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									IN THE HIGH COURT OF SOUTH AFRICA

DURBAN AND COAST LOCAL DIVISION




                                                         CASE NO.:- 2867/2008

Ex parte:-   JOZEF MARKUS FOURIE

__________________________________________________________________

                                   JUDGMENT

                                                          Delivered on: -

                                    July, 2008



NAIDU AJ :-



[1]     Rensco Motors S.A. (Pty) Ltd. (“Rensco Motors”) conducted the business

of an authorised dealer in Mercedes Benz and other motor vehicles in Port

Shepstone, on the South Coast.     Rensco Motors had a dealership agreement with

Daimler Chrysler South Africa (Pty) Ltd. (“Daimler Chrysler”).



[2]     Prior to 2002 the Applicant was a director and shareholder of Rensco

Motors. The Applicant, his brother and two other persons were involved in the day

to day running of this business.
                                                                             Page 2




[3]     So successful were their entrepreneurial endeavours, that in 2000 the

Applicant and the other directors of Rensco Motors took the decision to raise the

profile of the business by housing it in a brand new building specifically suited to

the needs of the motor dealership.



[4]     Rensco Properties (Pty) Ltd. (“Rensco Properties”) which was then

owned by the Applicant and his brother, put up this new building on property

owned by it with money borrowed against the security of a mortgage bond.



[5]     As luck would have it, fortune did not favour the Applicant and the

co-directors of Rensco Motors.        The high cost of building and formidable

challenges in the new motor vehicle market in 2001/2002, which the Applicant

and his associates did not bargain for, resulted in severe cash flow problems.



[6]     The high rentals paid by Rensco Motors to Rensco Properties to enable

the latter to fulfil its bond obligations compounded the problem.       Lower than

anticipated motor vehicle sales with substantial amounts of money being tied up in

stock and spare parts added to the Applicant’s woes.
                                                                           Page 3




 [7]     Towards the end of 2001 the cash flow problems of Rensco

Motors reached crisis proportions. With optimism, which later turned

out to have been misplaced, the Applicant took a decision which

he describes as “the worst decision” of his life.



[8]      Rensco Motors had a financing arrangement with Daimler Chrysler

regarding the stock of new motor vehicles. The essence of the arrangement was

that the new vehicles on the showroom floor were sold by Daimler Chrysler to its

finance division which, in turn, sold these vehicles to Rensco Motors under an

instalment sale agreement referred to as a ‘floor plan’. In terms thereof Rensco

Motors had to pay Daimler Chrysler for a new motor vehicle upon that motor

vehicle being sold by Rensco Motors to a customer.



[9]      The Applicant bound himself as surety for all the obligations arising from

this arrangement with Daimler Chrysler in respect of stock, the floor plan and

spare parts.



[10]     Rensco Motors also had an arrangement with Wesbank in regard to the

financing of motor vehicle purchases, in terms of which arrangement, Wesbank,

which also had a representative permanently stationed in the showroom, also
                                                                             Page 4



offered motor dealers including Rensco Motors, the same sort of floor plan

financing as was offered by Daimler Chrysler.

[11]          It was at this juncture that the Applicant abandoned his morality and

decided to resort to crime to try and free himself from the shackles of the financial

predicament in which he found himself.



[12]      He decided, as a temporary measure, so he says, to finance the new motor

vehicles which had already been financed by Daimler Chrysler and then to finance

the same vehicles through the Wesbank floor plan. Through this double financing,

Rensco Motors was able to generate sufficient cash to pay its obligations.



[13]      This respite was short. In a matter of months the frauds were uncovered.

The Applicant was confronted and he admitted his wrongdoing. The dealership

agreement was cancelled by Daimler Chrysler and the business was immediately

closed.    Rensco Motors was liquidated.



 [14]     Daimler Chrysler and Wesbank called upon the Applicant to

pay what was owed to both by virtue of the suretyship. He was

unable to do so.              Then       followed an application for his

sequestration.
                                                                               Page 5




 [15]       By an order of this Court, the Applicant’s estate was

sequestrated on 7th June, 2002.




