Republic of South Africa 
In the Western Cape High Court of South Africa

Sequestration Case No: 20327/2010 
Case No: 8537/2005

In re:

In the matter between:

Versus

Judgment Delivered: 8 June 2011

Louw J

[1] This is an application brought by Ms Magda du Plessis (the intervening party) for leave to intervene and then to oppose the final sequestration of the estate of Mr. Eben Thomas Human (the respondent) whose estate was provisionally sequestration by order of this court at the instance of Mr. Christo Witlem Carl Nel (the applicant) on 13 October 2010.

[2] The application for leave to intervene was heard on 30 May 2011 which is also the extended return day of the provisional sequestration order.

[3] The intervening party who had previously been in a relationship with the respondent and who, in July 2006 had bought an immovable property jointly with the respondent which purchase was financed with a mortgage bond from First National Bank, instituted an action (the action) which arose from this joint endeavour, against the respondent on 24 June 2010 for the payment of the amount of R225 350.00 plus interest as the enforcement of a contract between them, alternatively, the respondent's enrichment which resulted from the intervening party paying the aforesaid amount to First National Bank on the respondent's behalf. The respondent entered appearance to defend the action on 20 August 2010. The intervening party thereupon, on 9 September 2010 gave notice to the respondent of an application for Summary Judgment, which application was set down for hearing on 19 October 2010.

[4] While the intervening party's action against the respondent was pending, on 8 September 2010, the applicant deposed to an affidavit in support of the application for the sequestration of the respondent's estate. The application was launched on 14 September 2010 and was set down for hearing on 13 October 2010 on which date an order was issued placing the respondent's estate under provisional sequestration with an initial return day on 10 November 2010. The provisional order which was issued six cays before the hearing of the application for Summary Judgment, had the effect of suspending the intervening party's action against the respondent.

[5] Apart from the fact that the intervening party is a creditor of the respondent, she also has a direct and substantial interest in the application for sequestration. The interest is a legal interest in the subject matter of the application which directly impacts on the intervening party's claim and also on the action she has instituted to enforce the claim against the respondent.

[6] The intervening party is therefore given leave to intervene in the sequestration application.

[7] The next question is whether provisional sequestration order should be discharged.

[8] The intervening party contends that no case has been made out for the sequestration of the respondent's estate. In particular, Ms. Viljoen who appeared on behalf of the intervening party submitted that the facts demonstrate that not only is this a so-called friendly application for sequestration, but that the sequestration of the respondent's estate will not be to the advantage of creditors and that the purpose of the application is to afford him relief from his creditors.

[9] This is clearly what is loosely called a friendly sequestration. The applicant concedes as much but denies that the purpose of the application is to afford the respondent unfair relief from his obligations. He contends that the purpose of the sequestration is to benefit the respondent's creditors and that he bona fide wishes to share pro rata with other creditors in any dividends that may be obtained by means of the sequestration process.

'A Court should, I consider, be on its guard against it. Because of this, and when the signs are there, a Court may be forgiven for requiring rather more from a friendly petitioner in the way of establishing his claim than it may otherwise do'.

[12] The relevant facts related by the applicant are the following. The applicant and the respondent have known one another on a business and personal level since 2005. The applicant says that he knew that the respondent had been involved in a number of successful and lucrative business ventures. However, in September 2009. in order to assist the respondent who had become financially insecure and also to make use of the 'considerable business network contracts' the respondent had built up over the years, the applicant employed the respondent as a sales and marketing assistant in a new business started by the applicant. However, when the respondent's financial position remained precarious, he approached the applicant for a personal loan 'so that he can make ends meet, with a promise of speedy repayment from funds to be realised from a business venture in which he was involved'. Due to their 'trust relationship' the applicant made a personal loan to the respondent without seeing the need to question him about the details of the business venture. He took his promise to repay the loan promptly at face value, The applicant then proceeded to make monthly loans to the respondent from March to August 2010. He did so because he felt sorry for the respondent and firmly believed that he would repay him. The loans came from the applicant's personal loan account in his business. In August 2010 the applicant became nervous when the monies being advanced by him continued to escalate without any indication, barring empty promises, that repayment would be forthcoming. This led to the applicant demanding in an e-mail that a date for the repayment of the loans be fixed. The respondent replied by e-mail on 30 August and again on 7 September 2010, first expressing the hope that he will be given more time and, in the second, stating that he cannot pay the loans back to the applicant.

[13] The applicant then established through enquiries made through his legal representative that the respondent had a bad credit record with unsatisfied judgments and amounts written off by other creditors. He also established through the accounting officer of his business that he had, since March 2010, advanced an amount of R30 000.00 to the respondent which amount had been debited against his loan account of the business. As proof of the amount advanced to the respondent, the applicant annexed a written statement by the bookkeeper of the business to that effect.

