Bester N.O. and Others v Quintado 120 (Pty) Ltd

The judgment

The court's own file

IN THE CONSTITUTIONAL COURT OF SOUTH AFRICA Case numbers: CCT 246/2020 and CCT 160/21 In the matter between: GERT ERASMUS BURGER N.O. First Applicant ANTON KEET N.O. Second Applicant WILLEM JACOBUS CRONJE N.O. Third Applicant In their capacities as trustees of the HNP Trust and CHRISTIAN FINDLAY BESTER N.O. First Respondent LEGADIMANE ARTHUR MAISELA N.O. Second Respondent THOMAS CHRISTOPHER VAN ZYL N.O. Third Respondent In their capacities as trustees of the Insolvent Estate of Petrus Serdyn Louw and Martha Maria Louw Case number: CCT 160/21 In the matter between: CHRISTIAN FINDLAY BESTER N .O. First Applicant LEGADIMANE ARTHUR MAISELA N.O. Second Applicant THOMAS CHRISTOPHER VAN ZYL N.O. Third Applicant In their capacities as trustees of the Insolvent Estate of Petrus Serdyn Louw and Martha Maria Louw and QUINTADO 120 (PTY) LTD Respondent Reg. No. 2008/002818/07 Registered Office: 2 2 Harmonie Avenue Boston BELLVILLE _____________________________________________________________________ APPLICANTS’ HEADS OF ARGUMENT (IN CASE CCT 246/20) _____________________________________________________________________ Headings Pages A. Introduction 3 B. Principle Grounds of Appeal 3 – 5 C. Essential Background Facts 5 – 23 D. First Point of Law of General Public Importance: What is the Insolvent Estate’s Claim or cause of Action? 23 – 29 E. The Second Point of Law of General Public Importance: The manner in which trusts act 29 – 35 F. The Third Point of Law of General Public Importance: Provisional Order granted on admittedly incorrect facts 36 – 39 G. The respondents’ contentions in the application 39 – 45 H. Condonation 45 – 50 I. Conclusion 50 3 A INTRODUCTION 1. At the direction of the Acting Chief Justice dated 8 June 2021, the above two cases (“the HNP Trust matter” and “the Quintado matter”) are to be treated as consolidated (“the Directions”). 2. These are the applicants’ heads of argument in the HNP Trust matter, which include submissions on the impact that the Quintado matter has on the HNP Trust matter. 3. This is an application for leave to appeal against the Judgment and part of the Order of Mr Acting Justice Sievers under Western Cape High Court case number 23383/18. Leave is sought in respect of paragraph b of the Order in terms of which the HNP Trust was placed under final sequestration. 1 B PRINCIPAL GROUNDS OF APPEAL 4. There are two primary grounds on which the applicants contend that an Order of sequestration could and ought never have been granted in this matter. 5. The first is that the respondents never established that the insolvent estate of Mr Louw and Mrs Louw 2 (“the Insolvent Estate Louw”) had a claim against the HNP Trust at all. A claim cognisable in law must identify a cause of action and could not be established by the respondents. In fact, the evidence adduced by the 1 Record, volume 13, page 1216. 2 Martha Maria Sophia Louw. 4 respondents to obtain a provisional order included admittedly materially false allegations, and no further factual evidence was adduced by the respondents to establish a cause of action and claim at the provisional stage of the proceedings or thereafter, save for making entirely new speculative allegations and unsubstantiated conclusions in reply. 6. Secondly, the cause of action relied on by the respondents was that of a loan, allegedly advanced by Mr Louw to the HNP Trust. However, the respondents failed to make any allegations of the terms of such a loan or that the trustee (Mr Louw) was authorised by his co-trustees (Mrs Louw and third applicant) to enter into such a loan agreement. Accordingly, no such loan agreement could have been, and was, entered into by the HNP Trust. 7. The Court a quo did not, and could not, reject the version of Mrs Louw and the third applicant in relation to the lack of authority of Mr Louw to enter into any such transactions and there was no evidence whatsoever to establish a loan agreement or a loan advance between Mr Louw and the HNP Trust. 8. Sequestration proceedings have an extensive effect on the status of the debtor, usually an individual. 3 To foist the effects of sequestration upon a debtor, under circumstances where there is not a well-defined or clear and undisputed claim 3 Sections 20, 23 to 25, 64, 65, 67 and 136 of the Insolvency Act No 24 of 1936 (as amended). 5 against such debtor, is to allow the abuse of such a process and to endanger the status of a person without proper and full grounds for doing so. C ESSENTIAL BACKGROUND FACTS 9. Mr Petrus Serdyn Louw (“Mr Louw”) was the founding director of Louw & Cronje Inc., a registered firm of auditors conducting its business in Porterville, Vredendal and Strand in the Western Cape. 4 Mr Louw practised as an auditor for over 30 years and managed to build a substantial and loyal client base over the years .5 10. In the latter part of 2018, it became clear that Mr Louw was operating a massive fraudulent investment scheme through which he defrauded his clients of about R110 million. The scheme involved Mr Louw persuading his clients to make investments in a scheme called the ENB scheme and to make investments in certain companies in which Mr Louw failed to invest his clients’ monies. He misappropriated the funds instead. To conceal the theft, Mr Louw forged share certificates, bank statements and other documents. 6 Soon after Mr Louw’s malfeasance was unveiled, the respondents, as joint trustees of the Insolvent Estate Louw, launched an application for the sequestration of the HNP Trust on 21 December 2018 (“the sequestration application”). 7 Prior to their sequestration, 4 Record, volume 1, page 11, paragraph 15. 5 Record, volume 1, page 12, paragraph 16. 6 Record, volume 1, page 12, paragraph 19. 7 Record, volume 1, page 1. 6 i.e., before they were disqualified to act as such, 8 Mr and Mrs Louw were, together with the third applicant, Mr Cronje, trustees of the HNP Trust. 9 11. When the sequestration application was sued out, the remaining trustee, Mr Cronje, had no power to oppose the provisional order 10 and it was granted on an unopposed basis on 10 January 2019 (“the provisional order”). 11 Upon their sequestration, Mr and Mrs Louw had become automatically disqualified to act as trustees of the HNP Trust. The respondents did not anticipate that the sequestration application brought urgently would be opposed 12 and conceded that the HNP Trust was not capable of opposing the provisional sequestration. 13 12. In the founding affidavit of Mr Bester (“the founding affidavit”), the respondents’ case was premised entirely on what Mr Louw (after his disqualification as trustee) was supposed to have said at a meeting held on 13 December 2018, attended by the first respondent, Mr Bester, and the attorneys for the respondents, being Mr Pierre Du Toit (“Mr Du Toit”) and Ms Birkenstock of Mostert & Bosman Attorneys, and Mr Human of De Klerk & Van Gend Attorneys (representing a creditor) (“the Meeting”), namely that: 14 8 Record, volume 1, page 77, clause 5.5.3 of the Trust Deed. 9 Record, volume 1, page 27. 10 In terms of clause 5.2. of the Trust Deed of the HNP Trust, there must at all times be 3 trustees and if there are only two, they have limited powers (Record, volume 1, page 76, clause 5.2.). 11 Record, volume 1, pages 66-68. 12 Volume 1, page 17, paragraph 28. 13 Volume 4, page 330, paragraph 30. 14 Volume 1, page 17, paragraph 29. 7 12.1. all of the investment opportunities presented to his clients over several years were fraudulent; 12.2. the total amount that he misappropriated was approximately R110 million excluding interest; 12.3. of the sum of R110 million, Mr Louw advanced approximately R70 million to Mr Louw’s businesses, Pholaco (Pty) Ltd (“Pholaco”), to fund its operations of its business. For this funding, Mr Louw advanced the aforesaid funds to the Trust (“the Trust loan”) which in turn advanced the amount of R70 million to Pholaco (“the Pholaco loan”); 12.4. the Pholaco loan was recorded in the financial statements of Pholaco as at February 2016 in an amount of R44 144 181.00 and stood at the time at approximately R70million; 12.5. his insolvent estate “had a corresponding claim against the Trust, equal to the Pholaco loan made by the Trust to Pholaco, as the misappropriated funds of Mr Louw’s creditors, were advanced to the Trust, which in turn advanced same to Pholaco.” 15 ; and 12.6. that liabilities of the HNP Trust by far exceeded its assets and the HNP Trust had no underlying commercial activities or any source of income. 15 Volume 1, page 18, paragraph 29.5. 8 13. Premised on what Mr Louw had allegedly said at the Meeting, the respondents contended that the HNP Trust was indebted to the Insolvent Estate Louw in the sum of at least R70 million, and that, accordingly, they had the necessary locus standi to bring the sequestration application. 