INSOLVENCY

Facts: The applicant (Prudential Authority) applied for the sequestration of the Dlaminis. The application was founded on two grounds. The first was that they had committed an act of insolvency by failing to comply with a directive issued by the Authority in terms of section 83(1) of the Banks Act 94 of 1990 directing them to repay money they had obtained by carrying on the business of a bank in contravention of that Act. The second was that, in terms of section 84(1A)(a), the Dlaminis were factually insolvent. Following the section 12 directive by the Governor, and the subsequent inspection of the Dlaminis’ affairs, they were found to have obtained money by conducting the business of a bank without being registered as a bank and without being authorized to do so. The TVI scheme was held by the court, in Kruger v Joint Trustees of the Insolvent Estate of Paulos Bhekinkosi Zulu [2016] ZASCA 163, to have amounted to the unlawful carrying on of the business of a bank and a pyramid scheme in contravention of the Banks Act. The High Court dismissed the application on the basis that the Authority had failed to show that the Dlaminis were prima facie insolvent and relied further upon the exercise of its discretion.

Appeal: This is an appeal against the judgment and order of the KwaZulu-Natal Division of the High Court, in which it dismissed the appellant’s application for the provisional sequestration of the joint estate of the first and second respondents in terms of sections 83(3)(b) and 84(1A)(c) of the Banks Act 94 of 1990. The issues are, first, whether sections 83 and 84 of the Banks Act require proof of factual insolvency for the sequestration of a person under those sections, or whether mere proof of non-compliance with a directive issued under section 83 is a sufficient ground for sequestration. Secondly, whether the court may interfere with the High Court’s discretion to refuse the application.

Discussion: It was submitted on behalf of the Authority that the High Court erred in dismissing the application for the provisional sequestration of the Dlaminis on the basis that the Authority failed to establish that the Dlaminis were prima facie insolvent. This was not the only basis of its application. The Authority based its application both on section 83(3)(b) and section 84(1A)(c) of the Banks Act and, so it contended, either of the two sections was sufficient to found a case for the sequestration of the Dlaminis’ joint estate. The High Court did in fact err in dismissing the application. It is common cause that the Authority’s application was founded on sections 83 and 84 of the Banks Act. The Dlaminis failed to repay the amount within the period stipulated in the repayment directive. They also did not challenge the directive by way of review despite being entitled to do so. Therefore, the Dlaminis were, in terms of section 83, deemed to have committed an act of insolvency. There is no public policy reason for reading the sections so as to limit the power of the Authority to seek sequestration as contended for by the Dlaminis. On the contrary, the whole purpose of the provisions is to ensure that people who have contravened the Act should be held accountable to repay the monies unlawfully obtained. Public policy requires that the Authority ought to be properly empowered to secure this objective, not hamstrung by having to establish two bases for sequestration, as suggested by the Dlaminis.

Findings: The High Court misdirected itself in exercising its discretion against the granting of the sequestration order. The evidence established that the Dlaminis obtained money through their participation in the TVI scheme which entailed carrying on the business of a bank without being authorized to do so. The amount which they were directed to repay was disclosed in the directive that was issued and they failed to repay it as directed. In terms of section 83, they were deemed to have committed an act of insolvency. In terms of section 84(1A)(f), the Authority is regarded as a creditor and he or she has the same rights of a creditor in terms of the law relating to liquidation and insolvency. From the evidence adduced by the Authority, there is reason to believe that it will be to the advantage of creditors if the Dlaminis’ joint estate is sequestrated. The Authority should have been granted the provisional sequestration order. It discharged the onus on a balance of probabilities regarding the amount which the Dlaminis unlawfully obtained by conducting a business of a bank in contravention of the Banks Act; the Authority directed them to repay the amount; and the Dlaminis failed to repay the amount. As a result of their failure, section 83 of the Banks Act deemed them to have committed an act of insolvency which entitled the Authority to apply for the sequestration of their joint estate. There is reason to believe that their sequestration will be to the advantage of creditors.

Order: The appeal succeeds with costs. The joint estate of the respondents is to placed under provisional sequestration in the hands of the Master.

