IN THE HIGH COURT
OF SOUTH AFRICA (TRANSVAAL PROVINCIAL DIVISION)
Case number: 33815/05
the matter between:
TECHNOLOGIES LONDON LIMITED
JOHANNES BAREND DEYSEL
is the extended return day of an application for the sequestration
26 May 2006 this court granted a provisional
order and a rule nisi calling upon the respondent to show
why his estate should not be finally sequestrated.
application is based upon an act of insolvency in terms of Section
of the Insolvency Act, No. 24 of 1936 (as amended) ("the
Act") which provides that:
"A debtor commits an act of insolvency... if he gives notice in
writing to anyone of his creditors that he is unable to pay
alleged notice in writing is a letter which the then attorney of the
wrote to the attorney of the applicant on 10 August 2005.
applicant emphasizes the following passage from such letter as
the notice of inability to pay a debt of R5 million allegedly due,
and payable to the applicant:
It is in the spirit of the aforesaid that our client proposes the
Our client accepts that there
is an amount of R5 000 000,00 which is due to be paid to Melvill
and\or BTL London;
That in terms of the settlement agreement signed by the parties, the
amount is payable on or before the 16th August 2005;
Our client, as your clients are
no doubt aware, is currently unemployed and has no business or
trading opportunities in which to
affect payment of the sum of R5
000 000,00 to your client;
Our client subsequent to his resigning as a director of BTL and
subsequent to the settlement agreement being concluded during this
period has attempted to establish a venture with a third party, the
result will be that if this venture comes to fruition, our
will be in a position to liquidate the amount of R5 000 000,00 due
to Melvill/BTL together with interest at the rate of
15,5% per annum
as from 17 August 2005 to date of payment."
applicant contends that such debt arises from a settlement
(specifically clause 1.12 thereof) concluded on 18 April 2005
terms whereof the respondent undertook to effect payment of R5
to the applicant.
applicant goes further by pointing out that on the evidence of the
the respondent is factually insolvent in that his liabilities
R55 million whereas the only asset he has it an interest in a
motor vehicle which is financed. On behalf of the respondent it
indeed argued that there is no pecuniary advantage to creditors in
my opinion there can be no doubt that the respondent is factually
Mr Suttner SC on behalf of the applicant urged me to take
fact into account in exercising my discretion whether to grant a
order or not.
Suttner SC furthermore directed my attention to the following
from the letter of 10 August 2005:
client would undertake as part of its proposal to your client, the
from the proceeds which our client received from his venture, of
which your client is aware of, 50% of the amount which our
would receive would be paid to your client in reduction of the debt
of R5 million;
scenario would proceed until the capital amount together with
interest was liquidated in full;
client would then assist your client (BTL) London/Melvill with
whatever assistance our client may give, in resolving any issue
outstanding with Telkom and your client, as well as resolving issues
which may have arisen with Mafulong as well;"
Suttner SC argued that such proposal constitutes an act of
within the ambit of Section 8(e) of the Act in that it offers to
an arrangement with a creditor of the respondent releasing him
from his debts.
Burman SC on behalf of the respondent opposed the relief sought
the basis that there is no deed of insolvency and that sequestration
his estate will not be to the benefit of the respondent's creditors.
is apposite to deal with the various aspects raised by the
his heads of argument Mr Burman SC initially drew my attention to
fact that the letter of 10 August 2005 was addressed without
He during the argument of Mr Suttner SC abandoned such
respondent contends that in concluding the settlement agreement
respondent had no intention of assuming any monetary obligation
the applicant or any other entity. The only thing the respondent
to convey is that he is prepared to facilitate recovery of the
of R5 million. The respondent contended that there was no
for him to have assumed liability towards the applicant or any
Burman SC submitted that the applicant would not
the letter of 10 August 2005 as
a notice that the respondent
unable to pay his debt. Mr Burman SC further submitted that by
of the fact that it reflects Melvill alternatively BTL as the
cannot be an unequivocal indebtedness.
argument I asked Mr Burman SC to indicate who the indebted
is if not the respondent. Mr Burman SC answered that a company
the name Orion Telecom Investment Holdings (Pty) Ltd ("Orion")
role in the circumstances leading to the deed of settlement was
argued by Mr Burman SC) was the indebted party.
cannot accept such suggestion by Mr Burman. The fact of the matter
that Orion was not a party to the settlement agreement of 18 April
regards the fact that the letter of 10 August 2005 refers to
alternative to the applicant I am of the opinion that it does not
Mellvill favoured the applicant with
evidence in the present application and did not claim to be
creditor on any basis. In paragraph 8.1.6 of the answering affidavit
respondent indeed reflects the indebtedness as towards the
am not convinced by the argument that the letter of 10 August 2005
an attempt to find a commercial solution to a dispute not a deed of
insolvency. In clause 1.12 of the settlement agreement is
shall deliver all documentation held by him either directly or
through Evan Scop Incorporated relating to Orion Telecommunications,
and shall arrange for Evan Scop Incorporated to transfer to a
nominated trust account the R5 000 000,00 (five million rand)
paid into the trust account for Evan Scop Incorporated,
intended by BTL London
as a deposit for the Orion transaction; alternatively, these funds
are to be paid to BTL London within 120 days, and pending
Deysel shall register a covering bond over immovable property in
favour of BTL London, to secure the debt. Deysel shall
immediate steps to register the bond, and shall pay all costs
consequent upon the registration of the bond;"
wording is clear and unambiguous.
clear and unambiguous terms of clause 1.12 was accepted by the
find the argument on behalf of the respondent unconvincing. I point
that the obligation to pay the R5 million that is reflected in
of the settlement agreement is not conditional upon the respondent
such amount of money from Orion. In my opinion the letter of
August 2005 is
a clear notice that the respondent is unable to pay
debt. The debt is all the more clear when the factual context,
the settlement agreement, is taken into account. It cannot be
as anything else.
respondent furthermore asserted that the sequestration of his
will not benefit his creditors.