16 The cause of action was accordingly described in the founding affidavit as a loan advanced to the HNP Trust by Mr Louw. 14. Quite apart from the fact that the statements Mr Louw made at the Meeting could not be attributed to the HNP Trust, when a transcript of the Meeting 17 was produced pursuant to the applicants’ attorneys’ request therefor, it revealed that what Mr Louw had in fact stated at the Meeting was quite the opposite of what the respondents’ alleged he had said in the founding affidavit. 15. In fact, Mr Louw confirmed to the respondents, thrice during the said meeting, that the HNP Trust was not, nor could it have been, indebted to the Insolvent Estate Louw and the reference to the HNP Trust as a creditor in the books of account of Pholaco was a mistake. He also did not state that the liabilities of the HNP Trust far exceeded its assets. From the transcript, what Mr Louw in fact said was that: 15.1. he was angry when he saw that Pholaco’s financial statements reflected the HNP Trust as a creditor; and 16 Record, volume 1, page 20, paragraph 30. 17 Record, volume 2, pages 102 to 181. 9 15.2. “not one cent” of the funds that went to Pholaco went through the HNP Trust. 18 16. There was no additional evidence in the founding affidavit to establish that the Insolvent Estate Louw had a cause of action in the form of a claim against the HNP Trust in respect of the alleged loan(s), or at all, other than what Mr Louw allegedly said at the Meeting. 17. The respondents sought to explain their conduct in having made false allegations in the founding affidavit, in supplementary affidavits deposed to by Mr Bester and Mr Du Toit. 19 Mr Bester confirmed in his supplementary affidavit that his “recollection of the full extent of Mr Louw’s advices during the meeting [in paragraphs 26 to 29 of the founding affidavit in the Sequestration Application], was not accurate in all respects.” 20 Mr Du Toit confirmed in his supplementary affidavit that “it now appears that the First Applicant and my recollection of the 13 December 2018 meeting, is not accurate in all respects.” 21 18. Both Mr Bester and Mr Du Toit thus confirmed in the supplementary affidavits that the allegations of what Mr Louw had said at the Meeting, which formed the entire evidentiary basis of the alleged indebtedness for the HNP Trust to the Insolvent Estate Louw, were “not accurate”. 18 Record, volume 2, page 193, paragraphs (i) and (ii). Record, volume 9, pages 828 to 830, paragraph 33. 19 Record, volume 2, page 193, paragraph 18.2. 20 Record, volume 2, page 188, paragraph 8. 21 Record, volume 3, page 237, paragraph 13. 10 19. They thus conceded that there was no basis at all for alleging in the founding affidavit that the HNP Trust was in fact indebted to the Insolvent Estate Louw for an amount of not less than R70million, nor that the HNP Trust was “hopelessly insolvent”. 20. The respondents sought to explain such conduct based on certain events leading up to the Meeting, but such events were not relied upon in alleging the cause of action and claim of the Insolvent Estate Louw against the HNP Trust in the founding affidavit. 21. There was thus never any basis for the allegation that the HNP Trust was in fact indebted to the Insolvent Estate Louw for an amount of not less than R70million, being funds allegedly advanced by Mr Louw to the HNP Trust equal to the loan that had been made by the HNP Trust to Pholaco, and the provisional order was unjustifiably obtained as it was sought and obtained on the strength of false allegations. 22. It was established in the answering affidavit filed on behalf of the HNP Trust, with inter alia reference to the HNP’s Trust’s bank statements that no funds were transferred from the HNP Trust to Pholaco and, further, that no funds were transferred to it in the first place as would have enabled it to transfer it to Pholaco. 22 This became common cause. 22 Record, volume 3, page 247, paragraph 11, volume 3, page 252, paragraph 17.2.1, volume 3, page 253, paragraph 17.2.2. 11 23. In this regard, funds that had been advanced to Pholaco were in fact advanced directly from Mr Louw to Pholaco or indirectly, through the bank accounts of Quintado 120 (Pty) Ltd (“Quintado”) and another company, Piket Kalsiet (Pty) Ltd, bank accounts which Mr Louw solely controlled and managed at all material times. 23 In neither case does a claim, or cause of action, arise against the HNP Trust in favour of the Insolvent Estate Louw.Even if this were not the case, both Mrs Louw and Mr Cronje (at the time, with Mr and Mrs Louw, the joint trustees of the HNP Trust) confirmed that no resolutions of the trustees of the HNP Trust had ever been passed (a) resolving that funds be advanced from Mr Louw to the HNP Trust and (b) resolving that funds be advanced by the HNP Trust to Pholaco. 24 24. Applying the rule in Plascon-Evans, that ought to have been the end of the matter and the provisional order ought to have been discharged on the return day. 25. Faced with such evidence, the respondents sought inter alia to abandon any reliance on what Mr Louw had alleged confirmed at the Meeting in relation to the claim advanced in the founding affidavit and Mr Bester in contradiction of the contents of his founding affidavit contended that “It is not, nor was it ever the Applicants’ case that the actual funds flowed from a bank account of Mr Louw, to 23 Record, volume 6, page 534, paragraph 15.4. 24 Record, volume 6, pages 531 and 532, paragraph 14, and volume 3, page 252, paragraph 17.1 as read with record, volume 6, pages 531 to 532, paragraphs 14.1, 14.2 and 15.1 as read with record, volume 8, pages 711 to 716. 12 a bank account of the HNP Trust, and from there to a bank account of Pholaco”. This statement contradicts the contents of his founding affidavit. 25 26. The respondents then sought in reply, to introduce entirely new matter in the form of evidence that Mr Louw, Mrs Louw and Mr Cronje gave at an enquiry convened in terms of section 152 of the Insolvency Act 24 of 1936 (as amended) in relation to the affairs of the Insolvent Estate Louw and the affairs of the HNP Trust (in provisional sequestration) (“the section 152 enquiry”). The evidence was ultimately not admitted or relied on by the Court a quo. Having procured the provisional order on a false premise, the respondents were not entitled to seek to set up new grounds of sequestration in reply. In any event, their application to adduce new matter in reply was also not granted. 26 27. The Court a quo did not have regard to the evidence given at the section 152 enquiry, considering that the respondents had (allegedly) established their locus standi without reference to that evidence. 27 28. As appears from what is set forth below, the Acting Judge in the Court a quo elevated admittedly manipulated accounts to conclusive evidence and in doing so, it is respectfully submitted, misinterpreted the very documents on which he purported to rely in his Judgment. Most of the documents relied on were produced 25 Record, volume 4, page 334, para 39. 26 Triomf Kunsmis (Edms) Bpk v AE & CI Bpk en Andere 1984 (2) SA 261 (WPA) at 268A-H. 27 Record, volume 13, page 1213, paragraph 20. 13 in the reply and were roundly discredited as evidence by the applicants in answer to the replying affidavit. 29. In doing so, the Court erred in not applying the so-called Plascon-Evans Rule and placed reliance on facts which it said were not in dispute when they clearly were. 30. None of the facts set out by the Learned Acting Justice established any authority on the part of Mr Louw (acting alone and not on any authority of the trustees of the HNP Trust acting jointly) to make any alleged “advances”, nor did they establish that sums had been advanced by Mr Louw to the HNP Trust, and from the HNP Trust to Pholaco. Moreover, none of these alleged grounds for the finding could establish the existence of a loan agreement between the HNP Trust and the Insolvent Estate Louw. 31. The Court’s principal grounds for its finding are set out and dealt with below. 28 32. That Pholaco’s financial statements, signed by Mr Louw and his co-director, for the year ended February 2016 29 reflected a loan from the HNP Trust in the amount of R44 144 181.00 and that the HNP Trust’s financial statements for the year 28 February 2016 30 (prepared by Mr Louw) reflected Pholaco as a debtor in an amount of R40 451 373.00. In this regard: 28 Record, volume 13, page 1209, paragraphs 5 and following. 29 Record, volume 1, pages 33 to 59. 30 Record, volume 12, page 1108. 14 32.1. The fact that Pholaco’s financial statements were signed by Mr Louw and his co-director in that company, and purportedly reflected that there had been a loan from the HNP Trust in the sum of some R44 million, could simply not gainsay either the lack of authority of Mr Louw, nor could the content of the purported financial statements for the HNP Trust for the year end 28 February 2016 support the Court a quo’s findings in circumstances where they have not been signed by either Mr Cronje or Mrs Louw, at that stage the trustees of the HNP Trust. 