FirstRand Bank Limited v Coningsby and Another (6749/2021; 6750/2021) [2021] ZAGPJHC 744 (26 November 2021)

SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy

REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NO: 6749/2021

CASE NO: 6750/2021

REPORTABLE: NO

OF INTEREST TO OTHER JUDGES: NO

REVISED:

DATE: 26th November 2021

In the matter between:

FIRSTRAND BANK LIMITED

Applicant

and

CONINGSBY, SARKA Respondent (In 1st Case)

CONINGSBY, PAUL ANDREW

Respondent (In 2nd Case)

Heard: 22 November 2021 - The ‘virtual hearing’ of the Opposed

Application was conducted as a videoconference on Microsoft Teams.

Delivered: 25 November 2021 – This judgment was handed down electronically by circulation to the parties' representatives by email, by being uploaded to CaseLines and by release to SAFLII. The date and time for hand-down is deemed to be 10:00 on 26 November 2021.

Summary: Sequestration applications – Insolvency Act 24 of 1936 – section 8(g) – acts of insolvency – s 12(1) — advantage to creditors — means a reasonable prospect that some pecuniary benefit will result — ‘advantage’

is broad and should not be rigidified – provisional sequestration orders granted.

ORDER

[1]. In case number 6749/2021 (FirstRand Bank v Sarka Coningsby), I make the following order: -

(1) The estate of the respondent, Sarka Coningsby, identity number: [....], married out of community of property to Paul Andrew Coningsby, is placed under provisional sequestration in the hands of the Master of the High Court of South Africa.

(2) The respondent and any other party who wishes to avoid such an order being made final, are called upon to advance reasons, if any, why the Court should not grant a final order of sequestration of the said

estate on the 28th day of February 2022 at 10:00 or as soon as thereafter as the matter may be heard;

(3) A copy of this order must forthwith be served –

3.1 on the respondent personally;

3.2 on the employees of the respondent, if any;

3.3 on all trade unions of which the employees of the respondent are members, if any;

3.4 on the Master;

3.5 on the South African Revenue Service; and

3.6 by publication of a copy of the order once in the Government Gazette and once in the Citizen.

(4) Costs of this application on an attorney and client scale are costs in the administration of the estate.

[2]. And in case number 6750/2021 (FirstRand Bank v Paul Andrew Coningsby), the following order is made: -

(1) The estate of the respondent, Paul Andrew Coningsby, identity number: [....], married out of community of property to Sarka Coningsby, is placed under provisional sequestration in the hands of the Master of the High Court of South Africa.

JUDGMENT

Adams J:

[1]. On Monday, 22 November 2021, I had before me in the Opposed Motion Court these two applications by FirstRand Bank Limited (‘FirstRand’ or ‘the bank’) against Mr and Mrs Coningsby, who are married to each other out of community of Property. FirstRand applies for the sequestration of the respondents on the basis inter alia that they are unable to service a bond in favour of the bank over immovable property owned by them jointly. The relief sought by the bank against the two respondents is identical and based on similar factual matrices and legal arguments. The applications were argued together and the legal principles applicable to both of the applications and the broad factual matrix relevant to each of them overlap considerably. A single judgment dealing with the two applications would therefore suffice and would, in my view, constitute an efficient use of judicial resources.

[2]. As already indicated, these are applications for the provisional sequestration of the estates of the two respondents, Mr and Mrs Coningsby, a couple married to each other out of community of property. The applications, which are opposed by the respondents in person, have their genesis in a mortgage and credit facility agreement concluded between the applicant, FirstRand Bank, and the first and second respondents during January 2012.

[3]. At the time, Mr and Mrs Coningsby concluded an RMB Private Bank Single facility agreement (‘the facility agreement’), in terms of which they were granted a facility in the sum of R2 850 000. They registered a covering mortgage bond in favour of FirstRand over Erf [....], Dainfern Ridge (‘the Dainfern property’).