 [16]       On 12th December, 2002, the Applicant was convicted of

fraud in the Regional Court in Port Shepstone.



[17]        The Applicant applies for his rehabilitation in terms of Section

124(2) (c) of the Insolvency Act No. 24 of 1936 (“the Insolvency

Act”), on the following basis:-



        17.1 The fraud for which he was convicted had been

             committed in             relation to his insolvency;



        17.2     More than five years have elapsed since the date of his conviction;



        17.3 More than four years have elapsed since the date of his

                 sequestration.



[18]        Due notice of the application has been given to the Master and to the joint

trustees.
                                                                         Page 6




[19]     The Applicant has complied with the provisions of Section 124(2) of the

Insolvency Act regarding publication in the Government Gazette of the

advertisement signifying his intention to bring the application for his

rehabilitation.

 [20]    Consequent upon receipt of the notice of the application

the trustees reported to the Master in terms of Section 124(4) of the

Act. In all, the trustees furnished three reports.          The first report is

dated 25th April, 2008.         The second report is a supplementary

report and the third report is referred to by the trustees as “trustees’

second supplementary report.”              The position adopted by the

trustees towards the application is plain.            They are of the view

that it would be inappropriate for the Applicant to be rehabilitated

at this stage.        They propose, however, that should this Court

nevertheless resolve to rehabilitate the Applicant, then there should

be an order in terms of Section 219 of the Companies Act No. 61 of

1973, effectively barring him for a further period of not less than ten

years from taking part in the management of any company without

the leave of this Court.
                                                                        Page 7




[21]     The Master’s report records that the trustees have duly

reported in terms of Section 124(4) of the Insolvency Act.                 The

Master refers only to the first report and notes that the trustees are

not recommending the rehabilitation of the Applicant at this stage.

The Master draws attention to sections in the Applicant’s founding

affidavit which sets out the circumstances which led to the

conviction for fraud, the fine of R20 000 and the gaol term of two

years    suspended      for   five   years.       The   Master    makes     no

recommendation, admits lack of knowledge of further facts or

information which could assist the Court and abides its decision.




 [22]    The application is not opposed.            I have a discretion to

either grant or refuse the application or make such other order as I

am empowered by section 127(2) of the Insolvency Act. This

discretion I must exercise judicially and not arbitrarily.             In this

exercise, I shall bear in mind the remarks of Young, J. in Ex parte R.

1966 (1) S.A. p.84 (S.R.) at p. 87G-H:-



        “… in the end the question must be whether in all the circumstances the
                                                                             Page 8



       applicant has satisfied the Court that he has rehabilitated himself in the
       sense that he is worthy of trust in carrying out the functions which he is
       seeking permission to undertake.     The exercise of judicial discretion is a
       far-roving enquiry in the fields of law and morality but ultimately it boils
       down to the exercise of what has been called judicial common sense.”




[23]     In exercising its discretion a Court will be obliged to attach due and

significant weight to the views expressed in the reports submitted by the Master

and the trustee or trustees.


              Ex parte Goshalia 1957 (2) S.A. p. 182 (N) at p. 183E;

              Ex parte Isaacs 1962 (4) S.A. p. 767 (W) at p. 770 D.




[24]     Even if no recommendations are made, in a case such as this, where the

application for rehabilitation is made after the expiration of a period of four years

from the date of sequestration of the estate of the insolvent, the court is under a

duty to itself closely examine the facts and circumstances and arrive at a decision.

If there are other factors which warrant the refusal of the application, the lapse of

time alone can never be a good ground for granting it.



              Ex parte Martens 1951(4) S.A. p.531 (N) at p. 532A.
                                                                                 Page 9




[25]    The onus is of course on the Applicant to show that the discretion should

be exercised in his favour.



              Ex parte Stegmann 1936 (OPD) p. 38 at p. 43;

              Ex parte Koch 1983 (3) S.A. p. 700 (SE) at p. 704D.