ZONDI JA (SEEGOBIN AJA and KEIGHTLEY AJA concurring)

MBATHA JA and KGOELE JA dissenting from para [44]

Fact and issue: Application for the rescission of a provisional order of sequestration granted as well as the subsequent final order of sequestration which was granted. Both orders were granted in the absence of the respondents. The respondents are married in community of property and the provisional and final orders of sequestration thus pertained to the joint estate. The applicant’s case for the sequestration of the respondents’ estate was premised on monies that were received by the respondent by carrying on the business of a bank without being registered or authorised to do so.

Discussion: The respondent did not dispute that he obtained monies by carrying on the business of a bank without being registered or authorised to do so. It was also not disputed that the respondent failed to make payment in accordance with the directive. The respondents and their attorney did nothing to oppose the provisional sequestration order, despite being in possession of the application papers. Therefore, the provisional order of sequestration was granted in the absence of the respondents. In the circumstances, the respondents have failed to provide a reasonable explanation of their default when the court granted the provisional sequestration order. The first respondent’s (husband’s) evidence to dispute service of the court order is lacking in several respects and does not disturb the prima facie evidence of personal service placed before the court hearing the application for final sequestration. There is no confirmatory affidavit by the second respondent (wife) and it therefore needs to be accepted that the second respondent was personally served with the court order, as indicated by the sheriff’s return. There is nothing to suggest that the second respondent’s presence at the first respondent’s place of employment may have been untrue or even unusual.

Findings: The respondents failed to provide a bona fide defence, which prima facie carries some prospects of success in the sequestration application. As a result of the respondent’s failure to disclose his unsuccessful review of the directive, the respondents’ failure to make a full and complete disclosure of their assets, liabilities, income and expenditure and the failure by the second respondent to provide any evidence at all, the application is also not bona fide made. The respondents failed to satisfy the requirements for rescission under the common law. The provisional and final orders of sequestration were not granted in error which may have justified rescission.

Order: The application is dismissed with costs.

Facts and issue: The applicant seeks to sequestrate the estate of the respondent, who was previously employed by it as a senior business solutions analyst. The applicant alleges that the respondent has committed an act of insolvency as contemplated in s 8(b) of the Insolvency Act 24 of 1936. Having been employed by the applicant for two and a half years, the respondent was dismissed by it for misconduct regarding the respondent’s alleged misrepresentation of his academic achievements. The applicant seeks to recover the salary that it had paid him over the period of his employment.

Discussion: The respondent delivered an exception to the applicant’s particulars of claim. The exception was dismissed, and costs were awarded against the respondent (first costs order). When the taxed costs were not settled by the respondent, the applicant caused a warrant of execution to be served upon him by the sheriff of this court. There are, in fact, two matters between the parties, one relating to an unfair labour practice and the other to the termination of the respondent’s employment with the applicant. Before instituting its action against the respondent, the applicant had sought relief against him in the labour court. The applicant failed to mention in its founding affidavit that it was liable to the respondent in respect of the costs ordered against it in the labour court on the attorney and client scale. On the strength of that order of the labour court, the respondent caused a bill of costs to be drawn up. It came to the amount of R72,144.40, which exceeds the first costs order in favour of the applicant. The applicant ought to have disclosed in its founding affidavit that it, too, was indebted to the respondent in a yet undetermined amount. But it did not do so.

Findings: The two parties who have engaged in litigation in a variety of legal fora are the applicant and the respondent, as cited in this application. The amounts that have been awarded to each of them by way of costs orders have been taxed and are thus liquidated amounts, which are now due. All the requirements for the operation of set-off are consequently present and it has operated by operation of law. Consequently, the applicant is no longer a creditor of the respondent. As the applicant is not a creditor of the respondent, it has no basis to insist on the sequestration of his estate. The respondent is therefore not presently indebted to the applicant and the application cannot be granted.

Order: The application is dismissed with costs.

Facts and issue: The applicant, TUHF, and the respondent, Mr. Farber, are presently engaged in litigation arising from finance agreements. There are several cases in which TUHF has sought to realise its security and has obtained judgment against Mr. Farber or the companies he controls for the amounts outstanding under the various agreements. TUHF obtained two judgments against Mr. Farber. Neither of these judgments has been satisfied. TUHF instituted these proceedings, in which it seeks a provisional order of sequestration against Mr. Farber.