32.2. Moreover, the financial statements for the HNP Trust (the very document relied on by the Court a quo) shows no loan claim in favour of Mr Louw against the HNP Trust but, on the contrary, demonstrates under unsecured loans, a loan claim in favour of the HNP Trust against Mr Louw (and thus the Insolvent Estate Louw). On the same page 31 is reflected a loan account of some R40 451 373.00 against Pholaco. 32.3. It is clear that Mr Louw, acting alone, without the knowledge or authority of his co-trustees, manipulated these statements and that his intention was to hide the true source of the funds invested into Pholaco by reflecting loan accounts in Pholaco in favour of the HNP Trust. Thus, neither the financial statements of the HNP Trust or Pholaco could be relied on as a true reflection of the transactions concerned. 31 Record, volume 12, page 1108. 15 33. That on 30 October 2018, Mr Louw deposed to an affidavit in support of the proof of a claim of the HNP Trust against Pholaco (in liquidation) in which he claimed that the HNP Trust had advanced Pholaco R62 790 451,77 32 . In this regard: 33.1. The applicants dealt in detail with the circumstances surrounding the aforesaid claim and the fact that it was eventually dismissed by the presiding Magistrate as the attorney acting for Mr Louw, Francois Du Toit, as well as Mr Louw, had confirmed that the information contained therein was false. 33 33.2. Moreover, as contended by the applicants 34 , it was clear to the respondents that the claim was falsely advanced by Mr Louw by virtue of what was stated by him at the Meeting. 33.3. None of the co-trustees considered or approved any loan or cession of a loan by Mr Louw and Mrs Louw to Pholaco at all. 35 It is submitted in any event that the say-so of Mr Louw on affidavit could not be attributed to the HNP Trust and was not an admission made on behalf of the HNP Trust of any facts at all. 33.4. Mr Louw was not authorised to depose to an affidavit on behalf of the Trust and no authorisation is alleged. 32 Record, volume 5, pages 422 to 432. 33 Record, volume 4, page 358, paragraph 43, and volume 4, page 380, paragraph 78.1.1 and further. 34 Record, volume 4, page 356, paragraph 38.2.2. 35 Record, volume 4, page 359, paragraph 44. 16 33.5. It is difficult to understand how the Court a quo expected the applicants to deny the existence of these fraudulently executed documents, which obviously exist, but do not reflect the transactions which in truth occurred. 36 34. That in the “friendly” application for the liquidation of Pholaco the applicant, an attorney Francois Du Toit, advised that he had met with Pholaco’s financial manager on 10 October 2018, who had advised him that the HNP Trust was owed approximately R70 million by Pholaco 37 . In this regard: 34.1. The fact that a financial manager of Pholaco indicated that the HNP Trust was indebted to Pholaco in an amount of R70 million could simply not take the matter any further. Such financial manager did not or could not represent the HNP Trust or speak on its behalf, nor was there any basis set out for the “claim” that he allegedly referred to. He was also not a party to, or witness to, any loan agreement. 34.2. It ought to have been apparent to Mr Bester when he deposed to the founding affidavit that the statement by attorney Francois Du Toit of what had been conveyed to him by Mr Jaco Augustyn, the financial manager, was incorrect given what Mr Louw subsequently stated at the Meeting . 38 36 O’Shea v Van Zyl N.O. 20125 (1) SA 90 (SCA) at para 18. 37 Record, volume 2, page 191, paragraph 13.3 and volume 3, pages 226 to 232. 38 Record, volume 4, page 355, paragraph 38.2. 17 34.3. Moreover, there is also the affidavit of Mr Jaco Augustyn in which it is made clear that the content of the Pholaco financial statements were manipulated by Mr Louw, who instructed payments to Pholaco to be dealt with and allocated to the loan account of the HNP Trust, although the monies emanated from Mr Louw or entities he controlled 39 35. That in the application for the sequestration of the Louws’ estate, Mr Visagie in his founding affidavit in this application stated that at a meeting on 30 October 2018, attended inter alia by Mr Du Toit, Mr Louw had confirmed at the said meeting that “he had used most of the funds that he had fraudulently derived from third parties, to fund the business activities of Pholaco, by using “his” Trust, the HNP Trust, as a vehicle to advance the funds so derived from the third parties, to Pholaco” 40 : In this regard 35.1. Such statements ought to be read together with a further statement contained in the founding affidavit of Mr Visagie wherein it is stated that Mr Louw “had already arranged for a “friendly” liquidation of Pholaco to which it appears that the First Respondent, allegedly through his Trust, the HNP Trust, had advanced millions of Rands obtained through his fraudulent transactions with numerous of his “clients” and “friends””. 41 Thus the conclusion made by Mr Visagie in his founding affidavit is in respect of 39 Record, volume 5, pages 414 to 416 and in particular page 415, paragraph 5. 40 Record, volume 2, page 189, paragraph 12 and volume 3, pages 197 to 225, and in particular volumen 3, page 212, paragraph 36.6. 41 Record, volume 3, page 222, paragraph 50.2. 18 alleged “advances” by Mr Louw through the HNP Trust to Pholaco, which was a mere deduction that Mr Visagie had made premised on what had been conveyed to him by those present at the meeting of 30 October 2018, given that he was not present in person. Such conclusion obviously was not premised on fact. 35.2. Such statement also could never establish either the authority of Mr Louw to enter into loan agreements on behalf of the HNP Trust, or the fact of having entered into loan agreements nor could it establish that funds had indeed been advanced through the HNP Trust as a vehicle. 35.3. In any event, it was common cause in the Court a quo that no funds had actually been advanced by Mr Louw to the HNP Trust, or from the HNP Trust to Pholaco as alleged by the respondents in the founding affidavit. Moreover, these statements were clearly contradicted by Mr Louw’s later statement at the Meeting referred to above. 35.4. The direct evidence of Mrs Louw as well as Mr Cronje, the erstwhile co- trustees of Mr Louw, is clearly to the effect that no loans were agreed to and no cessions were agreed to by them and Mr Louw was not authorised to do so on behalf of the HNP Trust. 35.5. Moreover, these words of Mr Louw demonstrate clearly the true nature of the transactions concerned. Funds obtained from Mr Louw’s clients were 19 transferred through companies’ accounts, used by Mr Louw to Pholaco, for the benefit of Pholaco and ultimately for the sole benefit of Mr Louw. 35.6. The book entries that purported to demonstrate the flow of funds or transactions from the HNP Trust to Pholaco were merely a front created by Mr Louw in order to hide the origin of the funds so as to conceal his nefarious activities. Clearly his co-trustees were not aware of, nor was Mr Louw’s use of the HNP Trust for this purpose authorised. 36. That Pholaco’s 2016 Annual Financial Statements reflected that the HNP Trust had signed three limited suretyships in favour of ABSA Bank and that it had ceded its loan account against Pholaco as security to ABSA Bank 42 and the trustees signed a resolution authorising such a cession: 36.1. It is clear from the documentation signed by the trustees in relation to the ABSA Bank suretyships that the financial statements, once again, signed only by one trustee and not on behalf of the HNP Trust, that they could not constitute an admission by the trustees of the HNP Trust of the existence of any loan account against Pholaco, nor does the resolution signed by all the trustees authorise Mr Louw to enter into such a cession or record the existence of any loan 43 . 42 Record, volume 1, page 52. 43 Record, volume 11, pages 1079 to 1083. 20 36.2. The extent of the resolution is to authorise Mr Louw to bind as surety and co-principal debtor the HNP Trust for repayment of sums owed now or at any time in the future by Pholaco to the bank. 36.3. Mr Louw signs the suretyship alone and included therein is a cession of rights arising from a loan agreement which the HNP Trust has or may have in the future against Pholaco. 44 This document, it is submitted, is incapable of being interpreted as a confirmation that there was, at the time, a loan agreement in place between the HNP Trust and Pholaco or that such a loan agreement was authorised by the co-trustees of the HNP Trust and further, that a cession had occurred in respect of an existing loan account. 36.4. Moreover, it is entirely incapable of being considered evidence that there was any loan agreement in place between Mr and Mrs Louw on the one hand and the HNP Trust on the other hand. In other words, it constitutes no evidence of the claim, or any claim, advanced by the respondents in the sequestration application. 