[26]    The Applicant has caused a supplementary affidavit to be

filed in order to address the issues raised in the first report of the

trustees.    A further supplementary affidavit by the Applicant was

filed to specifically address the remarks made by the trustees in their

supplementary report regarding the Applicant’s conviction and

sentence for fraud.           I shall revert to this matter later.



[27]    In the founding affidavit the Applicant claims, without any reservations,

to have made a complete surrender of his estate. He even goes on to add that “the

trustees were satisfied that I have made a complete surrender of my estate and that

there was nothing left uncovered nor was I accused of any other fraudulent acts”

after being “thoroughly interrogated” about his affairs.



[28]    The trustees have a completely different story to tell.      It goes like this:-
                                                                           Page 10




       28.1 They are unable to say whether the Applicant made a complete

       surrender of his estate.   They were unable to take the enquiry to finality

       because the principal creditor, being Wesbank, withdrew financial support

       and requested that no further enquiries be conducted.



       28.2 They are not satisfied, however, that the Applicant voluntarily made

       a full and complete surrender of his estate.   Such disclosures that had been

       made, they state, were not made without pressure.



        28.3 They state that the Applicant denied the existence of

       cash although it emerged from certain records discovered in

       his office on 15th May 2002 (after the provisional order of

       sequestration) that the Applicant had received a payment of

       R256 000 in cash on 23rd February 2002.



28.4                 When he was confronted with the document and asked to

disclose the whereabouts of the cash, he originally stated that these monies had

been paid to an attorney to hold as a deposit to deal with any criminal proceedings

which might be brought against him and for the payment of bail, should such a

need arise.
                                                                   Page 11




28.5   When pressed to disclose the name of the attorney he changed his

       story and requested to be allowed a short period within which to

       retrieve the funds.   He left the premises with his wife and shortly

       thereafter handed the trustees a sum of R79 600 in cash which, they

       gathered, had been hidden in the ceiling of an adjoining house

       occupied by the Applicant’s in-laws.



28.6 When pressed to explain what happened to the balance of the cash,

       the Applicant eventually explained that R20 000 had been paid to an

       attorney in Margate; R10 000 to another attorney and R50 000 to his

       brother. The Applicant has not accounted fully for the balance of the

       funds.



28.7    During their enquiries, the trustees discovered that an

       account had been opened with Absa Bank in Margate

       under the name of Marburg Taxi Association.                   Funds

       from Rensco Motors had been regularly paid into that

       account without any apparent causa or justification.

       On 3rd March 2002, the Applicant withdrew a sum of
                                                                          Page 12




                R146 000 from that account.              Of this amount, the

                Applicant revealed, he had paid approximately R97 000

                to a Mr. Vogel, a previous director of Rensco Motors.

                The Applicant was unable to account for the balance.

                The trustees have established from the Applicant himself

                and from enquiries made that there is no such

                organisation as the Marburg Taxi Association.              In the

                light thereof, they conclude, the particular account was

                patently fraudulently created and that all payments thus

                made into the account were unlawful.



         28.8   The trustees also established that the Applicant “had

                moved large sums of money, inter alia, into an account

                with the H.S.B.C. Bank in Jersey.              This amount of

                approximately R300 000 was not originally disclosed by

                the Applicant.



[29]      In the supplementary affidavit the Applicant admits handing over the sum

of R79 600 to the trustees, and admits having done so “only under pressure from

them.”     He states that he hoped to retain that cash to support his family in the
                                                                             Page 13



months following the collapse of Rensco Motors.       He admits that he initially lied

to try and protect that cash.   He does of course deny that he did not fully explain

how the sum of R256 000 had been dealt with.




[30]     With regard to the bank account in the name of Marburg Taxi

Association, his response is simply startling.      He admits that Rensco Motors

operated a banking account under the name of Marburg Taxi Association.

