Case Comments: Suspect Applications for the Voluntary Surrender of Debtors’ Estates: Cure and Prevention

• Jurisdiction: South Africa
• Citation: (2006) 18 SA Merc LJ 214
• Published date: 16 August 2019
• Author: Alastair Smith
• Pages: 214-229
• Date: 16 August 2019

Case Comments

Suspect Applications for the Voluntary

Surrender of Debtors’ Estates: Cure and

Prevention

ALASTAIR SMITH

University of South Africa

1 Introduction

The facts of Malebo & Another v Schoonraad & Others ([2005] JOL 13609

(T)) were bizarre. Spouses with little education (the applicants) maintained

that they had wished to approach an attorney (the f‌i rst respondent) for a loan.

Later they discovered that he had brought an application on their behalf for

the voluntary surrender of their joint estate. As they had never wished to

surrender their estate, the spouses now applied to court for the rescission of the

sequestration order. In this casenote I shall

• introduce the parties to the rescission application;

• summarise the preliminary issue about the correct person to bring that

application, and the merits determined by the Court in ordering the rescission

with costs;

• explain how the applicants’ standing in court to bring the application was

based not on s 23(6) but on s 149(2) of the Insolvency Act 24 of 1936 (‘the

Act’);

• discuss the Court’s approach to the rescission; and,

• as prevention is better than cure, suggest amendments to the Act so as to

minimise the probabilities that such a sequestration order could be granted

erroneously on suspect grounds.

2 The Parties to the Rescission Application

Mr and Mrs Malebo, the applicants, were married in community of property.

Mr Malebo, so Ranchod AJ was informed, ‘can read and write very little, having

only passed standard two’ (see Malebo v Schoonraad supra at 6). Mr Malebo

was more involved than his wife in the events culminating in the present

application to rescind the sequestration order granted on 30 July 2002. The law

report does not reveal the literacy of Mrs Malebo. It is enough to assume, as

the editors have done in their headnote to the case, that ‘[t]he applicants were

a man and wife who were almost illiterate [...]’.

214

(2006) 18 SA Merc LJ 214

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SUSPECT APPLICATIONS FOR THE VOLUNTARY SURRENDER OF DEBTORS’ ESTATES 215

Mr Schoonraad, the f‌i rst respondent, was the Pretoria attorney who brought

the application for voluntary surrender of the Malebos’ estate. The second

respondent was the Master of the High Court. The third and fourth respondents,

Tirhani Sitos de Sitos Mathebula NO and Mabuthu Louis Mhlongo NO, had

been appointed as the provisional trustees of the insolvent estate (see the

penultimate and f‌i nal names in the ‘Parties’ f‌i eld in the headnote, read with

Malebo v Schoonraad supra at 4). Incidentally, the headnote to the Judgments

Online report shows the Judgment Date(s) as 14/09/2004 and the Hearing

Date(s) as 09/12/2004; while the headnote to the Juta’s Daily Law Reports

shows the Date Heard as September 09, 2004 and the Date of Judgment as

December 14, 2004 (see Malebo ID number 470508 5504 082 & Another v

Schoonraad & Others 2005 JDR 0165 (T)).

3 The First Respondent’s Preliminary Point

In Court the applicants f‌i rst had to defeat the preliminary argument by

counsel for the f‌i rst respondent (but not raised in the latter’s replying aff‌i davit)

that the trustees of the insolvent estate should have brought the rescission

application in their own name; the applicants had no standing in court in this

application. The Court held that it had been referred to s 54(5) of the Act and

Amler’s Precedents of Pleadings (5 ed by LTC Harms (1998) at 221). This

preliminary point was not ruled on and argument on the merits was allowed

by the Court.

It was held that the insolvent could litigate in his own name in the

circumstances of s 23(6)-(10) of the Act. The Court could rescind or vary its

orders under s 149(2) of the Act, a power that it enjoyed (even before it was

expressly conferred by the Insolvency Act 32 of 1916) by virtue of its inherent

jurisdiction (see Ex parte Mavromati 1948 (3) SA 886 (W) at 888). The case

of Ex parte Mavromati directly contradicted Schoonraad’s argument, because

the insolvent Mavromati, not the trustee of his insolvent estate, had applied for

rescission of the sequestration order under s 149(2) of the Act. The Court had

jurisdiction to rescind a court order issued ‘on the grounds of fraud or mistake’

(Ex parte Executor Estate of Morris 1913 WLD 40 at 41, quoted in Malebo

v Schoonraad supra at 3). Sequestration affected not the insolvent’s standing

in court (see PQR Boberg The Law of Persons and the Family (1977) at 240),

but his right to litigate concerning estate assets (see Grevler v Landsdown &

Another 1991 (3) SA 175 (T) at 177G-H).

The present circumstances, the Court found, where the applicant had not

known of the application for voluntary surrender in his name and he was

actually solvent at the relevant time, constituted even stronger justif‌i cation

than the circumstances provided for in s 23(6)-(10) of the Act (Malebo v

Schoonraad supra at 3). An insolvent’s standing in court was not conf‌i ned to

the terms of s 23 of the Act (see PM Meskin Insolvency Law and Its Operation

in Winding-up (1990-, loose-leaf) edited by B Galgut, PAM Magid, A Boraine,

JA Kunst & DA Burdette at 5-43 (Issue 20); see also in par 5.14.3 (electronic)).

Usually, the Court set aside a sequestration order only if rehabilitation was

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