JUSTICE TRAINING CENTER

Legal Professional Training (LPT)

LAW OF INSOLVENCY & TRUSTS

The Association of Law Societies of South Africa and

The Law Society of Namibia retain copyright of this document.
Except for Practical Legal Training (PLT) courses, use or duplication
is unauthorized

Updated by Mr K N Kangueehi in 2011

Insolvency Practice
K. Kangueehi
A. AIM OF COURSE

Candidate attorneys should be able to identify and use the options available and handle
various insolvency applications, the rehabilitation of the insolvent estate and related
matters.

B. SYLLABUS

 The purpose of the course is to provide a broad overview of the subject from a
practical point of view.
 During training, instructors will only cover those aspects which candidate attorneys
will encounter most often in practice.
 The remainder of the course is self study.
 The syllabus is compiled by experts in practice.

C. PRACTICE NOTES

1. TAKING INSTRUCTIONS AND GIVING ADVICE

1.1 FORMAL INFORMATION

The object of this introduction is to teach you to obtain proper and systematic instructions
from the client.

When the client enters your office, he expects you to advise him fully and comprehensively
how he should go about in solving his problem. In order to do so it is necessary for you to
identify his problem, to consider the different alternatives available to him, and to advise him
soundly on the route which he must follow in order to obtain the relief he seeks.

From an attorney's viewpoint it is important to ensure that the advice you give to the client is
correct and that the procedure you follow in order to obtain the relief he seeks, is not only
correct but is also the quickest and least costly route to be followed.

At the first consultation the full names, addresses, telephone numbers, marital status, identity
number/s or registration number of the client should be obtained.

2|Page
1.2 IDENTIFY THE PROBLEM

At your first consultation it is important, after you have obtained the formal information from
the client, that you immediately identify the problem - i.e. what relief does the client seek.

You will usually be approached by either the insolvent himself or by a creditor who wishes to
apply for the sequestration or liquidation of a third party.

In order to identify the problem, the following questions must be asked:

What?

When?

Where?

How?

1.2.1 WHAT

After the client has given you the factual background to his problem, you should be in a
position to know what kind of relief he seeks - i.e. a voluntary surrender of his own estate, a
compulsory sequestration or liquidation of someone else's estate, or a rehabilitation of
himself.

In order to do so you, as attorney, should ensure that you fully understand the facts given to
you and you should know the law well enough to apply your knowledge to the set of facts. In
some cases, for instance, you would not advise the client to apply for a voluntary surrender of
his estate but would rather bring an application in the Magistrate's Court to place his estate
under administration. There is also the less drastic option available of a common law
composition by which an informal voluntary distribution can be done. The Credit
Agreements Act 75 of 1980 was also introduced as a form of debt relief providing for debt-
re-organization in cases of over-indebtedness and for debt counselling services.

One must know the different options available as well as the consequences of each option and
you should be able to explain this to the client in such a way that it is easily understood.

1.2.2 WHEN

The next question to be dealt with is when the client wants the relief. Are you dealing with an
urgent matter or not? If it is urgent, to what degree is it urgent and what are the reasons for
urgency? Should you follow the normal route in approaching the Court or should you
approach the Court for urgent relief?

3|Page
As practitioner you must carefully analyse the facts of each case to determine, for the
purposes of setting the case down for hearing, whether a greater or lesser degree of relaxation
of the Rules and of the ordinary practice of Court is required.

Rule 6(12) of the Uniform Rules provides for applications to be brought on an urgent basis.

In the case of Luna Meubelvervaardigers (Edms) Bpk v. Makin & Another (trading as
Makin's Furniture Manufacturers)1977(4) SA 135(W) the Court set out the factors to be taken
into account when considering whether a matter is urgent and to what degree it is urgent. In
Commissioner, South African Revenue Services v Hawker Air Services (Pty) Ltd and
Commissioner, South African Revenue Services v Hawker Aviation Partnership and Others
2006 (4) SA 292 (SCA) the court held that lack of urgency was not an independent ground for
the dismissal of a Liquidation Application.

1.2.3 WHERE

After you have established the nature of the client's problem and you have decided on the
urgency of the matter, you can now determine where you will approach the Court. It is
therefore important that you are fully conversant with the law relating to the jurisdiction of
the High Court and the Magistrate's Court.

The basic position is that insolvency applications are brought in the High Court with the
following exceptions:

An application for an administration order can only be brought in the Magistrate's Court.

Debt relief in terms of the Credit Agreements Act where it provides for Magistrates' Court
involvement.

An application for liquidation of a Close Corporation can be brought in the Magistrate's
Court or the High Court.

Once you have established whether the High Court and/or the Magistrate's Court will have
jurisdiction, District will be able to exercise jurisdiction over the matter.

1.2.4 HOW

The last question to be answered is how you will approach the Court. Since most insolvency
matters require application procedure (as opposed to action procedure), you must determine
whether you will use the long form of Notice of Motion or whether you will bring an Ex parte
application without notice. We will deal with this aspect when we look at the different
matters which will be dealt with.

4|Page
1.3 CLIENT'S INTEREST

At the first consultation you should explain to the client what the consequences will be if he
succeeds in obtaining the relief he seeks. Both the advantages and the disadvantages must be
explained to him.

If you are dealing with a client who is going to apply for the voluntary surrender of his own
estate, you must explain to him that if he succeeds, his status will be affected and he will be
divested of his estate. Although in practice it would not be necessary for you to explain to the
client all the effects of a sequestration or liquidation order, it is important that you as
practitioner are fully informed of all those effects and you should be able to inform him of the
particular effects which will relate to him personally and to his estate in general.

If your client is a creditor who wishes to apply for the sequestration or liquidation of a third
party's estate, you must explain to him what the effects are of a sequestration or winding-up
order on a creditor's claim. Whenever an individual is sequestrated or a company wound up,
any payment to creditors after winding-up, the obligation for which payment arises before
sequestration, becomes void and may be recovered by the trustee or liquidator. All civil
proceedings against an estate, for instance the recovery of debt, are suspended once the
sequestration or liquidation has commenced.

The creditors of the estate must wait until the estate has been wound up and then they are
entitled to the amount due to them in terms of the estate account. You should also point out to
your client that where there is no free residue in an insolvent estate, or where the free residue
is insufficient to meet all the expenses, costs and charges of liquidation/ sequestration all
creditors who have proved claims against the estate are liable to make good any deficiency.

The applicant, if he is a concurrent creditor, will always be liable for the contribution, if one
is levied, and therefore, before bringing his application, he should ensure that there are
sufficient assets to pay the sequestration costs.

The sequestration costs are the Sheriff's charges, Master's fees, costs of sequestration or
winding-up, costs of drawing up the statement of affairs, remuneration of the trustees/
liquidators, all other costs of administration and costs of the surety bond by the
trustees/liquidators.

1.4 ETHICS

The two main principles are "honesty" and "full disclosure". It is the duty of the practitioner
to advise his client with scrupulous honesty and complete frankness. An attorney must not
participate in or support his client in anything unlawful in which his client is engaged or
contemplating. He must be careful to avoid in assisting in breaking the law and he must
impress on his client the need to abide by the law: If the client persists, the attorney should

5|Page
refuse to continue to act. Even where the client's conduct is not illegal, but dishonourable, the
attorney must have no part therein.

It has been stated on numerous occasions that the utmost good faith must be observed
especially when bringing an Ex Parte application.

The following principles prevail:

 In Ex Parte applications all material facts which may influence a Court in coming to a
decision must be disclosed;
 The non-disclosure or suppression of facts need not be wilful or mala fide to incur the
penalty of rescission; and
 The Court, apprised of the true facts, has discretion to set aside the former order or to
preserve it (Schlesinger v Schlesinger 1979 (4) SA 342 (D) at 349A).

TO QUOTE A FEW EXAMPLES:

1.4.1 In the case of In re The Leydsdorp & Pietersburg (Tvl) Estates Ltd (in liquidation) 1903
TS 254 a final liquidation order was granted ex parte in the Transvaal Supreme Court. It
appeared subsequently that, to the knowledge of the applicant, the company had also been
registered in England and was in the process of being wound up in that country when the
application was brought in the Transvaal. This fact was, however, not disclosed to the Court.
Application was then made to amend the final order and to issue a rule nisi which could be
served on the shareholders in England to ascertain their wishes and whether they had
objection to the winding-up proceeding in the Transvaal. This relief was refused by the Court
which held that had it known about the pending liquidation in England, it would not have
granted an order winding-up the company in the Transvaal.

1.4.2 In Barclays Bank v Giles 1931 TPD 9 it was held that the provisional sequestration
would not have been granted if certain material facts had been disclosed and the order was
accordingly discharged.

The duty of utmost good faith applies to ex parte applications. It has been held that that
principal did not extend to motion proceedings. In motion proceedings non disclosure should
lead to a punitive cost order and not denial of the substantive relief. See Trackman NO v
Livschitz and Others 1995 (1) SA 282 (A).

In practice you will sometimes find that a sequestrating creditor comes to the assistance of a
debtor by bringing a "friendly sequestration application" for the sequestration of the debtor's
estate. The term "friendly sequestration" carries the implication that the main object of the
creditor is to assist the debtor who wishes to avoid harassment by his creditors in having his

6|Page
estate sequestrated. The parties resort to this procedure in order to avoid the provisions of
Section 4 of the Act, which provisions are designed to protect the interests of creditors.
Although there is nothing sinister in a friendly sequestration, you as practitioner should
refrain from assisting the applicant acting in collusion with the debtor. You should therefore
ensure that an application for the sequestration of the debtor's estate does not amount to an
abuse of the process of Court. Under no circumstances should the practitioner be a party to
the creation of an act of insolvency under Section 8 or the obtaining of inflated valuations in
order to comply with the element of advantage to creditors.

Where the attorney is appointed as trustee/liquidator of an insolvent estate, he receives his

remuneration for his administration from the estate in terms of the statutory tariff applicable
to his office and he is not entitled to charge fees for work which he does in his capacity of
attorney, auctioneer and conveyancer.

Where the client is the trustee and the attorney is handling the administration on his behalf,
the fees which the attorney may charge must at all times be reasonable fees for the work done
and the tariff of trustee's remuneration is an appropriate guide.

Under no circumstances may an attorney attract professional work by way of financial

inducement. The payment to a third party of commission in consideration of procuring work
for the attorney is improper.

An attorney may not in any circumstances share his professional fees with a layman. It is also
unethical to support a trustee in obtaining the appointment as such on the basis that he will in
return for the support, instruct that attorney in attending to all transfers to be taken care of in
winding-up the estate. The only charges made by an attorney that may be shared are
commissions of various kinds such as those on property and other sales, insurance policies
and mortgage loans. The limitation on sharing does not apply to a non-legal business carried
on by an attorney quite separately from his legal practice. The converse situation where a
commission property levied by a layman is shared with an attorney is entire permissible,
subject however to all proper disclosures and approvals.

1.4.3 In Standard Bank of SA Ltd v Essop 1997 (4) SA 569 (D&C) the creditor and debtor
entered into an agreement providing that the application for the sequestration of the debtor's
estate is postponed sine die, but that in the event of the debtor failing to pay the amount
referred to in the agreement on due date, the creditor is entitled to reinstate the application for
sequestration on the unopposed motion roll and to utilise the affidavit deposed to by the
debtor in terms of which the debtor withdraws his opposition to the application and consents
to a sequestration. This was found to be against public policy and therefore illegal and
unenforceable.

7|Page
1.5 ADVICE

Your client depends on you to offer him sound advice at all times. You are therefore obliged
to advise him not only as to the correct procedure to be followed in order to obtain the relief
he seeks, but also as to the economic implications of a sequestration/liquidation/judicial
management/ rehabilitation order.

If your instructions are to apply for a sequestration or liquidation order in respect of a third
party, you should point out to your client what the consequences of such an order will be, the
dangers of a contribution being levied, and the fact that he may not be successful in
recovering his debt. If your client is the insolvent himself, and you are doing a voluntary
surrender, you must point out the consequences of him being sequestrated, that is it brings
about a change of status, his estate will no longer vest in him but in his trustee, and that in
normal circumstances he can only be rehabilitated after a period of 4 years.

SOURCE: Legal Ethics by E.A.L. Lewis

As to the different types of relief available in insolvency or debt matters, it is useful to

present the options diagrammatically to clients. A diagram such as the following can be used:

2. INTRODUCTION TO THE LAW OF INSOLVENCY

2.1 WHAT DOES IT MEAN TO BE INSOLVENT -

One is insolvent if one's liabilities, fairly estimated, exceed one's assets, fairly valued.

Note that there is a difference between actual insolvency and commercial insolvency. The
latter refers to an inability to pay debts. A company may be solvent on paper in that its assets
exceed its liabilities but have a cash flow problem which renders it unable to pay its debts, i.e.
be commercially insolvent.

2.2 SOURCES OF INSOLVENCY LAW

 The Insolvency Act 24 of 1936 (as amended);

 The Companies Act 61 of 1973 (as amended);
 The Companies Act 28 of 2004
 The Close Corporations Act 26 of 1988 (as amended) as read with the Companies
Act;
 The common law;
 Decided cases;

8|Page
  and with regard to practice and procedure, the Practice Manuals.

HINT: Recent helpful text books on the subject such as Hockly's Insolvency Law Eighth
Edition. When using text books on Insolvency one should be very careful not to regard
reference to older works as sufficient.

Section 339 of the Companies Act makes the Insolvency Act applicable to the winding-up of
Companies unable to pay their debts (in respect of any matter not specifically provided for by
the Companies Act).

Section 66(1) of the Close Corporations Act makes provisions of the Companies Act which
relate to the winding-up of a company applicable to the liquidation of a Close Corporation.
Thus section 66(1) of the Close Corporations Act, as read with section 339 of the Companies
Act, makes the Insolvency Act applicable to the winding-up of a Close Corporation in respect
of any matter not specifically provided for by the Companies or Close Corporation Acts.

There are certain draft bills which intend to amend the Insolvency and Administration Order
procedures. With every new matter the attorney should confirm that the procedures set out in
this manual have not changed.

2.3 INSOLVENCY PROCEEDINGS AS THE ULTIMATE FORM OF

EXECUTION / DEBT

A creditor who wishes to enforce payment of his claim after judgment has a number of
remedies:

 Writ of execution;
 Garnishee orders;
 Emoluments Attachment Orders
 Order of payment by Instalments

If none of these avail him/her, sequestration or liquidation proceedings are a further step in
the execution process.

2.4 PURPOSE OF SEQUESTRATION / LIQUIDATION

1. To bring about a concursus creditorum, literally a "coming together of creditors: i.e. a

freezing of the debtor's estate. The rights of the general body of creditors have to be

9|Page
 taken into consideration and it is not possible for one creditor to do anything which
would prejudice the rights of the general body of creditors.
2. To ensure the equitable distribution of the debtor's assets amongst his/her/its creditors
in accordance with the legal order of preference, thereby preventing a preferring of
one creditor over another.
3. To provide a mechanism for the orderly and efficient collection and realization of the
debtor's assets and payment of his/her/its creditors by the appointment of an impartial
trustee/liquidator whose duty it is to administer and wind-up the debtor's estate.
4. To investigate possibly impeachable transactions entered into by the person/company
with a view to setting aside dispositions/preferences/collusive dealings in terms of
sections 26, 29, 30 and 31 of the Insolvency Act. (Note provisions in the Insolvency
Act which empower the trustee and the Master to summon and interrogate persons
about the affairs of the insolvent:- Sections 65 and 152 of the Insolvency Act and
sections 415 and 417 of the Companies Act).

2.5 INTERFACE BETWEEN INSOLVENCY LAW AND COMMERCE

Insolvency affects a number of commercial contracts, eg employment contracts, leases, sale

of business, sales of immovable property, mortgage bonds, credit agreements.

ASSIGNMENT:

Study and understand the following sections of the Insolvency Act: 34, 35, 36, 37, 38, 83, 84,
85 and 88.

2.6 IMPEACHABLE TRANSACTIONS AND INTERROGATIONS IN

TERMS OF THE INSOLVENCY AND COMPANIES ACT

One of the special purposes and advantages of insolvency proceedings is that where a debtor
is suspected of having committed an impeachable transaction (e.g. a disposition without
value, an undue preference, a collusive dealing - see the detailed notes in Chapter Eleven),
the trustee or liquidator may hold an enquiry in terms of the Insolvency/Companies Act and
subpoena and interrogate the debtor and any person who has knowledge of his affairs. In this
way evidence may be gathered of concealed assets or impeachable transactions. The
trustee/liquidator can then apply to court to set aside the impeachable transaction and recover
the relevant asset into the estate in terms of Section 32 of the Insolvency Act.

10 | P a g e
The following sections provide for enquiries: Insolvency Act Sections 65; 152, Companies
Act Sections 415; 417

3. VOLUNTARY SURRENDER

3.1 INTRODUCTION

Whereas an application for compulsory sequestration is made by one or more of the creditors
of the debtor's estate, an application for the voluntary surrender of a debtor's estate is brought
by the debtor himself. (See s 3 of the Insolvency Act with regard to other persons empowered
to bring the application on the debtor's behalf.)

The primary purpose of the sequestration of an estate is the benefit of the creditors and not
the relief of the harassed debtor. For this reason the applicant for voluntary surrender must
make out a stronger case than the applicant for compulsory sequestration - he must show that
sequestration will be to the advantage of his creditors.

The applicant for voluntary surrender must be able to show that:

1. He is factually insolvent (section 6(1)) (NB: He cannot rely on one of the acts of
insolvency);
2. That there are sufficient assets in the free residue (section 6(1)) of his estate to defray all
the costs of the sequestration;
3. That it will be to the advantage of his creditors if his estate is sequestrated;
4. That all the formalities prescribed in the section 4 of the Insolvency Act have been
complied with.

The evidence must be placed before court in an affidavit.

The Founding Affidavit should set out fully the facts for the causes of action relied upon. An
applicant may not set out new facts which disclose new cause of action in a replying
affidavit. See Union Finance Holdings Ltd v IS Mirk Office Machines II (Pty)Ltd 2001 (4) SA
842 (W) at 848.

