CIV/APN/130/80

IN THE
HIGH COURT OF LESOTHO

In the
Application of :

KENNETH
C.S. GRADWELL 1st Applicant

KWAME
OFINAM 2nd Applicant

PINO
GUISEPPE FLORIO 3rd Applicant

J.G.
SMITH 4th Applicant

V

T.S.
LEFALATSA Respondent

REASONS
FOR JUDGMENT

Filed by
the Hon. Mr. Justice F.X. Rooney on the 25th day of January, 1982

Mr. P.B.
Geldenhuys for 1st Applicant

Mr. S.
Harley for 2nd, 3rd and 4th Applicants,

Mr. H.M.
Raubenheimer for the Respondent.

On the
14th December, 1981, I made a final sequestration order against the
respondent. I allowed the costs of the

2nd and
4th applicants against the insolvent estate and reserved for further
consideration the costs of the 1st and 3rd applicants.

These
sequestration proceedings have had a long history. They began on the
7th August, 1980 when the first applicant petitioned
this Court for
an order that the estate of the respondent be placed under
provisional sequestration in the hands of the Master,
The matter was
mentioned before the Court on the 11th August, 1980 and there
followed a series of postponments until the 28th September,
1981 when
a provisional sequestration order was made. The reason for the
tardiness of the first applicant has become apparent from
the
numerous affidavits filed.

Section
10 of the Insolvency Proclamation lays down the conditions which are
required to exist before this Court may make a provisional

sequestration order. Included is the requirement that the Court must
be of opinion that prima facie there is reason to believe
that it
will be to the advantage of the creditors of the debtor if his estate
is sequestrated. Not only should the petition include
such an
allegation, but, it must contain information to enable

2

the Court
to form an opinion on the matter of advantage to creditors (Meikles
(Gwelo)(PVT) Ltd v. Potgieter 1957(2) S.A. 20).

The first
applicant complied with this requirement and stated that it was in
the interest of the respondent's creditors that a trustee
be
appointed to take control of the assets of the respondent and to
realise the same and take further personal assets and preserve
and
distribute them equitably among the creditors. The first applicant
went on to allege that the trustee could investigate and
hold an
inquiry in regard to any undue preferences which may have been made
by the respondent as envisaged in Sections 29, 30 and
31 of the
Insolvency Proclamation.

Having
thus proclaimed that he was acting in the interest of the creditors
of the respondent generally, the first applicant entered
into
negotiations with the debtor in the expectation that he would secure
thereby a settlement of the debt due to him without regard
for the
interests of the other creditors. The first applicant negotiated with
a third party (who stated he was acting on behalf
of the respondent)
for the settlement of his claim by the acceptance of diamonds to the
value of M53,000. The first applicant alleged
in his petition that
the respondent was indebted to him to the extent of M84,860.

Not only
did the negotiations between the first applicant and the respondent
fail to achieve a result satisfactory to the former,
but they enabled
the latter to claim in his opposing affidavit that he had discharged
his indebtness to the first applicant by
handing over to him certain
diamonds in full settlement of his claim. For this Court to have
resolved that issue between the parties
would have entailed the
taking of oral evidence. Insolvency proceedings are not a proper
forum in which to resolve disputed claims.
(in re Gold Hill Mines
1883 23 Ch D 210 and Diamandis v. Speedy Lines Holdings 1975 (1)
B.L.R. 70).

There was
no dispute about the indebtness of the respondent at the time that
the petition was presented to this Court. It was the
subsequent
activity of the first applicant which created a new situation. I see
no reason why the general body of creditors should
be asked to bear
the first applicant's costs on this account in the circum­stances
I have described. He has only himself to
blame,

3

if having
set the law in motion, he applied the brakes in a futile endeavour to
achieve an advantage for himself. I make no order
for costs in favour
of the applicant.

On the
12th December, 1980, the second and third applicants applied by way
of notice of motion for leave to join as petitioners
in the case
instituted by the 1st applicant. Although the motion was opposed by
the respondent, leave was granted on the 28th September,
1981 when
the provisional sequestration order was made. The 3rd applicant
alleged that the respondent was indebted to him in respect
of money
lent as follows :

1. On
   the 10th June, 1978 R13,000

   
   

2. On
   the 15th Oct., 1978 8,000 (o) On the 8th Feb., 1979 2,200 As
   evidence of this indebtness, the 3rd applicant placed before the

   Court three cheques namely :

   
   

1. One
   for R13,000 dated 14th June, 1978

   
   

2. One
   for R8,000 dated 21 st Oct., 1978 and

   
   

3. One
   for R2,200 dated 12th Feb., 1979 all signed by the respondent and
   made payable to cash or bearer. None of the cheques was
   presented
   for payment.

