IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE HIGH COURT, CAPE TOWN)

DATE: 7 SEPTEMBER 2010
In the matter between: 

and

JUDGMENT

BOZALEK. J:

The respondents appeared in person and in open court the first respondent submitted that although he and his wife could not presently effect full payment of the underlying debt owing to the applicant, nevertheless their joint estate was by no means insolvent. In addition the first respondent tendered, on several occasions in open court, to immediately pay the applicant R10 000,00, which I understood him to be holding in cash, and the balance of the debts, some R8 100,00, either in monthly instalments or R1 000,00 commencing immediately, or alternatively one full payment in December this year when he receives his salary bonus.

In addition, first respondent was prepared in principle to pay the applicant's legal costs. From the bar, the first respondent advise that he was an employee of the Department of Health of some 20 years standing, that he had recently been transferred to Knysna from Cape Town and, although unable to afford legal representation, he and his wife had travelled from Knysna to oppose the granting of the final order of sequestration. The first respondent advised furthermore that the joint estate was the owner of fixed a property in Mitchells Plain presently being rented out. Although bonded, there was substantial equity in the property in the order of several hundred thousand rand.

The case made out by the applicant arises out of a debt of R18 120,74, owing by the respondents to applicant, which in turn arises out of a loan of R20 000 made by the applicant to the respondents in December 2007 for a period of 62 days at an interest rate of 44.2% per annum. The applicant is in the business of providing bridging finance to sellers of immovable property The respondents have already paid R10 081,00 to the applicant.   It appears further from the applicant's papers that in April 2010 summons was issued out by the applicant and served on the respondents for recovery of the outstanding balance of the loan and interest and that no notice of intention to defend was filed by the respondents.

Somewhat strangely, no reference is made in the applicant's papers to whether default judgment was taken or not, or why applicant was not minded to pursue that cause of action. Given the existence of fixed property in the joint estate, it seems reasonably clear that were it to follow that path the applicant would, sooner rather than later, obtain satisfaction of the debt. Instead the applicant, in seeking relief, relies on a written communication received from the first respondent on or about 5 May 2010 in response to the summons, stating that the respondents were unable to satisfy the debt and offering to pay it off by way of monthly instalments.

There is nothing then to gainsay the applicant's case in this regard on the papers and thus I am satisfied that the respondents have committed an act of insolvency as envisaged by the Act. Similarly, I am satisfied that the applicant has satisfied what I shall term all the procedural requirements for a final order. What remains to be determined is whether the applicant has proved that a sequestration order will result in an advantage to creditors and if so, whether the Court should exercise its discretion to grant such an order.
A   court   may   not   grant   a   sequestration   order,   whether

provisionally or finally, unless it is established that:

"there is reason to believe that it will be to the advantage of creditors of the debtor, if his estate is sequestrated."

In the present instance the only other debtor, apart from the applicant, which can be identified on the papers is Nedbank No details are furnished of the quantum or nature of this debt beyond the fact that such debt apparently exceeds R5 000,00. One possibility is that Nedbank is the mortgagee of the fixed property in the respondents' joint estate. There is no suggestion that Nedbank is not receiving its monthly instalments on the bond. In fact the indications, if anything, are to the contrary. Nor do I see in what way the sequestration of the respondents' estate will be to Nedbank's advantage.

That leaves the applicant as the only other creditor. On the papers it has, at the very least, issued a summons against the respondents for its debt. Whether it has taken default judgment and proceeded to execution, is unknown, but appears not to be the case. I can see no good reason why the applicant, having gone that far, namely issuing summons in the magistrate's court, has not taken those additional steps. If it were to do so and the debt were to remain unsatisfied upon presentation of execution of its writ, it would be open to the applicant to attach and sell the respondents' fixed property in further execution of its judgment, and failing unsuccessful execution, would then be able to bring a sequestration application.

When one has regard to the founding affidavit in this matter, the question of an advantage to creditors is not addressed directly at all. At best for the applicant in this regard, are four generalised averments to the effect that, it would be just and equitable for the respondents' estates to be wound up, in that:

1. it would enable an impartial trustee to gain control of the respondents' assets, realise same and distribute the proceeds.
2. it will prevent certain of the respondents' creditors from incurring unnecessary legal expenses in attempting to procure payments from the respondents.
3. it will ensure that none of the respondents' creditors receive payments from the respondents to the prejudice of other creditors.
4. it will enable a duly appointed trustee to properly investigate the affairs of the respondents.

None of these allegations are supported by facts justifying their invocation. The reference to "unnecessary legal expenses" is ironic in view of the magistrate's court action on the part of applicant to recover the amount, the debt outstanding, which appears to have been halted and replaced instead by this relatively much more expensive application for a sequestration order.

Applying these criteria to the case of a single creditor who uses sequestration proceedings as a mode of execution, one draws the following conclusions. He must satisfy the Court at the least that there is reason to believe in all the circumstances that after the costs of sequestration are paid, he will recover an amount which is not negligible. What is more, in my opinion, he must demonstrate some reasonable expectation that it

will exceed the likely proceeds of an ordinary
execution. Unless he does that, the laborious and
substantially more expensive remedy of
sequestration, can hardly be thought
advantageous	
The notion of advantage to creditors is a relative and not an absolute one. Sequestration cannot be said to be to the creditors' advantage unless it suits them better than any feasible and reasonably available alternative course. It follows that the enquiry necessarily postulates a comparison."