[4]. During 2016 the respondents breached, for the first, but not for the last time, the terms and conditions of the facility agreement, and despite various indulgences by the applicant and attempts to resolve the respondents’ indebtedness, they remained in breach. During July 2018, the parties concluded a repayment agreement (‘the repayment agreement’), in terms of which the respondents acknowledged the conclusion of the facility agreement and the registration of the bond. They also irrevocably acknowledged that they were indebted to the applicant in an amount of R3 356 286.99, plus interest thereon and legal costs.

[5]. Although the debt was then due, owing and payable, it was recorded that the respondents were unable to immediately repay the debt, but the parties agreed to an extension for the repayment in accordance with the repayment agreement. Unfortunately, the respondents failed to make payment in accordance with the repayment agreement and, despite further indulgences by the applicant and attempts to resolve the debt, the arrears on the account were not brought up to date. Evidently, the respondents were simply unable to make payment in terms of the original facility or, for that matter, in terms of subsequent agreements concluded with the bank aimed at accommodating the respondents.

[6]. On 21 August 2017, Mr Coningsby sent an email to FirstRand Bank’s attorneys, requesting a ‘grace period’ within which to sell another piece of immovable property owned by them. The idea was that the proceed of the sale of that property would be utilised to bring the account up to date. Similar communiques were subsequently addressed to the bank by Mr Coningsby in which he requested extensions to bring the account up to date. So, for example, on 20 October 2020, Mr Coningsby addressed another email to FirstRand and again proposed to make payments (of the already due and payable debt) over a period of time.

[7]. Mr Coningsby’s liabilities amount to over R5 million, including the amount of over R4 million owed to FirstRand. Mr and Mrs Coningsby have been unable to make payment to the bank of the requisite (agreed upon) amounts since as far back as 2017 and the position has not changed. The last payment received by the bank was an amount of R30 000, which was paid on 4 June 2019. No further payments have been made since then.

[8]. The question to be decided in this application is simply whether FirstRand has made out a case for the sequestration of the respondents.

[9]. In opposing the application for their provisional sequestration, the respondents inter alia dispute that their sequestration would be to the advantage of the general body of creditors. Even if it is, Mr Coningsby seeks to persuade the court to exercise its residual discretion to refuse the sequestration order sought, on the basis he should be afforded a further opportunity to endeavour to dig them out of the financial hole that they find themselves in.

[10]. The sequestration applications are based on the respondents’ factual insolvency and their acts of insolvency. The respondents, so FirstRand contends, are unable to make payment of their debts and it will be to the benefit of their creditors if their estates are sequestrated.

[11]. As regards the acts of insolvency, it is the case of FirstRand that in terms of the repayment agreement, it was recorded, on 27 July 2018, that the respondents were unable to immediately repay their debt to the bank. This, so FirstRand argues, means that the respondents have given notice in writing to it that they are unable to make payment of their debt. This is the very definition of an act of insolvency, so it was submitted on behalf of the bank.

[12]. I agree. Support for this contention is to be found in Court v Standard Bank of SA Ltd; Court v Bester NO and Others[1], in which the AD had the following to say at 134A-B:

‘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. ... 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 ...’.

[13]. I therefore have little doubt that Mr and Mrs Coningsby performed an act of insolvency in terms of section 8(g) of the Insolvency Act[2] (‘the Insolvency Act’). On that basis the applicant is entitled to an order for the sequestration of their estates.

[14]. Moreover, as contended by FirstRand, the estates of both of the respondents are factually insolvent. In that regard, a simple arithmetical calculation indicates that Mrs Coningsby’s assets, on a best case scenario, are worth approximately R2 625 000. Her liabilities, on the other hand, amount to approximately R4 229 531. Her liabilities therefore exceed her assets by some R1 604 000. The same applies to Mr Coningsby. Both of them are evidently unable to make payment of their debts as and when it falls due, which means that they are also commercially insolvent.

[15]. As for the benefit for creditors, I agree with the applicant’s submissions that a scrutiny of the assets of the respondents and their liabilities, indicates that a realisation of their interest in the immovable properties would render a significant dividend for distribution to the creditors.

[16]. It is also trite that an applicant may establish advantage to creditors on grounds such as the avoidance of unfair distribution of the respondents’ assets, interrogation of the respondents, investigation of their affairs, coupled with a not unreasonable

prospect that assets may be revealed or recovered as a result of the investigation. In that regard see: Meskin and Co v Friedman[3].