According to him there was nothing unlawful about Rensco Motors depositing

money into that account. Significantly, he neither makes any effort to address the

complaint that there is no such entity as Marburg Taxi Association, nor does he

provide any reason why it was necessary for Rensco Motors to have deposited

money into the bank account of a non-existent entity. His response displays either

a shocking lack of appreciation of the gravity of the matter and its implications

concerning the Directors of Rensco Motors (of which he was one), or a shameful

thriftiness with the truth. In either event, it does not speak well of a person who is

aspiring to take up the position of the director of a company, once rehabilitated.



[31]     A close and careful reading of the Applicant’s supplementary affidavit,

particularly in those respects where he responds to the trustees’ complaint that he

had to be pressurised into surrendering cash and providing information, reveals a
                                                                              Page 14



picture substantially different from the bold and confident stance adopted in the

founding affidavit to the effect that the trustees were satisfied that he had made a

complete surrender of his estate and that there was nothing left uncovered.



 [32]    A further disquieting feature in this application is that relating

to the Applicant’s conviction and sentence for fraud.                         In the

founding affidavit, the Applicant states that, having pleaded guilty

on 12th December 2002, he was sentenced to pay a fine of R20 000

and to a gaol term of two years, which was suspended for five

years.      Completely unsolicited, he adds “despite an intensive

search I have been unable to locate documentary evidence of my

conviction and sentence as the records of the clerk of the criminal

court are presently in a state of disarray.”



[33]     After submitting their first report, the trustees managed to obtain a copy

of the proceedings relating to the appeal which had been brought by the Director

of Public Prosecutions, KwaZulu Natal, against the sentence that had been

imposed upon the Applicant. It seems that the Appeal had been instigated by some

of the creditors who appeared to have been upset by its leniency.
                                                                           Page 15




 [34]   From    the    record     of   these     proceedings       the    Trustees

established that the Applicant had pleaded guilty to thirty-nine

counts of fraud. In consequence thereof                      he had          been

sentenced to pay a fine of R80 000 or in default of payment, eight

years’ imprisonment, half of which had been suspended for five

years on condition that the Applicant was not convicted of an

offence of fraud, attempted fraud, theft or attempted theft

committed during the period of suspension. A further term of five

years’ imprisonment had been imposed, all of which was totally

suspended for five years on condition that the Applicant was not

convicted of an offence of fraud, attempted fraud, theft,

attempted theft or any offence involving dishonesty committed

during the period of suspension and for which he was sentenced

to imprisonment without the option of a fine. The sentence had

actually been imposed on 10th January 2003, which means that the

period of suspension of the sentence had expired only in January

this year, about a month before the Applicant brought this

application.



[35]    The Applicant responds to this revelation by the trustees as follows:-
                                                                          Page 16




       35.1 “As I said in paragraph 13.2 of my founding affidavit in this

       matter, I was unable to obtain court documents to confirm what I said

       about the sentence which was imposed upon me, when I was convicted.



35.2                The documents now provided by my trustees confirm that I

was sentenced to a fine of R80 000 or eights years’ imprisonment, half of which

was suspended, upon conditions, for five years, as well as a further five years’

imprisonment which was wholly suspended, on conditions, for five years.



35.3                I cannot really explain my lapse of memory in recording my

sentence as I did in paragraph 13.2 of my founding affidavit.



       35.4 At the time of my criminal trial, and for a good while thereafter, I

             was in a state of extreme anxiety and depression and I can only think

             that is why my recollection about my sentence, six years later, was

             obviously incorrect.



       35.5 I had also completely forgotten that half of the first part of my

             sentence had been suspended and the other half not.
                                                                          Page 17



       35.6 I apologise to the Court for my error.



       35.7 There was certainly no intention on my part to mislead the Court

               about the details of my sentence. It would have been foolish to do

               so because it would be so easy for my trustees to report the correct

               position.”



[36]     Mr. King, who appeared for the Applicant, adopted very much the same

position in argument as that of Applicant.    He submitted that it is unlikely that

the Applicant was being deliberately untruthful because the trustees were bound to

expose that falsity in their report.