   
   

In an
affidavit filed in opposition, the respondent admitted that he had
borrowed money from the 3rd applicant against a pledge
of his Jaquar
X J 6 motor vehicle. He claimed that all these loans had been repaid
by him and on each occasion he had redeemed
his security. The cheques
were intended to be acknowledgements of his indebteness. Once again
it would not have been possible for
this Court to have resolved the
issue raised by the respondent without hearing oral evidence. The 3rd
applicant has not chosen
to proceed on an obvious and ascertainable
legal claim capable of quick and ready proof. (Diamandis v. Speedy
Lines Holdings, supra).
I take the view that the intervention of the
3rd applicant was unnecessary and did not contribute to the progress
of the action
taken , nor could it be said to have influenced the
result in any material way. In the circumstances, I am not prepared
to order
that the 3rd applicant's costs be paid out of the assets of
the insolvent estate of the respondent.

4

The
second applicant obtained an order for costs in this Court in
CIV/T/134/77 and holds two certificates from the taxing master,
the
first dated 13th November, 1979 for M4314.93 and the 2nd on the 16th
July, 1980 for M118.61. In addition he has a claim for
interest
amounting to M378.40. In his replying affidavit dated the 6th
February, 1981, the respondent admitted his indebtness to
the 3rd
applicant in the amount claimed and stated "I am even up to day,
prepared to pay this said gentleman".

The 2nd
applicant relied upon an act of insolvency in terms of Section 8(b)
of the Insolvency Proclamation. He alleged that he issued
execution
against the property of the respondent and that the Deputy Sheriff on
the 7th December, 1979 made a nulla bona return.
This was repeated on
the 1st July, 1980 with a similar result.

The first
nulla bona return reads "The defendant has got no attachable
assets save his house furniture which is under H.P.
Agreement with
Bradlows of Bloemfontein". The second nulla bona return states
"The defendant has failed to satisfy the
demands in not showing
whether he has any attachable assets. The house is still registered
in favour of Lesotho Housing Corporation".

In reply,
the respondent contended that the return of service made by the
Deputy Sheriff was not correct in that he had immoveable
property
registered in his name namely site 431, New Europa, district of
Maseru. He further alleged that he had moveable property
which could
be attached to satisfy the above mentioned debt. He did not say where
these movables were to be found or what they
were. In support an
affidavit was filed by the Deputy Sheriff concerned. He said in
regard to his return of service dated 7th July,
1980

"I on his (Lefalatsa's) request made a personal search at the
Registry of Deeds on the above mentioned date (5-2-81) and found
that
site 431 situated at New Europa Maseru had been registered in his
name since 15th April, 1980. When the return of service
dated 1st
July, 1980 was made, the information that the property was registered
in the first respondent's name was given to me
by the staff of the
Registrar of Deeds office. I now believe that this information was
incorrect".

5

An act of
insolvency if alleged must be proved. As Aguda C.J. said in African
Gate and Fence Works v. Andrew Hajionnou 1974(2) B.L.R.
29 at 30

"In my view clear proof is required to establish the fact that a
respondent has committed an act of insolvency. See Corner
Shop (Pty)
Ltd. v. Moodley 1950 (4) S.A. 55 especially at 59. As Roper. J.,
pointed out in that case which concerned a similar
provision of a
South African Act, 24 of 1966, two distinct types of acts of
insolvency are contemplated by the provision. In respect
of both
types there must be an existing sentence of a Court of competent
jurisdiction which the respondent has not satisfied. The
first act
requires that the Deputy Sheriff must have required the respondent to
satisfy the judgment debt and the respondent must
have failed to do
so. Furthermore the Deputy Sheriff must have required the respondent
to point out to him sufficient disposable
property to satisfy the
judgment debt and the respondent must have failed to point out such
property. In this case there is nothing
to indicate that the Deputy
Sheriff ev asked the respondent to satisfy the debt or to point out
his disposable propety. I agree
with Mr. Ettlinger that disposable
property must be distinguished from mere possessions and that a
judgment debtor may not think
of his money in the bank or other
incorporeal property as part of his possessions. This argument is
more valid in this case where
the petitioner in paragraph 6 of his
petition has alleged that the respondent was carrying on business and
that he has several
lucrative contracts to execute and that "he
is or will be in receipt of substantial sums of money".