36.5. Insofar as the financial statements refer to the cession of HNP Trust’s loan account against Pholaco, this cannot lead to the conclusion that a loan account was in existence between the HNP Trust and the Insolvent Estate Louw. 45 44 Record, volume 11, page 1080. 45 The allegations are fully dealt with at record, volume 4, page 394, paragraph 95.4. 21 37. That the HNP Trust had no source of income which would enable it to lend such amounts to Pholaco. In this regard: 37.1. It is indeed so that the HNP Trust did not have a source of income which would enable it to lend amounts to Pholaco. That is because it did not in fact do so. 37.2. The creation of a loan account in favour of the HNP Trust against Pholaco was a mere device employed by Mr Louw to hide the source of the investments flowing into Pholaco (primarily the money of Mr Louw’s clients). 37.3. No money flowed into the HNP Trust and no loan agreements or any other agreements creating an obligation between the Insolvent Estate Louw and the HNP Trust ever existed. 38. The Court a quo stated further that the aforesaid advices, recordals and documents had not been denied by the applicants “who content themselves by saying that they were false”. 46 This is an entirely incorrect finding on which the Court a quo based its decision. 39. A reading of the record as a whole and from the very outset reveals that the applicants had investigated and established that no sums had been advanced from Mr Louw to the HNP Trust’s bank account at all nor from the HNP Trust to Pholaco 46 Record, volume 13, page 1210, paragraph 12. 22 and no authority existed for Mr Louw to enter into any loan agreement on behalf of the HNP Trust. This was not disputed by the respondents. 40. In addition, the source of the funding to Pholaco was Mr Louw personally and these funds had been fraudulently obtained from his clients and were paid by him personally to Pholaco or through companies whose accounts he controlled and did not emanate from the HNP Trust. This was also not disputed by the respondents at all. Entries in the books of account of Pholaco arose from Mr Louw’s allocation thereof in the ledger account of the HNP Trust, as was confirmed by Mr Augustyn, even though payments to Pholaco were made by Mr Louw directly or indirectly through Quintado or Piket Kalsiet. 41. Given the above, the Court a quo found it to be common cause that Mr Louw transferred funds from his bank account to the bank account of Pholaco and that corresponding credits were recorded against the loan account of the HNP Trust in the books and records of Pholaco and then, without any justification, found that the Insolvent Estate Louw enjoyed a claim against the HNP Trust, and therefore locus standi in the sequestration application and that, once the claim was accepted, it was clear that the HNP Trust was hopelessly insolvent. 47 . 47 Record, volume 13, page 1213, paragraph 21. Despite the respondents’ allegations in their founding affidavit that the HNP Trust had, on a best case scenario, assets of a total value of about R12 500 000.00 (record, volume 1, page 21, paragraph 32), in the application for leave to appeal in the Quintado matter, they make fabricated, unsubstantiated and false allegations that the value of the assets of the HNP Trust is R90million (Quintado record, volume 14, page 1316, paragraph 23). 23 42. However, it is respectfully submitted, that there was no factual or legal basis for the Court a quo to have found that the Insolvent Estate Louw had any claim of any nature whatsoever against the HNP Trust, and certainly not a claim based upon a loan which was the cause of action relied upon by the respondents in the founding affidavit. D FIRST POINT OF LAW OF GENERAL PUBLIC IMPORTANCE: WHAT IS THE INSOLVENT ESTATE’S CLAIM OR CAUSE OF ACTION? 43. The Court a quo’s inferential jump from the finding that there was a loan claim in favour of the HNP Trust against Pholaco to the conclusion that the Insolvent Estate Louw enjoyed a claim against the HNP Trust was, with respect, not reasoned at all and misguided. 44. The Court a quo found that it was Mr Louw who transferred funds from his bank account to the bank account of Pholaco and that corresponding credits were recorded against the loan account of the HNP Trust in the books of Pholaco and in doing so acknowledged that no monies were actually advanced to Pholaco by the HNP Trust that made up the credits to its loan account in the books of Pholaco. 48 45. The Court a quo, found that the whole purpose of using the HNP Trust was to hide the illicit source of funds. 49 48 Record, volume 13, page 1212 paragraph 17. 49 Record, volume 13, page 1212, paragraph 18. 24 46. Where the Court a quo erred was in describing this purpose as using the HNP Trust as a conduit for the funds whilst it was common cause that no monies flowed through the HNP Trust to Pholaco. 47. The Court a quo erred in failing to find, on the evidence before it, that it was Mr Louw himself that had a claim against Pholaco and that the HNP Trust was simply used by Mr Louw to conceal his nefarious activities and that there was no factual or legal basis to make the inferential jump and conclusion referred to aforesaid that Mr Louw had advanced funds to the HNP Trust which in turn advanced the amount of R70million to Pholaco as contended by the respondents. 48. Without having established any loan agreement having been concluded between Mr Louw and the HNP Trust, the Court a quo erred in finding that the respondents had discharged the onus to establish locus standi and once this claim is accepted it is clear that the HNP Trust is hopelessly insolvent. 50 49. Similarly, in the application for leave to appeal a quo, the Court made the following un-reasoned inferential jump: “Louw was in effect laundering stolen money through the Trust. Accordingly, I am of the view that there can be no real doubt that Louw’s estate enjoys a claim against the Trust.” 51 50 Record, volume 13, page 1213, paragraph 20 and 21. 51 Record, volume 13, page 1235. 25 This is, with respect, a non sequitur par excellance. 50. The respondents made a similar inferential jump in their papers. According to Mr Bester “Mr Louw had confirmed that all of the money that ended up on the loan account with Pholaco, had as its source the funds he misappropriated from his clients. As explained in my founding affidavit in the sequestration application, once it is proved that the HNP Trust has a claim for this amount against Pholaco, it necessarily follows that the insolvent estate will have a claim against the HNP Trust.” 52 .This inferential jump is never explained by the respondents. 51. The Court a quo’s complete failure to apply its mind to the facts and the establishment of a cause of action in the sequestration application stands in contrast to the careful analysis of the Court a quo in the Quintado matter. 52. In that matter, the applicant creditor was also the trustees of the Insolvent Estate Louw (i.e. the respondents in casu), but it was found that they lacked locus standi under circumstances where it had not established any cognisable cause of action. Where the judgment of the Honourable Mr Justice Binns-Ward J in that matter has an impact on the present application, is that it was correctly found that Mr Louw was using Quintado’s banking facilities, over which he exercised sole control, to launder the pilfered funds and to facilitate the fabrication of accounts that would misrepresent that the beneficiaries of the payments, notably Pholaco, were indebted 52 Record, volume 10, page 938, paragraph 36 and volume 4, page 323, paragraph 19.2. 26 on loan account to the HNP Trust in respect of the stolen monies that they had received. 53 53. In that matter, as in this case, the respondents employed the same tactic of not establishing any cause of action upfront and then later attempting to rely on enrichment and the actio pauliana. 54 As was found in the Quintado matter, and similarly applies in this matter, no enrichment was raised, and no enrichment could have occurred on the facts of the matter concerned. 54. The actio pauliana, as a first requirement, requires that there be a cause of action, in other words, a claim by the creditor against the alleged erring debtor. No such claim could be established in this case or in the Quintado matter on behalf of the Insolvent Estate Louw. An enrichment claim can only arise where there has been a transaction between the parties concerned or there has been a payment made by the one party to the other. In casu, Mr Louw made no payment to the HNP Trust and the HNP Trust has received no benefit at all from Mr Louw. The mere book entry into the accounts of Pholaco to the effect that Pholaco owes the HNP Trust a loan account is obviously, on the grounds set out above, not of any value to the HNP Trust at all. It is nothing more than mere pretence on the part of Mr Louw to hide the origin of the funds concerned. His true intention, if given effect to, was to 53 Record, volume 13, page 1299, paragraph 23. 