Strutfast (Pty) Ltd v Uys and Another

• Jurisdiction: South Africa
• Court: Gauteng Local Division, Johannesburg
• Judge: Rome AJ
• Judgment Date: 05 July 2017
• Citation: 2017 (6) SA 491 (GJ)
• Hearing Date: 05 July 2017
• Docket Number: 5675/2016
• Counsel: JF van der Merwe for the applicant. E Coleman for the respondents.

Rome AJ:

[1] This is an application for the sequestration of two individuals, the first and second respondents, respectively. The respondents are married, but not in community of property. The applicant's founding affidavit does not contain any averments from which it can be discerned that the J sequestration of two individuals is sought in the same application

Rome AJ

because there is an identity of interests between the respondents or their A estates.

[2] The application thus runs contrary to the established practice in the Gauteng courts. It has for many years undoubtedly been a rule of practice here that, save where parties are married in community of property or in the otherwise very unusual circumstance of a complete B identity of interests, one should not seek the sequestration of multiple respondents in a single application.

[3] Apart from the weight of the authorities discussed further below, one underlying reason for limiting a sequestration application to the estate of C one respondent only is that sequestration brings with it the status of diminished legal capacity (capitis diminutio). The relief sought in a sequestration application is directed at diminishing the legal status and capacity of a particular individual debtor. Because of this, similar to an application for the appointment of a curator bonis for a patient, it should pertain to that debtor's circumstances only. D

[4] The authority for the practice against joining multiple respondents in a joint application for their individual sequestration is Ferela (Pty) Ltd v Craigie and Others 1980 (3) SA 167 (W), a decision of a judge (Coetzee J) of this division. Coetzee J's judgment in turn drew upon case law in which a similar rule against joining multiple respondents had been E developed and applied in the context of winding-up applications. Ferela has however recently been departed from in another judgment of this division on the basis that it was wrongly decided.

[5] It is therefore necessary to consider the judgment in Ferela before deciding whether it ought to be consigned to the scrapheap of outmoded F insolvency law and practice on the basis that it is clearly wrong. In Ferela the petitioning applicant launched proceedings against three respondents, seeking the sequestration of each of them. The first two respondents were alleged to be partners in the third respondent, which was cited as a partnership. No case was made out as to why the partnership fell within the purview of an application for its sequestration and thus no G case had been made out for the sequestration of the cited partnership.

[6] The question in Ferela accordingly was whether the first and second respondents (the erstwhile two partners) could be jointly sequestrated in the same application. In that case the applicant, citing several H pre-1948 judgments, argued that it was competent to sequestrate two separate estates in the same application. These earlier decisions, however, as appears from Coetzee J's judgment, contain scant reasons for the principle they were purported to have established. Coetzee J noted (correctly, with respect) that the issue was whether the first and second respondents in that case had been correctly joined per rule 10 and I whether their joinder was appropriate. The issue of joinder was then considered in the context of the requirements for compulsory sequestration set out in ss 9(1) and 10(c) of the Insolvency Act 24 of 1936.

[7] By reference to the specific statutory requirements, Coetzee J determined that it could rarely be the case that the sequestration of more than J

Rome AJ

one A respondent would pertain to the determination of substantially the same questions of fact. The following extract from the Ferela judgment is apposite:

'When one comes to the acts of insolvency, however, it is apparent from the facts that I have given that these are based on completely different B facts not related in any sense whatsoever. There were two different warrants of execution. One had nothing to do with the other, save that possibly the headings or the case numbers were the same. But in the case of one some fixed property was attached; in the case of the other no attachment could be made. The facts which have to be investigated to decide whether each of these persons committed an act of insolvency C do not overlap in any sense whatsoever. But even more important is the fact that, as far as the third requirement is concerned, one has to do with two sets of creditors, two different sets of assets, two different sets of circumstances which will each have to be investigated in order to decide whether in that particular case there is the likelihood of an advantage to creditors in respect of that particular debtor. It could therefore quite easily be that two D completely different cases, both as far as the act of insolvency or actual insolvency and the advantage to creditors are concerned, may have to be heard and determined by the Court.

. . . This is not simply a case where either money or property is claimed from a respondent and where the provisions of Rule 10 would very E easily be applicable mutatis mutandis. This is a procedure which really achieves a concursus creditorum. That is the purpose of sequestration proceedings. It is to my mind inadvisable that two separate estates should be dealt with in this way, each leading to its own and utterly separate concursus creditorum.' [At 171C – H, emphasis added.]

[8] F Coetzee J found support for his reasoning in Breetveldt and Others v Van Zyl and Others 1972 (1) SA 304 (T), a cognate case concerning an application for the winding-up of several corporate debtors. There, Margo J had reasoned that, barring a complete identity of interest or the consent of each of the respondents, several companies should not be joined in one application for their liquidation. Margo J stated as follows:

'In G the present case, each company has its own separate share capital, separate shareholders and separate creditors, and the fusing of the interests of all four companies in one proceeding is confusing and prejudicial to persons interested in only one such company. In the compulsory winding-up of a company, the petition is an important H document. Its purpose, inter alia, is to place before the Court, for the information of the company, the creditors and shareholders, a statement of the material facts upon which a winding-up order is claimed, and it also serves to provide information to the Master, the Sheriff, the liquidator and other interested parties. If, for example, creditors in one or other of the companies in this case should wish to intervene on the I return day, or to suggest a compromise under sec. 103 of the Companies Act, there is no valid reason why they should have to become involved in the affairs of three other companies.' [At 314G – H.]

[9] Some four decades later Boruchowitz J remarked that Breetveldt has 'stood the test of time'. (See Brack and Another v Front Runner Racks J 2000 (Pty) Ltd [2011] ZAGPJHC 34 (4 May 2011) para 7.)

Rome AJ

[10] It is important to note that while it is convenient to treat Breetveldt A and Ferela as alike judgments, there was a further important consideration, which informed the decision in Ferela. As the above emphasised...