In Standard Bank of SA Ltd v Sewpersadh and Another 2005 (4) SA 148 (C) it was held that
the ordinary rule is that three sets of affidavits are allowed in an application (supporting,
answering and replying affidavits). Where further affidavits are filed without the leave of
court, the court can regard such affidavits as pro non scripto.

As set out in Union Finance Holdings Ltd v IS Mirk Office Machines II (Pty)Ltd 2001 (4) SA
842 (W) at 848, a fourth set of affidavits may be necessary when the Applicant has set out
new facts. A way to deal with such new facts is to object to the new facts but to request the

11 | P a g e
courts indulgence at the same time to submit the fourth affidavit. The following wording is a
practical example of an introductory paragraph to such a fourth affidavit:

"I have read the Applicant’s reply, and wish to comment on certain averments in his
reply. I am advised that the Applicant is not entitled to make out a case in reply, but,
to the extent that this new cause of action and the allegations contained therein are
allowed to stand, I respectfully submit that the Respondent should be provided with
an opportunity to deal therewith. The Respondent objects to the new matter in the
applicant’s replying affidavit and an application will be made to strike same out. In
the event of the new matter not being struck out, I respond thereto as set out below. In
the short time available to me I shall do my best to attempt to respond thereto. In the
event that I fail to deal with any specific allegation, contained in the replying affidavit
those must be regarded as denied save to the extent that they are entirely consistent
with what is contained in my answering affidavit or herewith."

3.2 ESSENTIALS TO BE DEALT WITH IN THE FOUNDING AFFIDAVIT

NOTE: An application for voluntary surrender is an ex parte application which carries with it
the requirements of utmost good faith and disclosure of all material facts. The deponent must
not, therefore, conceal ulterior motives or relevant facts from the court, or the application will
fail.

S3.2.1 IDENTIFY THE APPLICANT(S)

[See definition of "debtor" in Section 1]

Full names

Occupation, Is he a trader? [Section 1 read with Section 4(1)]

Jurisdiction

Domicile of debtor (business or residential address) [Section 149(1)]: Nahrungsmittel v Otto

1991(4) SA 416 (c); 1993(1) SA 639 (A).

Marital Status to determine whether or not it is a joint estate which is being surrendered.

Basis for making the affidavit (personal knowledge), to show that it is not based on hearsay
or other inadmissible advice.

If married in community of property, both spouses are joined to the proceedings or if only
one spouse acts as Applicant, then the other should give his/her written consent - Section
17(4) of Act 88/1984.

12 | P a g e
See Fesi & Another v Absa Bank Ltd 2000 (1) SA 499 (CPD)

3.2.2 INSOLVENCY

[Section 6(1)]

That he is insolvent, i.e. his liabilities exceed his assets. The fact that he is commercially
insolvent in the sense that he cannot pay his day to day debts is not per se sufficient to obtain
an order but it is one of the factors taken into account in determining whether the Applicant is
de facto insolvent.

NB. - Applicant cannot rely on the Acts of Insolvency

The statement of affairs attached to the application should show insolvency, but a résumé of
the statement should be included in the affidavit.

Causes of Insolvency - facts must be given to show that the applicant has by misfortune and
without fraud or dishonesty on his part become insolvent, since the court will not come to the
assistance of an applicant whose conduct is shown to have been dishonest or reprehensible.

The liability of a surety and co-principal debtor is not contingent, unless the principal debt is
itself contingent. Therefore it follows that the obligations undertaken by the applicant as
surety and co-principal debtor must be included among the applicant's liabilities - Millman
and Another NNO v Masterbond Participation Bond Trust Managers (Pty) Ltd (under
curatorship) and others 1997(1) SA 113 (c).

3.2.3 FORMALITIES

That he has complied with all the formalities (when and how) viz:

Publication of Notice of Surrender in Government Gazette and newspaper. [Section 4(1)] -

Form A in Schedule 1 to the Act. Publication of the notice must take place not more than 35
days and not less than 21 days before the date stated in a notice as the date for the hearing.
The purpose of the notice is to alert creditors as to the intended application in case they wish
to oppose. The 21 day time limit is to ensure that creditors have sufficient opportunity to
peruse the statement and decide whether or not to oppose the application. The 35 day limit is
that the debtor’s should not be able to give long notice, months before hand and in that way
keep creditors from levying execution and in the meantime dissipate all the assets.

Notice to every creditor – by registered post. (Section 4(2)(a)). Annex a confirmatory

affidavit by applicant's attorney that this has been done with the documentary proof (Post
Office certificate of posting more commonly called the 'registered slip').

Notice to every registered trade union that to the applicant's knowledge represents any of the
debtor's employees – by registered post (Section 4(2)(b)(i)). Annex a confirmatory affidavit

13 | P a g e
by applicant's attorney that this has been done with the documentary proof (Post Office
certificate of posting more commonly called the 'registered slip').

Notice to every employee of the applicant – by affixing a copy of the notice to:

a notice board to which the employees have access inside the debtor's premises (Section
4(2)(b)(ii)(aa))or

if there is no access, to the front gate (section 4(2)(b)(ii)(bb)) or

if there is no front gate, to the front door (section 4(2)(b)(ii)(bb))

Annex a confirmatory affidavit by applicant's attorney that this has been done

Notice to the Receiver of Revenue – by registered post. (section 4(2)(b)(iii)) Annex a

confirmatory affidavit by applicant's attorney that this has been done with the documentary
proof (Post Office certificate of posting more commonly called the 'registered slip'). [See
Standard Bank of SA Ltd v Sewpersadh and Another 2005 (4) SA 148 (C)]

PREPARATION AND LODGING OF STATEMENT OF AFFAIRS TOGETHER

WITH ITS ANNEXURES. [SECTION 4(3)] AND VERIFIED UNDER OATH BY
APPLICANT

Lodgement thereof with Master in duplicate (and Magistrate - where applicable) [Section
4(4)& (5)] to lie open for inspection for 14 ordinary days. (Forms B in Schedule 1 to the Act)

Sworn valuation of Property, if so directed by the Master [Section 4(4)]

Certificate of Master (and Magistrate) that statement of affairs has lain open for inspection
for a period of 14 days [Section 4(6)] with / without objection

No security is to be lodged with the Master

Master's Report: Although there is no requirement in the Insolvency Act that a Master's
Report be filed in a voluntary surrender application, a recent decision of the full Bench of the
CPD made this a requirement of practice in the CPD. Other divisions may well do so in
future as well.

See Ex Parte Anthony & Another 2000(4) 116 (CPD)

3.2.4 SUFFICIENT FREE RESIDUE

[Section 6(1)]

14 | P a g e
Debtor must aver that he owns realisable property of sufficient value to defray all costs of
sequestration. ‘Costs of sequestration’ includes not only the costs of surrender but also all the
general costs of administration (See section 97). ‘Free residue’ is that portion of the estate
which is not subject to any right of preference by reason of any special mortgage, legal
hypothec, pledge or right of retention’ (See section 2). It includes the balance of the proceeds
of encumbered property after discharge of the encumbrances. [See Ex parte Van Heerden
1923 CPD 279]. The logical result of the requirement that the debtor must own sufficient
property to meet the costs of sequestration is that a debtor who has no assets and only
liabilities cannot surrender his estate (See Ex parte Collins 1927 WLD 172). Note that such
an estate can however be compulsorily sequestrated. In this regard look at Miller v Janks
19744 TPD 127.

3.2.5 ADVANTAGE TO CREDITORS

[Section 6(1)]

There is a reasonable prospect that some pecuniary benefit will result to creditors. A bald
statement will not do - the actual advantage must be mentioned and explained in the affidavit.
Distinguish between secured, preferential and concurrent creditors - the Court will accept that
there is an advantage to creditors only if it is clear that concurrent creditors will benefit
primarily.

THE ADVANTAGES are, e.g.: (Refer to paragraph on compulsory sequestrations):

That all creditors will receive a not negligible dividend in the event of the surrender being
accepted whereas if it is not accepted, it is doubtful whether creditors will receive anything;

Insolvency will preclude one creditor (eg one that has already obtained judgment) from
benefiting to the prejudice of others;

There would be a benefit to creditors where a debtor, receiving a salary, undertakes to make
part of his salary available for distribution to creditors. A statement of the amount of the
applicant's salary and [Where a surplus of income is alleged (as being an advantage to
creditors) his consent to deductions being made in favour of the trustee should be obtained.
(Ex Parte Watson 1926 WLD 106; Ex Parte Veitch 1965(1)SA667(W) at 668)]

The book debts of the insolvent could be collected more effectively by the trustee.

The certainty that the insolvent cannot contract further debts and so diminish his estate.

The process of the administration of the estate may result in the acquisition of property for
the benefit of creditors, e.g. if the debtor has made payments which prima facie are defensible
as voidable or undue preferences.

15 | P a g e
Whether or not taxes are owing to the Receiver of Revenue, he is regarded as a creditor. This
will affect the amount of free residue available to pay concurrent creditors.

In determining whether or not there will be an advantage to creditors it is essential to place

reliable evidence before the court as to the value of the assets in the estate. Where a valuer
gives a valuation of the assets, he must set out the basis for his conclusions. Ex Parte Anthony
& Another 2000(4) SA 116 (CPD) The valuation should be based on the expected proceeds in
a forced sale.

Advantage to creditors is determined by value and not number. Therefore, when a secured
creditor is owed 96% of the debt in the estate and concurrent creditors 4% of the debt, if there
will not be an advantage to the secured creditor and the secured creditor opposes the
application, advantage to creditors is not present and the application for voluntary surrender
will fail. See Fesi and Another v Absa Bank Ltd 2000 (1) SA 499 (CPD). The involvement
can, in order to assist in creating advantage to creditors, waive the benefits of section 82(6) of
the Insolvency Act. See Ex Parte Anthony (supra)

NOTE: The onus of proving advantage to creditors in a voluntary surrender application is

more strenuous than the requirement to show reason to believe that there will be advantage to
creditors in a compulsory sequestration application - see Ex Parte Steenkamp 1996 (3) SA
822 (W)

3.2.6 APPLICANT'S SALARY OR INCOME

A statement of the amount of the applicant's salary or other income if he is in receipt of such
salary or income.

NOTE: It is important not to omit the details of the applicant's salary and/or income. This is
required because of the obligation of good faith and disclosure in an ex parte application. Fesi
& Another v ABSA Bank Ltd 2000 (1) SA 499 (CPD)

3.2.7 PRAYERS

That the voluntary surrender of applicant's estate be hereby accepted and his estate be
sequestrated and placed in the hands of the Master of the High Court;

That the costs of the application be costs of the sequestration (optional) - Section 97(2) (c)
and 97(3).

3.3 SUPPORTING DOCUMENTS

(To be annexed to Founding Affidavit - or under cover of a supporting affidavit of the

attorney who attended to the formalities)

16 | P a g e
‘Tearsheets’ from Government Gazette and newspaper in which Notice of Surrender was
published - only the full page constitutes a "tearsheet", the relevant part must be clearly
marked.

Copy of Statement of Affairs.

Affidavit in respect of notice to creditors, including registered slips and copy of notices.

Affidavit in respect of notice to every registered trade union, including registered slips and
copies of notices.

Affidavit in respect of notice to employees.

Affidavit in respect of notice to Receiver of Revenue, including, registered slips and copy of
notices.

Sworn valuation if required by Master.

Certificate from Master and, where necessary, from Magistrate stating -

 statement of affairs has lain for inspection;

 whether objections have been lodged.

If the applicant is a partnership, a resolution by partners or verifying affidavit of each partner.

Report from Master

If free residue consists of cash, certificate by Master that it has been deposited with him.

Any other document referred to in Affidavit e.g. writ of execution, or a summons or return of
service.

3.4 PROCEDURE

3.4.1 TAKING INSTRUCTIONS

Draw up statement of affairs, verified under oath.

Make copies thereof for Master (in duplicate), Magistrate (where applicable), Court, Counsel
and to keep.

17 | P a g e
3.4.2 COMPLY WITH STATUTORY FORMALITIES

Draft Notice of Surrender

Publish it in Government Gazette and relevant newspaper

Lodge Statement of Affairs in duplicate with Master and Magistrate (if necessary)

Deliver or post by registered post copies of Notice of Surrender to all known creditors

Obtain sworn valuations if required by Master

After 14 days uplift Statement of Affairs together with certificate of Master and Magistrate
(where applicable) and report of Master.

3.4.3 PREPARE EX PARTE APPLICATION

Draft Applicant's affidavit and attend to his signature thereon

Draft supporting affidavit dealing with compliance with formalities and attend to signature
thereof

Ensure that all necessary annexures are annexed to affidavit

Draft notice of motion and affix N$5.00 revenue stamp on original notice of motion

Make copies for Master, Counsel, to keep (Court gets original)

File application with Registrar and serve copy (with case number) on Master.

Uplift Master's report and certificate and file at Court.

3.4.4 PROCEDURES CONTINUED

Brief counsel to appear

Attend court

Uplift court order

Advise your client and render your account

3.5 TIME LIMITS

[Section 4(1), 4(2), 4(6)]

18 | P a g e
Publication of Notice of Surrender in Government Gazette and newspaper (circulating in the
district where applicant resides or, if he is a trader, in the district where his principal place of
business is or was situated) not more than 35days and not less than 21 days before the date
upon which application will be made to Court. A notice that is not published within these
time limits is invalid and consequently the application for voluntary surrender will be
dismissed.

In Ex Parte Oosthuysen 1995 (2) SA 694 (T) the Court refused to entertain an application for
voluntary surrender where the Notice of Surrender was published 39 days before the Court
date. In Ex parte Harmse 2005 (1) SA 323 (N) the court criticised Ex Parte Oosthuysen and
did not follow it. The court held that the non compliance is a factor to be taken into account
in exercising its discretion.

Lodge Statement of Affairs with Master and Magistrate before or on date mentioned in
Notice as from when statement will lie open for inspection.

Statement must lie open for inspection for at least 14 ordinary days before hearing.

Within 7 days after publication in Government Gazette the Notice must be delivered / posted
to known Creditors, per registered post.

File and set down application according to existing practice of the Division.

3.6 GENERAL

3.6.1 CALCULATION OF TIME

Section 4(1) "No more than 35 days and not less than 21 days before date of hearing"

Count back from date of hearing, excluding date of hearing but including date of publication
in Government Gazette, ordinary days, not Court days. Date of Application is date stipulated
in the Notice of Surrender as the date on which application will be made to court for the
surrender of the estate.

Section 4(2) "Within a period of 7 days" Count on from date of publication in Government
Gazette (not newspaper) including date of publication, ordinary days.

Section 4(6) "for a period of 14 days"

Includes the first day mentioned in the Notice of Surrender, as the date from which the
statement of affairs will lie for inspection. (ordinary days).

19 | P a g e
3.6.2 OTHER OPTIONS

1. ADMINISTRATION ORDER

Section 74 of the Magistrate's Court Act contains a similar but less expensive procedure
where the Applicant's debts do not exceed R50 000.

That section and the rules of the Magistrates' Court contain different time periods and a
different statement of affairs. The procedure is easier for debtors in that the advantage of
creditors is not a requirement. (See Ex Parte August 2004 (3) SA 268 (W) paragraph 10 at 271
I/J and Fortuin and Others v Various Creditors 2004(2) SA 570 C paragraphs 11,16, 18 at
574 D-F and 575 D-H)

There has for some time been a draft bill which seeks to address abuses in the administration
industry and raise the jurisdiction to deal with matters where the capital of debts do not
exceed R100 000.

3.6.3 FAILURE TO COMPLY WITH SECTION 4(1) AND 4(2) OF THE INSOLVENCY ACT

Although the provisions of Section 4 are peremptory (see however 3.2 infra), non-compliance
can in certain instances be condoned in terms of Section 157(1). If a formal defect has not
caused a substantial injustice, the procedural step in question is valid)

THE EFFECT OF SECTION 157(1) IS THREEFOLD:

1. If the formal defect / irregularity has not caused a substantial injustice, the procedural
step in question is valid. See Ex parte Cowley 1950 (4) SA 161 (GW). Cf Ex parte
Slabbert 1960 (4) SA677 (T) 681-2.
2. If a formal defect has caused a substantial injustice, but the prejudice to creditor can,
in the opinion of the court, be remedied by an appropriate order, then the defect is not
fatal provided the party concerned complies with the corrective order. Refer to Ex
parte van Rensburg 1955 (1) SA 570 (O).
3. If a formal defect has resulted in a substantial injustice and the prejudice to creditors
cannot be cured by any court order, then the procedural step is invalid.

TEST:

 Did the defect cause prejudice to creditors?

 If so, can it be cured by an appropriate order of Court e.g. postponement linked to
further publication of notice?

20 | P a g e
  If not, the defect is fatal and cannot be condoned.

With regard to the interpretation of section 157(1), vide Ex Parte Anderson 1995 (1) SA 40
(SECLD).

Contra: Kritzinger v Moreletta Motorhawe-Projek 1994(2) SA 717 (T) - the periods laid
down by Section 4(1) are not peremptory.

Section 157(1) was also referred to in Ex Parte Harmse 2005 (1) SA 323 (N) where the court
held at 330C that a formal defect does not render the conduct invalid unless it has caused a
substantial injustice which cannot be remedied by the court's order.

The courts have attempted to define ‘formal’ in formal defect, but have arrived at varying
conclusions. See Ex parte Fakir 1956 (4) SA 177 (C) 179, Ex parte Foley 1954 (3) SA 1 (O) 3
and Ex parte Marais & two others 1957 (3) SA 311 (W). The preferred interpretation was
adopted in Ex parte Slabbert (supra) at 682, namely, that a formal defect is simply a
departure from prescribed procedure.

3.6.4 INSURANCE POLICIES

For a summary of the provisions of Section 39-44, see Hockly's Insolvency Law, 8th edition
by Sharrock R et al on pp.67-8).

Section 39(1) of the Insurance Act 27 of 1943 determines that a life policy, on own life which
is three years or older on the date of sequestration of the estate of the policy holder does not
fall into his estate. The intention of the Legislature is clear that only that portion of the actual
value of the policy (ie the surrender value which exceeds R30 000) falls into the insolvent
estate.

