Dato' Samsudin Bin Abu Hassan and Another v P De Villiers Berrange NO

The respondent, as provisional liquidator of NRB Holdings Limited (in provisional liquidation) (NRBH), launched successful ex parte sequestration proceedings against the appellants (married in community of property) on 17 December 2003. NRBH had borrowed R32,658,649.35 from New Republic Bank Limited to acquire shares and warrants in Mitrajaya Holdings Berhad (MITRAJAYA), a Malaysian public company. The shares were registered in the name of OSK Nominees (Asing) Sdn Bhd (OSK), a Malaysian stockbroking firm. On 25 July 2002, NRBH (through signatures of a director and the first appellant) instructed OSK to execute a 'married deal' selling 22,400,000 MITRAJAYA shares at RM1.15 per share to Khidmas Capital Sdn Bhd (KHIDMAS), a company in which the first appellant held 99,999 out of 100,000 shares and was a director. The proceeds were credited to the buyer's trading account rather than to NRBH. KHIDMAS pledged these shares to Southern Bank Berhard (a Malaysian bank) as security for a RM20 million loan granted personally to the first appellant, who used the proceeds to purchase shares in Seacera Tiles in his own name. During 28 October 2002 to 28 October 2003, 9,500,000 MITRAJAYA shares were sold on instructions of Southern Bank. On 14 May 2003, winding-up proceedings were instituted against NRBH. The first appellant opposed the winding-up, stating in his affidavit that NRBH was the owner of the MITRAJAYA shares. The first appellant, a Malaysian citizen who had immigrated to South Africa in 1994, returned to Malaysia in August 2002, came back to South Africa in early December 2003, and departed again for Malaysia on 9 December 2003. On 5 December 2003, he applied to transfer US$100,000 from his South African Nedbank account to Malaysia. On 28 November 2003, the respondent obtained an interim injunction in the Malaysian High Court against disposal of the MITRAJAYA shares. The provisional sequestration order was granted on 17 December 2003, preventing the transfer of funds. Both appellants brought reconsideration applications which were dismissed, and the provisional sequestration order was confirmed by Levinsohn J on 18 January 2004.

• Whether the respondent established a liquidated debt in terms of s 9(1) of the Insolvency Act 24 of 1936
• Whether the first appellant committed acts of insolvency in terms of ss 8(a) and 8(d) of the Insolvency Act
• Whether the requirements of s 12(1) of the Insolvency Act were satisfied for the grant of a final sequestration order
• Whether notice of the ex parte application for provisional sequestration should have been given to the appellants
• Whether there were material non-disclosures in the ex parte application
• Whether the defence of lis alibi pendens applied given concurrent Malaysian proceedings
• Whether the application was actuated by an ulterior purpose
• Whether the respondent's dual role as liquidator and co-trustee was improper
• Whether certain evidence (interrogation transcripts, company documents) was admissible
• Whether the word 'property' in s 8(d) of the Insolvency Act includes incorporeal property

The appeal was dismissed with costs, including costs occasioned by the employment of two counsel by the respondent. The final sequestration order of the joint estate of the appellants was confirmed.

The binding legal principles established are: (1) A liquidated debt for purposes of s 9(1) of the Insolvency Act means a claim where the amount is fixed and certain, not affected by the legal basis or nature thereof. Misappropriation of marketable securities with readily ascertainable market values constitutes a liquidated claim based on the market value at the relevant date. (2) The subjective intent required for acts of insolvency under ss 8(a) and 8(d) is established by inferential reasoning from all relevant facts and circumstances to determine the dominant, operative or effectual intention in substance and truth of the debtor. (3) Under s 8(d), a debtor commits an act of insolvency by attempting to remove property (including by transmitting funds abroad) with intent to prejudice creditors or prefer one creditor above another. (4) Courts may exercise discretion under s 9(4)(A)(a)(iv) to dispense with notice to a debtor in ex parte sequestration applications where satisfied that it would be in the interests of the debtor or creditors to do so, particularly where there is evidence of asset dissipation. (5) The word 'property' in s 8(d) includes incorporeal property, and 'removes' encompasses acts that put assets beyond the reach of creditors, including transmission of funds (per Lewis JA's concurring judgment). (6) Material non-disclosure in ex parte applications requires disclosure of facts that might influence the court's decision; failure to disclose may result in setting aside the order, but courts retain discretion considering all circumstances including representative capacity of applicants. (7) Concurrent proceedings in different jurisdictions do not constitute lis alibi pendens where the parties, relief claimed, and legal bases differ.

Zulman JA noted that it was unnecessary to decide whether: (1) The respondent established general insolvency under s 9(1) of the Insolvency Act, as the liquidated debt and act of insolvency were established. (2) The first appellant committed an act of insolvency under s 8(a) by leaving South Africa with intent to evade payment of debts, though the cumulative facts suggested this may well have been his dominant intention. (3) The other debts relied upon by the respondent (totaling R7,337,020.75) were established, as the MITRAJAYA share misappropriation alone exceeded the jurisdictional threshold. (4) Whether 'property' in s 8(d) is restricted to corporeal property, though he noted that transfer of a bank balance would be tantamount to transfer of actual money (a corporeal) represented by the credit. Lewis JA observed that: (1) S v Levitt's interpretation of 'removes' in s 132(d) (dealing with concealment or destruction offences) should not be applied to s 8(d) which has a different purpose. (2) The word 'property' in general usage refers to both corporeals and incorporeals, and there is no reason to restrict its meaning in s 8(d). (3) Reading s 8(d) with s 8(c) (which clearly covers incorporeals) supports the broader interpretation. The court also made obiter remarks about: (1) The futility of the first appellant's attempts to defend the Malaysian claims. (2) The impropriety of disposing of substantially the whole undertaking without s 228 Companies Act resolution. (3) The first appellant's awareness of Exchange Control requirements. (4) The rejection of complaints about the respondent's dual role as liquidator and trustee by the Master.

This case is significant for: (1) Confirming that courts may dispense with notice in ex parte sequestration applications under s 9(4)(A)(a)(iv) where notice would defeat the rights of creditors. (2) Establishing that misappropriation of marketable securities with readily ascertainable market values constitutes a liquidated debt for purposes of s 9(1) of the Insolvency Act. (3) Clarifying the test for acts of insolvency under ss 8(a) and 8(d), particularly the subjective intent requirement established through inferential reasoning from cumulative circumstances. (4) Addressing the meaning of 'property' and 'removes' in s 8(d), with Lewis JA holding that the provision extends to incorporeal property including attempts to transmit funds abroad. (5) Confirming that concurrent insolvency proceedings in different jurisdictions do not constitute lis alibi pendens where the relief, parties, and legal bases differ. (6) Providing guidance on material non-disclosure in ex parte applications and the exercise of discretion in sequestration matters. (7) Illustrating the application of the Plascon-Evans principle to disputes of fact in motion proceedings where denials are far-fetched or untenable.