12(1) of the Insolvency Act provides:
at the hearing pursuant to the aforesaid rule nisi the court is
is reason to believe that it will be to the advantage of creditors
of the debtor if his estate is sequestrated
it may sequestrate
the estate of the debtor."
court need not be satisfied that sequestration will be to the
of creditors. The court only has to find that there is reason
believe that it will be to the advantage of creditors.
the benefit of an enquiry is not in itself an advantage to
is not necessary to demonstrate that an enquiry will yield the
is required is a demonstration of a prospect, not a likelihood, that
advantage may accrue to creditors as a result of the respondent's
proof is required in the case of sequestration by a creditor than in
case of a so-called "friendly sequestration".
that passage as my starting point, it will be seen that in the case
of an arms-length transaction a sequestrating creditor
does not have
to set out in its founding affidavit the detail and intensity of
averments required when the nature of the claim
is under scrutiny as
required by Nicolas J in the Klemrock case, although a proper
case should always be made out. It will be sufficient if the
creditor in an overall view of the papers can
show, for example,
that there is reasonable ground for coming to the conclusion that
upon a proper investigation by way of an inquiry
under Section 65 of
the Act a trustee may be able to unearth assets which might then be
attached, sold and the proceeds disposed
of for distribution amongst
Tyres (Pty) Ltd v Brewitt, 1990(2) SA
580 (W) at 583F-G.
applicant has argued that a benefit to creditors on the basis
above flows from a series of facts reflected in the papers
the applicant demonstrated the association of the respondent
eight companies and a close corporation. The applicant has also
the respondent's association with a trust. In general a
a close corporation and a trust is created for a reason,
as vehicle to conduct a business or hold an asset. Usually a
company has a value in itself. It costs thousands of rands to
and incorporate a company.
of being sold for the benefit of creditors. Companies with
losses for income tax purposes are valuable vehicles for the
of businesses with high income tax exposure. The respondent
the answering affidavit testified that two of the above companies
liquidated. He does not state whether he is a creditor of either of
what stage the liquidations have reached or whether dividends
accrued or are likely to accrue in his favour. To my mind an
by a trustee holds out a serious prospect of a benefit to the
creditors. In the case of one company the respondent
his shares in 2003. The respondent does not state the terms upon
he sold his shares, more particularly the price and the manner
payment. I am of the view that it raises reason for investigation
serious prospect of benefit to the creditors.
Suttner SC argued that the relationship between the respondent and
ABD Family Trust warrant an investigation.
is his child the respondent considered himself entitled to
a mortgage bond in favour of the applicant over the trust's
as is reflected in clause 1.12 of the settlement agreement. I
of the opinion that an investigation to ascertain whether the
of the trust is in fact one that rightly belongs to the trust is
It may well be that a proper investigation reveals that such
falls to be returned to the estate of the respondent.
has refrained from taking the court into his confidence in
of the date of acquisition, the value at which the property was
and/or transfered to the trust, the identity of the person who
paid and the identity of the sureties, if any, for the liability of
respondent demonstrated that there is equity of at least
000,00 in the immovable property of the trust. The respondent
not explain why, if that was the amount of the equity, he was in a
to undertake to register a bond for R5 million. In this regard I
into account that a trust will not be allowed to register a bond
property without a surety.
(Pty) Ltd. Apart from the companies already dealt
this is another potential source of a benefit to creditors.
Burman SC on behalf of the respondent has argued that there was
attempt by the applicant to pierce the corporate veil. I am of the
that it is in the nature of an arms-length application that the
will not at this stage be able to do so. For that reason I am of
opinion that such failure is not fatal to the applicant's case.
criticism by the applicant in the replying affidavit as well as in
heads of argument at the provisional order stage of the
of the respondent, the respondent has delivered a
affidavit purportedly to clarify the original answering
affidavit was sworn to on 21 August 2006.
annexed to such supplementary affidavit, a statement which
described as "the latest statement" from BMW Finance.
goes only as far as 5 July 2006.
is not clear what
on 5 August 2006, which was 16 days before the delivery of
supplementary affidavit. The statement reflects that the respondent
a payment of R15 758,00 to BMW Finance on 5 June 2006. That
ten days after the provisional order. If the respondent is pennyless
is not clear on what basis the luxury vehicles is financed. There is
possibility that a creditor, BMW Finance, is preferred over other
are other avenues for pursuit by a trustee. There is no doubt that
respondent has had a massive business interest. I am satisfied that
applicant has set out sufficient facts for this court to have reason
that it will be to the advantage of creditors if the respondent's
applicant has satisfied me on a balance of probabilities that the
requirements of Section 12 of the Act has been met.
Burman SC submitted that even in such circumstances I should
my discretion against confirming the rule by reason of the fact
applicant's case on the alleged indebtedness and the act
insolvency is weak;
applicant's case on the benefit to creditors is particularly
real reason why the application has been brought is to
am of the opinion that by reason of the factual insolvency of the
and the attempt to have an arrangement with creditors I
exercise my discretion against the respondent.
make the following order:
rule nisi issued on 26 May 2006 is confirmed;
estate of the respondent is finally sequestrated;
costs of the application, including the costs of senior
shall be costs in the sequestration.