The amount which they were directed to repay was disclosed in the directive that was issued and they failed to repay it as directed. In terms of section 83, they were deemed to have committed an act of insolvency. In terms of section 84(1A)(f), the Authority is regarded as a creditor and he or she has the same rights of a creditor in terms of the law relating to liquidation and insolvency. From the evidence adduced by the Authority, there is reason to believe that it will be to the advantage of creditors if the Dlaminis’ joint estate is sequestrated. The Authority should have been granted the provisional sequestration order. It discharged the onus on a balance of probabilities regarding the amount which the Dlaminis unlawfully obtained by conducting a business of a bank in contravention of the Banks Act; the Authority directed them to repay the amount; and the Dlaminis failed to repay the amount. As a result of their failure, section 83 of the Banks Act deemed them to have committed an act of insolvency which entitled the Authority to apply for the sequestration of their joint estate. There is reason to believe that their sequestration will be to the advantage of creditors.

Order: The appeal succeeds with costs. The joint estate of the respondents is to placed under provisional sequestration in the hands of the Master.

ZONDI JA (SEEGOBIN AJA and KEIGHTLEY AJA concurring)

MBATHA JA and KGOELE JA dissenting from para [44]