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

DATE:						13 OCTOBER 2010

In the matter between:

and

JUDGMENT

This is an application for the provisional sequestration of the Erf 1957, Sunset Beach Trust (the respondent trust). The application was brought jointly by two insolvent trusts, the first is the CAM Brown Family Trust (the CAM Trust), represented by its provisional trustees in insolvency, Mr Michael Lane (described as first applicant). Mr Johan Appies (described as second applicant) is the trustee in insolvency of the S L Brown Family Trust (the SL Trust), represented herein by its provisional trustees in insolvency, first applicant and Mr Themba Basiwe, described as the trustee in insolvency of the SL Trust as third applicant. Both applicant trusts were provisionally sequestrated on 23 September 2009.

First applicant provided some background relating to the two applicant trust. Both were registered in 2003. He provided information in regard to the beneficiaries under each of the trust deeds and the trustees, prior to the sequestration of the two trustees.

During December 2002, the two applicant trusts purchased the beneficial interest and the loan accounts in the respondent trust from Mr Hans and Ms Rosemary Runz. The respondent trust was the registered owner of Erf 19571, Milnerton.   First applicant stated that the two trusts are joint creditors of the respondent trust in an amount of not less than R2 131 276,00. He attached a letter from Mr Runz, in which he confirmed, as at 27 May 2003, that his loan account in the respondent trust was valued at this amount. The purchase price for the beneficial interest and loan accounts of the sellers was R5 000 000,00. Upon cession of the loan account, the two applicant trusts became joint creditors of the trusts in the sum or R2 131 276,00.

In respect of the amount R987 256,00, he said, the last payment was R42 000,00 in and during June 2009. The balance of the purchase price was not paid as Mr Moosa requested an extension and Mr Khan subsequently advised him not to make any further payments until he received notification from him. The sum of R42 000,00 was also disbursed by Mr Khan in and during 2009. Mr Khan then said that there are therefore no monies held in trust. The transaction was based on the purchaser being allowed to pay off the purchase price, but to allow Mr Khan to utilise the funds prior to transfer on a loan basis.

First applicant contended in the founding affidavit in the present application that Mr Khan had used the proceeds of the sale for payment of the fees owing to him as Brown's attorneys. He thus committed an act of insolvency in terms of section 8(c) of the act ad the disposition of property would have had the effect of prejudicing the creditors of the respondent trust. Applicants maintain that the market value of Erf 19571 is R9,5 million. The movable property of the respondent trust was sold for R928 225, but the purchase price has not been paid to the respondent trust. This was confirmed by Mr Khan. Mr Brown also testified, however, that the movable property was worth only some R100.00 to R2 000,00.

The liabilities at this stage, according to applicants, are (1) the amount owing to applicants, (2) an amount of about R19 000,00 owing to Cape Town City Council and (3) the claim of R4 000 000,00 for the repayment of the purchase price by the purchasers in the event of the sale being set aside.
Applicant contended that there are various aspects to investigate which could have beneficial results for creditors. I shall revert to that hereunder.

On 11 October 2010, that is the day before the hearing, a number of documents found their way into the court file. The first is an affidavit by first applicant, advising that he had been informed by Mr Johannes Klopper and Mr Craig McLean Hathorne that they had been appointed as joint trustees of the respondent trust by the Master. On 8 October 2010 he had been advised by Klopper that a trustees' meeting took place on 8 October 2010. Mr Khan did not attend the meeting. At the meeting it was decided to terminate the mandate of Mr Khan to represent the respondent trust and to withdraw the opposition to the application.
The second document is an affidavit made by Klopper. He explained the recent developments. He said that attempts were made to secure the attendance by Mr Khan at the meeting in question, but Mr Khan did not respond to his attempts. On 8 October 2010, he and Hathorne met and passed certain resolutions. Two resolutions were taken, which have been referred above. Klopper pointed out that the resolutions were probably invalid as Mr Khan had not been given proper notice of the meeting in terms of the provisions of the trust deed. Klopper said that he wished it to be placed on record that he and Hathorne believed that a proper case had been made out for the sequestration of the respondent trust and that they did not oppose the application. Hathorne filed a confirmatory affidavit.

The application was in any event not ripe for hearing, he said, for the following reasons. I quote from paragraph 22.1 of this application:

"1. The surreptitious application and appointment of the additional trustees. The unauthorised and surreptitious resolution which purported to withdraw by opposition to the application, both of which have been effectively attacked in the pending review application.
2. The additional trustees to the main sequestration have not been joined in same. This non-joinder means that the application cannot proceed until such time ad the additional trustees have been so joined.
3. The application for the review of the decision by the Master to appoint the additional trustees aforesaid, is pending and requires to be decided before the main sequestration application can proceed."

The fifth document is a review application in which Mr Khan sought a temporary interdict staying the sequestration application and a review and setting aside of the Master's decision to appoint Klopper and Hathorne as trustees. In this application applicant was described as Mr Khan, in his representative capacity, as a trustee of the Erf 19571, Sunset Beach Trust. The hearing of the matter commenced on 12 October 2010 and stood over until today 13 October 2010.

The result is that the respondent trust has been unable, and still is unable, to decide how to approach the present sequestration application. Mr Khan nevertheless proceeded to act as if he was the sole trustee. In that capacity he brought the condonation application, deposed to the proposed answering affidavit and brought the review application, all purporting to act on behalf of the respondent trust. The problem, however, that it is not clear at all whether he had authority to act on behalf of the respondent trust.

1.      To persist in opposing the application.
2.	To instruct himself as attorney to give effect to that opposition.
3.	To   apply  for  condonation  for  the  filing   of  the   late answering affidavit.

4.      To   prepare   such   affidavit   as   the   object   of   the condonation application.

5.     To authorise the appointment of counsel to act for the respondent trust.

6.      To  launch  the  review  application  in  his  capacity  as trustee.

In my view, not one of these decisions was valid or binding on the respondent trust, for the reasons that I have given above. The result in law is that the recent affidavits filed by Mr Khan and his opposition to the application, are unauthorised and do not bind the respondent trust.

In the present circumstances, for the reasons already given, it seems to me in any event necessary and equitable and to the advantage of creditors, that the provisional trustees take control of the affairs of the respondent trust as soon as possible. Apart from preserving the assets of the trust, there are the various matters which require to be investigated, as mentioned in applicants' founding affidavit. These matters require immediate attention and some of them concern Mr Khan himself in his personal capacity. In this regard I wish to point out, without making any findings, that there appear to be serious conflicts of interest which may affect the suitability of the existing trustees of the respondent trust to act as trustees. For that reason I propose to bring this judgment to the attention of the Master of this court.

I have not heard any arguments in regard to costs regarding this application. They will in any event stand over for determination on the return date of the order which I am about to grant.