Waiving of rights to property in insolvent estates and advantage to creditors in sequestration proceedings in South Africa

• Author: Roger Evans
• DOI: 10.10520/EJC-1406a7b0fc
• Published date: 01 December 2018
• Date: 01 December 2018
• Record Number: dejure_v51_n2_a7
• Pages: 298-317

298

Waiving of rights to property in insolvent

estates and advantage to creditors in

sequestration proceedings in South Africa

Roger Evans

BLC LLB LLD

Professor of Mercantile Law, UNISA

OPSOMMING

Voordeel vir skuldeisers by insolvensieaansoeke en die afstanddoening van

die regte van skuldenaars in hierdie aansoeke

In vandag se samelewing, en veral in Suid Afrika, wend die meeste mense

hulle tot die leen van geld ten einde hul daaglikse bestaan te finansier.

Gevolglik was daar nog altyd ’n behoefte aan professionele hulp in gevalle

waar die skuldenaar probleme ondervind met die terugbetaling van sy of

haar skuld. Sodanige hulp word gewoonlik daargestel deur wetgewing. In

Suid Afrika word die Insolvensiewet 24 van 1936 hoofsaaklik gebruik om

hulp te verleen aan partye by die kollektiewe skuldinsamelingsprosedure

wat die sekwestrasie van die skuldenaar se boedel beoog. Sekwestrasie is

onder andere veronderstel om te lei tot die rehabilitasie van die skuldenaar

en dus ’n nuwe kans op finansiële herstel. Vir die sekwestrasie van ?n

skuldenaar se boedel vereis die Insolvensiewet bewys dat sekwestrasie tot

voordeel van skuldeisers sal wees. ’n Probleem wat ontstaan is dat daar in

sommige gevalle’n potensiële voordeel vir skuldeisers bewys kan word,

maar in ander gevalle nie. Dus word “arm” of minder-bevoorregte

individue verhoed daarvan om gebruik te maak van die prosedure en regte

wat die Insolvensiewet daarstel, en daarom ook die voordeel van

rehabilitasie. Skuldenaars probeer om hierdie probleem van “voordeel vir

skuldeisers” te omseil deur afstand te doen van sekere “regte” wat die

Insolvensiewet aan hulle toeken. Dit skep die indruk dat hulle

boedelwaarde voldoende is om voordeel te bewys. Die Hoë Hof het egter

bevind dat sodanige afstanddoening nie moontlik is nie, en gevolglik

ontoelaatbaar.

Hierdie probleem lei tot die vraag of minder-bevoorregte skuldenaars in

sulke omstandighede ongelyk behandel word, en of sulke behandeling in

stryd is met die vereistes van die Suid-Afrikaanse Grondwet, 1996. Die

artikel ondersoek dus die kwessie van voordeel vir skuldeisers by

insolvensieaansoeke; die afstanddoening van regte van skuldenaars in

hierdie aansoeke; en die moontlike ongrondwetlikheid van die beleid van

“voordeel aan skuldeisers” in die Suid-Afrikaanse insolvensiewetgewing.

Die skrywer kom tot die gevolgtrekking dat die ongelyke behandeling van

skuldenaars in die toekoms heel moontlik voor die Grondwetlike Hof kan

beland. Maar alvorens dit egter gebeur sal daar streng gehou moet word by

die vereiste van voordeel vir skuldeisers soos in die Insolvensiewet

uiteengesit.

How to cite: Evans ‘Waiving of rights to property in insolvent estates and advantage to creditors in

sequestration proceedings in South Africa’ 2018 De Jure 298-317

http://dx.doi.org/10.17159/2225-7160/2018/v51n2a6

Advantage to creditors in sequestration proceedings in South Africa 299

1Introduction

Bread, cash, dosh, loot, moollah, readies, the wherewithal: call it what you

like, money matters.1

In today’s consumer-oriented society this quotation is more relevant than

ever. Without money it is impossible to survive. But what is to be done

when an individual, for whatever reason, runs out of money? Particularly

in South Africa, the majority of persons rely to some extent on the

borrowing of money from creditors for their daily and future survival.2

But is this a negative trend? Coetzee answers this question in her citation

of the INSOL Consumer Debt Report as follows:

“Consumer debts however are no problem per se: they are one of the great

dynamic factors in our economies. A high level of domestic consumption is

required for both stability and growth. This is why consumers are

encouraged by governments to consume. One of the ways to boost this

consumption is to facilitate and expand credit facilities for consumers.

Consumer debts become a problem when debtors are unable to find

solutions for repayment without professional help and that is why society as

a whole bears a collective responsibility.”3

This being so, it is also true that historically there has been a need for

debtors and creditors to seek professional help when the money runs out

and the repayment of debts becomes impossible.4 Professional help

usually is achieved through legislation, which may vary in form,

depending on the type of debtor or the country where the parties are

living.5

In South Africa the three important legislative methods by which debt

collection amongst natural persons may be achieved are administration

orders provided for by section 74 of the Magistrates’ Courts Act6; debt

review under section 86 of the National Credit Act;7 and the

sequestration of a debtor’s estate under the Insolvency Act.8 Only the

1 Ferguson (2008) Ascent of Money 1.

2 For statistics see the Credit Bureau Monitor and Consumer Credit Market

Report at www.ncr.org.za (accessed 2018-12-31).

3

See INSOL

Consumer Debt Report II

4, quoted by Coetzee 2015 LLD Thesis

1. For this quotation Coetzee cites the following authors and information:

Ramsay 2006 U Ill L Rev 244–245 (the year 2006 for the latter University of

Illinois Law Review article should be 2007} and the Co rk Report par 9.

4 See eg Hunter Introduction 122; Wessels History 663; Burdick Principles 271;

and Bertelsmann et al Mars 6 for a few sources on the history of insolvency

law.

5 See Ferriel and Janger Understanding Bankruptcy par 1.02 for modern

theories in bankruptcy law.

6 32 of 1944 (individual debt collection procedure).

7 34 of 2005 (hereafter

the

NCA) (individual debt collection procedure).

8 24 of 1936 (hereafter the Act or the Insolvency Act) (collective debt

collection procedure, as opposed to the individual collection procedure).

Only High Courts have jurisdiction over sequestration applications since the

individual’s status is affected – see ss 2 and 149 of the Insolvency Act 24 of

1936.