The value of the policy is to be determined as at the date of sequestration - Sackstein en 'n
Ander NNO v Smith en 'n Ander 1995 (4) SA 1029 (O). See also subsections of Section 39-44.
See also Brink v Kitshoff NO 1996(6) BCLR 752(CC) where it was held that Section 44(1)
and (2) of the Insurance Act, 1943 are invalid because they are unconstitutional.

Also, see the discussion and arguments regarding policies and the effect of the death of a
spouse on the date of determination in Shrosbree and Others NNO v Van Rooyen NO and
Others 2004 (1) SA 226 (SE) and the criticism of that judgment in Love and Another v
Santam Life Insurance Ltd and Another 2004(3) SA 445 (SE).

21 | P a g e
3.7 CONSEQUENCES OF PUBLICATION OF NOTICE OF SURRENDER

Sales in execution of property of Applicant's estate are stayed - Section 5(1) - but a creditor
may still attach the debtor's assets in execution. (The Master can authorise sale in execution
of property worth under R5000. The Court can authorise sales of property worth in excess of
R5000. In such cases the Master/Court will direct how the proceeds are to be applied.);

Once published in the Government Gazette and newspaper, such notice cannot be withdrawn
without the written consent of the Master - Section 7(1);

If debtor does not proceed with the Voluntary Surrender of his estate, such publication is
regarded as an act of insolvency Section 8(f).

The Master can appoint a Curator bonis to take control of the assets of the Applicant -
Section 5(2). (Although he is not obliged to do so.);

The Master may direct that a sworn valuation of any property be obtained - Section 4(4).

The notice lapses if the Court refuses to accept the surrender or if the notice is withdrawn, or
of the debtor fails to apply for surrender within 14 days after the advertised date (Section 6
(2)).

3.8 EXCURSUS - VOLUNTARY SURRENDER OF A PARTNERSHIP

[Section 3(2) and Section 13 read with the definition of "debtor" in Section 2]

All partners who reside in the Republic (Namibia) must apply jointly, except partners en
commandite (anonymous partners).

Each partner must at the same time apply for the acceptance of the surrender of his private
estate, even if it is not insolvent.

Notice of intention to surrender must be given in respect of each private estate as well as the
partnership estate.

Statements of affairs must be prepared and lodged in respect of each private estate and the
partnership estate.

All creditors of the partnership and of each partner must be notified of the application.

The relief sought must refer to the sequestration of the partnership estate as well as the
separate estates of the partners.

22 | P a g e
No necessity to observe the requirements for the surrender of the individual partners' estates,
apart from the procedural ones, since the sequestration of their estates is in any event
compulsory under the Act.

3.9 EXCURSUS - THE MATRIMONIAL PROPERTY ACT (No 88/1984)

3.9.1 This Act envisages 3 types of marriages in community of property, viz -

Marriages entered into before 1 November 1984;

Marriages entered into on/after 1 November 1984;

Marriages entered into before 1 November 1984 where the spouses have caused the
provisions of Chapters II and III of the Act to apply to their marriages.

NOTE: In terms of section 2 of the Married Persons Equality Act, Act 1 of 1996, Section 11
of the Matrimonial Property Act, 1984 has been substituted. The effect thereof is that the rule
of the common law whereby a husband has the marital power over the person and property of
his wife, is repealed. The effective date of the Act is 20 May 1996.

3.9.2 Locus Standi:

In all 3 Categories an application for the acceptance of the surrender of the joint estate must
be made by both spouses - Section 17(4) of Act 88/1984.

See Detkor (Pty) Ltd v Pienaar 1991(3) 406(W)

See also paragraph 4.4.1 "Joinder of Spouse married in community of property"

3.10 FLOW CHART

Take instructions from client to apply for the voluntary surrender of his estate.

Advise client on risks

Take deposit of approximately N$3000,00

23 | P a g e
Complete draft statement of affairs.

Ascertain suitable date for application.

Prepare notice of surrender for publication in -

Newspaper

Government Gazette.

Arrange for publication of notice of surrender.

Finalize statement of affairs and have same signed and attested to, and make copies thereof.

Hand in statement of affairs at Master's office (duplicate) and Magistrate's office, if

applicable.

Obtain tear sheets of newspaper and Government Gazette publication of the notice of
surrender.

Mail copies of notice of surrender to known creditors per registered post.

Mail copy of notice of surrender to every registered trade union that represents the debtor's
employees

Affix copy of notice of surrender to notice board to which employees have access inside
debtor's premises (or to gate or door, whichever applies)

24 | P a g e


Mail copy of notice of surrender to the Receiver of Revenue

Prepare founding affidavit for applicant in support of application.

Uplift certificate by master that the statement of affairs has lain open for inspection.

Uplift similar certificate by magistrate, if applicable.

Arrange for signing and attesting of affidavit.

Complete Notice of Motion. (Ex parte)

Affix revenue stamps

Make three copies of complete application with annexures.

Have papers issued by Registrar

Serve application on master

Uplift Master's report

Make copies of Master's report and Add to papers

25 | P a g e


File original with Registrar

Instruct Attorney or Advocate to move and argue the application

Check and prepare the court file

Attend court

Report to client and remind client of effects of court order

Uplift brief and pay the Attorney or Advocate who appeared

Uplift court order

Prepare bill of costs for taxation

Ascertain who was appointed Trustee

Dispatch consent to taxation (Rule 70(4)(b)) for signature by Trustee

Submit Bill of Costs for taxation to Taxing Master

Submit taxed Bill to trustee for payment

26 | P a g e


Account to client when payment is received

3.11 CHECKLIST OF MATTERS TO BE DEALT WITH IN FOUNDING

AFFIDAVIT

3.11.1 APPLICANT

Full names [Rule 6]

Occupation [Rule 6]

Domicile

Marital status

3.11.2 INSOLVENCY

Actual insolvency. (Section 6). Give short résumé of statement of affairs.

3.11.3 CAUSES OF INSOLVENCY

"By misfortune without fraud or dishonesty on my part"

Annexure VII of Statement of Debtor's Affairs [Form B in First Schedule]

3.11.4 PUBLICATION OF NOTICE OF SURRENDER

Section 4(1) read with Form A in First Schedule:

Government Gazette

Newspaper

3.11.5 NOTICE TO CREDITORS

[Section 4(2)]

Per registered post

27 | P a g e
3.11.6 NOTICE TO REGISTERED TRADE UNIONS THAT, TO THE APPLICANT'S KNOWLEDGE,
REPRESENTS ANY OF THE DEBTORS EMPLOYEES

Per registered post

3.11.7 NOTICE TO DEBTOR'S EMPLOYEES

By affixing to notice board to which they have access at debtor's premises (or front gate or
front door whichever is applicable).

3.11.8 NOTICE TO SOUTH AFRICAN REVENUE SERVICE

Per registered post

3.11.9 STATEMENT OF AFFAIRS

Section 4(3)(5) read with Form B in First Schedule:

Sworn valuation of property if required by Master [Section 4(4)]

Lodged for inspection as required

3.11.10 CERTIFICATES BY

Master

Magistrate (if applicable)

3.11.11 MASTER'S REPORT

3.11.12 SUFFICIENT FREE RESIDUE

[Section 6(1)]

3.11.13 Advantage to Creditors

[Section 6(1)]

3.11.14 Prayers

[Section 6(1)]

28 | P a g e
4. COMPULSORY SEQUESTRATION

4.1 INTRODUCTION

An Applicant for the compulsory sequestration of a debtor's estate needs to show that:

1. The applicant has established a claim which entitles the applicant in terms of section
9(1) to apply for the sequestration of the debtor's estate;
2. The respondent debtor is actually insolvent, i.e. his liabilities, fairly estimated,
exceed his assets, fairly valued; OR that the debtor has committed an act of
insolvency in terms of section 8.
3. There is reason to believe that it will be to the advantage of creditors if the debtor's
estate is sequestrated: section 12(1)(c).

4.2 ACTS OF INSOLVENCY

An act of insolvency committed by either spouse in a marriage in community of property

may be relied upon to sequestrate the joint estate. In Standard Bank of SA Ltd v Sewpersadh
and Another 2005 (4) SA 148 (C) it was held that while this is so, the legal position in a
marriage by Muslim rites remains unknown.

4.2.1 SECTION 8(a)

"If he leaves the Republic or being out of the Republic remains absent from it, or departs
from his dwelling or otherwise absents himself, with intent by so doing to evade or delay the
payment of his debts."

Need to prove:

absence/departure by the debtor; and

intent to evade/delay payment of debts

Need to be able to support one's averments with the fullest possible information regarding the
movements and intention of the debtor since the onus is on the Applicant to establish the
debtor's intent.

EXAMPLES:

Showing that the debtor has taken a large sum of money with him / that the debtor was
disposing of assets to realise money with which to get away / that after making an
appointment to make payment of a debt he has departed without keeping the appointment.

(a)….Debtor's original departure may be innocent, but he may thereafter form the intention to
stay away to evade payment of his debts. Cf Bishop v Baker 1962 (2) SA 679 (D).

29 | P a g e
(b)….Not essential for the debtor to leave the Namibia - sufficient if he "departs from his
dwelling" or "otherwise absents himself".

(c)….The words "otherwise absents himself" suggests that a debtor can commit this act of
insolvency by retiring within his dwelling and refusing to see his creditors.

(d)….What would one do about service of the application on the debtor where one is relying
on section 8(a) and one is therefore unable to find him for the purpose of serving the
application? - See Section 11(2).

The intention to evade or delay payment must therefore be deduced from the facts of the
given case. See Abel v Strauss 1973 (2) SA 611 (W) and Estate Salzmann v Van Rooyen 1944
OPD 1.

4.2.2 SECTION 8(b)

"If a court has given judgment against him and he fails, upon the demand of the officer whose
duty it is to execute the judgment, to satisfy it or to indicate to that officer disposable property
sufficient to satisfy it, or if it appears from the return made by that officer that he has not
found sufficient disposable property to satisfy the judgment."

Two separate acts of insolvency are contemplated here, one involving presentation of the writ
to the debtor personally and the other not involving personal presentation of the writ to the
debtor. The two acts are interdependent i.e. the second act applies only if the first cannot be
established (only if the writ of execution cannot be served personally on the debtor).

Where there is personal service of the writ on the debtor and presentation of the writ to the
debtor, the debtor commits an act of insolvency where he fails, on the presentation by the
Sheriff and demand for payment by the Sheriff, to pay the judgment debt and indicate to the
Sheriff sufficient disposable property to satisfy the writ. Note: It is not sufficient for the
debtor simply to fail to satisfy the judgment debt; he must also fail to indicate sufficient
disposable property to satisfy the writ. But where the debtor says to the Sheriff in response to
his demand for payment that he has no money, property or assets of any description, it would
be superfluous for the Sheriff to ask him to point out any property.

Where there is no personal presentation of the writ to the debtor, the debtor commits an act of
insolvency where it appears from the return of service of the Sheriff that he has not found
sufficient disposable property to satisfy the judgment. See Nedbank Ltd v Norton 1987 (3) SA
619 (N). However, if the sheriff, on serving the writ, neglects to demand satisfaction of the
writ by the debtor and thereafter simply states in his return that he was unable to find
sufficient disposable property, no act of insolvency is committed: Nedbank Ltd (supra).

Note: The second act of insolvency can only be committed where personal service of the writ
on the debtor is not possible, i.e. only when the first act cannot be established can the second
one be committed. Beira v Raphaely-weiner & others 1997 (4) SA 332 at 338 E-f).

30 | P a g e
Meaning of "disposable property" in section 8: Unlike the case in the High Court and
Magistrates' Court Rules, "disposable property" in section 8 of the Insolvency Act includes
immovable property.

The Sheriff must specifically ask the debtor to point out "disposable goods" and not "movable
property". The Return of Service must not refer to movable goods but to disposable property
of whatever nature. If the debtor fails on demand to satisfy the judgment or indicate sufficient
disposable property, it is irrelevant whether or not the sheriff subsequently finds disposable
property.

"Disposable" does not include immovable property subject to a mortgage bond (unless the
execution creditor is the mortgagee) since this property is not freely disposable.(Tewari v
Secura Investments 1960 (3) SA 432 (N) - Mars 69).

The demand to satisfy the judgment debt must be made of the debtor, or his/her duly
authorized agent.

Note: not only the executing creditor can rely on the nulla bona return in sequestration
proceedings. Any creditor can rely on the nulla bona obtained by another creditor provided
that the other creditor remains unpaid at the time the application is lodged - Beira v
Raphaely-weiner and others 1997(4) SA 322 (SCA)

If the nulla bona return is an old one (6 months or older) you must be able to allege and show
facts which show that the debtor's position is unchanged, e.g. that the particular judgment
debt still remains unpaid and that his financial position has not improved at all. See judgment
in Lorac (Pty) Ltd v Musa 1991 (1) SA 152 ZHC, for general law relating to nulla bona
return, especially on 157G - 158C.

Any nulla bona return should contain the following statements:

 that the nature and exigency of the writ was explained to the Respondent;
 that the Sheriff demanded payment;
 that the Respondent failed to indicate disposable property sufficient to satisfy the
judgment;
 that the officer did not find sufficient disposable property to satisfy the judgment
despite diligent search and enquiry.

The nulla bona return of service must be signed by the sheriff, deputy sheriff or messenger
who actually served the writ of execution / executed the judgment. If it is not, the return is
defective and cannot be relied on in a sequestration application. De Wet v Le Riche 2000(3)
SA 118 (TPD).

31 | P a g e
An applicant who seeks a provisional sequestration order on a nulla bona return should
satisfy the Court that there is only one interested party, i.e. the Respondent against whom the
order is sought and on whom the writ was served resulting in the nulla bona return - Ratilal v
Dos Santos 1995 (4) SA 117 (W). Therefore where parties are married in community of
property, the writ should be served on both of them. If he, however, only applies for the
sequestration of one of such spouses, the writ having been served only on such spouse, then a
provisional order of sequestration which might affect the rights of the other spouse should not
be granted automatically without notice to that spouse and joinder of in the application.

Section 8 (b) requires personal service only and it does not state where such service has to
take place See Beira v Raphaely-Weiner supra at 338 D.

Personal service can be effected on the debtor at any address; it does not have to be served on
the debtor at his/her home/place of employment/business. Where the debtor is not personally
present at his/her home/place of employment/business, then the sheriff is entitled to serve the
writ at such address in the absence of the debtor. Wilken and Other NNO V Reichenberg 1999
(1) SA 852.

Where a debtor does not have any disposable property with him where the writ is served, and
where he merely mentions to the Sheriff that he has movable property at another address, the
Sheriff is not obliged to ask the debtor what property he has and where it is situated. What the
Sheriff must do is to ask the debtor to indicate sufficient property to satisfy the writ. It is then
up to the debtor to point out the property or indicate its whereabouts and describe it in order
to demonstrate its sufficiency to satisfy the writ. The debtor is obliged to indicate with
sufficient particularity the nature and locality of the goods to enable the sheriff to attach and
sell them. (Wilken’s case - supra)

NOTE: The attorney who wishes to rely on a nulla bona return in a sequestration application
must carefully scrutinise the nulla bona return concerned. If it is defective or inadequate, it
should be sent back to the sheriff or officer concerned for rectification, amplification or
amendment before it is used in a sequestration application.

4.2.3 SECTION 8(c)

If he makes or attempts to make any disposition of any of his property which has or would
have the effect of prejudicing his creditors or of preferring one creditor above another.

Intention of the debtor is not relevant here: the effect of the disposition is the only
consideration. The section envisages two sets off circumstances, namely, an actual
disposition of property or attempted disposition of property.

It is not enough to simply make the bald allegation of prejudice – the creditor must be able to
show how they are prejudiced or the nature of the disposition must be such that the
reasonable person would draw the inference that it would prejudice the creditors.

32 | P a g e
In considering whether the disposition has had the effect of prejudicing creditors it is not
necessary to show that the disposition has the effect of rendering the debtor's estate insolvent,
or more insolvent than it was. Standard Bank of SA Ltd v Court 1993(3) SA 286 (c) at 294I -
295G. [Note: If this was the case, you would have to show actual insolvency in order to
establish an act of insolvency which negates the whole purpose of having acts of insolvency.]
One does not have to make an assessment of the Respondent's assets and liabilities.

What is required to be established is that having regard to all the surrounding circumstances
the disposition has (or would have had if it had been done) the effect of prejudicing the
Respondent's creditors. The only requirement of section 8 (c) is that the "disposition" and the
"prejudice" be sufficiently closely related in time and causality for it to be said that the
prejudice was the "effect" of the disposition See Nahrungsmittel GmbH v Otto 1991 (4) SA
414 (c).

EXAMPLES

(a)….A debtor selling his immovable property for a price far below the market value when
his financial position is precarious;

(b)….A debtor who is experiencing financial difficulties/cash flow problems paying one
creditor in full while failing to pay other creditors;

(c)….A debtor ceding his claim against one of his own debtors to one of his creditors as
payment for his debt at a time when he is insolvent or unable to pay his other creditors.

(d)….The passing and registration of a mortgage bond by a debtor over his immovable
property to secure the debt of his business venture in favour of one of his creditors, at a time
when the debtor was not paying creditors and when his business ventures were in financial
difficulties - Fittinghof and Others v Stockton 1997(1) SA 535 (W).

4.2.4 SECTION 8(d)

If he removes, or attempts to remove, any of his property with intent to prejudice his creditors
or to prefer one creditor above another.

A disposition of property is not required, mere removal is enough. Also, intention of the
debtor, not the effect of what he does is important here. Test of intention is subjective.
Intention can be inferred from the surrounding circumstances.

33 | P a g e
EXAMPLE

Debtor removing valuable furniture and paintings from his house in the middle of the night /
under suspicious circumstances for no apparent reason, leading to the inference that he
intended to prevent these assets being attached by his creditors.

4.2.5 SECTION 8(e)

If he makes, or offers to make, any arrangement with any of his creditors for releasing him
wholly or in part from his debts.

Here it is essential to prove that the debtor made an arrangement for releasing him (wholly or
partially) from his debts e.g. offering to pay his creditors 50c in the Dollar as in Joosub v
Soomar 1930 TPD 773.