[15] It is be noted, as was pointed out in argument by Ms. Viljoen, that the applicant's attorney in the sequestration application is the same attorney who acts for the respondent in opposing the intervening party's action against him. The applicant further recounts his attorney's advice that the respondent's e-mail admission that he was unable to repay the loan constituted an act of insolvency as contemplated by section 8 (g) of the Insolvency Act 24 of 1936 and that in order to prevent the respondent from borrowing further monies from third parties, the applicant should urgently bring sequestration proceeding against the respondent. He was advised that it would not be in the best interest of the body of creditors for the respondent to incur further debts.

[16] Dealing with the respondent's creditors the applicant states that as far as he was aware from the credit search, the only other known creditors of the Respondent totalling approximately R20 450.00, were:

2. Third Parties			R20 450.00 

[17] In the context of a friendly sequestration it is significant that although sharing the same attorney with the respondent, the applicant did not disclose the intervening party's action for the recovery of a substantial amount far in excess of the claims of the other creditors. The action had progressed to the point that the respondent entered appearance to defend and the intervening party had applied for Summary Judgment at the very time that the applicant, on the advice of his attorney, launched the application for the sequestration of the respondent's estate.
[18] In setting out the assets of the respondent in his affidavit in support of his application for sequestration, the applicant recounts how at a chance encounter, during the weekend before he deposed to his affidavit, with a mutual acquaintance of the respondent, one Jakob Steenkamp, he happened to mention that the respondent could not repay money he owed him and how Steenkamp in reply mentioned that he fortuitously happened to hold an amount of R10 500,00 of the respondent on the respondent's behalf for unforeseen expenses. There is no affidavit by Steenkamp confirming this fact nor is there an affidavit by the applicant's attorney stating that the amount is held in trust. The applicant further states that, to the best of his knowledge, the respondent does not own any immovable property which could form part of the insolvent estate and that the respondent was currently living in rented accommodation and that apart from the funds held by Steenkamp and the furniture in the rented accommodation, the respondent owns no other realisable movable property. In addition, the applicant states that to the best of his knowledge the respondent's expenses far exceeded his income.

[19] On the aforesaid basis, the applicant then estimated the dividend to creditors to be 20. 81 cents in the Rand. However, if the intervening party's claim of R225 350.00 is brought into reckoning and the costs of the administration are added, the dividend shrinks to practical insignificance.

[20] Once the provisional order of sequestration was granted and after the present application to intervene and oppose the granting of a final order of sequestration was launched and served on the applicant, the applicant filed a supplementary affidavit in the sequestration application wherein he states that the respondent had now provided him with a list of his movable assets which consist of wearing apparel, bedding and household furniture comprising a television set, surround sound system, television cabinet, couch and storage chest all of which he states is conservatively valued at approximately R3 500, 00. In addition the respondent has, according to the applicant, now informed the applicant that he owns a diamond pendant which, according to a valuation obtained by his attorney, is worth R28 850, 00. The valuation appears on the face of it to be a replacement value valuation and does not show that the pendant is likely to yield that amount in the administration of the respondent's insolvent estate. The applicant further reports that the respondent had since the launch of the application also informed him that he was prepared to renounce in favour of his creditors any protection from execution that he may have in respect of the pendant. In addition, the respondent is stated to have informed the applicant of an outstanding debt on his Virgin credit card of R27 000, 00 which, on the applicant's calculation of the respondent's creditors increased his debts to R77 450, 00. On the credit side, however, the applicant reckons the respondent's assets to have increased, after deduction of trustees' fees of R3000, 00, by R33 350, 00. All in all, this left an expected dividend to creditors of 43 cents in the Rand, the applicant claims. Again there is no mention in these calculations of the intervening party's claim of R 225 350, 00.

[21] I am not satisfied that the applicant has made out a case for the sequestration of the respondent's estate. While the respondent appears to be insolvent, the applicant has not shown on a balance of probabilities that there is an advantage to creditors in the sequestration of the respondent's estate. The applicant has also failed to disclose all material facts, in particular, the intervening party's action against the respondent. This is clearly a fact which might have influenced the court in deciding to issue a sequestration order. In addition, and given the timing of the launch of the application and the failure to disclose the action by the intervening party, I conclude that the application was brought to provide the respondent with relief from his main creditor, the intervening party. In the circumstances, the provisional order falls to be discharged.

[22] The intervening party seeks a costs order against the applicant on the attorney and client scale. In my view, the intervening party's success in obtaining the relief sought by her entitles her to a costs order against the applicant who has opposed the relief sought by her and has persisted in his application for the final sequestration of the respondent. However, although this is a borderline case, I do not think that this is a case where attorney and client costs should be awarded to the intervening party.

[23]   In the result the following orders are made:
1.	The intervening party (du Plessis) is granted leave to intervene in the application to sequestrate the estate of the respondent Human;
2.	The provisional order of sequestration issued on 13 October 2010, as extended, is discharged;
The applicant Nel is ordered to pay the intervening party's costs in both the application to intervene and her costs of opposition to the sequestration application.

W.J. LOUW
Judge of the High Court