Does an insolvent debtor have a right to adequate housing?

• Jurisdiction: South Africa
• Date: 25 May 2019
• Pages: 119-147
• Published date: 25 May 2019
• Author: R G Evans

DOES AN INSOLVENT DEBTOR HAVE A

RIGHT TO ADEQUATE HOUSING?

R G EVANS*

Professor, Department of Mercantile Law, University of South Africa

I INTRODUCTION

Some jurisdictions refer to the sequestration of a debtor’s estate as

bankruptcy, but, for the purpose of this article, insolvency and bank-

ruptcy will refer to the same debt collection procedure. The sequestra-

tion of a debtor’s estate, or insolvency, relates to what is known as a

collective debt collection procedure. The individual debt collection

procedure relates to the attempt by a creditor or creditors to collect their

debts ‘individually’ prior to the sequestration of the debtor’s estate.

Upon the sequestration of a debtor’s estate, any attempt by a creditor

of the insolvent debtor to collect his outstanding debt through an

individual court process is halted. From this point on, the debtor’s estate

vests in the Master of the High Court and eventually in the trustee of the

debtor’s insolvent estate, thus placing the property in that estate beyond

the control of the debtor and beyond the reach of separate creditors.

From here on, the creditors come together to have their claims satisf‌ied

collectively. So the sequestration procedure is referred to as the

collective debt collection process, as opposed to the pre-sequestration

individual debt collection process. The Cork Report,

1

which was instru-

mental in compiling a modern and progressive Insolvency Act in

England and Wales, stated: ‘Insolvency proceedings are inherently of a

collective nature; their prime benef‌iciary is the general body of creditors,

each of whom is affected . . . by the common disaster.’

2

However, before the sequestration procedure can commence, the

applicant must prove that there will be adequate assets in the insolvent

estate to cover sequestration costs and to satisfy the creditors’ claims.

These claims are usually not satisf‌ied in full because there is not enough

* BLC LLB LLM LLD (UP). Professor, Department of Mercantile Law, School of Law,

University of South Africa. This article is based partly on the author’s inaugural lecture held at

the University of South Africa, Pretoria, on 28 July 2011 and on his LLD thesis entitled A

Critical Analysis of Problem Areas In Respect of Assets of Insolvent Estates of Individuals

(University of Pretoria, 2008).

1

Report of the Review Committee Insolvency Law and Practice Chairman Sir Kenneth Cork

GBE Cmnd 8558 (1982). For the sake of convenience, only the male gender is referred to in

this article.

2

Idem at 61 (emphasis supplied).

119

(2013) 25 SA Merc LJ 119

© Juta and Company (Pty) Ltd

property in the insolvent estate to go round, but, despite this, it must be

shown that the sequestration will be to the advantage of the creditors. So

the predominant policy in South African insolvency law is that of

advantage to creditors. The system is therefore creditor friendly, not

debtor friendly.

This article concerns the period in the sequestration procedure when

the property that may or may not be part of an insolvent estate must be

identif‌ied. Once identif‌ied, the property in the estate will generally

be liquidated for the benef‌it of the general body of creditors. However,

depending on the situation, certain categories of that property may be

excluded from the debtor’s insolvent estate for the debtor and his

dependants’ own subsistence, or because it belongs to a third party. The

crux of this article questions the possibility of a debtor being allowed to

keep his dwelling to live in after his estate has been sequestrated.

Deciding on how the property in the estate must be dealt with, and

whom it belongs to, is problematic. Fletcher,

3

writing on insolvency law

in England and Wales, put it this way: ‘In view of the complexities which

can exist in relation to the holding and use of property, [after vesting in

the insolvent estate] intricate and particularised provisions are necessary

to ensure that this simple-sounding objective may be realised in

practice.’

The law of insolvency in South Africa is regulated primarily by the

Insolvency Act 24 of 1936,

4

but its foundations can be found in common

law, which has been inf‌luenced by various different legal systems from

Western Europe.

5

However, in the present context the bigger picture in

South African insolvency law, and probably in insolvency law univer-

sally, is the fact that mankind has been captured by a credit hunger that

will probably never be escaped from. Credit is a fairly modern phenom-

enon that was generally not available to the general public as late as the

f‌irst part of the previous century.

Nicholson said the following in respect of money-lending in the f‌irst

half of the previous century:

6

‘Bohemia’s position on borrowing money was startlingly distinct

from that of conventional society, and it still is. Most people in the

early twentieth century subsisted on cash; bank accounts were only

3

Ian F Fletcher The Law of Insolvency 4 ed (2009) 221.

4

Hereafter referred to as the ‘Act’ or the ‘Insolvency Act’.

5

See the discussion of this in Eberhard Bertelsmann et al Mars: The Law of Insolvency in

South Africa 9 ed (2008) 6 ff and Roger Graham Evans A Critical Analysis of Problem Areas In

Respect of Assets of Insolvent Estates of Individuals (LLD thesis, University of Pretoria, 2008).

6

Virginia Nicholson Among the Bohemians: Experiments in Living 1900 – 1939 (2003) 14.

(2013) 25 SA MERC LJ120

© Juta and Company (Pty) Ltd