The second act of insolvency is where it appears from the return made
by the Deputy Sheriff that he had not found sufficient disposable

property of the respondent. This second act of insolvency may come
about where the Deputy Sheriff was unable to find the respondent
for
example, having absconded from the country and the Deputy Sheriff has
made a return concerning the disposable property of the
respondent
and this if found to be insufficient to satisfy the judgment debt. As
I have taken the view that what the law prescribes
is disposable
property, not possessions, it is clear therefore that there is no
proof that the respondent had committed an act
of insolvency either
of the first or of the second type. As Botha, Judge President of the
Orange Free State Provincial Division
of the Supreme Court of South
Africa, said in Lotzof v. Raubenheimer 1959(1) S.A. 90 at page 92, it
is not the words Nulla Bone
or the form of the document on which they
appear which are of improtance, but whether the facts necessary for
establishing either
act of insolvency as set out in Section 8(b) have
been proved. In this case the evidence as disclosed by the return of
the Deputy
Sheriff does not establish either of the two acts of
insolvency as set down in this section. The words Nulla Bona carry no
magic
in them: there must be evidence that no sufficient disposable
property to satisfy the debt was found."

6

Applying
this principle to the first return of the Deputy Sheriff, it is to be
noted that he did not say that he required the respondent
to satisfy
the judgment debt and that the letter had failed to do so. Without
disclosing the source of his information the Deputy
Sheriff states
that the defendant has no "attachable assets". Disposable
property and attachable assets mean much the
same thing. The Deputy
Sheriff uses the same phrase in the return dated 1st July, 1980. In
the second return reference is made
to a failure on the part of the
respondent to satisfy a demand to show whether he had attachable
assets. The Deputy Sheriff made
a reference (which he acknowledges to
be an error), to the respondent's house being "registered in
favour of Lesotho Housing
Corporation". The return is made by a
layman. The reference to the Lesotho Housing Corporation suggests
only one of two possibilities
either that the house was owned by the
Lesotho Housing Corporation and had not been transferred to the
respondent or there was
a bond on the house in favour of the Lesotho
Housing Corporation.

The
respondent has succeeded in establishing that he was the registered
owner of the Land on the 1st July, 1980. He has made no
reference
whatsoever to the existence of any bond on the property. If he was
the holder of free and un­encumbered property
as at the 1st July,
1980 then he had at his disposal assets sufficient to satisfy the
relatively small debt then due to the second
applicant. Although the
respondent has gone to the trouble of obtaining a correction from the
Deputy Sheriff, he has carefully
refrained from asserting the exact
position. He does not say that the land is free of mortage bonds.

If
immoveable property is mortgaged it cannot be regarded as disposable
property. (Fourie v. Bezuidenhout 1932 T.P.D. 110).

Although
there are deficiancies in the Deputy Sheriff's returns to the writs
of execution, I propose to take the broad view and
I find that they
consitute nulla bona returns sufficient to meet the requirements of
Section 8 of the Insolvency Proclamation.

If my
conclusion in regard to the Deputy Sheriff's returns is not correst,
this is a case where, even if the

7

debtor
had not committed an act of insolvency, the preponde rence of
evidence leads me to the conclusion that he is in fact insolvent

under Section 12 (1 )(b) of the Insolvency Proclamation. It is not in
dispute that the respondent has outstanding judgment debts
which he
has not paid for several years. The respondent has not placed before
this Court information as to the property he possesses
and which
would be sufficient to satisfy his liabilities.

He gives
his own estimate of the value of his estate without any mention of
his liabilities. He gives no explanation as to why he
has not paid
his debts. As Innes C.J. said in the case of De Waard v. Andrew &
Thienhans Ltd 1907 T.S. 727 at 733 "To
my mind the best proof of
solvency is that a man should pay his debts; and therefore I always
examine in a critical spirit the
case of the man who does not pay
what he owes". See also Langstone v. Lambert 1948 (4) S.A. 392.

On the
14th October, 1981, the 4th applicant intervened in these proceedings
in support of the other applicants. He has a judgment
against
respondent dated the 18th September, 1978 and the amount due is
R8,514. He was concerned (not without reason) that the
respondent
might reach a settlement with the other applicants or any one of them
prejudicial to his interests. The respondent admits
owing the 4th
applicant the money claimed. The 4th applicant was fully justified in
intervening in these proceedings and he should
be allowed his costs
out of the insolvent estate,

F.X.
ROONEY

JUDGE.

2nd
February, 1982.

Attorney
for the 1st Applicant : Messrs. Du Preez, Liebetrau & Co

Attorney
for the 2nd,and 3rd Applicants : Mohaleroe,Sello & Co.

Attorney
for the 4th Applicant : Messrs. Du Preez, Liebetrau & Co.

Attorney
for Respondent: E.G. Cooper & Sons,