Note: Asking for an extension of time within which to pay in full does not constitute and act
of insolvency within the meaning of section 8(e). [If made in writing, however, such a request
might constitute an act of insolvency in terms of section 8(g) - see Standard Bank of South
Africa Ltd v Court 1993 (3) 286 CPD].

Before an act can amount to an act of insolvency under this section it must be indicative of
the debtor's inability to pay his debts; so where an offer of settlement is made on the basis
that the existence or extent of the debt is disputed or not admitted, such an offer would not
amount to an act of insolvency since it does not appear therefrom that the debtor cannot pay
his debts.

Be careful about "without prejudice" communications. There is a large body of authority that
an act of insolvency cannot be committed "without prejudice" and can therefore be disclosed
even if it was committed during settlement negotiations. See Absa Bank Ltd v Chopdat
2000(2) SA 1088 (WLD)

Note: Where the debtor acknowledges that he owes the amount and that payment therefore is
due but offers a lesser amount by way of settlement, he commits an act of insolvency since he
by implication acknowledges that he cannot pay his debts.

4.2.6 SECTION 8(f)

If, after having published notice of surrender of his estate which has not lapsed or been
withdrawn in terms of section 6 or 7, he fails to comply with the requirements of sub-section
(3) of section 4, or lodges, in terms of that sub-section, a statement which is incorrect or
incomplete in any material respect or fails to apply for the acceptance of the surrender of his
estate on the date mentioned in the aforesaid notice as the date on which such application is
to be made.

34 | P a g e
Three acts of insolvency ensue: a debtor commits an act of insolvency if after publication of a
notice of surrender which has not lapsed or been withdrawn, he:

1. fails to lodge a statement of affairs with the Master; or

2. lodges a statement which is incorrect or incomplete in any material respect; (when
determining whether the error is material or not, regard should be had to the
probability of prejudice to creditors); or
3. fails to apply for the acceptance of the surrender of his estate on the specified date;
provided the notice of surrender has not lapsed or been withdrawn. (If you want to
rely on this act of insolvency, quick action is required because the notice of surrender
lapses 14 days after the date on which the application was set down for. There is no
act of insolvency where the notice has lapsed. [See 6(2)])

4.2.7 SECTION 8(g)

If he gives notice in writing to any one of his creditors that he is unable to pay any of his
debts.

Notice in writing of inability to pay debts. Notice must be in writing - oral notice does not
suffice (Patel v Sonday 1936 CPD 466 469).

Does the section mean any one debt / all debts? Correct interpretation is any single one or
more of the debtor's debts See Optima Fertilizers (Pty) Ltd v Turner 1968 (4) SA 29 (D) at
32F - 33A and Court v Standard Bank of SA Ltd 1995 (3) SA 123 (A) at 133I - J.

The notice must be given with the intention of giving notice of inability to pay debts; but
such intention is inferred from the actual wording of the notice.

The test is how the notice would be understood by a reasonable person in the position of the
creditor to whom it is addressed. Does the recipient, as a reasonable person, understand the
notice to mean that the debtor cannot pay his debts?

Distinguish between unwillingness and inability to pay.

The tenor of the notice must be construed as a whole and not according to the words relied on
in isolation. If the wording of the notice is unambiguous, the notice alone should be looked at
and interpreted. If there is ambiguity, the surrounding circumstances may be taken into
consideration when construing the terms of the notice.

In determining whether or not a written notice constitutes a notice of inability to pay, the
approach is to consider how the notice would be understood by a reasonable person in the
position of the creditor to which it is addressed. To such reasonable person must be attributed

35 | P a g e
knowledge of the relevant circumstances which would have been known to the creditor at the
time. See Court v Standard Bank supra at 134B.

An application in terms of section 74 of the Magistrates Court Act 1944 for an

Administration Order is an act of insolvency as contemplated in section 8(g) - Volkskas Bank
v Pietersen 1993 (1) SA 312 (c).

A request for time to pay a debt which is due and payable coupled with an undertaking to pay
the amount due in instalments will ordinarily give rise to an inference that the debtor is
unable to pay the debt. "A request for time to pay the debt which is due and payable will
ordinarily give rise to an inference that the debtor is unable to pay a debt and such a request
contained in writing will accordingly constitute an act of insolvency in terms of section 8(g).
This is particularly so where the request is coupled with and undertaking to pay the amount
due and payable by way of instalments." - Standard Bank of South Africa Ltd v Court 1993
(3) SA 286 (c).

The Appellate Division (per Vivier JA) held in Court v Standard Bank 1995(3)SA 123 (A) at
134A - C as follows:

"Whether a particular notice is such as to constitute an act of insolvency within the meaning
of S 8(G) depends on a construction of its contents, read as a whole. The question when
considering the letter is not whether the debtor is in fact unable to pay or whether he is
solvent or insolvent. Inability to pay must be distinguished from unwillingness to pay. If the
debtor us merely saying that he is unwilling to pay, the letter does not constitute an act of
insolvency."

NOTE: an act of insolvency in terms of section 8(g) is admissible even if it is marked

"without prejudice". See Absa Bank v Chopdat 2000(2) SA 1088 (WLD) and authorities cited
there.

NOTE: In the case of DP Du Plessis Prokureurs v Van Aarde 1999(4) SA 1333, the Court
held that where a debtor had committed an act of insolvency in terms of section 8(g), the
creditor had a claim as intended in section 9(1) of the Act, it was apparently to the advantage
of creditors for the debtor's estate to be sequestrated and the debtor was co-operating in the
sequestration, it could grant a sequestration order even although the debtor was technically
solvent. The debtor's assets exceeded his liabilities, but they were illiquid. The debtor lacked
sufficient monthly income to meet all his monthly expenses. The Court granted the
sequestration order even although he was only commercially insolvent as opposed to be
actually insolvent.

4.2.8 SECTION 8(h)

If, being a trader, he gives notice in the Gazette in terms of sub-section (1) of section 34, of
his intention to transfer his business and is thereafter unable to pay all his debts.

36 | P a g e
Where a trader publishes a notice in terms of section 34, of intention to sell his business, all
his liabilities become immediately due at the option of the creditor.

(On the definition of a trader in this context, see Gore NO v Mc Carthy Ltd 2006 (3) SA 229
(C).

If the trader is then unable to pay any of these debts, he commits an act of insolvency.

Note: must not be a mere unwillingness to pay, must be an inability to pay. Thus a disputed
debt will not suffice.

The Court considers the trader's ability to pay at the time of and immediately after publication
of the notice (and not his capacity to pay once the business has been sold and the funds
recovered.)

Note: IS IT "OFF THE RECORD" OR NOT? In Absa Bank v Chopdat 2000(2) SA 1088
(WLD), the debtor had a meeting with the creditor for the purposes of settlement negotiations.
During this meeting, the debtor disclosed to the creditor that he was insolvent. The creditor
made notes of the debtor's assets and liabilities which showed that the debtor was insolvent.
The creditor later annexed the note to an application for the sequestration of the debtor's
estate. The debtor argued that the list was inadmissible because it was privileged. The court
held that the note was admissible. The court stated that public policy required that this
admission should not be precluded from use in the sequestration proceedings even though it
had been made on a privileged occasion.

A similar result was arrived at in Lynn & Main Inc v Naidoo and Another 2006 (1) SA 59 (N)

SO IF YOU ARE ACTING FOR A DEBTOR, BE CAREFUL NOT TO SAY TOO MUCH!

4.3 CONTENTS OF AFFIDAVIT

Sequestrations proceedings are always brought by way of application on Notice of Motion.

The evidence is placed before court by way of affidavit.

In Standard Bank of SA Ltd v Sewpersadh and Another 2005 (4) SA 148 (C) it was held that
the ordinary rule is that three sets of affidavits are allowed is an application (supporting,
answering and replying affidavits). Where further affidavits are filed without the leave of
court, the court can regard such affidavits as pro non scripto.

4.3.1 THE APPLICANT

(Objective is to show that he has locus standi)

Company or other legal entity -

37 | P a g e
If the company is a juristic person, obtain and annex a resolution authorising the proceedings
and the signing of the affidavit by the deponent. State the capacity of the deponent and that
he/she is duly authorised to bring the application.

It has been held that ex post facto ratification is possible after a Respondent has objected that
the proceedings in the name of the company are not duly authorised.

See: Baeck & Co v Ltd van Zummeren & Another 1982 (2) SA 112 (W), Merlin Gerin (Pty)
Ltd v All Current Drive Centre (Pty) Ltd & Another 1994 (1) SA 659 (c), and National Co-op
Dairies Ltd v Smith 1996 (2) SA 717 (N).

In Tattersall and Another v Nedcor Bank Ltd 1995 (3) SA 222 (A) the AD held that a copy of
the resolution of a company authorising the bringing of an application need not always be
annexed;

Section 242(4) of the Companies Act does not provide the exclusive method of proving a
company's resolution;

Evidence of authority can be proved aliunde;

Where the Respondent's challenge to Applicant's authority is a weak one (e.g. a bare, tactical
denial) a minimum of evidence will suffice to establish the existence of Applicant's authority.

4.3.1.1 Spouses

In community of property before or after 1 November 1984 : no locus standi on his/her own.
Since 30 May 1996 each spouse would need the written consent of the other spouse - Section
17(1) Act 88/1984.

Out of community of property: locus standi

NOTE: The marital power principle has been abolished with effect from 30 May 1996.
(Section 11 of Act 88 of 1984 read with Section 2 of Act 1 of 1996)

4.3.1.2 Provisional Liquidator of a company:

Needs the authority of the Court to bring legal proceedings. Companies Act Section 386 (5)
read with 387 (3) and 361 (3).

(See Henochsberg's Commentary on these sections of the Companies Act and Meskin
Insolvency Law at paragraph 6.14.1).

38 | P a g e
4.3.1.3 Final Liquidator of a company:

In order to bring/defend legal proceedings in the name and on behalf of the company, the
(final) liquidator needs the authority granted by meetings of creditors and members. Section
386 (4) (a) read with Section 386 (3) (a) of the companies Act.

Where the liquidator cannot obtain such authority from the creditors and members (e.g. for
reasons of urgency) or where there is a difference between the directions of creditors and
members, the liquidator may apply to the Master for directions. Section 386 (3) (a) read with
Section 386 (4) (a) and Section 387 (2) of the Companies Act.

Where the Master refuses to give such directions, the liquidator may apply to court for leave
to bring/defend legal proceedings. (Section 386 (5) read with Section 387 (3).

4.3.1.4 Provisional liquidator of a close corporation:

Needs the authority of the court: Section 386 (5) and 361 (3) of the Companies Act read with
Section 66 (1) of the Close Corporations Act (alternatively Section 66 (1) of the Closed
Corporation Act read with s339 of the Companies Act and s18 (3) of the Insolvency Act).

4.3.1.4 Final liquidator of a close corporation:

Needs the authority of creditors given at the second meeting of creditors, to bring/defend
legal proceedings (Section 66[1] and 79(e) of the Close Corporations Act read with ss 386
(3)(a) and s 339 of the Companies Act and ss 73 (1) of the Insolvency Act).

Where the liquidator is unable to get the requisite authority (because of urgency or a refusal
by the creditors to give directions) the liquidator needs the authority of the Master (Section
66 (1) and s 79 (e) of the Closed Corporation Act read with ss 364 (a) and 339 of the
Companies Act and ss 73 (1) and 81 (3) of the Insolvency Act).

4.3.1.5 Provisional Trustee of an Insolvent Estate:

Needs the authority of the court (s 18 (3) of the Insolvency Act). In motion proceedings the
provisional trustee can simultaneously seek the authority to bring the proceedings concerned
and the substantive relief sought.

4.3.1.7 Final Trustee of an Insolvent Estate:

Needs the authority of the creditors or the Master - s 73 (1) Insolvency Act.

4.3.1.8 Commissioner of Inland Revenue

Section 89(2) or 89 quat of the Income Tax Act, 58/1962

39 | P a g e
See also Commissioner, South African Revenue Services v Hawker Air Services (Pty) Ltd;
Commissioner, South African Revenue Services v Hawker Aviation Partnership and Others
2006 (4) SA 292 (SCA).

Address, occupation and marital status of Applicant.

4.3.2 PERSONAL KNOWLEDGE

Avoid hearsay evidence.

If hearsay evidence is used, supporting affidavit must be obtained from person who can give
direct evidence thereof.

In urgent applications, statements of belief may be made provided the Applicant's source or
ground for belief is set out.

4.3.3 THE RESPONDENT

Full names, date of birth and ID number, occupation and business and/or home address
should be given [Section 9(3))].

Marital status of debtor and if the debtor is married, description of marital regime and the full
name, date of birth and ID number of his spouse must also be given [Section 9(3)]:

In all instances where the parties are married in community of property an application for the
sequestration of the joint estate is to be brought against and served upon both spouses, subject
only to the proviso in s 17(4)(b) of the Matrimonial Property Act. See Ratilal v Dos Santos
1995 (4) SA 117 (WLD).

Married in community of property but wife is a public trader: joint estate must be
sequestrated, and both spouses are joined in the proceedings.

Marital status unknown: Applicant must satisfy the Court that despite reasonable steps taken
by him he was unable to establish whether the debtor is married in community of property or
the name and address of his spouse [Section 17(4)(b) Act 88/1984] - in this instance both
spouses need not to be joined.

Married out of community of property - spouses need not be joined, but it must be clearly
stated that the Respondent and his/her spouse are married out of community of property.

A trust is sequestrated not liquidated.

One cites as trust as follows: "Respondent is the trustee for the time being of the WYZ trust..."

40 | P a g e
4.3.4 JURISDICTION

[Section 149]

An averment that the Court has jurisdiction to hear the application, substantiated with facts
(High Court has jurisdiction to adjudicate upon an insolvency matter. Magistrates’ Court may
preside over prosecutions for criminal offences under the Insolvency Act, proceedings to set
aside voidable dispositions, and few other matters, provided that jurisdictional limits imposed
by Magistrates’ Court Act are not exceeded).

Respondent must at date of lodging the Application with Registrar -

Own or be entitled to property within jurisdiction of the Court;

Be domiciled within the jurisdiction of the Court;

Be ordinarily resident within the jurisdiction of the Court; or must have ordinarily resided
within the jurisdiction of the Court at any time within 12 months immediately preceding date
of lodgement;

Must be carrying on business within the jurisdiction of the Court; or must have carried on
business within jurisdiction of Court at any time within 12 months preceding date of
lodgement.

Nahrungsmittel GmbH v Otto 1991(4) 414 (c); 1993(1) SA 639 (A)

"If the Respondent were not found to be ordinarily resident within the jurisdiction of the
Court, the Court would more readily exercise its discretion to refuse to grant a sequestration
order on the ground that it would be equitable or convenient for the Respondents' estate to be
sequestrated elsewhere."

But see Deutche Bank AG v Moser & Another 1999(4) SA 216 (c) where the court granted a
sequestration order of the estate of a German resident who owned immovable property in the
Cape but virtually no assets in Germany. The basis was the convenience in the administration
of the estate.

4.3.5 LOCUS STANDI AS CREDITOR : A LIQUIDATED CLAIM WHICH HAS ACCRUED

[Section 9(1)]

The amount, cause and nature of the claim against the debtor must be given. Applicant must
fall within one of the following categories:

A creditor with a liquidated claim of not less than R100 - it must be a claim sounding in
money and not e.g. a claim for the transfer of property

41 | P a g e
Two or more creditors whose liquidated claims in the aggregate are not less than R200

Joint creditors in respect of one liquidated claim of not less than R100.

Note: The minimum amount required must exist at date when application is lodged with
Registrar, when provisional order is granted and when final order is applied for.

Claim need not be due and payable at date of institution of proceedings. It is sufficient if the
claim has accrued. [Section 9(2)] Future rentals which will become due in terms of a lease
agreement cannot be considered to be claims which have accrued. The lessor's claim for each
future month's rental would accrue only when the lessor makes the leased premises available
to the lessee on the first day of each month - Sanddune CC v CATT 1998(2) SA450(SE)

"Liquidated" means fixed and ascertained by agreement, judgment or otherwise. A disputed

claim is not liquidated.

If the claim is ceded to Applicant he must state that fact and set out the nature of the claim
before cession to enable the Court to decide if it was liquidated or not.

It is an abuse of process to use sequestration proceedings to enforce payment of a debt which

is disputed bona fide by the debtor on reasonable grounds (the onus being on the debtor to
establish such a dispute). See Kalil v Decotex (Pty) Ltd & Another 1988 (1) SA 943 (AD) at
980, Investec Bank Ltd v Lewis 2002(2) SA 111 at 116 E-F and Sonnenberg McLoughlin Inc
v Spiro 2004 (1) SA 90 (C).

For example where the estate of a surety was sequestrated, see: Louw v WP (Koöperatief) Bpk
1998(2)SA 418 (SCA).

4.3.6 SECURITY FOR CLAIM

[Section 9(3)]

Nature and value thereof must be disclosed - the fact that the applicant holds security does
not deprive him of his right to apply for sequestration of the Respondent's estate.

Note the definition in Section 2 of security as meaning real security.

4.3.7 DE FACTO INSOLVENCY OR AN ACT OF INSOLVENCY

[Section 9(1)]

De Facto insolvency - i.e. his liabilities exceed his assets, supported by prima facie evidence
thereof; or

Act of Insolvency - (use wording of subsection) and state facts which give rise to the alleged
act of insolvency.
42 | P a g e
Actual insolvency may be established inferentially - Absa Bank Ltd v Rhebokskloof (Pty) Ltd
and Others 1993 (4) SA 436 (c)

The court has discretion whether to allow further proof of insolvency after the initial
affidavit. This discretion may only be interfered with on appeal if the discretion was
exercised capriciously, on wrong principal, with bias or if the court did not act for substantial
reasons. Ganes and Another v Telecom Namibia Ltd 2004 (3) SA 615 (SCA)

4.3.8 REASON TO BELIEVE THAT SEQUESTRATION WILL BE TO ADVANTAGE OF CREDITORS

[SECTION 12 (1)(c)]

The affidavit must contain an averment that there is "reason to believe that the sequestration
will be to the advantage of creditors".

The averment must be supported by facts upon which this belief is based.