54 In the sequestration application, the respondents in their supplementary heads of argument attempted, for the very first time, to rely on enrichment or the actio pauliana as a cause of action in relation to the sequestration application. 27 steal the money of his clients and to use such monies to his benefit in his company, Pholaco. 55. It is respectfully submitted that it is of general public importance that the above Honourable Court should reiterate that in insolvency and, in particular, in sequestration applications, the process of sequestration should not be used in an abusive manner to obtain control over the estate of other entities merely because wild allegations of fraud have been made in the papers. 56. The potential for injustice and destruction of value which follows from an approach, as adopted by the respondents in casu, should not be countenanced by the law. 57. No matter what the inconvenience is to the trustees of the Insolvent Estate Louw, the respondents should be obliged, when applying for sequestration, to comply with the first principle of such proceedings, being that they have to establish a claim in law against the alleged insolvent estate or the alleged debtor and, indeed, that such claim in law must identify a cause of action in law. 58. No evidence was adduced at any stage, certainly no direct evidence, to the effect that there was any loan agreement authorised by the co-trustees. In the Judgment of the Court a quo, the nearest the Honourable Acting Justice got to finding that there was authority was the rather unsubstantiated statements in the Judgment 55 55 Record, volume 13, page 1210, paragraph 12. 28 that “It must be emphasised that this allegation is now made on behalf of a self- confessed fraudster and two trustees who at best acquiesced in allowing the Trust to be used as a vehicle to obscure the true source of the funds”. It is respectfully submitted the sentence is nonsensical in a number of respects. 59. It was the evidence of the third applicant and also the evidence of Mrs Louw contained in supporting affidavits, that Mr Louw as the co-trustee of the HNP Trust was never authorised to act on behalf of the HNP Trust, in particular, in entering into any loan agreements with the estate of Mr and Mrs Louw as alleged in the founding affidavit and upon which the respondents alleged existed. The Court a quo had no basis to reject the version of the third applicant or Mrs Louw. It had to do so to find for the respondents, it is submitted. 60. The statements in affidavits made by the third applicant and Mrs Louw were certainly not made on behalf of Mr Louw, the so-called “self-confessed fraudster”. They were made on behalf of the HNP Trust or on behalf of the individual, in the case of Mrs Louw, or the third applicant personally. Moreover, there was no evidence that Mrs Louw or the third applicant acquiesced in the entering into any loan agreement between the HNP Trust and Mr and Mrs Louw. They were not aware of such a loan agreement and nowhere in the papers is there even the slightest suggestion that they could have been aware of such an alleged agreement. The reason for not being aware of this is that there was not such an agreement. 29 61. Such an agreement was never described in the founding affidavit (or in any affidavit filed by the respondents in the sequestration application) nor was any evidence ever given of such an agreement by any party. The respondents merely relied on documentation which was admittedly fraudulently produced in order to conceal the true facts. Such documentation did not show that there was a loan between the HNP Trust and the Insolvent Estate Louw as demonstrated hereinabove. E THE SECOND POINT OF LAW OF GENERAL PUBLIC IMPORTANCE : THE MANNER IN WHICH TRUSTS ACT 62. The uncontested evidence of the third applicant, who, with Mr and Mrs Louw, was a trustee of the HNP Trust at all material times, as he remains, was that no advances on loan from Mr Louw to the HNP Trust for the purpose of advancing such funds thereafter to Pholaco were authorised by the trustees of the HNP Trust. 56 63. Can the HNP Trust be said to have acted at all when Mr Louw purported to reflect such loan accounts in books of account, on affidavit, and in documentation signed by him alone? 56 Record, volume 1, page 71, paragraph 8.1. 30 64. Subject to the provisions of the Trust Deed, the majority principle applies when trustees deal with outside persons, in other words, when dealing with outside persons, the trustees must act jointly. 57 65. The Trust Deed does not make provision for general authorisation of a trustee to conduct the affairs of the HNP Trust on his own at all. On the contrary, it prescribes very clear circumstances under which one trustee may be authorised to act on behalf of the HNP Trust. In casu, it is submitted that the following terms of the Trust Deed are relevant and demonstrate that the HNP Trust could not be bound under any general authority provided to Mr Louw, nor was it in fact so bound. 66. Clause 5.2 58 which provides that there must be at least three trustees in office at all times on the understanding that in case only two trustees remain as a result of the resignation or death of a co-trustee, the remaining trustee is authorised to exercise all powers of trustees for the preservation and administration of the trust fund excluding any amendment or deviation from the status quo in respect of the beneficiaries of the trust until such time as a further trustee has been appointed. If there are only two trustees in office, such trustee is obliged to immediately appoint a further trustee after the resignation or death of the other trustee. 59 57 Cameron et al, “Honore’s South African Law of Trusts”, 5 th Ed. at 324 Hoosen v Deedat 1999 (4) SA 425 (SCA) 58 Record, volume 1, page 76. 59 See also clause 5.3 (record, volume 1, page 91) and clause 5.5 (record, volume 1, page 77). See also clause 23 (record, volume 1, pages 86 to 87). 31 67. Clause 23(4) 60 provides that the trustees are entitled to authorise one of them to sign all documents for official purposes necessary for the administration of the HNP Trust or in the execution of any particular transaction that relates to the business of the trust and a decision certified by a trustee as a true extract of the minute of the meeting has the same effect as a decision signed by all the trustees. 68. In the Judgment of the Court a quo, the evidence to the effect that any loan agreement between the HNP Trust and the Insolvent Estate Louw and any payments or advances made to or by the HNP Trust were not authorised by Mr Cronje and Mrs Louw, was not rejected. 69. That being so, the Court’s finding that the Insolvent Estate Louw had a claim against the HNP Trust subverts the established principle that for a trust to be bound to outside parties, the business transacted with outside parties must be undertaken by the trustees acting jointly. 70. An outside person may be able to rely on estoppel against trustees who were not acting jointly if they, by culpable conduct, create the impression that the remaining trustee was empowered to act by him or herself, but the outsider cannot rely on estoppel if he or she had actual or constructive knowledge of the contents of the trust instrument. 61 60 Record, volume 1, page 87. 61 Cameron et al, “Honore’s South African Law of Trusts”. 5th Ed, at 324. 32 71. In this case, the outside party is Mr Louw who, of course cannot rely on estoppel: he knows the content of the trust instrument (actually or constructively) and if allowed to rely on estoppel will be deriving a benefit from his own wrong-doing. Moreover, he was the one who was unauthorised and knew that he was unauthorised. 72. In the Court a quo, the respondents contended that the evidence at the section 152 enquiry supported the notion that Mr Louw had a ‘general authorisation’ from Mrs Louw and Mr Cronje to conduct the HNP Trust’s affairs. As set out hereinabove, the application for admission of the evidence in the section 152 enquiry was not granted and the Court did not rely on that evidence. As there was no cross-appeal against such failure to grant the application, that evidence is not available to the respondents. The contention in general that a general authorisation may enable one trustee to run the conduct and affairs of the trust without having regard to the particular instructions or wishes of the other trustees is, however, problematic in any event. 73. In the case of Niewoudt and Another N.N.O. v Vrystaat Mielies (Edms) Bpk 2004 (3) SA 486 (SCA), it was described as a fundamental rule of trust law that in the absence of contrary provision in the Trust Deed, the trustees must act jointly if the trust is to be bound by their acts. The rule derives from the nature of the trustees’ joint ownership of the trust property. Since co-owners must act jointly, trustees must also act jointly. 