[17]. I therefore agree that there is reason to believe that the sequestration of the estates of the respondents would be to the advantage of their creditors.

[18]. In the all the circumstances, the requirements of section 12(1)(c) of the Insolvency Act are accordingly met.

[19]. As regards the defences raised by Mr and Mrs Coningsby to the sequestration applications, FirstRand submits that no genuine, reasonable or bona fide defences have been raised.

[20]. Mrs Coningsby avers that, prior to signing any contract, her husband (who has studied law) assured her that the contract that she signed was ‘safe’ for her to sign. This included the facility agreement and the repayment agreement. She trusted her husband in this regard and did not obtain independent legal advice prior to signing contracts. It is not her case that she was in any way forced or coerced into signing any of the agreements. She did not sign the agreements under duress. Significantly, Mrs Coningsby recorded in the repayment agreement that the restrictions contained therein are fair and reasonable and that she had not been unduly influenced into signing the repayment agreement.

[21]. That, in my view, is the end of the so-called defence raised by Mrs Coningsby. There is no merit in such defence. In any event, it is a well-established principle that a person who signs a contract will be bound by its contents. It is expected of a contracting party to know the contents of a contract that she is signing. She will still be liable under the terms and conditions of that contract even if she did not read it. There is a duty on the signatory of a contract to make sure that she understands the terms and conditions before signing it.

[22]. I am therefore of the view that the applicant has met the three jurisdictional requirements for a provisional sequestration order as required by the provisions of section 9 of the Insolvency Act. It has established that it has a liquidated claim in excess of R100 against the respondents; the respondents committed an act of insolvency; in addition, the respondents are factually insolvent and unable to pay their debts; and the sequestration of the estate would be to the benefit of the creditors.

[23]. That means that orders sequestrating the estates of the respondents should therefore be granted, unless the respondents have established special or unusual circumstances that warrant the exercise of the Court's discretion in their favour. See FirstRand Bank Ltd v Evans[4].

[24]. The respondents, who appeared in person at the hearing of the applications, urged me to exercise my discretion to refuse the sequestration orders, and instead to postpone the applications in order to afford the respondents more time to right their affairs and to repay FirstRand. Mr Coningsby suggested that such a remedy was appropriate.

[25]. To my mind, this consideration is open to doubt. In relation to the property, the respondents have, so far, proved unable to find a buyer for it. Their endeavours since 2017 to sell the property have proved futile.

[26]. In the circumstances, I do not find the factors put up in favour of exercising my discretion in favour of the respondents, compelling. They must, moreover, be weighed against the consideration that the respondents have, on the papers, failed to make any payments to FirstRand for more than two years. In the meantime, their debts presumably continue to mount. And FirstRand is entitled to effective relief as against the respondents.

[27]. In the circumstances, I find that a proper case has been made out for the provisional sequestration of the estates of the first and second respondents.

Order

[28]. Accordingly, in case number 6749/2021 (FirstRand Bank v Sarka Coningsby), I make the following order: -

[29]. And in case number 6750/2021 (FirstRand Bank v Paul Andrew Coningsby), the following order is made: -

_________________________________

L R ADAMS

Judge of the High Court

Gauteng Local Division, Johannesburg

HEARD ON:

22nd November 2021 – in a ‘virtual hearing’ during a videoconference on Microsoft Teams

JUDGMENT DATE: 26th November 2021 – judgment handed down electronically

FOR THE APPLICANT: Advocate P G Louw

INSTRUCTED BY:

Werksmans Attorneys, Sandton

FOR THE RESPONDENT IN THE

FIRST CASE:

In person

SECOND CASE:

In person

[1] Court v Standard Bank of SA Ltd; Court v Bester NO and Others 1995 (3) SA 123 (A).

[2] Insolvency Act, Act 24 of 1936

[3] Meskin and Co v Friedman 1948 (2) SA 555 (W) at 559.

[4] FirstRand Bank Ltd v Evans 2011 (4) SA 597 (KZD) at para 27.