The words "reason to believe" show that the Applicant does not have to furnish positive proof
of advantage to creditors - something less is required. It is not correct to speak of an onus to
show advantage to creditors since the Court is clothed with a discretion. The exercise of such
discretion requires the Court to examine the facts and decide whether a sequestration will be
to the advantage of creditors - Standard Bank v Van Zyl No 1999(2) SA 221(O)

In Lynn & Main Inc v Naidoo and Another 2006 (1) SA 59 (N) it was held that even if the
insolvent had no assets but there was reason for thinking that , as a result of enquiry under the
Act, some may be revealed or recovered for the benefit of creditors, it was sufficient Also see
Commissioner, South African Revenue Services v Hawker Air Services (Pty) Ltd;
Commissioner, South African Revenue Services v Hawker Aviation Partnership and Others
2006 (4) SA 292 (SCA).

Advantage to creditors means advantage to the general body of creditors, not the advantage
of one or of all the creditors. This means that there has to be advantage for the concurrent
creditors, not merely for the secured or preferential creditors. However, in Lynn & Main Inc v
Mitha NO 2006 (5) SA 380 (N) the debtor only had one creditor and the Court held that this
was not necessarily a bar to sequestration. It was pointed out that in such circumstances the
potential advantages are less and the case for sequestration correspondingly weaker.

In order for there to be an advantage to creditors, a pecuniary benefit in the form of a

dividend, which is not immaterial, must be anticipated. There must be a reasonable prospect
of a not negligible dividend - not necessarily likelihood, but a prospect which is not too
remote.

The right of creditors to hold an enquiry, interrogate the debtor and investigate his
transactions is not enough in itself to constitute advantage to creditors - there must be a
reasonable prospect that some pecuniary benefit will result to creditors from the enquiry.

43 | P a g e
In the case of Nosworthy v Holiman 1993(2) SA 774 ECD, Jones J, referring to the former
Transvaal practice rule, said that there is no magic in the figure of R 5000, 00 in determining
whether there is sufficient free residue so as to confer a benefit on creditors. "An adequate
free residue will no doubt change from time to time and from case to case, and in each case
the judicial discretion (whether or not to grant the sequestration application) must be
exercised in the light of the facts and circumstances proved in the affidavits".

In the case of Millman NNO v Masterbond Participation Bond Trust Managers (Pty) Ltd
(under Curatorship) and Others 1997 (1) SA 113 (c) it was decided that the liability of a
surety and co-principal debtor is not contingent, unless the principal debt is itself contingent
and therefore it follows that the obligations undertaken by the Insolvent as surely and co-
principal debtor must be included among his liabilities and therefore taken into account in
determining whether there is an advantage to creditors.

Where there is only one asset in the estate which is subject to a bond/pledge, a sworn
valuation should be furnished by an expert witness to establish what price is likely to be
realised from a forced sale so that the Court can determine whether there will be a free
residue available for creditors. The expert must place evidence before the Court of the facts
relied upon for his opinion, as well as the reason for his opinion. It is not sufficient for the
expert merely to state the amount that he believes a forced sale will realise - Nel v Lubbe
1999 (3) SA 109 (WLD.

Note the difference between "friendly sequestrations" and "arms length" or "hostile
sequestrations". In the case of a friendly sequestration, the applicant should be able to furnish
full details about the respondent's financial position so as to enable the Court to assess
whether there will be an advantage to creditors. It is therefore expected of the applicant to
make such full and detailed disclosure in a friendly sequestration. In an arms length
transaction, however, the sequestrating creditor does not have to set out the detail and
intensity of averments required in a friendly sequestration. It will be sufficient if the creditor
in an overall view on the papers can show, for example, that there is a reasonable ground for
concluding that upon an investigation by way of an enquiry a trustee may be able to discover
assets which might be attached and sold to generate a dividend for creditors - Dunlop Tyres
(Pty) Ltd v Brewitt 1999 (2) SA 580 (WLD.

In the case of Absa Bank Ltd v De Klerk and Related Cases 1999 (4) SA 835 (ECD) projected
dividends of at least 5c,17c, 5c and 6c in the rand were held not to be so small as to produce
no advantage to creditors in the circumstances.

EXAMPLES

The assets of the Respondent have been attached at the instance of one judgement creditor
and will be sold in execution shortly.

44 | P a g e
That the Respondent has concealed assets which a Trustee will be able to investigate, find
and realise.

That although the Respondent in insolvent there are considerable assets in the estate which
could be realised and the proceeds distributed to creditors.

The prospect of an immediate dividend as opposed to a long wait for payment.

That the Respondent has preferred one creditor or made a disposition without value and
therefore a Trustee should investigate the transaction and possibly set it aside.

That the affairs of Respondent be investigated by an impartial trustee with a view to an

equitable distribution of residue.

Possibility that Insolvent may dispose of assets to prejudice creditors is minimised.

Assets of Insolvent are liquidated and proceeds made available for distribution.

4.3.9 SECURITY FOR COSTS

[Section 9(3)]

A security bond is always lodged - if there is no certificate from the Master filed of record
when the application is heard whereby it is certified that security has been lodged, the
application is fatally defective. The Master's security certificate does not have to be annexed
to the papers when the application is issued; nor does it have to be served with the application
on Respondent. What matters is that it should accompany the application when it is heard by
the Court. See Court v Standard Bank of SA Ltd 1995 (3) SA 123 at 131B - E.

Master's certificate re security must be given not more than 10 days before date of signing of
Notice of Motion.

Note: There is nothing to prevent an applicant using the same set of papers with a new
Master's report in a sequestration application where the first Master's report became "stale",
i.e. older than 10 days before the date on the Notice of Motion.

See Intercontinental Exports (Pty) Ltd v Fowles 2000(4) SA 833 (WLD.

4.3.10 THAT A COPY OF THE APPLICATION WILL BE LODGED WITH THE MASTER

[Section 9(4)]

45 | P a g e
4.3.11 COPY OF THE APPLICATION TO TRADE UNIONS

That a copy of the application will be furnished to every registered trade union that, as far as
the applicant can reasonably ascertain, represents any of the debtor's employees [Section
9(4a)(a)(i)]

4.3.12 COPY OF THE APPLICATION TO EMPLOYEES

That a copy of the application will be affixed to the notice board inside the debtor's premises
to which the employees have access [Section 9(4a)(a)(ii)(aa)]

or

To the front gate or door (whichever is applicable) [Section 9(4a)(a)(ii)(bb)]

4.3.13 THAT A COPY OF THE APPLICTION WILL BE FURNISHED TO THE SOUTH AFRICAN
REVENUE SERVICES [Section 9(4A)(a)(iii)]

4.3.14 THAT A COPY OF THE APPLICATION WILL BE FURNISHED TO THE DEBTOR (Section
(4A)(a)(iv))

alternatively

Set out reasons to satisfy the court that it is in the interest of the debtor or creditors to
dispense with such notice

4.4 JOINDER

4.4.1 JOINDER OF SPOUSE MARRIED IN COMMUNITY OF PROPERTY

Detkor (Pty)Ltd v Pienaar 1991(3) 406(W) [Full Bench Decision]

Ratilal v Dos Santos 1995 (4) SA 117 (W)

Effect of Chapters II and III of the Matrimonial Property Act, 1984 - marital power is
abolished and the husband is no longer the sole administrator of the joint estate;

If it was not for the proviso to Section 17(4) of the Matrimonial Property Act, failure to cite a
wife whose matrimonial regime is governed by Chapters II and III would automatically result
in a plea of non-joinder being successfully raised. In order to avoid a plea of non-joinder, one
has to satisfy the Court that the Applicant has taken reasonable steps to establish whether
Respondent is married in community of property and has been unable to do so;

46 | P a g e
The drastic nature of the changes in terms of the substantive law brought about by Chapters II
and III render compliance with the procedural requirements of Section 17(4) of the Act
peremptory; i.e. where a debtor is married in community of property, both spouses have to be
joined as Respondents in an application for the sequestration of the joint estate.

Any sequestration application will thus fail where Applicant merely states that marital status
of Respondent is unknown to him. It must be clear from the papers that there is not another
interested party in the form of a spouse married in community of property.

It is implicit in the very wording of the proviso to Section 17 (4)(b) of the Matrimonial
Property Act, 1984 that, where a sequestration order has been issued against a person who is
married in community of property despite non-compliance with the provisions of Section 17
(4)(b), the order is not per se invalid. - Absa Bank Ltd t/a Trust Bank v Goosen 1998(2)SA
550(W).

4.4.2 JOINDER OF MULTIPLE RESPONDENTS IN A SEQUESTRATION APPLICATION

It has been held in a number of cases that it is undesirable to join more than one person as
respondent in an application for sequestration, even where the persons are jointly and
severally indebted to the applicant. See Caltex Oil (SA) (Pty) Ltd v Govender's Full
Distributions 1996 (2) SA 552 (N) at 556 E and 557 (A). This does not apply where two
spouses are married in community of property. In that case both spouses must be joined as
respondents in an application for the sequestration of their joint estate.

4.4.3 JOINDER OF MULTIPLE RESPONDENTS AND MIXING SEQUESTRATION AND

LIQUIDATION APPLICATIONS:

In Business Partners Ltd v Vecto Trade 87 (Pty)Ltd and Others 2004 (5) SA 296 (SE)
paragraph 36 at 311 B-F it was held that due to the different requirements and interests, the
joinder of directors (and the addition of prayers to sequestrate their estates) will not easily be
allowed in applications to liquidate their companies. In this case the court allowed the
applicant to withdraw against the natural persons and provisionally wound up the first
respondent company.

Where sequestration and liquidation are necessary in related matters, it is better to bring
separate applications. If separate applications cannot be brought, care will have to be taken to
address the different requirements and interested parties properly. Where the directors are
also the shareholders, another option might be to sequestrate their estates so that the shares
fall in the insolvent estate. (Depending on the circumstances, it might in any event become
necessary to later liquidate the company.)

An example where related liquidation and sequestration applications were entertained

together in the Supreme Court of Appeals can be found in Commissioner, South African
Revenue Services v Hawker Air Services (Pty) Ltd; Commissioner, South African Revenue

47 | P a g e
Services v Hawker Aviation Partnership and Others 2006 (4) SA 292 (SCA). However in
those matters separate applications were filed in the court of first instance.

4.5 SUPPORTING DOCUMENTS

If Applicant is a legal entity, a Resolution to the effect that the application has been
authorised by that legal entity and that it has appointed someone to act on its behalf in such
proceedings.

Master's written consent (where necessary) (vide supra at iii 1).

Original Practice rule J1 return of service (or copy thereof) if Applicant relies on a nulla bona
return.

Original written notice of inability to pay [Section 8g] (or certified copy thereof)(if
applicable) and if it is hand-written, a typed copy thereof (Practice Rules/TPD & WLD).

Master's Certificate that security has been founded, need not be attached to the affidavit when
it is served. It must, however, be filed before the application is heard. Court v Standard Bank
of SA Ltd 1995 (3) SA 123 (A).

Master's Report [Section 9(4)] if he wishes to make a report - this is not attached to the
affidavit but is filed with the Registrar in the Court file. It must be in the Court file when the
application is heard.

Affidavit by the person who furnished the relevant registered trade unions with notice
(Section 9(4A)(a)(i) and (b))

Affidavit by the person who furnished the employees with notice (Section 9(4A)(a)(ii) and
(b))

Affidavit by the person who furnished the South African Revenue Services with notice
(Section 9(4A)(a)(iii) and (b))

Affidavit by the person who furnished the debtor with notice (Section 9(4A)(a)(iv) and (b))
(unless reasons are provided as prescribed, why notice to the debtor should not be given)

One should be careful not to be pressurized by the respondent not to serve on SARS and
labour in terms of Section 9(4A)(a). The service on the SARS and labour is peremptory.
Standard Bank of SA Ltd v Sewpersadh and Another 2005 (4) SA 148 (C) .

4.6 NOTICE OF MOTION

Use Form 2(a) (long form) See Rule 6(5)(d)(ii) for wording

48 | P a g e
Short Form (Form 2) only to be used in urgent applications; where (in Gauteng and
KwaZulu-Natal) applicant relies on nulla bona return [Ratilal v Dos Santos 1995 (4) SA 117
(W)] and (in FS) where there is clear documentary proof of an act of insolvency in terms of
Section 8 (c). If return is older than 6 months, service on the Respondent in the usual manner
is required.

In the Western Cape one may always use the short form (Form 2) of Notice of Motion. This
practice is also accepted in the Eastern Cape division.

See Absa Bank Ltd v De Klerk 1999(4) SA 835 (ECD).

Notice of Motion (Form 2(a)) and Ex parte application (Form 2) to be signed by Attorney and
Registrar.

Contents of Notice of Motion

[Rule 6]

The heading should also reflect the full name, date of birth and ID number of the Respondent
debtor. If he is married, he should state the full name, date of birth and ID number of his
spouse -[Section 9(3) (c)] - and if the Applicant is unable to do so, he must state the reason
why he is unable to do so.

Date and time of hearing

Prayers

Urgency (if applicable)

Provisionally sequestrating estate of Respondent (Section 10)

Rule nisi (Section 11)

Service (respondents, registered trade unions, employees and South African Revenue
Services)

Costs

Reference to deponent of supporting affidavit

Address where applicant will accept service [Rule 6(5)(b)] (Long Form)

Last day for service notice of intention to oppose (Long Form)

Statement to the effect that replying affidavit must be filed within 15 days of date of service of
notice of intention

49 | P a g e
To oppose (Long Form)

Respondent must furnish address for service of documents (Long Form)

Date of hearing if no notice of intention to oppose is received (Long Form)

4.7 PROVISIONAL ORDER OF SEQUESTRATION

[Section 17]

Must be served on Respondent by the Sheriff.

Registrar must transmit one original to -

Master

Sheriff of every district in which Respondent resides or owns property

Every Registrar of Deeds

Every office having charge of a register of ships kept at a port of registry in Namibia

Every Sheriff who holds under attachment any of the Respondent's property.

Master must give notice in the Government Gazette of the provisional sequestration.

Extension of Rule Nisi will be allowed only if an affidavit by attorney has been timeously
filed, explaining reasons and need for extension. [Practice Manual TPD and WLD - par FC4].
In Stander vs Stander 1997(3)SA922 C) it was decided that whenever a rule nisi is extended
because there was late or defective service thereof on the respondent, or late or defective
notice was given to interested parties, it is necessary for the respondent and the interested
parties to be given notice of the extension of the return day so that they are aware of the date
on which the case will be heard and so that they can decide whether they wish to give reasons
on the return day why the order sought by the applicant should be granted or not. In
"friendly" sequestrations, the Court may lean towards discharge of the rule rather than
confirming it, or granting an extension.

The sequestration order must also reflect the particulars that appear in the heading to the
Notice of Motion [Section 9(3)(d)]

A provisional order of sequestration is not appealable - Moch v Nedtravel (Pty) Ltd t/a
American Express Travel Service 1996 (3) SA 1 (A). The dismissal of an application for
provisional sequestration is likewise not appealable - Gottschalk v Gough 1997(4) SA 562 (c).

50 | P a g e
4.8 INTERVENTION - MUST PROVE A DIRECT AND SUBSTANTIAL
INTEREST IN THE MATTER BEFORE THE COURT

Maritz t/a Maritz & Kie Rekenmeester v Walters & Another & 2 other cases 2002 (1) SA 689
(C)

MVV Tractor & Implementing Agencies BK v Olierivier Landgoed 2000(2) SA 571 (NC).

Lordan NO v Dusky Dawn Investments (Pty) Ltd (In Liquidation) (Pearmin and Another
Intervening) 1998 (4) SA 519 (SE)

Fullard v Fullard 1979 (1) SA 368 (T)

Storm v Storm and Volkskas Ltd v Storm 1973 (2) 382 (T)

A creditor may intervene -

To have the provisional order set aside; or

To apply for a fresh order in his own right and name if applicant fails to proceed.

If applicant does not proceed, the existing provisional order cannot be confirmed at the
instance of the intervening creditor it must be set aside and the intervening creditor must
apply afresh and make out its own case for a provisional order. The intervening creditor must
furnish security etc as if he had originally been the applicant, but he can rely on facts that
appear from the record in the existing proceedings.

A creditor wishing to oppose an application by the sequestrating creditor to discharge a

provisional order must show some substantial reason for his opposition.

Note: In certain circumstances an applicant will be entitled to rely on the facts averred in an
interving creditor's affidavit in support of his own application.

See: Uys and Another v Du Plessis (Ferreira Intervening) 2001 (3) SA 250 (CDP).

4.9 URGENT APPLICATIONS

[Rule 6(12)]

Short form may be used (ex parte application). It must however contain a prayer that the
Court is requested to deal with the matter by way of urgency, and in most cases it will also be
necessary to ask for a rule nisi to be issued, linked to a return day. Service of notice of

51 | P a g e
motion only to be dispensed with where there is a possibility of irreparable loss to applicant,
but this must be explained in a supporting affidavit. [Practice Rule F2.2]

Grounds for urgency and degrees of Urgency: See Luna Meubelvervaardigers 1977 (4) SA
135 (W); Republikeinse Publikasies Bpk 1972 (1) SA 773 (A).

Must be set down for 10:00 on Friday and if not possible, arrange with Registrar a time which
will suit judge. Extremely urgent applications may be set down on shorter notice.

Certificate of Urgency only necessary if matter must immediately be heard on viva voce
evidence.

4.10 PARTNERSHIPS

[Section 13]

Private Estates of partners can be sequestrated without a partnership sequestration.

If the Partnership Estate however is sequestrated, the separate estates of the Partners must
simultaneously be sequestrated. [Section 13(1)]. All the individual partners must be cited as
co-respondents.

This only applies to those partners capable of being sequestrated. If one of the parties cannot
be sequestrated, it is not an impediment to sequestrating the partnership.[Commissioner,
South African Revenue Services v Hawker Air Services (Pty) Ltd; Commissioner, South
African Revenue Services v Hawker Aviation Partnership and Others 2006 (4) SA 292
(SCA]..

If one of the Partners is a Company, the Court will only sequestrate the estates of the other
partners but will not liquidate the Company.

Test in respect of "benefit for creditors" is whether the sequestration of the partnership estate
would be to the advantage of the partnership creditors.

The estate of a dissolved partnership is also capable of being sequestrated.