33 74. In Hoosen & Others N.N.O. v Deedat & Others, 62 the Court stated that it is: “… noteworthy that where provision is made for delegation in the Trust Deed, such delegation relates to matters that are by and large purely administrative. The allegation does not relate to areas where the exercise of a discretion is called for by the trustees in carrying out their duties of management and control. This accords with the principle that the fundamental decisions relating to a trust need to be taken by the trustees; the implementation of such decisions may be delegated to others, although ultimately responsibility remains with the trustees (see F Erlanks Trustee v Allan [1909] TS 303 at 306)”. 75. The fact that trustees must act jointly does not preclude them from expressly or impliedly authorising one of their number to act on their behalf once decisions have been taken, unless this is prohibited by the statute or by the Trust Deed. 76. A single trustee cannot act alone in respect of trust matters without first consulting other trustees and, thereafter, acting in terms of a resolution of trustees. Once the trustees have decided an issue, a sole trustee or some of the trustees cannot thereafter act unless specifically authorised by the Trust Deed or by the trustees. 77. Trustees must act jointly in trust affairs after consulting each other and if a Trust Deed provides for it, a sole trustee (or some trustees) can thereafter act in implementing the decision taken by the body of the trustees acting together. 63 62 (336/97) [1999] ZASCA 49; [1999] 4 All SA 139 (A) (16 July 1999). 63 Meyer N.O. & Another v First Rand Bank Ltd (Formerly known as First National Bank of Southern Africa) and Another In re Firstrand Bank Limited (Formerly Known as First National Bank of Southern Africa) v Meijer NO and Others [2013] JOL 30560 (WCC). 34 78. It is submitted, however, that when the conduct of co-trustees amount to a voluntary or involuntary abdication of powers by them, that cannot constitute a delegation of their authority to one trustee. 64 79. It is submitted that the above principles apply under circumstances where two trustees out of three may have allowed one trustee to conduct the affairs of the trust without exercising specific oversight. In such circumstances, the trust does not become bound by the unlawful conduct of the trustee except under circumstances where he has sought specific resolutions to authorise him from his co-trustees. 80. The trustees, acting jointly (and by that is meant all three of them in casu), must delegate authority in respect of a particular discretionary act to one of them in order to have said to have acted. 81. As submitted above, the only instance where the trustees of the HNP Trust did in fact act jointly is the instance of the signing of a resolution in relation to the HNP Trust being empowered to enter into a suretyship agreement for the debts of Pholaco. This resolution is not a general authority for Mr Louw to enter into any loans nor, indeed, a confirmation that there was any continuing authority on the part of Mr Louw at all to represent the HNP Trust. Mr Louw was never delegated with authority either to represent the HNP Trust in making affidavits and claims and admissions on behalf of the HNP Trust at any stage. 64 “Trust Law in South Africa”, Juta, Walter D Geach, 1 st Ed, 2007 at pages 172-174. 35 82. In fact, the respondents have, in their papers, relied on “admissions” made by Mr Louw and have purported to hold the HNP Trust liable for such admissions under circumstances where Mr Louw was no longer a trustee of the HNP Trust given the sequestration of the joint estate. 83. Insofar as the authority in the case of Grainco (Pty) Ltd v Broodryk en Andere 65 contradicts the principles that abdication of powers by co-trustees do not constitute delegation of the authority to one trustee, it is submitted that such authority is in direct contrast to the adopted and inevitable principles of the law of trusts. It also contradicts the dictum in Hoosen’s case supra that discretionary powers are not capable of delegation at all. In Grainco’s case, the Court found in favour of the plaintiff on the basis of evidence before the Court that indicated that his son had for many years conducted the business of the trust with the plaintiff and other entities. The Court found that the inescapable inference was that the son had a general authority from his mother to conduct the business of the trust although the son had not consulted or obtained approval of his mother every time he transacted on behalf of the trust. 66 84. Unless the trust instrument provides for it, the notion of a ‘general authorisation’ may not be relied on; an aggrieved outsider is, instead, permitted to rely only on established principle, like estoppel, if the requirements are met. 65 (1300/2009) [2009] ZAFSHC 143, 2012 (4) SA 517 (FB) (18 June 2009) 66 See criticism of the above in “Trust Law in South Africa”, Geach, page 173. 36 F THE THIRD POINT OF LAW OF GENERAL PUBLIC IMPORTANCE : PROVISIONAL ORDER GRANTED ON ADMITTEDLY INCORRECT FACTS 85. As indicated above, the provisional order was granted unopposed and on evidence that was admittedly false. It is passing strange that the deponents to the sworn affidavits on behalf of the respondents all remembered what Mr Louw was alleged to have stated at the Meeting in the same way but in a manner directly contradictory to what actually occurred at the said meeting. The deponent to the founding affidavit was Mr Bester and the deponents to the confirmatory affidavits filed in support thereof, were deposed to by, Mr Du Toit and Ms Birkenstock. It is inconceivable that by the time that they deposed to the aforesaid affidavits (within a week of the Meeting, on 21 December 2018) all three of them had been mistaken in their recollection of what Mr Louw had in fact stated at the said meeting. 86. In Moodley v Cassim 1953 (4) SA 516 (NPD) the applicant had obtained a provisional order of sequestration alleging that the respondent was indebted to him in the sum of £200 being the balance owing under certain cheques. On the return day the respondent admitted proof that his indebtedness under the cheques was only £40 (not sufficient to entitle the applicant to an order of sequestration). The debtor submitted, however, that he owed the applicant a further sum of £200. The applicant filed no affidavit in reply. The Court held that the applicant was confined 37 to the claim set out in the petition; he could not rely on the debtor’s own assertion that he was liable for a claim not relied on in the petition. 67 87. While the respondents also relied on acts of insolvency in the sequestration, these were never established. In this regard, in argument before the Court a quo, the respondents relied on Hassan v Berrange N.O. 2012 (6) SA 32 (SCA) and, in particular, at 347C-D where the Court stated that: ‘…an applicant is entitled to rely on the commission of an act of insolvency albeit that he only became aware of it after the commencement of the sequestration proceedings.’ 88. In making this statement, the Court referred to two cases. The first was Schlemmer v Mehnert (1908) 25 SC 782. In that case a petitioning creditor alleged that as an act of insolvency on the part of the defendant, the defendant had failed to satisfy a writ of execution. It was then discovered that although the defendant had since satisfied the writ, he had committed another act of insolvency. The Court ordered the amendment of the summons by including the allegation about the new act of insolvency and postponed the case to enable the defendant to answer the fresh allegation. 89. The present case is wholly distinguishable: in Schlemmer no order was taken on the basis of wrong facts, the debt was merely paid (and another alleged) after 67 See also Enter Centre Enterprise (Pty) Ltd v Brogneri 1972 (1) SA 117 (CPSD) at 122H – 123A. 38 summons. Moreover, there the defendant was given a full opportunity to meet the new case. 90. The second case the Court referred to was Joosub v Soomar 1930 TPD 773 at 779. In that case the Court held that in an application for sequestration the petitioning creditor may rely on a further act of insolvency committed by respondent after the filing of the petition in support of the application. 91. This case, too, is wholly distinguishable from the present case. Here the respondents did not seek to rely on a further act of insolvency committed by the HNP Trust but rather sought to introduce additional causes of action that were not advanced at the time that the provisional order was granted. As stated above, there were no grounds at all for sequestration when the provisional order was taken. 