Discussion: TUHF despatched the Sheriff to Mr. Farber’s home with instructions to execute against Mr. Farber’s assets. The Sheriff’s return records that Mr. Farber was able neither to satisfy the judgment nor to point out movable or immovable assets which could be attached to satisfy the full amount due under it. Section 8 (b) of the Insolvency Act 24 of 1936 provides that Mr. Farber commits an act of insolvency if “a court has given judgment against him and he fails, upon the demand of the officer whose duty it is to execute that judgment, to satisfy it or to indicate to that officer disposable property sufficient to satisfy it, or if it appears from the return made by that officer that he has not found sufficient disposable property to satisfy the judgment”. This is exactly what happened when the Sheriff visited Mr. Farber’s home.

Findings: The act of insolvency defined in section 8 (b) of the Act has been established. It seems at least prima facie, to be to Mr. Farber’s creditors’ advantage that the affairs be interrogated with the aim of establishing exactly what is available to satisfy Mr. Farber’s proven and substantial indebtedness. Provided that there is some prospect that such an investigation will uncover assets that can be liquidated to pay his debts, Mr. Farber’s provisional sequestration will advantage his creditors in at least this sense.

Order: The respondent and any other interested party are called upon to advance reasons why the respondent ought not to be finally sequestrated at 10h00 on Monday 25 November 2024, or as soon thereafter as counsel may be heard.

Facts and issue: Application by the Prudential Authority for the provisional sequestration of the respondent's estate in terms of sections 83(3)(b) as read with 84(1A)(c) of the Banks Act. The allegation is that the respondent has committed an act of insolvency as contemplated in terms of section 83(3)(b) of the Banks Act further read with section 8 of the Insolvency Act 24 of 1936.

Discussion: The conduct constitutes “bank business practice”, which was done by the respondent without being registered as a bank, nor authorised as envisaged in section 18A(1) of the Banks Act and Mutual Banks Act. In terms of section 11(1) of the Banks Act, “no person shall conduct the business of a bank unless such person is a public company and is registered as a bank in terms of this Act”. Business of a bank includes conduct such as the acceptance of deposits from the public as a regular feature of the business in question. The respondent willingly participated in the TVI Scheme and her participation constituted the unlawful conducting of the business of a bank, thus contravening the Banks Act. The amounts obtained were not repaid to the persons that deposited those amounts.

Findings: The applicant's claim is not disputed by the respondent on reasonable and bona fide grounds. Self-evidently, the machinery of the Insolvency Act is accordingly more advantageous to creditors than trial procedure on these facts. Considering the uncontested claim and the failure by the respondent to pay the monies deposited into her bank accounts, a provisional trustee will be able to clarify this by way of an enquiry, far much speedily than the institution of action proceedings. The sequestration of the respondent may well result in the proceeds being brought back into the estate for the benefit of the applicant and general body of creditors.

Order: The estate of the respondent is placed under provisional sequestration in the hands of the Master of the High Court of this Division.

Facts and issue: Mr. Atholl Liebman, now deceased, issued a sequestration application wherein he sought that a provisional sequestration order be granted against the respondent, Mr. Brett Liebman, his son. Due to a family feud, no love was lost between the two parties. The parties will be referred to as the applicant and respondent. The applicant seeks that the respondent be placed under provisional sequestration. The respondent owes a total amount of R752,955.85 for taxed legal costs, which costs are due and owing because of a court order.

Discussion: The applicant avers without any substantiation that the respondent is factually insolvent. The respondent answers and denies being insolvent. He indicates that he holds interests in companies that are sufficient to satisfy the judgment debt. The applicant acknowledges that the applicant holds, at minimum, 50% of the member’s interest in O V H Unit 12 CC and 100% of the issued shareholding in Emerald Haven (Pty) Ltd. The applicant does not elaborate on why he decided, for instance, not to attach the respondent’s shareholding in Emerald Haven (Pty) Ltd. Even though the respondent offers to cede his interests in the trusts in which he is a beneficiary and the companies wherein he holds an interest to the limited value of the bills of costs plus interests thereon, the applicant proceeded with the sequestration application. The applicant is determined to obtain the respondent’s provisional sequestration at all costs. The applicant relies on indirect, non-pecuniary advantages that the respondent’s sequestration might have. The allegations boil down to unsubstantiated generalised statements.

