IN THE HIGH COURT OF SOUTH AFRICA 
(WESTERN CAPE) CAPETOWN

CASE NO: 6112/2009

In the matter between:

and

THRING, J.:

"A creditor (or his agent) who has a liquidated claim for not less than fifty pounds, 	against a debtor who has committed an act of insolvency, or is insolvent, may petition the court for the sequestration of the estate of the debtor."

Section 9(2) goes on to provide that:

"A liquidated claim which has accrued but which is not yet due on the date of hearing of the petition, shall be reckoned as a liquidated claim for the purposes of subsection (1)."

I shall deal with each of these grounds in turn.

The first respondent's alleged act of insolvency

"Ek het teenoor me. Le Roux bevestig dat ek as bemiddelaar vir mnr van Zyl optree ten opsigte van die skuld en dat mnr van Zyl reelings wil tref om betalings te begin maak."

(Ms. le Roux being the applicant's attorney.) In the second, Mr. Klopper said:

"Soos vantevore meegedeel is Mnr van Zyl se voorstel dat hy onmiddellik weer sy normale paaiement begin betaal vir res van   hierdie  jaar  en   dan  volgende  jaar  wanneer  sy sakebedrywighede verbeter het sal hy dubbele paiemente betaal."

"Whether a particular notice is such as to constitute an act of insolvency within the meaning of s 8(g) depends on a construction of its contents, read as a whole. The question when considering the letter is not whether the debtor is in fact unable to pay or whether he is solvent or insolvent. Inability to pay must be distinguished from unwillingness to pay. If the debtor is merely saying that he is unwilling to pay, the letter does not constitute an act of insolvency. Construing the written notice involves deciding how the reasonable person in the position of the creditor receiving the notice would understand it. To such a reasonable person must be attributed the creditor's knowledge at the time of the relevant circumstances."

The applicant has not persuaded me that the e-mails in question constituted an act of insolvency.

Actual insolvency

As to the first respondent's liabilities, he says in his opposing affidavit that he has no debts "in my persoonlike hoedanigheid" other than his indebtedness to the applicant, and this averment is not disputed by the applicant. At best for the applicant, then, it must be accepted, for the purposes of this case, that, as at the date of the launching of this application, the first respondent's liabilities amounted to the sum of R2,948,733.28 which the applicant contends is currently due and payable to it by the first respondent under the bonds. This is leaving out of account, for the moment, the balance owing by the first respondent to the applicant in respect of a mortgage on his plot, to which I shall advert presently.

The applicant has set out to establish that the first respondent's assets are worth less than this. For this purpose the applicant has obtained and placed before the Court valuations of two pieces of immovable property, viz. the first respondent's property at Firlands, Gordon's Bay which is hypothecated by the seven mortgage bonds, to which I shall refer herein as "the first respondent's main property", and a piece of unimproved land, also at Gordon's Bay, to which I shall refer herein as "the first respondent's plot", which also belongs to him and is also mortgaged to the applicant. The first respondent says that he is also the owner of a 25% member's interest in a close corporation called Pham Ondernemings BK, which owns some 14

The applicant has valued the first respondent's main property

Market valuation

Less: commission    R255,360

	Plot (at cost)		150,000
	Less: balance owing on 

	Net market value of assets					R2,878,170

	Shortfall, market value of

"Forced sale" valuation

By a "forced sale" valuation is presumably meant a sale in circumstances where the unwilling seller has no option but to sell to the highest bidder, such as a sale in execution, and where there has not been sufficient time or resources for the seller to advertise the sale extensively or to market the property properly. Such sales can usually be expected to yield less fruit for the seller than would a normal arms-length sale at leisure.

On either of the above two bases of valuation, the applicant contends that the first respondent is actually insolvent, inasmuch as his liabilities exceed the value of his assets.
As regards the first respondent's interest in Pham Ondernemings BK, the applicant, I think correctly, adopts the attitude in reply that this must be disregarded, as the first respondent has given no indication of the close corporation's liabilities, so that it is not possible to place a net value on his interest. It may be worth nothing. In favour of the applicant I shall ignore any value which this asset may have.

To his opposing affidavit the first respondent has annexed a market valuation of his main property at R4,750,000 and of his plot at R320.000. After deducting the balance owing on the bond over the plot (R116,470), the aggregate of these figures reflects the net value of the first respondent's assets, leaving aside his interest in the close corporation, as R4,953,530, which is more than R2 million in excess of his liabilities. On this basis, the first respondent denies that his estate is insolvent.

In reply, the applicant has annexed yet a further valuation of these assets, on a "forced sale" basis, of R2,150,000 for the main property and R265,000 for the plot, which, if accepted, would also result in a very substantial shortfall in the value of the first respondent's assets as against his liabilities.

Where in sec. 30(1) the value of assets is to be assessed in order to determine whether it is exceeded by the liabilities of a debtor at a particular point of time, it is only the temporary or market value that can be of any relevance. In the instant case the Court had to determine the market value of an immovable property. It is well established that comparable transactions afford the most satisfactory guide in determining market value of immovable property."

"	 in the context of the Insolvency Act assets have
significance as property which can be applied to discharge the liabilities of the debtor".

properly planned, and will be a voluntary one, "upon the usual terms and conditions", and the price which he can expect to obtain for his asset will be

or market value. To apply to such a debtor a measure of valuation based on a notional "forced sale" would, to my mind, be to subvert the intention of the legislature when it employed the term "is insolvent" in section 9(1), and would be tantamount to importing the notion that even solvent debtors pay

"In relation to the valuation of assets, it is submitted that the same principles obtain as in the case of determining whether liabilities exceed the value of assets for the purposes of the application of sections 26, 29 and 30 of the Insolvency Act."

I agree.
I conclude that the proper measure of valuation of the first respondent's assets for the purposes of this case is their fair market value at the relevant time, viz. when the application was launched, and not the price which they could be expected to realise on a "forced sale". It follows that the various "forced sale" valuations of the first respondent's property are, in my judgment, not relevant.

The applicant's first valuation was carried out in August, 2008 by a Mr. A.C. Laubser, a professional associated valuer with national diplomas in property valuation and agriculture. This was the only attempt made by the applicant to prove the market value of the first respondent's main property. As I have said, he assessed its market value at R3.2 million. He arrived at this figure by the comparable sales method.

On the basis of Mr. Hugo's valuations, as I have said, the first respondent is not actually insolvent, and the application must consequently fail.

The application is therefore dismissed, with costs.

				THRING, J.