92. In casu the respondents, in order to obtain the original provisional order, relied on false evidence and proceeded to obtain an order under circumstances where they were aware that there was only one trustee in office who could not defend the proceedings. They nonetheless cited all three trustees and did not bring to the Court’s attention the fact that two of them were disqualified. 93. The cause of action which they relied on was the advance of funds in terms of a loan agreement between the HNP Trust and Mr Louw based on what was allegedly said by Mr Louw at the Meeting. The provisional order was accordingly obtained on entirely misguided and false grounds. 39 94. Every single pillar of the sequestration application fell away when it was established that the respondents could not have been represented at the provisional date, the cause of action relied on was based on false evidence and there was no basis to rely on such false evidence which false evidence also allegedly came from a person who was no longer a trustee of the HNP Trust and, therefore, could not bind the HNP Trust at all. 95. The provisional order ought to have been discharged on this basis alone. G. THE RESPONDENTS’ CONTENTIONS IN THE APPLICATION: Ad paragraph 12 (record, volume 14, page 1316): 96. The allegation of a collusive transaction is rejected. The papers contain a full explanation from Mr Kellerman as well as from the trustees of the HNP Trust as to the nature of the agreement which gave rise to Mr Kellerman obtaining the assets of the HNP Trust as security. 97. Mr Louw had asked Mr Kellerman to lend him a substantial amount of money in order to put things right with Mr Louw’s creditors. Mr Kellerman and the trustees of the HNP Trust, at the time, in September/October 2018 agreed that the HNP Trust would assume liability for the amount of R17 680 000.00, that was advanced by Mr Kellerman to Mr Louw. 68 68 Record, volume 4, page 370, paragraph 62.2. 40 98. Thereafter, a written agreement was executed, recording the terms of the agreement reached between Mr Kellerman and the then trustees of the HNP Trust which was conceded by the third applicant to be unauthorised as he was not authorised at the time to bind the HNP Trust, on his own, the other trustees having been provisionally sequestrated. 69 99. There was no collusion at all but simply an attempt on behalf of Mr Kellerman and the third applicant to give effect to the agreement which had been entered into between Mr Kellerman and the trustees of the HNP Trust reached in September/October 2018/ 70 . 100. The trustees, past and present, of the HNP Trust are all still agreed that the agreement of the HNP Trust to assume liability and to make available its assets for satisfying the indebtedness to Mr Kellerman remains binding and will be confirmed in a written agreement. 71 Ad paragraph 13 (record, volume 14, page 1316): 101. The object of the present application is exactly what the present application is. It is to ensure that the law of insolvency is applied to the proceedings properly and correctly. It is also, of course, correct that should the correct order be granted in the humble submission of the applicants, the HNP Trust will be entitled to comply 69 Record, volume 4, page 372 to page 373, paragraph 64.3 to 64.5. 70 Record, volume 4, page 372 to page 373, paragraph 64.3 to 64.5. 71 Record, volume 4, page 370 and 371, paragraph 62.2. 41 with its obligations and to ensure that the security provided to Mr Kellerman for the loan advanced to Mr Louw is perfected properly. 102. It is submitted that there is nothing wrong with ensuring that Mr Kellerman receives repayment of the loan as secured by the agreement that the assets of the HNP Trust will stand as security for it. Ad paragraph 14 (record, volume 14, page 1316): 103. The respondents are trying, as usual, to shift the focus of the proceedings.They have sought to bring an application for sequestration and have made out no grounds for the application. 104. There is no obligation on the HNP Trust to explain where it found its assets or how it funded its assets at all. It certainly is open to the respondents, should they so wish, to institute proceedings against the HNP Trust should they have any grounds to allege that the HNP Trust was favoured by dispositions which may be set aside under the law of insolvency. Such proceedings are entirely distinct and do not equate, it is submitted, to unlawful attempts to sequestrate the HNP Trust. Ad paragraph 35 (record, volume 14, page 1326): 105. A point of law is indeed mentioned in the paragraph concerned. The point of law concerns the authorisation of trustees of the HNP Trust. It was always in dispute that, and in fact, never alleged otherwise by the respondents that Mrs Louw for 42 example had no knowledge of the shenanigans of Mr Louw, or that the third respondent was a party thereto. Ad paragraph 42 (record, volume 14, page 1328): 106. As pointed out in these heads of argument, there are divergent views in relation to the question of general authorisation under the law of trusts. A full discussion of the above is set out herein above. The fact that the respondents contend for a particular line of authority including Supreme Court of Appeal authority does not detract from the fact that there is apparently divergent authority. Ad paragraph 54 (record, volume 14, page 1333 and 1334): 107. It is submitted that the allegation that funds were advanced was made by the respondents in the founding affidavit. No funds flowed and, therefore, no advance was made. It is not clear how a factual allegation like that can be bad in law. The contention quoted in the paragraph is accordingly rejected. 108. The alleged benefits which arose are entirely nonsensical as there is no indication that shareholding in Pholaco arose from the entry into a loan. The respondents are misdirected if they contend that a loan amount can pay for the acquisition of shares. 109. Moreover, as contended above, the loan accounts reflected in Pholaco’s books are fraudulent entries. The fact that the HNP Trust has acquired assets has nothing to do with this matter and cannot create a cause of action on behalf of the Insolvent Estate Louw. 43 Ad paragraph 55 (record, volume 14, page 1334): 110. There is no evidence of the allegations made on the record at all and accordingly no basis is established for the contents of the paragraph under reply. Ad paragraph 56 (record, volume 14, page 1334): 111. The applicants have not established a liquid claim that the Insolvent Estate Louw has against the HNP Trust and that it is unable to pay such claim or is factually insolvent. 112. The only claim of R150 000.00 has been secured for payment upon discharge of the insolvent estate of the HNP Trust from provisional sequestration. The reason why the Insolvent Estate of the HNP Trust was not able to pay the respondents is because the Insolvent Estate of the HNP Trust was provisionally sequestrated and the trustees of the HNP Trust under provisional sequestration is in charge of the affairs of the HNP Trust and therefore it cannot make valid payment of the debt. 72 At the date of the launching of the sequestration application, the ABSA Bank statements of the HNP Trust reflects that the Trust held sufficient funds to pay the claim of R150 000.00. 73 No demand whatsoever has been made for payment of the sum of R150 000.00. 74 72 Record, volume 4, page 366, paragraph 55.7. 73 The date of launching of the application for sequestration is 21 December 2018 and the balance at 31 December 2018 is R364 640.39, see record, volume 3, page 294. 74 Record, volume 4, page 366, paragraph 55.8. 44 Ad paragraphs 60 to 68 (record, volume 14, pages 1337 to 1339): 113. The respondents attach a sinister plot to the facts relating to the loan which had been granted by Mr Kellerman to Mr Louw and the subsequent entry into an agreement for curing the loan by means of the assets of the HNP Trust. 114. The applicants and Mr Kellerman have been open about the intentions of securing the assets of the HNP Trust in security for the loan advanced to Mr Louw and there is nothing sinister about it. 115. The respondents only have themselves to blame for the fact that they brought a sequestration application which is entirely groundless. Ad paragraphs 80 to 85 (record, volume 14, pages 1344 to 1346): 116. It is submitted that it is beyond opportunistic for the respondents who have abused the process of Court in order to obtain an unlawful sequestration order as set out in the papers of record, to ask for a punitive costs order against the applicants. 117. The applicants have been open and clear about their intention and that they intend to honour the agreement the HNP Trust has entered into with Mr Kellerman. The third applicant has dealt explicitly with the alleged complicity in the affairs of the HNP Trust and has made it clear that he has made errors in not applying more oversight over the affairs of the HNP Trust. 45 118. It is respectfully submitted that the present application is an attempt at correcting a clear injustice and it is not without merit nor is it an abuse, unreasonable or unacceptable or improper in any manner whatsoever. 