Body Corporate Palm Lane v Masinge 2013 JDR2332 (GNP) : recent case law

• Author: A. Boraine,M. Roestoff
• DOI: 10.10520/EJC173463
• Published date: 01 January 2015
• Date: 01 January 2015
• Pages: 206-226

206

Onlangse regspraak/Recent case law

Body Corporate Palm Lane v Masinge

2013 JDR

2332 (GNP)

Discretion and powers of the court in applications for sequestration

1Introduction

In Body Corporate Palm Lane v Masinge (2013 JDR 2332 (GNP)) the court

exercised its discretion in terms of section 12(1) of the Insolvency Act 24

of 1936 against the granting of a final order for sequestration even

though all the requirements for the granting of such order in terms of

section 12(1) were satisfied. The court thus came to the assistance of the

respondent-debtor by allowing him the opportunity to pay off his debt

rather than have his estate sequestrated and being obliged to surrender

his assets and thus also being subjected to the stigma and restrictions of

insolvency. In this respect, it is to be noted that it is currently a world-

wide trend to accommodate insolvent or over-indebted debtors and to

retreat from the principle of maximising returns for creditors as the only

objective of consumer insolvency regimes. The following observation in

a recent report of the World Bank is pertinent in this regard (see Working

Group on the Treatment of the Insolvency of Natural Persons Report on

the treatment of the insolvency of natural persons Insolvency and Creditor/

Debtor Regimes Task Force, World Bank 2012 par 393 – available at

http://bit.ly/Oft3hp – hereafter the World Bank Report):

[A] regime for treating the insolvency of natural persons not only pursues the

objectives of increasing payment to individual creditors and enhancing a fair

distribution of payment among the collective of creditors, but, just as

importantly, such a regime pursues the objectives of providing relief to

debtors and their families and addressing wider social issues. In achieving

those objectives, a regime for the insolvency of natural persons should strive

for a balance among competing interests.

The court in Masinge did not elaborate much on its decision.

References to relevant case law and provisions of the Insolvency Act are

few and far between and the court’s viewpoints and reasons for its

decision have to be deduced from what is read between the lines. The

aim of this case discussion is thus, first of all, to discuss and analyse the

court’s decision with specific reference to the applicable provisions of the

Act and relevant case law that relate to the question as to what the

discretion of the court pertaining to the granting or refusing of

sequestration applications entails. Masinge concerned a compulsory

sequestration application, but it should be noted that the Act also affords

How to cite: Roestoff & Boraine ‘Body Corporate Palm Lane v Masinge 2013 JDR 2332 (GNP): Discretion and

powers of the court in applications for sequestration’ 2015 De Jure 206-226

http://dx.doi.org/10.17159/2225-7160/2015/v48n1a13

Onlangse regspraak/Recent case law 207

discretion to the court to grant or refuse a voluntary sequestration

application even though the requirements in terms of the Act have been

complied with. The provisions of the Act and relevant case law in this

regard are therefore also investigated as it may shed some light on the

issues under consideration. After discussing the issues relating to the

court’s discretion, the implications of the ruling in Masinge and the

powers of the court when refusing a sequestration order are discussed.

In light of this discussion, proposals are made for the amendment of the

relevant provisions of the Act in order to allow the court to make certain

orders when exercising its discretion to dismiss an application for

sequestration. Paragraph 4 contains our proposals for amendment of the

Act and concluding remarks.

2Facts and Decision

Masinge concerned an application for the compulsory sequestration of

the respondent’s estate. A provisional order had already been obtained

by the applicant and the matter was before Kubishi J for a final

sequestration order (par 1). The court referred to the requirements for

the granting of a final sequestration order in terms of section 12 of the

Insolvency Act (par 3; see the discussion in par 3 1 below).

It was not in dispute that the respondent was indebted to the applicant

in the amount of R32003,16 for levies and costs payable to the applicant

in terms of the Sectional Titles Act 95 of 1986. The levies and costs were

payable in respect of immovable property situated in Pretoria and owned

by the respondent. It was also common cause that the respondent had

committed an act of insolvency in that he failed to satisfy a warrant of

execution issued against him in respect of the debt. The act of insolvency

(see s 8(b) of the Insolvency Act) entailed that the respondent was unable

to point out any disposable goods, movable or immovable, to the sheriff

and that the latter could not locate any goods for attachment (par 3).

The respondent opposed the application on the basis that the

sequestration would not be to the benefit of the creditors (par 4).

However, no details are provided in the judgment as to the grounds for

such allegation.

Contrary to our courts’ unsympathetic attitude generally as regards

debtors’ interests in sequestration applications (see Boraine & Roestoff

‘Revisiting the state of consumer insolvency in South Africa after twenty

years: The courts’ approach, international guidelines and an appeal for

urgent law reform’ 2014 THRHR 351361 et seq), Kubishi J was of the

view that he should exercise his discretion against the applicant’s request

for a final sequestration order. Referring to Epstein v Epstein (1987 4 SA

606 (C) 612G–J) the court pointed out that even if a court is satisfied that

the creditor has established his or her claim, that the debtor has

committed an act of insolvency or is in fact insolvent, and there is reason

to believe that it would be to the advantage of creditors that the debtor’s

estate be sequestrated, the court nevertheless has a discretion, which