Findings: Having regard to the proximity between the applicant and the respondent, despite their animosity towards each other, one expects primary facts being averred to substantiate a finding that assets will be recovered that are currently stowed away in obscurity. No case is made out for the court to find that it will be beneficial to the respondent’s body of creditors if a provisional sequestration order is granted. The sale of a vehicle valued at R20,000 can, in the circumstances, hardly be seen as the dissipating of assets, particularly if regard is had to the fact that no allegations are made that the respondent alienated the vehicle because he caught a whiff of the applicant’s intention to attach the vehicle. As for the cession in securitatem debiti, the cession is conditional.

Order: The application is dismissed with costs.

Facts and issue: The applicant obtained a default judgment against the respondents in an amount of R11,652.95. The causa was unpaid levies. The applicant obtained an order provisionally sequestrating the respondents’ joint estate. The applicant seeks the confirmation of the rule nisi and a final sequestration order. The Sheriff served the warrant of execution on the respondents by affixing it to the principal door.

Discussion: The failure to serve a warrant of execution on a debtor at his residence does not affect the validity of the execution of a warrant. Nor does the failure to serve a warrant of execution on a judgement debtor personally. Regarding solvency, the respondents do not dispute that a bond is registered over the Unit in favour of Nedbank. They aver that they have been paying the monthly instalment on the bond. As far as assets are concerned, the respondents have not disclosed the value of the motor vehicles, nor whether they are subject to a credit agreement. They have also not produced a valuation of the household furniture and appliances. What ultimately weighs in favour of the respondents is that cash totalling R276,134.94 stands to the credit of the respondents in two bank accounts held at Standard Bank. The applicant has demonstrated that the respondents have committed an act of insolvency.

Findings: The applicant has not succeeded in establishing that the respondents are insolvent. The applicant’s case is that it can be inferred from the respondents’ failure to satisfy the judgment debt and pay levies to the body corporate that they are insolvent. However, the respondents have been paying creditors, albeit that they were not paying the levies as they fell due. The respondents are not impecunious. This is not a case of a debtor who is unable to pay his debts. The payment of R40,000 is in itself an indication that the respondents can pay their debts. Moreover, they are servicing the bond to Nedbank monthly.

Order: The rule nisi is extended.

Facts: The applicant instituted an action against the respondents for payment of R300,000. This was settled and the parties entered into a written settlement agreement, but the respondents breached the agreement by failing to pay the first instalment. The applicant issued a writ of execution to attach the movable assets of the respondents. The sheriff ended up rendering a nulla bona return and noted that he had been advised that the respondents had no money or assets which could be attached.

Application: In 2022 the joint estate of the respondents was placed under provisional sequestration. This order was not opposed by the respondents, however, they oppose the present application which is for the granting of a final order of sequestration. The respondents have committed an act of insolvency and the only issue is whether there will be an advantage to creditors as envisaged in terms of subsection 12(1)(c) of the Insolvency Act 24 of 1936 if the joint estate is finally sequestrated.

Discussion: Counsel for the applicant referred to the judgment of Twala J in Mercantile Bank (division of Capitec) v Ross [2023] ZAGPJHC 435 and it was submitted that this judgment had effectively changed the law of insolvency in that Twala J had held that there is no onus on an applicant in sequestration proceedings to prove an advantage or benefit to creditors. However, it remains incumbent upon an applicant to set out facts and, where available, cogent evidence to satisfy the court that there is reason to believe that it will be to the advantage of creditors if the estate of a respondent is sequestrated. There is no true onus in the first place. In order to grant a sequestration order the court must be satisfied that there will be an advantage to the creditors of a respondent. Both an applicant and a respondent have an "evidentiary burden" to place before court facts, supported by evidence, to show that there is either an advantage to creditors or no such advantage to creditors exists.

* Note at paras [16]-[20] regarding the portion of the Mercantile judgment regarding an evidentiary burden on the respondent.

Findings: The respondents have failed to place before this court any real facts, supported where necessary with documentary proof, in terms of which this court could find that there would be no advantage to creditors and, in the exercise of its discretion, refuse to grant a final order of sequestration. The respondents have confined their opposition to the granting of a final order of sequestration essentially to the averments that the sequestration application is an abuse of process and the application has been brought by a single creditor. The applicant has placed before this court sufficient facts supported by documentary evidence to satisfy this court that there is reason to believe, on a balance of probabilities, that it will be to the advantage of creditors of the respondents if their joint estate is finally sequestrated.