119. The alleged ulterior purpose has not been established and cannot be established. The purpose of the present application is to ensure that an unlawful and correctly obtained sequestration is not upheld and is set aside, and that the costs incurred by the HNP Trust in having to overturn such unlawfully obtained order is recovered. H CONDONATION 120. The applicants seek condonation for the late filing of their application for leave to appeal (“the condonation application”). The respondents oppose the condonation application 75 . 121. On 19 February 2020, the Supreme Court of Appeal refused the applicants’ application for leave to appeal against the Judgment of the court a quo in terms whereof the HNP Trust was placed under final sequestration. 76 122. On 18 March 2020, the applicants applied to the President of the Supreme Court of Appeal for a referral of the Supreme Court of Appeal’s decision aforesaid, to 75 Record, volume 14, pages 1317 to 1324, paragraphs 16 to 30. 76 Record, volume 13, page 1246, paragraph 4 and pages 1207-1217. 46 the Supreme Court of Appeal for reconsideration in terms of section 17(2)(f) of the Superior Courts Act 10 of 2013 (“the application for reconsideration”). 77 123. On 25 August 2020, the President of the Supreme Court of Appeal dismissed the application for reconsideration. 78 The applicants received the ruling of the President of the Supreme Court of Appeal on 7 September 2020 and thus ought to have filed the application for leave to appeal on 29 September 2020 (being 15 days from receipt of the ruling concerned). 124. The applicants’ application for leave to appeal was launched on 20 October 2020 79 and was thus filed approximately 14 Court days out of time. 125. In terms of Rule 32(1) of the Rules of the above Honourable Court, the court may condone any failure to comply with the rules on sufficient cause shown. 126. The approach which the courts have followed in determining whether sufficient cause (or good cause) is shown, has been set out by Holmes JA in Melane v Santam Insurance Co. Ltd. 80 127. This Honourable Court has emphasised that lateness and the explanation therefor is not the only consideration in determining whether an application for condonation may be granted. The overarching question in considering the grant of condonation 77 Record, volume 13, page 1247, paragraph 6. The application for reconsideration was brought within one month as required in terms of section 17(2)(f) of the Superior Courts Act 10 of 2013. 78 Record, volume 13, page 1247, paragraph 7, and page 1240. 79 Record, volume 13, page 1243. 80 Melane v Santam Insurance Co. Ltd 1962 (4) SA 531 (A) 532C-F. See also United Plant Hire (Pty) Ltd v Hills 1976 (1) SA 717 (A) 720E-G. 47 is the interest of justice. As such, condonation may be granted even in the absence of any explanation at all for a significant delay or where the explanation is inadequate, especially in circumstances where there is no prejudice to the respondent. 81 128. Applying this approach, it is apparent that even a very long delay (even as much as three years) may be condoned where the interests of justice require this 82 (as in the present instance). Furthermore, if the merits of the case of the party seeking condonation are particularly strong, this “tips the scales” in favour of condonation even in the presence of other “adverse factors”. 83 129. Finally, a court will readily grant condonation in the absence of any prejudice to the respondent. 84 130. Applying the above principles to the facts of this case, it is submitted that it would be appropriate to condone the delay of the filing of the application for leave to appeal, particularly in view of the applicants’ overwhelming prospects of success therein. 81 Brummer v Gorfil Brothers Investments (Pty) Ltd and Others 2000 (2) SA 837 (CC) para 3; Geldenhuys v National Director of Public Prosecutions 2009 (2) SA 310 (CC) para 21; Bertie van Zyl (Pty) Ltd and Another v Minister for Safety and Security and Others 2010 (2) SA 181 (CC) paras 13- 14; Ferris v FirstRand Bank Ltd 2014 (3) SA 39 (CC) paras 10-12. 82 Swifambo Rail Leasing (Pty) Ltd v Prasa 2020 (1) SA 76 (SCA) paras 40 – 42. 83 Finbro Furnishers (Pty) Ltd v Registrar of Deeds, Bloemfontein 1985 (4) SA 773 (A) 790D. 84 Shepherd v Mossel Bay Liquor Licensing Board 1954 (3) SA 852 (C) 858A. 48 131. As to the explanation for the delay, this is dealt with in paragraphs 82 to 85 of the founding affidavit. 85 The respondents are not satisfied with the applicants’ explanation for the delay in that inter alia they deny that applicants’ attorneys require to canvas over 2700 pages 86 , contend that the comparison of the record in both applications could not have caused delay, dispute that it would have been prudent to wait for Binns-Ward J’s judgment before launching the present application 87 , contend that no explanation is given for why it was only after the lapse of the prescribed 15-day period it was decided to launch the present application 88 and contend that the applicants should have, and were obliged to launch the present application before 14 September 2020 89 . 132. The decision to launch the present application was made pursuant to 16 September 2020, and thus approximately within 7 (seven) Court days of receipt and notification of the President of the Supreme Court of Appeal’s ruling in relation to the reconsideration application. 133. The applicants were obliged to launch the present application by no later than 29 September 2020 90 and definitely not before 14 September 2020. 85 Record, volume 13, pages 1287 to 1288, paragraphs 82 to 85. 86 Record, volume 14, page 1319 and 1320, paragraph 23.1. 87 Record, volume 14, page 1320, paragraph 23.2. 88 Record, volume 14, page 1321 paragraph 23.4. 89 Record, volume 14, page 1321, paragraph 23.5. 90 Record, volume 13, page 1287, paragraph 81. 49 134. The respondents seek to rely on Glenister v President of the RSA. 91 This case does not assist the respondents as the length of the delay in bringing the application for leave to appeal concerned was 2 (two) months i.e. 62 days. The present application for leave to appeal has been brought 14 Court days out of time. Notwithstanding the Court’s dissatisfaction with the reasons furnished for the delay in that matter, the Court granted condonation on the basis that it was in the interests of justice, 92 as it is submitted is the case in the present instance. 135. Moreover, the respondents cannot be said to have suffered any prejudice. As alleged creditor of the HNP Trust, the Insolvent Estate Louw proceeded to submit a claim against the HNP Trust at the first meeting of creditors of the HNP Trust. The Insolvent Estate did so. 93 Assets of the Trust have been sold by the insolvency trustees of the HNP Trust 94 , and thus the administration of the estate of the HNP Trust proceeded notwithstanding the present application for leave to appeal in accordance with section 150 of the Insolvency Act No 24 of 1936 (as amended). 136. The respondents, despite their criticism 95 of the applicants’ contentions that they cannot be prejudiced in the delay in the bringing of the present application 96 nor if condonation for the late bringing of the present application is granted, 97 failed to sufficiently set out any facts evidencing that that they will suffer any prejudice. On 91 2011 (3) SA 346 CC at para 49 note 39. 92 See paragraphs 49 and 50. 93 Record, volume 14, page 1322, paragraph 25. 94 Record, volume 14, page 1322, paragraph 26. 95 Record, volume 14, page 1322, paragraph 27. 96 Record, volume 13, page 1289, paragraph 85.3, and page 1322, paragraph 27. 97 Record, volume 13, page 1289, paragraph 85.4. 50 the other hand, the applicants will suffer significant prejudice if the late delivery of the application for leave to appeal is not condoned. It is submitted that the prejudice to be suffered by the HNP Trust is self-evident given the applicants’ overwhelming prospects of success in relation to the present application for leave to appeal. 137. When properly weighed, these factors favour the exercise of the above Honourable Court’s discretion to grant condonation. I. CONCLUSION 138. It is accordingly submitted that the application should be granted with costs (including the costs of two counsel) and that the appeal should succeed. 139. The order and judgment of the Court a quo under case number 23383/2018 in the Western Cape Division, Cape Town, per Sievers AJ and part b of the order should be set aside and the respondents ordered to pay the costs (including the cost of two counsel) incurred in respect of the application in the Court a quo, the application for leave to appeal in the Court a quo, the application for leave to appeal to the Supreme Court of Appeal and the application in terms of Section 17 of the Superior Courts Act No 10 of 2013. P A VAN EEDEN SC D BAGULEY Chambers, Cape Town 7 July 2021