A firm by its nature cannot be sequestrated if the Court does not know who the partners are.

A partnership where there is not a single natural person who is a partner, cannot be
sequestrated.

If one partner has already passed away, notice of the proceedings must be served on his
executor and on all co-partners.

52 | P a g e
If applicant relies on an act of insolvency it must be one committed by a partner in his
capacity as such and not in respect of his own estate.

If a man or woman married in community of property is a partner, his or her joint estate must
be sequestrated simultaneously with the co-partner's estates and the partnership estate.

A partner may avoid having his private estate sequestrated if he undertakes to pay the debts
of the partnership and puts up security for such payment. [Proviso to S 13(1)]

4.11 FRIENDLY SEQUESTRATIONS

See: Hillhouse v Stott 1990 (4) 580 (W); Vermeulen v Hubner, case no. 11655/90 (TPD),
judgment given on 12 September 1990; Craggs v Dedekind 1996 (1) SA 935 (c); Ex Parte
Steenkamp 1996 (3) SA 822 (W); Baartman v Baartman and Another; Van Jaarsveld v
Roebuck; Van Aardt v Borrett 1996 (1) SA 935 (c); Van Eck v Kirkwood 1997 (1) SA 289
(SE); Beinash & Co v Nathan (Standard Bank of SA Ltd intervening) 1998(3) SA 540 (W);
Meyer v Batters 1999(1) SA 1041 (W); Esterhuizen v Swanepoel and Sixteen Other Cases
2004 (4) SA 89 (W).

Sworn valuations must be attached giving value of property if sold on a forced sale.

Free residue of R8000 is not enough - it will only cover administration costs and there is
therefore no good reason to believe that sequestration will be to the advantage of creditors.

Some substantial (not negligible) pecuniary benefit will result to creditors, i.e. a substantial
dividend must be paid out.

Compulsory sequestrations are for use by Creditors - a friendly sequestration should actually
be a voluntary surrender and should therefore comply with Section 4.

Applicant must supply a statement of affairs of Respondent. [Form B, Schedule 1]

Respondent must verify it under oath.

Applicant must obtain a complete list of Respondent's creditors, verified by Respondent

under oath.

Applicant must notify each creditor per registered post, at least 10 days before the hearing of
the application, of the date and place of hearing.

Sufficiently detailed evidence must be produced to satisfy the Court that the Applicant indeed
has a claim against the Respondent (e.g. in the case of a loan; a paid cheque, documentation
showing a withdrawal from a bank account or a deposit into Respondent's account at the time
the loan is alleged to have been made.)

53 | P a g e
Sufficient details of the assets of the Respondent and how Applicant arrived at the estimated
value thereof, so the Court can determine whether there will be advantage to creditors.

Must not be flimsy and inconclusive evidence; affidavits must not lack particularity.

Court found practice in regard to applications for friendly sequestrations needed to be

tightened up and that Court needed to concern itself with the interests of creditors in friendly
sequestrations.

What is required in regard to the valuation of the movable assets is a valuation as on a forced
sale.

With regard to immovable property, liabilities owing on the mortgage bond (including arrear
interest) need to be disclosed.

With regard to insurance policies, regard must be had to s39 of the Insurance Act which
protects up to N$30 000.00 of the policy monies.

Although there is authority that a court's discretion, to refuse a sequestration order where an
act of insolvency has been committed, is very narrow, the court still has that discretion where
the free residue in the estate appears to be insufficient to pay the costs of sequestration or to
provide a dividend for creditors (829B - C).

The Court must guard against there being collusion between the applicant and the respondent.
The Court should ensure that the "friendly creditor" does not obtain an order which cannot be
said to be in the interests of creditors and accordingly the allegations made in regard to this
issue should be closely scrutinized.

It is only if co-operation is apparent between Applicant and Respondent that the Court should
consider the evidence critically because of the risk of collusion. This alone does not justify an
extra-ordinary approach to deciding the matter on papers.

Scant averments do not satisfy the requirements for a sequestration application. Particularly
where the application is a "friendly" one, adequate information should be furnished (e.g.
Cause of action, when and where it arose; which parries acted; what circumstances made the
loan necessary; terms of the loan; written proof e.g. receipts; invoices; cheques etc).

The court must exercise its discretion to ensure that the procedure is not abused. A friendly
sequestration applicant must place sufficient evidence before the court to satisfy it of the
veracity of the claim. (The court discusses the requirements to prove that a section 8(g) act of
insolvency has really been committed. It then turns down 17 applications (11 for provisional
and 6 for final orders.)

54 | P a g e
4.12 EFFECTS OF SEQUESTRATION

4.12.1 ON INSOLVENT'S PROPERTY

The insolvent is divested of his estate which vests in the Master and later when a trustee is
appointed, in his trustee. It is the trustee's task to realise his assets and distribute the proceeds
to his creditors in accordance with the legal order of preference. The insolvent's estate
consists of all his property as at the date of sequestration. All the property subsequently
acquired by or accruing to the insolvent during the sequestration vests in the trustee, not only
the property of the insolvent as at the date of sequestration. There are several important
exceptions to the rule that all the insolvent's property vests in his trustee:

Section 23(9) provides that the insolvent may recover for his own benefit the remuneration
for work done or professional services rendered by him after the sequestration of his estate.
This right to receive remuneration is, however, subject to the provisions of section 23(5). It
provides that the trustee shall be entitled to any moneys received by the insolvent as
remuneration for employment which in the opinion of the Master is not necessary for the
support of the insolvent and those dependent on him.

In terms of section 23(7), the insolvent may recover for his own benefit any pension moneys
to which he may be entitled. (Various other statutory enactments also protect pension moneys
in the case of insolvency).

In terms of section 23(8) the insolvent may recover, for his benefit, any compensation for any
loss/damage, whether sustained before or after sequestration, by reason of any personal injury
or defamation. The word "recover" is not limited to compensation recovered by means of
legal process and the subsection also applies to damages awarded prior to sequestration -
Santam Ltd v Norman and Another 1996 (3) SA 502 (c).

The wearing apparel and bedding of the insolvent, his household furniture and tools and other
essential means of subsistence (or such part thereof as the creditors may determine) are
excluded from the estate and the insolvent is allowed to retain such property for his use.
(Section 82[6])

Prior to sequestration, an insolvent had full locus standi. His capacity to litigate affected only
to the extent provided for in Section 23 but those specific circumstances recognised in
Section 23 are not exhaustive. The Insolvency act nowhere specifically deprives an Insolvent
of locus standi. In the absence of such provision, an Insolvent retains the general competency
to sue and be sued and therefore he is entitled to bring an application for mandament van
spolie - Marais v Englen Earthworks (Pty) Ltd 1998 (2) SA 450 (ECD).

Insofar as his insolvency is concerned, an Insolvent only has locus standi to sue in matters
concerning the estate where there has been an irregularity or maladministration by the
Trustee - Muller v De Wet NO 1999(2) SA 1024 (W).

55 | P a g e
See also section 20 (c)).

In certain instances, a creditor may claim against the insolvent's insurer in terms of section
156 of the Insolvency Act. No contractual relationship is required between the creditor third
party and the insurer. See Unitrans Freight (Pty) Ltd v Santam Ltd 2004 (6) SA 21 (SCA).

4.12.2 ON THE PROPERTY OF THE SOLVENT'S SPOUSE

See: De Villiers NO v Delta Cables (Pty) Ltd 1992(1) SA 9 (A); Harksen v Lane NO and
Others 1998(1) SA 300(CC), Jooste v De Witt NO 1999(2) SA 355, Cothill et uxor v
Cornelius 2000(4) SA 163 (TPD) and Janit v Van den Heever v Another 20001(1) SA 731
(WLD)

In terms of section 21, the property of the solvent spouse (who is married to the insolvent out
of community of property) vests in the insolvent's trustee. The trustee is empowered to deal
with such property as if it were the property of the insolvent, subject to the further provisions
of section 21.

The trustee is not entitled to simply take possession of the solvent spouse's property. It has to
first be attached by the sheriff acting in terms of s198(1) of the Insolvency Act. (See Cothill
et uxor v Cornelius supra)).

The trustee must release to the solvent spouse the property referred to in section 21(2),
notably property proved to have been acquired by that spouse by a valid title against the
creditors of the insolvent.

Where the solvent spouse claims as her own property which has vested in the trustee, she/he
must apply to the trustee for the release of such property i.e. the onus is on him/her to furnish
proof to the satisfaction of the trustee that the property is his/hers (see section 21 (2)).

Should the trustee refuse to release any property claimed by the solvent spouse, she/he may
apply to Court for an order releasing such property / an order staying the sale of such
property / or if property sold already for an order that the proceeds should be paid to him/her
(section 21(4)).

It is not necessary that the solvent spouse first obtain the trustee's decision in terms of section
21(2) before applying to court under section 21(4): she may apply directly to court under
section 21(4) for relief.: Hawkins v Cohen 1994(4) SA 23(W).

Where it appears that the insolvent and his spouse embarked on a scheme to put property
beyond the reach of the insolvent’s creditors, a valid title is not established - Jooste v De Witt
(supra).

The actual intention of the parties to the transaction is what the Court is concerned with. The
validity of the true transaction has to be examined in order to determine whether a title valid

56 | P a g e
against creditors has been established. The onus is on the solvent spouse to prove that the
transaction was a valid one conferring valid title. Validity is closely related to the parties'
knowledge of the alienator's actual or imminent insolvency: Beddy NO v Van Der
Westhuizen 1999(3) SA 913 SCA.

NB: Section 21 does not apply where the relationship between the insolvent and the other
solvent party terminated before the sequestration, e.g. by death, divorce or separation. See
Janit v Van den Heever (supra).

4.12.3 ON THE INSOLVENT PERSONALLY

See section 23 on the rights and obligations of the insolvent during sequestration.

Section 23(2) provides that the fact that a person entering into a contract is insolvent shall not
affect the validity of that contract, provided that:

 the insolvent does not thereby purport to dispose of property of his insolvent estate,
or;
 the insolvent does not enter into any contract which might adversely affect his estate
without the consent, in writing, of his trustee.

An insolvent may during his sequestration follow a profession or engage in an occupation.

The insolvent may not (without the written consent of his trustee) carry on, or be employed in
any capacity or have any direct or indirect interest in, the business of a trader who is a general
dealer or a manufacturer.

The insolvent is entitled to keep as much of his salary or remuneration earned from
employment while sequestrated which, in the opinion of the Master, is necessary for the
support of the insolvent and his dependents (sections 23(5) and 23(9)).

As to the rest of the insolvent's rights, see section 23.

Once the insolvent has been served with a copy of the final order of sequestration in terms of
section 16(1), he is obliged to deliver to the Sheriff all books and records relating to his
affairs which have not yet been taken into custody by the Sheriff in terms of section 19(1) (ie
when the Sheriff has served the provisional order on him).

The insolvent is obliged within 7 days of service on him of the final order to lodge with the
Master a statement of his affairs as at the date of the sequestration order, framed in
accordance with the prescribed form.

The insolvent's spouse must also lodge such a statement of affairs with the Master (section
16(3)).

57 | P a g e
Within 14 days from the appointment of a trustee, the insolvent must:

Deliver to the trustee any property belonging to the estate in his possession.

Inform the trustee of the existence and whereabouts of any property belonging to the estate
not disclosed in the statement of affairs or not already in the possession of the trustee.

Deliver to the trustee books and documents in his possession/under his control relating to his
affairs/inform the trustee of the whereabouts of such books if not already in the possession of
the trustee.

The insolvent must at any time after the sequestration of his estate furnish to his trustee, at the
trustee's request, complete and truthful information regarding property in his possession or
which he has disposed of/ceased to possess.

The insolvent must attend the first and second meetings of creditors.

The insolvent must keep the trustee informed of his residential and postal address.

NOTE: For a complete and comprehensive exposition of the insolvent's rights and
obligations see Smith p 100 -107

4.12.4 ON CIVIL PROCEEDINGS

Civil proceedings instituted by or against the insolvent are stayed on sequestration until the
appointment of a trustee (section 20(1)(b)). This is so with the exception of such proceedings
as the insolvent is entitled in terms of section 23 to institute for his own benefit or which may
in terms of section 23 be instituted against the insolvent. (See in this regard sections 23(6),
23(8) and 23(10).)

If a person suing the insolvent wishes to continue the proceedings, he must (within three
weeks from the first meeting of creditors) notify the trustee to that effect. He must also
prosecute the proceedings after the expiration of three weeks from the date of the notice
(section 75(1)), failing which the proceedings shall lapse (This is so provided that the Court
in which the proceedings are pending may permit the proceedings to be continued even
though the requisite notice was not given if it finds that there was a reasonable excuse for
such failure).

The trustee may engage the services of an attorney and Counsel for the institution / defence
of any legal proceedings on behalf of the estate. The costs will be included in the costs of the
sequestration of the estate, provided that the trustee has been authorised by the creditors or by
the Master (section 73(1)).

It is customary to have a standard clause in the resolutions passed at the second meeting of
the creditors authorising the trustee to conduct legal proceedings on behalf of the estate.

58 | P a g e
4.13 CHECK LIST

The applicant

Company or other legal person

Natural person

Personal knowledge

The respondent

Jurisdiction

Locus standi - creditor, amount, cause, nature of claim

Security for claim

Insolvency

Advantage to creditors

Security for costs

Copy of papers to the master

Copy of the application to the registered trade unions applicable

Copy of the application to the employees

Copy of the application to the Receiver of Revenue.

Copy of the application to the debtor (or make out a case that is in the interest of the debtor or
creditors to dispense with such notice)

Prayers

4.14 FLOW CHART

Take full instructions from client to apply for this sequestration of the Respondent's estate
and give special attention to the following :

Whether the Applicant has locus standi.

59 | P a g e
Whether the Court has jurisdiction over the Respondent.

What Respondent's Marital Status and Matrimonial Property system is.

Whether the Applicant holds any security for his claim.

Whether there is any advantage to creditors.

Whether there is a sufficient free residue to cover the costs of sequestration

Advise client on risks.

Take deposit from client of approximately N$10 000,00. (Especially if your firm furnishes
security on behalf of the Applicant.)

Give security [section 9(3)]

Draft affidavit for applicant with the aid of the check list.

Arrange for attesting of the affidavit.

Draft Notice of Motion

Uplift certificate by Master that security has been furnished (Certificate to be dated not more
than 10 days before date of Notice of Motion).

Make adequate copies of application and annexures (original +4).

Affix stamps to original (N$5.00)

60 | P a g e


Arrange for personal service on Respondent - subject to an order authorising substituted

service, personal service is required because the relief claimed will affect the Respondent's
status - [

Have the Registrar issue the papers

Serve on the Master

File application with Registrar

Ascertain that return of service is correct / draft affidavit of service if someone other than the
Sheriff served the application on Respondent.

Uplift Master's Report and file it with Registrar (if applicable).

Pay Deputy Sheriff for service (if applicable)

Instruct attorney or advocate and deliver written instruction.

Enrol matter if no notice of intention to oppose is received. (Long Form)

Enrol matter on the day before the matter is to be heard.

61 | P a g e
File affidavit by person/s who furnished the registered trade unions, employees, Receiver of
Revenue and debtor with copies of the application

Attend Court when rule nisi issued - provisional order is usually granted for a return day +4
weeks away.

Report to client.

Pay the attorney or advocate that was instructed and uplift brief.

Uplift provisional sequestration order from Registrar.

Make copies and arrange for service of provisional sequestration order on Respondent by the
Sheriff.

Ascertain that return of service for provisional sequestration order is correct and peruse
inventory complied by Deputy Sheriff.

If the Court ordered notice to creditors by registered post, make sure this is done.

Make sure that original provisional sequestration order and original return are in Court file.

File an affidavit confirming notice sent to creditors. Annex registered post slips to affidavit.

Pay Deputy Sheriff for service.

62 | P a g e


Instruct attorney or advocate to appear on return date and deliver written instruction.

Attend Court when provisional order is confirmed.

Report to client.

Uplift original Order.

Pay the attorney or advocate that was instructed to appear on the return date and uplift brief.

Draft Bill of Costs for taxation.

Ascertain who was appointed as provisional/final trustee.

Dispatch consent to taxation [Rule 70(4(b)] for his signature.

Submit bill of costs for taxation.

Claim costs from Trustee and account to client.

4.15 CAUTIONARY NOTES ON PROCEDURE

Be sure to check the Court Practice Notes regarding:

63 | P a g e
  The practices pertaining to applications
 Manner and timing of service of provisional sequestration
 Manner and timing of publication of provisional order in newspaper / government
gazette.

When you extend the rule nisi, you must give notice of the extended return day to the
respondent and interested parties. Allow sufficient time for the sheriff to effect service.

Stander vs Stander 1997 (3) SA 922 (c).

The practitioner should not assume that where a provisional order has been granted, it will
automatically be made final if it is not opposed on the return date. In Esterhuizen v
Swanepoel and Sixteen Other Cases 2004 (4) SA 89 (W) the court refused to do so and
rejected six applications on the return date. Clients should be advised of this risk and the
practitioner must prepare properly as the court still needs to be convinced of the grounds of
the claim.

64 | P a g e
EXAMPLES

NOTICE OF MOTION

IN THE HIGH COURT OF NAMIBIA

In re:

Ex parte application of

XYZ (PTY) LTD Applicant

and

DAVID WRIGHT First Respondent

ID 56012 5074 006

and

CHRIS LESCH Second Respondent

ID 620222 0163 089

and

DAVID WRIGHT and CHRIS LESCH trading in co-partnership as

(a) DELMAS FURNITURE MANUFACTURERS

and

(b) SANDTON FURNISHERS Third Respondent

___________________________________________________________________________

NOTICE OF MOTION

___________________________________________________________________________

TAKE NOTICE that application will be made on behalf of the above-mentioned Applicant
on the day of February 1989 at 10h00 in the forenoon or as soon thereafter as counsel may be
heard from an order in the following terms:

65 | P a g e
(1) Granting leave to the Applicant to bring this Application as a matter of urgency, and
dispensing with the usual Rules as to notice and service in terms of Rule 6(12) of the Rules of
this Honourable Court.