[37]     I am of the view, for the reasons set out hereunder, that the

Applicant was not being candid when he recounted the sentence

imposed upon him when he dealt with it in the founding affidavit.



       37.1. According to the Applicant, that was the only criminal

       case in which he had been involved.                  So it is difficult to

       imagine that having pleaded guilty to such serious charges

       and having received a relatively heavy sentence, he would

       give such a substantially different account of the fine and gaol

       sentence, (even though these had been totally suspended),
                                                                Page 18




from that which had actually been imposed, when he has to

speak of it a little over 5 years later.



37.2. He made no mention in his founding affidavit of the fact

that the sentence had been taken on appeal by the Director

of Public Prosecutions of KwaZulu-Natal.            According to the

trustees the appeal had come before the Court and “with

the information which had been placed before the Court, the

Court was unable to interfere with the sentence.”            No genius

was required of the Applicant, if he was in fact experiencing

difficulties in connection with locating the records at the

criminal court, to request his attorney to obtain these records

from the attorney who represented him at the trial, or to obtain

the record of the appeal from the attorney who handled his

appeal. These records could easily have been obtained from

the High Court in Pietermaritzburg, where the Appeal was

heard. His failure to even mention the appeal in his founding

affidavit is telling.



37.3 I have no hesitation in rejecting the explanation he provides in the
                                                                               Page 19



       further supplementary affidavit for not correctly stating the number of

       counts he had pleaded guilty to and the actual sentence imposed upon him.

       That he was, at the criminal trial, and for a good while thereafter, in a state

       of extreme anxiety and depression and this accounts for why his

       “recollection was obviously incorrect” is an explanation which is

       manifestly unworthy of credit. Whilst it is true that he might have been in

       this state that he complains of during and after his trial, it is unlikely in the

       extreme that he was labouring under this ‘condition’ when he was

       instructing his lawyers at the time his application was being prepared.



37.4     According to the trustees they had not even been aware of the Court

proceedings at the time that the Applicant had pleaded guilty and had been

sentenced.   The trustees also appeared not to have known about the appeal which

had been brought by the Director of Public Prosecutions against the sentence.

There is also nothing in the founding affidavit to suggest that the Applicant was

even aware that the trustees had either attended the Court proceedings in the

Magistrate’s Court and in the High Court or that they had even been aware of the

criminal proceedings at the time it occurred. The trustees say that they only got to

know of the criminal proceedings after it had been completed. It is likely that the

Applicant assumed that the Trustees would either not be in a position to dispute

his account of the criminal charges and its consequences or that they might have
                                                                              Page 20



lacked the enthusiasm to investigate it.



 [38]    The trustees also make some serious allegations about the

Applicant, inter alia, regarding his involvement in the conduct of the

affairs of Rensco Motors and go so far as to suggest that he

probably contravened the provisions of Section 226 of the

Companies Act of 1973 by making loans or advancing money to

other companies in which and parties with whom he had either a

direct or indirect interest.



[39]     An application for rehabilitation is not a formality.   It requires frankness

and a full disclosure of all relevant facts. Particularly in a case where there is a

direct link between the insolvency and the criminal conduct of the insolvent,

there is a greater obligation to ensure that there is a full and complete disclosure of

the details of the resultant conviction and sentence . The number of counts for

which




 an insolvent had been convicted and the gravity of the sentences

imposed upon that insolvent for past criminal conduct, especially
                                                                Page 21




offences involving dishonesty, are matters which are fundamental to

a proper assessment of the extent to which rehabilitation has been

accomplished. It is not without significance that in those cases

where the insolvent has been convicted of a fraudulent act in

relation to his insolvency, i.e., an offence which includes all forms of

falsitas which affected the insolvent estate, the Legislature has

deemed it necessary to impose a restriction for the longest period

for   which    an insolvent is    precluded from applying       for his

rehabilitation, namely, five years. An insolvent who falls into this

category cannot, therefore, content himself or herself with a

half-hearted and feeble attempt to place all relevant facts relating

to his or her criminal conduct, conviction and sentence before the

Court hearing the application for rehabilitation. It must follow that

there is a greater duty on such an insolvent to ensure that all such

relevant and material information which will enable the Court to

make an informed decision regarding his rehabilitation, is placed

before it.