Order: The joint estate of the respondents is placed into final sequestration.

WANLESS J

Facts: The applicant asserted that the respondent is heavily indebted to the applicant pursuant to a money judgment, and accordingly the applicant is a creditor of the respondent, in a liquidated amount exceeding a sum of 12 million dollars. Further, the respondent is in fact insolvent as envisaged in section 9(3)(a)(v) of the Insolvency Act 24 of 1936, alternatively, the respondent has committed an act of insolvency in the manner contemplated in section 8(a) of the Insolvency Act and the sequestration of the respondent’s estate would be to the advantage of his creditors. The respondent put in issue that the sequestration would not be to the advantage of his creditors. This is the only issue that the court is called upon to adjudicate. The respondent is a chartered accountant and currently employed. The respondent is the owner of an immovable property. Absa Bank has two registered bonds in their favour over the respondent's immovable property.

Application: The applicant applied for the provisional sequestration of the respondent. The respondent is married out of community of property. No relief is sought against the respondent's wife.

Discussion: The applicant alleges that there is reason to believe that it will be to the advantage of creditors if the estate of the respondent is sequestrated because the respondent has been involved in businesses both as a director and member over a substantial period in his life to reasonably have acquired assets, including both movable and immovable assets. Upon sequestration of the respondent’s estate, the insolvency mechanism will allow the appointed trustee to take charge of the respondent's estate, conduct an investigation and inquiry into the respondent's financial position and the respondent’s actions regarding his estate with the view of reporting to the respondent’s creditors, taking any appropriate action. The respondent’s case is that he is actively negotiating with Absa Bank on a repayment plan of his home loan debts pursuant to summons being issued by the bank. If the respondent is sequestrated, the concurrent creditors would at best receive a dividend of less than one cent to the rand. A provisional or final sequestration order may realize the risk of having the respondent removed as a registered chartered accountant from the South African Institute of Chartered Accountants and if that happens his employment will be terminated. If the respondent is provisionally sequestrated and thus ultimately dismissed, he would not be able to keep up with his monthly obligations to his creditors which would be to the determinant of the creditors.

Findings: The sequestration will be prejudicial to Absa Bank as it would bring about the end of the bond agreements between the respondent and the bank, which would have the effect of depriving the bank of the accrued interest on the bonded amount for the duration of the bond agreements. There is a considerable risk that no dividend will be realized and that debtors who proved their claims will be obliged to contribute to the sequestration costs. The respondent has made repayment arrangements with most of his creditors. He is in salaried employment and there is a reasonable prospect that he will continue to make these repayments. If he is sequestrated, there is a significant risk that most of the creditors, including the applicant, will not recoup any of their claims. The respondent's creditors have the usual debt enforcement mechanisms at their disposal, which will likely lead to a larger payment to them than having the respondent sequestrated.

Order: The application is dismissed.

KOK AJ

Facts and issue: Investec has applied to sequestrate the joint estate of the respondents, Singh and Killick, in circumstances where the joint estate is alleged to owe Investec debt in excess of R470 million. Singh and Killick married in community of property. The joint estate’s alleged indebtedness arises from various sureties (styled guarantees) Singh provided Investec and her private bank facility at Investec. When Investec instituted the sequestration application, the alleged indebtedness to Investec of Singh, and in turn the joint estate, arising from the transactions was in the aggregate amount of some R189,525,735.50 plus interest. Investec alleges a further indebtedness of the joint estate in an amount of some R281,638,056.92, which is also said to arise from Singh having guaranteed BIG’s debts.

Discussion: Killick’s counsel responsibly conceded in argument that Investec has a claim against the joint estate for not less than R100. The concession was made based on Singh’s debt in respect of her private bank account with Investec which, at the date of institution of proceedings was R468,346. Investec has established further indebtedness on the part of the joint estate based on most of the guarantees. Investec relied upon various sources of information to demonstrate insolvency. The issue of insolvency turns on the alleged debts owed to Investec’s private banking division. Singh disputed the liability of the joint estate for inter alia these debts by contending that Investec had failed to establish BIG’s indebtedness to Investec under the working capital facility agreement or the term loan agreement. Investec has satisfactorily established BIG’s indebtedness under the agreements relied upon, including the working capital facility agreement (and addendum) and the term loan agreement. Singh admits that BIG is the borrower under the working capital facility agreement and the term loan agreement and she admits that there has been an instance of default in respect of the term loan agreement. What she does not explain is why Investec was not entitled to accelerate these debts, whereas Investec pleads that entitlement, and it is apparent from the agreements.