(2) Provisionally sequestrating the Estates of:-

DAVID WRIGHT (First Respondent)

and

CHRIS LESCH (Second Respondent)

and the partnership estate of

DAVID WRIGHT and CHRIS LESCH trading in co-partnership as

DELMAS FURNITURE MANUFACTURERS

and

SANDTON FURNISHERS (Third Respondent)

(3) Specifying the form of service of the said Orders on all the Respondents and ordering
service on the registered trade unions, employees and the Receiver of Revenue as prescribed
in the Insolvency Act.

(4) Cost of suit.

(5) Such further or alternative relief as this Honourable Court may deem fit.

TAKE FURTHER NOTICE that the affidavit of NORMAN COHEN annexed hereto, will be
used in support thereof.

KINDLY place the matter on the roll for hearing accordingly.

DATED at WINDHOEK on this day of FEBRUARY1989.

___________________________

Attorneys for Applicant

CLOETE & CLOETE INC

Third Floor, Nedbank Building

66 | P a g e
 200 Andries Street

WINDHOEK

Ref: LE ROUX/lvdm

TO:

THE REGISTRAR

HIGH COURT OF NAMIBIA

AND TO: (Respondent’s Counsel)

67 | P a g e
AFFIDAVIT

IN THE HIGH COURT OF NAMIBIA

In re:

Ex parte Application of

XYZ (PTY) LTD Applicant

and

DAVID WRIGHT First Respondent

ID 56012 5074 006

and

CHRIS LESCH Second Respondent

ID 620222 0163 089

and

DAVID WRIGHT and CHRIS LESCH trading in co-partnership as

(a) DELMAS FURNITURE MANUFACTURERS

and

(b) SANDTON FURNISHERS Third Respondent

___________________________________________________________________________

AFFIDAVIT

___________________________________________________________________________

I, the undersigned,

NORMAN COHEN

68 | P a g e
do hereby make oath and say:

1.

The Applicant is represented herein by myself, the Managing Director of the Applicant. I am
duly authorised thereto by virtue of a Resolution passed at Windhoek on the 01st day of
February 1981. The facts hereinafter set out are within my personal knowledge and are true
and correct to the best of my knowledge and belief. A copy of the empowering Resolution is
hereunto annexed marked "A". Applicant is XYZ (Pty) Ltd, a Private Company with limited
liability duly incorporated according to the Company Laws of Namibia with its registered
address at 105 King Street, Windhoek, Namibia.

2.

The First Respondent is DAVID WRIGHT a furniture manufacturer, formerly residing at 111
Kilkenny Court, van Zyl Street, Windhoek and carrying on business as such in partnership
with the second Respondent as is hereinafter more fully described at 12 Voortrekker street,
Suiderhof, Windhoek.

3.

The Second Respondent is CHRIS LESCH a furniture manufacturer, formerly residing at 203
Queensbury Court, 214 Vos Street, Pioneerspark Ext. 1, Windhoek and carrying on business
as such in partnership with the First Respondent at 12 Voortrekker Street, Suiderhof,
Windhoek.

4.

The First and Second Respondents carry on business at the address hereinbefore mentioned
under the names or styles of Delmas Furniture Manufacturers and Sandton Furnishers.

5.

The First and Second Respondents trading as aforesaid are the Lessees and tenants of the
property situated at the place of business which property is owned by the Applicant.

6.

The Respondents are indebted to the Applicant in the sum of N$20 000.00 (TWENTY
THOUSAND NAMIBIA DOLLARS) in respect of unpaid rentals for the business premises
hereinbefore mentioned and save for the landlord's lien on the contents of the premises the
Applicant has no security whatsoever for payment of the amount due to the Applicant by the
Respondents. The value of such contents is far less than the aforesaid sum of N$20 000.00
and if same is sold and the amount paid to the Applicant the balance of the claim which will

69 | P a g e
then be totally unsecured, will be far in excess of the sum of N$400.00 (FOUR HUNDRED
NAMIBIA DOLLARS).

7.

(a) The Deponent was informed by one LEONARD GOUWS, the Manager of ABC (PTY)
LTD he had visited the residential premises of both Respondents on Saturday 14 February
1989 and found that their respective wives and children had already left for America and that
the said residential premises were no longer occupied by the Respondents.

(b) The said Gouws further informed my Attorney, Mr Peter Good of Weavind & Weavind
Inc that goods, being vacuum cleaners, polishers, foodmixers and shampoo machines to the
value of approximately N$5 000.00 (FIVE THOUSAND NAMIBIA DOLLAR) had been
sold by his company to Respondents trading as Delmas Furniture Manufacturers and Sandton
Furnishers during January 1989 and February 1989 and to date have only received the sum of
N$206.00 (TWO HUNDRED AND SIX NAMIBIA DOLLAR). The Respondents are
furniture manufactures and as far as I am aware they have never dealt in the goods referred to
above.

(c) An Affidavit by the said Gouws is annexed hereto marked Annexure "B" which Applicant
humbly prays may be considered as if inserted herein.

8.

(a) I was advised, on Thursday 31st January 1989, at approximately 16:00 by a member of the
staff of the Respondents that completely-manufactured and partly-manufactured furniture
together with furniture manufacturing machinery manufactured machinery was being
removed at nine from the premises in Suiderhof and was being transferred to 100 Main
Street, Olympia, Windhoek. I then proceeded to the house of one of the Respondents where I
ascertained that Respondent's family had already left for America and that he (that
Respondent) was also preparing to leave for America.

(b) As a result of the information so conveyed to me I deputed a male member of my staff,

Steven Fox, to watch the business premises of the Respondents in Suiderhof, Windhoek
during the night of 31st January – 01st February1989.

(c) The said Fox reported to me on Friday morning, 01st February1989 that at approximately
19:00 on the evening of 31st January 1989 First Respondent who is known to the said Fox,
and five (5) males appeared with a Toyota motor car CGH141T and a Volkswagen Kombi
delivery van and removed furniture together with furniture manufacturing machinery from
the Suiderhof premises.

(d) The said Fox remonstrated with First Respondent, stating that he should not make such a
removal and the said Fox was instructed by the First Respondent in vulgar terms not to
interfere and to go away.

70 | P a g e
 9.

(a) At or about 18:00 on the 31st January 1989 I, together with my Attorney, Mr Peter Good
went to the premises situate in 12 Voortrekker Street, Suiderhof, Windhoek to investigate the
position and found that the windows of the premises had been partly, but deliberately
obscured to prevent any investigation from the street. However, I managed to look into the
premises through those portions of the windows which had not been completely obscured,
and found that certain furniture which usually was stored in great quantities had been
practically all removed.

(b) Thereafter I and my said attorney went to 100 Main Street, Olympia, Windhoek and
found that certain premises formerly occupied by Whill Engineering which were locked,
contained furniture similar to that which I had seen at the Suiderhof premises, stored there
together with some furniture manufacturing machinery.

(c) Likewise the windows of the premises appeared to have been deliberately but
incompletely obscured so as to render difficult or impossible investigation of the inside of the
premises from the street.

(d) Immediately outside the premises a large closed truck GBK555T was parked. On both
front doors were painted "12 Voortrekker Street, Suiderhof, Windhoek- 24-7773". This truck
was sold to the Respondents by SAL Timber & Hardware Company (Pty) Ltd also of 100
Church Street, Olympia, Windhoek, of latter Company I am also the Managing Director and I
have personal knowledge of the said sale.

(e) I annex hereto an affidavit by my attorney Peter Good to confirm the contents of this
paragraph hereto marked "C".

10.

On or about Tuesday, 29th January 1989 the respondents in response to my request to pay
either the entire or a substantial portion of the arrear rentals, promised to pay to me, on the
Applicant's behalf, the sum of N$4 000,00 (FOUR THOUSAND NAMIBIA DOLLARS) but
to date hereof, have failed to do so.

11.

I verily believe that the Respondents are about to depart from Namibia having made
preparations so to do as is hereinbefore set out. Accordingly I made application successfully
to the Registrar of this Honourable Court on Friday, 01st February 1989, for the issue of a
Writ of Arrest of both Respondents which Writ is in the hands of the deputy Sheriff of this
Honourable Court but it has not yet been executed as the Respondents cannot be found.

71 | P a g e
 12.

I annex hereto as annexure "D1 - D4" a certificate from the Master of the High Court dated
04th February 1989 indicating that sufficient security has been given for the payment of all
fees and charges necessary for the prosecution of all sequestration proceedings and of all
costs of administering the estate until a trustee has been appointed as required by and in terms
of Section 9(3) of the Insolvency Act No 24 of 1936 (as amended).

13.

I annex hereto an Affidavit by J E le Roux, the caretaker of Kilkenny Court, confirming the
contents of paragraph 11 hereof. Accordingly, I am unaware of the First and Second
Respondents' whereabouts and respectfully seek the directions of this Honourable Court for
the purpose of effecting service on the respondents of such Orders which this Honourable
Court may issue. (marked "E").

14.

I humbly submit that the First and Second Respondents have departed from their respective
dwellings with intent by so doing to evade a delay payment of their debts and those of the
Third respond and that they are in fact insolvent.

15.

The Second Respondent, Lesch, has leased and appears as the registered owner of a Mercedes
motor car, HYN476T the Lessor of which vehicle is the TRUST BANK LIMITED. Mr
Christiaan Gerhardus van der Walt, the Credit Manager has discovered that the said vehicle is
about to be shipped by the second Respondent from Durban on board the Hellenic Pioneer
which is scheduled to drive from Katima Mulilo on 09th February 1989 despite the fact that a
substantial sum is still due and owing to the said Trust Bank Ltd. An Affidavit by the said
Christiaan Gerhardus van der Walt in support of the allegations set out in this paragraph is
hereunto annexed marked "F".

16.

I annex hereto an Affidavit by Steven Fox, to confirm the contents of Paragraph 8(b), (c) and
(d) hereto marked "G".

17.

I humbly submit that because of the conduct of the respondents and particularly the
surreptitious transfer of their assets at night from their normal business premises in Suiderhof,
to the premises in Olympia, Windhoek aforementioned and the existence of the possibility
that they have hidden other assets at other points of which, at this moment, I am unaware, I
respectfully submit that this sequestration of their respective estates is a matter of urgency as

72 | P a g e
delay can be to the serious prejudice of the Applicant and the general body of creditors. In the
event of this Honourable Court ordering such sequestration orders to issue it will be to the
advantage of creditors inasmuch as a Trustee can be appointed to take possession of and
safeguard their assets, and to investigate the possibility of the respondents having made
illegal dispositions of their assets to the prejudice of the creditors.

18.

A copy of this application will be served on the Master of this Honourable Court, the
Respondent, and ABC Trade Union that represents all the employees and the Receiver of
Revenue.

WHEREFORE the Applicant humbly prays that it may please this Honourable Court to
Grant on Order:-

(a) Provisionally sequestrating the Estates of:-

DAVID WRIGHT (First Respondent)

and

CHRIS LESCH (Second Respondent)

and the partnership estate of

DAVID WRIGHT and CHRIS LESCH trading in co-partnership as

DELMAS FURNITURE MANUFACTURERS

and

SANDTON FURNISHERS (Third Respondent)

(b) Specifying the form of service of the said Orders on all the Respondents and ordering
service on ABC Trade Union being the registered trade union, employees and Receiver of
Revenue as prescribed in the Insolvency Act.

(c) Cost of suit.

(d) Such further or alternative relief as this Honourable Court may deem fit.

I certify that the Deponent has acknowledged that he knows and understands the contents of
this Affidavit. Sworn

to and signed before me at WINDHOEK on this the day of FEBRUARY 1989.

73 | P a g e
__________________________

COMMISSIONER OF OATHS

74 | P a g e
CONFIRMATORY AFFIDAVIT

IN THE HIGH COURT OF NAMIBIA

In re:

Ex parte Application of

XYZ (PTY) LTD Applicant

and

DAVID WRIGHT First Respondent

ID 560121 5074 006

and

CHRIS LESCH Second Respondent

ID 620222 0163 089

and

DAVID WRIGHT and CHRIS LESCH trading in co-partnership as

(a) DELMAS FURNITURE MANUFACTURERS

and

(b) SANDTON FURNISHERS Third Respondent

___________________________________________________________________________

CONFIRMATORY AFFIDAVIT

___________________________________________________________________________

I, the undersigned,

PETER GOOD

75 | P a g e
do hereby make oath and say:-

1.

I am the attorney of record of the Applicant. The facts set out herein are within my personal
knowledge and are true and correct to the best of my knowledge and belief.

2.

I have read through the affidavit of Norman Cohen and confirm the contents thereof as far as
it relates to me, especially the contents of paragraph 9 thereof.

I certify that the Deponent has acknowledged that he knows and understands the contents of
this Affidavit.

SWORN to and SIGNED before me at WINDHOEK on this the day of FEBRUARY 1989.

__________________________

COMMISSIONER OF OATHS

76 | P a g e
EXTRACT FROM THE MINUTES OF A MEETING OF THE BOARD OF
DIRECTORS OF XYZ (PROPRIETARY) LTD HELD AT WINDHOEK ON THE 01ST
DAY OF FEBRUARY 1989

RESOLVED

1 THAT the Company bring an urgent application to the High Court of Namibia for an order
for

the sequestration of the individual estates of DAVID WRIGHT and CHRIS LESCH and the
partnership estate

of the said WRIGHT and LESCH trading as DELMAS Furniture Manufacturers and
SANDTON FURNISHERS

and all and any matters incidental thereto.

2 THAT Mr NORMAN COHEN be and is hereby authorised

(a) to instruct the company's attorneys to make the necessary application.

(b) To do all such things and sign all such documents on the company's behalf which may be
required to give effect to the action set out in Resolution No 1 hereof.

CERTIFIED A TRUE COPY

CHAIRMAN

77 | P a g e
AFFIDAVIT 2

IN THE HIGH COURT OF NAMIBIA

In re:

Ex parte Application of

XYZ (PTY) LTD Applicant

and

DAVID WRIGHT First Respondent

ID 560121 5074 006

and

CHRIS LESCH Second respondent

ID 620222 0163 089

and

DAVID WRIGHT and CHRIS LESCH trading in co-partnership as

(a) DELMAS FURNITURE MANUFACTURERS

and

(b) SANDTON FURNISHERS Third respondent

___________________________________________________________________________

AFFIDAVIT

___________________________________________________________________________

I, the undersigned,

LEONARD GOUWS

78 | P a g e
do hereby make oath and say:

1.

I am the area Manager of ABC (Pty) Ltd, electrical appliance merchants of 46 De Korte
Street, Eros, Windhoek.

2.

I know CHRIS LESCH and DAVID WRIGHT who trade as Sandton Furnishers at 12
Voortrekker Street, Suiderhof, Windhoek.

3.

On behalf of my firm I, during January 1989 and February 1989 sold to the Respondent
goods to the value of approximately N$5 000.00 and as at the date hereof merely N$206.00
has been paid on account of their indebtedness to my firm.

4.

On or about Saturday 14 February 1989 being concerned in respect of the large amount
owing and knowing that the furniture manufacture trade had closed for its annual holiday, I
went to 111 Kilkenny Court, Van Zyl Street, Windhoek, the residential address of DAVID
WRIGHT, which address was given to me by the said WRIGHT as his permanent residential
address.

5.

There I was informed by the caretaker, when I arrived at the premises-

(a) That WRIGHT had sent his wife and children to America and that they would not be
returning.

(b) That he no longer lived there;

(c) He had sold the furniture in the flat to its present occupant; and

(d) Had sublet the flat without the owner's authority in breach of the terms of his lease.

6.

I also went to 203 Queensbury Court, 214 Vos street, Eros and there learnt from the
caretaker:-

(a) that CHRIS LESCH had sent his family to America and that they would not be returning.

79 | P a g e
(b) that he no longer lived there. The address herein stated was given to me by Lesch as his
permanent address.

7.

The last time I saw the Respondents was on Tuesday 10 February 1989 at their business
premises at 12 Voortrekker Street, Suiderhof, Windhoek.

I CERTIFY that the Deponent has acknowledged that he knows and understands the contents
of this affidavit which was sworn to and signed before me at Windhoek on this day of
FEBRUARY 1989.

__________________________

COMMISSIONER OF OATHS

80 | P a g e
AFFIDAVIT 3

IN THE HIGH COURT OF NAMIBIA

In re:

Ex parte Application of

XYZ (PTY) LTD Applicant

and

DAVID WRIGHT First Respondent

ID 560121 5074 006

and

CHRIS LESCH Second Respondent

ID 620222 0163 089

and

DAVID WRIGHT and CHRIS LESCH trading in co-partnership as

(a) DELMAS FURNITURE MANUFACTURERS

and

(b) SANDTON FURNISHERS Third respondent

___________________________________________________________________________

AFFIDAVIT

___________________________________________________________________________

I, the undersigned,

STEVEN FOX

81 | P a g e
do hereby make oath and say:

1.

I am an adult male employed by XYZ (Pty) Ltd at 105 King Street, Eros, Windhoek.

2.

Mr Norman Cohen is in charge of that business and he and others give me orders during each
and every day when I work at the said premises in connection with my work.

3.

On Thursday 19 December 1989 I was taken by Mr Cohen to 12 Voortrekker Street,

Suiderhof, Windhoek and instructed me to watch the premises throughout the night and
particularly to watch whether anyone called at the premises and whether anything was
removed from them.

4.

At about 19:00 one bearded man and five other males arrived with a Toyota motor car CGH
141 T and a Volkswagen Kombi delivery van with the number of which I did not record. The
bearded man, whom I know belongs to that business, opened the premises with keys he had
in his possession and then entered it together with the five other males.

5.

I spoke to this bearded man and asked him why he was opening the place and explained that
my employer said that I should tell him not to remove anything. I also showed him a
letterhead which my employer had given me to show where I was employed and that I was
authorised to stay and watch the premises.

6.

The bearded man read the letter and stated that he would not speak to me and he handed back
the letterhead I had shown him and, in vulgar terms, told me to go away. The Kombi was
then driven into the premises.

7.

I did not go away but remained and watched the premises. After a short while I saw the
Kombi van was driven out and that it was loaded with a blue woodworking machine and
furniture.

82 | P a g e
 8.

The bearded man and the other males then drove off.