              Ex parte Koch (Supra) at 705 (C).
                                                                          Page 22




[40]    Of the reasons given by the Applicant for wanting to be rehabilitated is

that which relates to an intention to occupy a marketing position in a business

started by his brother which is engaged in selling immovable property in the

United Kingdom.       According to the Applicant the demands of the position and

the market place are such that he would be required to become a director of the

marketing company.



[41]    I am not satisfied that the Applicant has made a full and frank disclosure

in his application.    I am further not satisfied that he has been entirely candid

about the extent to which he has made a complete surrender of his estate and the

extent to which the trustees had been satisfied that he has made a complete

disclosure.



[42]    The fact that the Applicant wishes to return to operating in the

commercial world in a position and to an extent not dissimilar to that in which he

had been involved at the time of the commission of the offences for which he had

been convicted, is a matter which causes me some consternation.      The effect of

the rehabilitation of the Applicant would be to restore him completely and fully to

the market place and, more significantly, to the obtaining of credit.       In the
                                                                            Page 23



circumstances and having regard to what the Applicant expects to achieve upon

being rehabilitated, I am as concerned with the Applicant’s probable future

conduct as I am with his past.



[43]     This is appropriately a case in which I must enquire “– is he a person who

ought to be allowed to trade with the public on the same basis as any other honest

man?     That depends entirely on how he conducted his trade before he became

insolvent.   If he conducted it in a negligent manner, or so as to deceive others, he

is not a person who ought to be rehabilitated until it is clear that he intends to

adopt better methods.     His rehabilitation ought to be withheld from him, or at

any rate it ought to be postponed for such a time that he will receive a severe

lesson as to the necessity of trading honestly.”



Per Wessels J. in Ex Parte Heydendreich 1917 T.P.D. p.657 at p. 658



 [44]    I must ask also myself the same question that Slomowitz, A.J.

posed in the case of Kruger v. The Master and Anor. NO., Ex parte

Kruger 1982 (1) S.A. 754 (W) at p. 761H – 762A.



        “As I have been at pains to point out, what the Master should have asked
        himself was not whether the applicant’s insolvency causes him hardship,
                                                                                Page 24



        which it patently does, but rather whether the applicant had shown that he
        was indeed a man who had rehabilitated himself in the sense that he
        understood his obligations to society in general and the business world in
        particular, or whether, in all the circumstances, he needed the lesson of
        time.”



 [45]      Finally, I can do no better than to quote the remarks of the

learned author Meskin in Insolvency Laws, para. 14.4.1 on page

14-19 :-



        “…. the discretion exists only to enable the Court, in each case, to
        accommodate, not only the applicant’s interests, but the interests of his
        creditors, whether or not they have proved claims, of the State in relation to
        any prosecution of him, and of the public and, more particularly, the
        commercial public;      and that in the exercise of the discretion, in a
        particular case, the essential enquiry is whether, in the light of its facts, and
        taking all relevant interests into account, the applicant is a fit person again
        to participate in the commercial life of the community free of the
        constraints and disabilities affecting an insolvent.”



[46]       I am mindful of the need not to avoid ascribing too much

weight to the past criminal conduct of the Applicant for which he

has already been punished. To do so will be to punish him twice, so

to speak, although a court in appropriate cases could still further
                                                               Page 25




punish an insolvent by refusing his or her rehabilitation.



Mars: The Law of Insolvency in South Africa — Fourth Edition by H.

E Hockly p. 482




[47]    In the exercise of my discretion I feel obliged to afford some

prominence to the interests of those engaged in the commercial

world and who are likely to become involved with the Applicant

upon his rehabilitation. In my view the Applicant needs and will likely

benefit from the lesson of time.




I accordingly make the following order:-




             The application for rehabilitation is refused.
                              Page 26



            _________________________



NAIDU AJ.

								
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