Findings: The contention, in effect, is that a joint estate can avoid the ordinary course of business provision where a third party fails to conduct itself with due diligence or care when procuring a surety. The court disagrees as that interpretation too would generate undue uncertainty in business transactions and undermine their efficacy. It would defeat the protective purposes for third parties and importantly, would denude the enquiry of its objective nature. Investec has established prima facie that the joint estate is liable to it for most of the pleaded debts and that there is no genuine or bona fide dispute in respect thereof. The court is satisfied that there may be an advantage to creditors if a sequestration order is granted.

Order: The joint estate of the respondents is placed under provisional sequestration.

Facts: Mr Courtney, a citizen of the United Kingdom, who was resident in South Africa at the time, set up two companies and he signed guarantees on behalf of them to Absa. Both companies defaulted on their obligations to Absa in terms of their respective overdraft facilities. Mr Courtney, in turn, failed to make payment in terms of the guarantees. Mr Courtney and his wife left South Africa and never returned to their home. In 2020 an order was granted, on an unopposed basis, placing the estate of the appellant, Mr Courtney, under final sequestration. The final order was not preceded by the grant of an order in terms of section 10 of the Insolvency Act 24 of 1936, sequestrating the estate of Mr Courtney provisionally. Nor did the court issue a rule nisi under section 11(1) of the Act, calling upon him to appear on a day mentioned in the rule to show cause why his estate should not be finally sequestrated. The sequestrating creditor was Absa Bank, to whom Mr Courtney was indebted in excess of R54 million. Mr Courtney and his attorneys, to all intents and purposes, appeared to have accepted the outcome of the sequestration application, to which there had, in any event, been no opposition.

Appeal: In 2022, the trustees launched an ex parte application in the Court of Sessions in Scotland with a view to obtaining an order from that court in respect of Mr Courtney’s assets that were situated in that jurisdiction. On becoming aware of this, Mr Courtney suddenly saw fit, some two years after the event, to challenge the grant of the final sequestration order. The High Court dismissed the application, however, it varied the order of 2020 such that the estate of Mr Courtney was placed under provisional sequestration in the hands of the Master of the High Court.

Discussion: Having chosen not to oppose the application for his sequestration, Mr Courtney was not free to thereafter ignore the order that issued. Even an incorrect judicial order exists in fact and may have legal consequences until a court sets it aside. The final order of sequestration continued to operate and had force and effect. Pursuant to that order, the trustees were appointed and, thereafter, continued to discharge their function. This being the case, Mr Courtney’s only option was to apply for a rescission of the order of final sequestration. A rescission may be granted in terms of Uniform Rule 42(1)(a) on the basis that it was erroneously sought and erroneously granted in the absence of a party, alternatively the common law. Rescission does not follow automatically upon proof of a mistake. A court always has a discretion whether to grant an application for rescission which must be judicially exercised. If litigants deliberately elect not to participate in proceedings, they cannot raise their absence as a ground for rescission in terms of Rule 42(1)(a). A court does not grant a default judgment on the basis that the defendant does not have a defence but on the basis that the defendant has been notified of the claim and the plaintiff is entitled to the order sought as per the rules.

Findings: Not only did Mr Courtney elect not to participate in the application for his final sequestration, but he also has put up no defence whatsoever. It is not disputed that he is hopelessly insolvent. A judgment granted against a party in his absence cannot be considered to have been granted erroneously because of the existence of a defence on the merits which had not been disclosed to the judge who granted the judgment. Clearly Mr Courtney cannot avail himself of Rule 42(1)(a), in support of which, in any event, no case was properly advanced. It remains to consider a rescission under the common law. To be successful, Mr Courtney has to show that he was not in wilful default and that there is good cause to grant the rescission. He is unable to show either. He has put up no defence and he consciously chose to ignore the order of final sequestration for two years. The sole objective of the application seems to be to disrupt the administration of his insolvent estate. No doubt, the legal steps taken by the trustees in respect of his property in Scotland appear to have impelled him to act. At the bar, counsel conceded that in persisting with the matter, Mr Courtney hoped to force the respondents to the negotiating table. It is plain that the clock cannot be turned back.

Order: The appeal against paragraphs 1, 2 and 3 of the order of the High Court is dismissed with costs (the dismissal of his application). Paragraphs 4 to 8 of the order of the High Court are set aside (regarding Mr Courtney’s estate being placed under provisional sequestration).

NICHOLLS JA (PONNAN JA, MOCUMIE JA, MATOJANE JA and TOLMAY AJA concurring)

Facts: The respondent bought a home within the sectional title scheme development, administered by the applicant. The respondent fell behind on his levy payments. The applicant obtained judgment in the Magistrate’s Court, against the respondent in the amount of R14,272. The subsequent sale in execution of his movables yielded only R3,910. A further judgment in the amount of R49,104.11 was obtained against him. The Sherriff issued a nulla bona return. The applicant applied for the respondent’s provisional sequestration. The respondent’s estate was placed into provisional sequestration. The respondent’s submissions are that he fell behind on his levy payments because of the loss of his employment during the Covid-19 pandemic. Since then, he has attempted to make payment when due and, as he has recently obtained work as a e-hailing service driver, he anticipates that he would be able to expeditiously bring his debt up to date. He states that he has kept the applicant up to date regarding these developments and has attempted to make payment arrangements with it.

Application: The applicant applies for a final sequestration order against the respondent based on a nulla bona return on the judgment debt of R49,104.11 for unpaid levies due to the body corporate. Section 12(1) of the Insolvency Act 24 of 1936 provides for two instances where the court is called upon to exercise its discretion. Having factually proven that the requirements of section 12(1)(a) and (b) have been met, the applicant must satisfy the court that, per section 12(1)(c) there is reason to believe that the sequestration of the respondent’s estate would be to the advantage of creditors. The second instance arises if the applicant has successfully proven that the requirements per section 12(1)(a) have been met. Here the court still retains an overall discretion to refuse the application if the respondent proves that there are special or unusual circumstances justifying such a refusal.

Discussion: The applicant alleged that advantage to creditors exists by virtue of there being no effort by the respondent to pay the outstanding amounts. It is factually incorrect to state that the respondent has made no attempts to pay the outstanding amounts. As can be gleaned from the applicant’s replying affidavit, the respondent has in fact made regular, albeit partial, payments in the period since the two judgments were obtained. With regards to “adversely affected” other owners, sequestration holds no distinct advantage above execution. Amounts levied by a Body Corporate are utilised for administration, operational expenses, maintenance etc of the sectional title scheme. As such, the pro rata portion to be contributed by the owner of a unit within the scheme, does not "disappear" if such an owner’s estate is sequestrated. The sequestration of the respondent’s estate will not put an end to the losses suffered by the applicant. The applicant waited 10 months after the nulla bona return was issued to bring the application for sequestration. In total, a period of two years had lapsed between the receipt of the nulla bona return and the hearing of this application.

Findings: The applicant failed to demonstrate an advantage to creditors. The very asset to be sold, on which the applicant has based the reasonable possibility of advantage to creditors, is also the respondent’s primary residence. Since the provisional order was granted, there have been no investigations done into the need to sell the property. The submission that, as he owns a second home, the respondent would not be homeless if sequestrated is legally unsound. That the applicant’s motivation in launching this application is to sell the respondent’s primary residence is clear. Unjustifiable rendering a person, such as the respondent, who has owned his home for 22 years, homeless, was the exact mischief the Constitutional Court in Jaftha v Schoeman; Van Rooyen v Stoltz [2004] ZACC 25, sought to cure. The potential infringements of the rights enshrined in section 26 of the Constitution, if proven, would constitute special circumstances to be taken into consideration in exercising the court’s overall discretion to refuse an application for final sequestration. Sequestration may be a legitimate form of execution. However, where it could result in a person losing his primary residence of 22 years, due to a judgment debt of less than R50,000, without any form of oversight by the court, it can hardly be described as just.

Order: The rule nisi is discharged. The application for final sequestration of the respondent’s estate is refused and the provisional sequestration order is set aside.

STRYDOM AJ