9.

I made a report to Mr Cohen on the morning of the 01st February 1989.

I CERTIFY that the Deponent has acknowledged that he knows and understands the contents
of this affidavit which was sworn to and signed before me at Windhoek on this day of
FEBRUARY 1989.

_________________________

COMMISSIONER OF OATHS

83 | P a g e
AFFIDAVIT 4

IN THE HIGH COURT OF NAMIBIA

In re:

Ex parte Application of

XYZ (PTY) LTD Applicant

and

DAVID WRIGHT First Respondent

ID 560121 5074 006

and

CHRIS LESCH Second respondent

ID 620222 0163 089

and

DAVID WRIGHT and CHRIS LESCH trading in co-partnership as

(a) DELMAS FURNITURE MANUFACTURERS

and

(b) SANDTON FURNISHERS Third Respondent

___________________________________________________________________________

AFFIDAVIT

___________________________________________________________________________

I, the undersigned,

JOHAN ETTIENNE LE ROUX

84 | P a g e
do hereby make oath and say:

1.

I am the caretaker of Kilkenny Court, in which building DAVID WRIGHT was a tenant of
Flat No 111 together with his wife and children.

2.

Approximately one month ago he sold the contents of the said flat to the present tenant and
sublet the flat for the balance of his lease.

3.

He informed me that he and his family were going back to America permanently.

4.

Since he and his family have left the said flat I have not seen him since, but I have had a
number of personal and telephone enquiries, from people who claim to be creditors of the
said WRIGHT and of his business. Amongst these claimants were employees who stated that
he had not paid them their "Holiday Pay".

I CERTIFY that the deponent has acknowledged that he knows and understands the contents
of this affidavit which was sworn to and signed before me at Johannesburg on this day of
FEBRUARY 1989.

__________________________

COMMISSIONER OF OATHS

85 | P a g e
AFFIDAVIT 5

IN THE HIGH COURT OF NAMIBIA

In re:

Ex parte Application of

XYZ (PTY) LTD Applicant

AND

DAVID WRIGHT First Respondent

ID 560121 5074 006

and

CHRIS LESCH Second Respondent

ID 620222 0163 089

and

DAVID WRIGHT and CHRIS LESCH trading in co-partnership as

(a) DELMAS FURNITURE MANUFACTURERS

and

()b) SANDTON FURNISHERS Third Respondent

___________________________________________________________________________

AFFIDAVIT

___________________________________________________________________________

I, the undersigned,

CHRISTIAAN GERHARDUS VAN DER WALT

86 | P a g e
do hereby make oath and say:

1.

I am the Credit Manager of Trust Bank Ltd (hereinafter referred to as "the said Bank") of
Jorrissen Street, Eros, Windhoek. The facts hereinafter set out are within my personal
knowledge and I am authorised to make this Affidavit on behalf of the said Bank.

2.

The Bank in its capacity as a financial institution acts as the Lessor in respect of the various
motor vehicles taken on lease by members of the public.

3.

A Mercedes motor car HYN476T was leased by the Bank to the said LESCH and as such at
all material times the said vehicle remains the property of the Bank. The period of the lease
has not expired and there is a substantial sum owing thereunder, portion of which rentals is in
arrear as at the date hereof.

4.

From enquiries made by me I have discovered that the Lessee arranged through Frasers
International of Durban, a firm of forwarding agents carrying on business both in Windhoek,
and at Durban to have the car shipped on board the "Hellenic Pioneer" a cargo vessel now
lying at anchor in the Durban harbour to the Respondent in America. The vessel is due to sail
from Durban on 09th February 1989.

5.

The action of the lessee is a flagrant breach of the conditions of the lease.

I CERTIFY that the deponent has acknowledged that he knows and understands the contents
of this affidavit which was sworn to and signed before me at Windhoek on this day of
FEBRUARY 1989.

__________________________

COMMISSIONER OF OATHS

87 | P a g e
CERTIFICATE OF TENDERED SECURITY

(Insolvency Act, 1936; Companies Act, 1973; Close Corporation Act, 1984)

In the matter between:

XYZ (PTY) LTD (Applicant)

and

DAVID WRIGHT (1st Respondent)

ID 560121 5074 006

CHRIS LESCH (2nd Respondent)

ID 620222 0163 089

I CERTIFY that sufficient security has been given for the payment of all fees and charges
necessary for the prosecution of all sequestration/winding-up proceedings in the above matter
and of all costs of administering the Estate/Company/Close Corporation until a Provisional
Trustee / Trustee / Provisional Liquidator / Liquidator has been appointed, or, if no
Provisional Trustee/Trustee/Provisional Liquidator/Liquidator is appointed, of all fees and
charges necessary for the discharge of the Estate/Company/Close Corporation form
sequestration/winding-up.

Date stamp

MASTER OF THE HIGH COURT

88 | P a g e
NOTICE OF MOTION

IN THE HIGH COURT OF NAMIBIA

CASE NO:

In the matter between:

MORTGAGE NOMINEES (PTY) LTD Applicant

and

JOE BLOGGS Respondent

___________________________________________________________________________

NOTICE OF MOTION

___________________________________________________________________________

BE PLEASED TO TAKE NOTICE that application will be brought on behalf of the above-
named applicant on Friday the 11th day of March 1996 at 10:00 or so soon thereafter as
Counsel may be heard for an Order in the following terms:

1. Dispensing with the forms and service provided for in the rules of the above
Honourable Court and entertaining this matter as one of urgency in terms of rule
6(12).
2. That the estate of the Respondent be placed under a provisional order of sequestration
in the hands of the Master of the above Honourable Court.
3. That a rule nisi be issued calling upon Respondent and all persons interested to show
cause on Friday the 30th day of April 1996, as to why the estate of Respondent should
not be placed under a final order of sequestration.
4. That this order be served by the Sheriff of this Honourable Court on the Respondent
personally and on all the registered trade unions representing the employees of the
respondent (being…), the employees of the Respondent, and the Receiver of Revenue
as prescribed in the Insolvency Act.
5. That the costs of this application be costs in the sequestration.
6. Such further and/or alternative relief as the above Honourable Court may deem fit in
the premises.

89 | P a g e
TAKE NOTICE FURTHER that the affidavit of Mr WYX attached hereto will be used in
support hereof.

KINDLY PLACE THE MATTER ON THE ROLL ACCORDINGLY.

Dated at Windhoek on this 8th day of March 1996

_____________________

ABC INC

Applicant's attorney

per 10th Floor, 9 Long Street

Windhoek

TO: THE REGISTRAR

HIGH COURT OF NAMIBIA

AND TO: THE MASTER

HIGH COURT OF NAMIBIA

90 | P a g e
AFFIDAVIT 6

IN THE HIGH COURT OF NAMIBIA

CASE NO:

In the matter between:

MORTGAGE NOMINEES (PTY) LIMITED Applicant

and

JOE BLOGGS Respondent

___________________________________________________________________________

AFFIDAVIT

___________________________________________________________________________

I, the undersigned,

WYX

do hereby make oath and say that:

1.

The Applicant is MORTGAGE NOMINEES (PTY) LIMITED, a company having a share

capital, duly registered and incorporated in accordance with the company laws of the
Namibia and having its principal place of business within the jurisdiction of this Honourable
Court.

2.

I am an official of the Applicant and am duly authorised to depose to this affidavit and to
bring this application on behalf of the Applicant as is apparent from the Resolution annexed
hereto marked "A". The facts herein contained are, unless the context indicates to the
contrary, within my personal knowledge and are true and correct.

3.

The Respondent is an adult male businessman whose full and further names and occupation
are to the Applicant unknown, whose chosen domiliclum, citandi et executandi is at

91 | P a g e
 4.

The Respondent resides at this address, within the jurisdiction of this Honourable Court.

5.

On 27 November 1994 and at Windhoek the Respondent bound himself as surety and co-
principal debtor with Investments CC ("the close corporation") to and in favour of the
Applicant for the due and punctual discharge by the close corporation of all and any of the
close corporation's obligations to the Applicant in terms of a certain participation mortgage
bond, No. B87522191 for the sum of N$660 000.00 registered in favour of the Applicant over
Erf 7541, Windhoek, being property owned by the close corporation. I annex marked "B" and
"C" respectively copies of the said suretyship and mortgage bond documents.

6.

The close corporation is in arrears in Respect of its obligations to the Applicant under the
bond and Erf 7541, Windhoek has been declared especially executable in terms of a judgment
of this Honourable Court which the Applicant obtained against the close corporation on 29
October 1993 under case number 12110/92. The said property is under attachment at the
instance of the Applicant and will shortly be sold in execution.

7.

The Applicant has the following claims against the Respondent:

7.1.Respondent is, jointly and severally with Investments CC, indebted to Applicant in
terms of a judgment granted by this Honourable Court on 29 October 1993 under case
number 12110/93 for, inter alia, payment of interest on the said capital sum of
N$660 000.00, which interest is calculated at the rate of 17.29% per annum as from 1
September 1993. As at 1 March 1993 Respondent's indebtedness under the said
judgment will amount to N$56 588.03, of which no part has, as yet, been paid. I
annex hereto marked "D" a copy of the said judgment as well as the notice in terms of
which judgment was granted, marked annexure "E" W. I shall ensure that the papers
in case number 12110/93 are made available for reference by this Honourable Court
at the hearing of this matter.
7.2.The Applicant has a claim against the Respondent as co-principal debtor with
Investments CC In an amount of N$796 833.37 as at 1 March 1993 in respect of the
indebtedness of the close corporation to the Applicant by virtue of the Deed of
Suretyship signed by the Respondent in respect of the close corporation's obligations

92 | P a g e
 to the Applicant. Applicant has already taken judgment for portion of this claim as set
out in paragraph 5.1 above.
7.3.In the circumstances it is respectfully submitted that the Applicant has the necessary
locus standi to bring this application for the sequestration of the Respondent.
7.4.The Applicant has no security for its claims against the Respondent, other than the
mortgage bond over the property registered in the name of the close corporation
referred to in paragraph 3 above.
8.

It is respectfully submitted that the Respondent has committed acts of insolvency as

contemplated in Sections 8(b) and 8(c) of the Insolvency Act, Act No. 24 of 1936 ("the Act")
and his estate is therefore liable to be sequestrated in terms of Section 9(1) of the Act. In
amplification, I set out the following facts:

8.1.On 14 December 1994 1 caused Applicant's attorneys to issue a Writ of Execution

against the Respondent in respect of the judgment taken against the Respondent under
case number 12110/93. I annex hereto marked "F" a copy of the said Writ of
Execution. On 17 December 1994 the Sheriff of the High Court for Maitland served
the said Writ of Execution on the Respondent. I annex hereto marked "G" a copy of
his return of service, from which it is apparent that.

8.1.1 On 17 December. 1994 the Sheriff of the High Court, personally served the Writ of
Execution on the Respondent;

8.1.2 The Sheriff demanded payment of the amount of N$32 827.31 plus costs from the
Respondent;

8.1.3 The Respondent informed the Sheriff that he had no money, disposable property or
assets wherewith to satisfy the Writ or any portion thereof;

8.1.4 No movable property or disposable assets were pointed out to the Sheriff.

8.1.5 The Sheriff could find no movable property or disposable assets after a diligent search
wherewith to satisfy the Writ;

8.1.6 The Sheriff's return is therefore one of nulla bona. In the circumstances I respectfully
submit that the Respondent has committed an act of insolvency as contemplated in Section
8(b) of the Insolvency Act.

8.2 On 17 July 1992 Respondent had prepared a signed statement of his assets and liabilities
which was handed to the Applicant. A copy of the said statement of assets and liabilities is
annexed hereto marked "H". As is evident from annexure "H", Respondent reflected as assets

93 | P a g e
in his estate his member's interest in six close corporations, namely Property Developments
CC

8.3 I recently caused Applicant's attorneys to conduct searches of the records of the Registrar
of Close Corporations. From the said searches I ascertained that

8.3.1 On 29 January 1993 Respondent resigned, as a member of and his 100% member's
interest was acquired by one

8.3.2 On 21 August 1992 Respondent resigned as a member of and his 100% member's
interest was acquired by one

8.3.3 On 29 January 1993 Respondent resigned as a member of and, his 100% member's
interest was acquired by

8.3.4 On 25 March 1993 Respondent resigned as a member of and his 100% member's
interest was acquired by one the accounting officer of all those close corporation in which
Respondent did and still have an interest. In order to avoid prolixity I have not annexed
copies of the searches of the records of the Registrar of Close Corporations, but shall ensure
that these are available for perusal by this Honourable Court at the hearing of this matter.

8.4 I annex hereto marked "I 1 – 4" copies of searches of the records of the, Registrar of
Deeds conducted on 2 September 1993 from which it is apparent that as at that date still had
substantial property holdings registered in their respective names. Indeed the properties
registered in the names of and are the same properties referred to in annexure "H" at a time
when Respondent was still the member of these close corporations.

9.

In all the circumstances and inasmuch as:

9.1 the Respondent has disposed of his member's interest in four Close corporations which
accounted for N$541 000.00 worth of his assets as at 30 June 1992;

9.2 the member's interest concerned must have had a substantial value at the time they were
disposed of judging by the immovable properties which are still registered in the name of the
relevant close corporations (see annexures "I1 – 4");

9.3 the Respondent, as appears from annexure "G" now alleges that he has "no money,
disposal property or assets" wherewith to satisfy his judgment debt to the Applicant, it is
respectfully submitted that the only reasonable inference that can be drawn is that the
Respondent has disposed of certain of his properties in a manner which has had the effect of
prejudicing his creditors as contemplated in Section 8(c) of the Act.

94 | P a g e
 10.

I respectfully submit that it would be to the advantage of the Respondent's creditors for his
estate to be sequestrated for the reasons set out below:

10.1 The Respondent has, it is submitted, been less than frank in advising the Sheriff that he
has no money, disposable property or assets wherewith to satisfy the Applicant's judgment
debt. In this regard I state that:

10.1.1 From a search of the records of the Registrar of Close Corporations I have ascertained
that Respondent is still the member of Property Investment CC which is the registered owner
of a property in Maitland. I annex in this regard, marked "J", a copy of a Deeds Office
printout which reflects this fact. Although the said property is bonded in favour of Volkskas
Bank and the Allied Building Society for N$230 000.00 it is submitted that inasmuch as this
property is situated in a commercial zone there is at least reasonable possibility of there being
some equity in the property to be realised for the advantage of the Respondent's creditors.

10.1.2 I am aware that the Respondent still trades as Butcher and Supermarket. I refer this
Honourable Court in this regard to annexure "H" where the Respondent valued these
enterprises at N$300 000.00 and N$250 000.00 respectively as at 30 June 1993. I annex
hereto marked "K" and "L" respectively copies of the provisional income statement for
Supermarket for the Period 1 March 1991 to 31 May 1992 and for Butchery for the year
ended 28 February 1992 from which it is apparent that these enterprises were at that time
trading profitably. I therefore submit that it is highly unlikely that the enterprises which were
trading profitably in 1992, now have absolutely no value in the Respondent's estate.
Accordingly I submit that there is every likelihood that these, enterprises could be sold as
going concerns by a trustee so as to realise a not insubstantial dividend for the Respondent's
creditors.

10.2 It is submitted that the circumstances under which the Respondent disposed of his
member's interest in four of his close corporations warrant closer scrutiny. In particular, a
trustee would be in a position to investigate whether the transactions concerned constitute
dispositions without value in terms of Section 26 of the Act or collusive dealings in terms of
Section 31 of the Act which are capable of being set aside by this Honourable Court, thereby
recovering assets capable of being realised to the advantage of the Respondent's creditors. I
point out in this regard that it is noteworthy, that one of the persons to whom the Respondent
disposed of one of his member's interests was the accounting officer in all the close
corporations in which the Respondent formerly had an interest and in those in which he still
does have an interest.

10.3 A trustee would be in a position to investigate the whereabouts of the Respondent's

assets, to take control of such assets and realise same and distribute the proceeds to
Respondent's creditors in accordance with the legal order of preference.

95 | P a g e
10.4 Other creditors of the Respondent's estate who are unaware of his financial predicament
would be prevented from incurring unnecessary legal expenses in attempting to recover his
indebtedness to them.

11.

Due security has been given to the Master of the above Honourable Court for payment of all
fees and charges necessary for the prosecution of all sequestration proceedings and of all
costs of the Respondent's insolvent estate until a provisional trustee has been appointed, as
will appear from the report of the Master of this Honourable Court to be filed herewith.

12.

A copy of this application will be lodged with the Master of this Honourable Court and
furnished to the Respondent personally, all the registered trade unions representing the
employees of the respondents (being…), the employees of the Respondent, and the Receiver
of Revenue as prescribed in the Insolvency Act.

13.

In all the circumstances, I humbly pray that the above Honourable Court may deem fit to
grant an order in terms of the Notice of Motion to which this affidavit is annexed.

I certify that:

1. The deponent has acknowledged that:

1.1 He knows and understands the contents of this declaration;

1.2 He has no objection to taking the prescribed oath;

1.3 He considers the prescribed oath to be binding on his conscience.

2. The deponent thereafter uttered the words *I swear that the contents of the declaration are
true, so help me God.

3 The deponent signed this declaration in my presence at the address set out hereunder on this
26th day of MARCH 1994.

__________________________

COMMISSIONERS OF OATHS

96 | P a g e
SECURITY
IN THE HIGH COURT OF NAMIBIA
In the matter between:
Applicant
And
Respondent
1. A copy of the Applicant's Petition
with annexures has been lodged
with me as required by section 9(4)
of Act 24 of 1936*
2. 1 CERTIFY THAT due
security has been found for
payment of my fees and charges
necessary for the prosecution of
all sequestration proceedings in
the above matter and of all costs
of administering the estate until a
trustee has been appointed and,
if no trustee in appointed, all fees
and charges necessary for the
discharge of the estate from
sequestration.
I know of no facts which would
justify the Court in postponing
the hearing or dismissing the
petition.
A copy of this report has been
transmitted to the applicant's
agent.
IN DIE HOOGGEREGSHOF
NAMIBIE
In die saak tussen:
Applikant
en
Verweerder
1. 'n Afskrif van die Applikant
se petisie met aanhangsels
soos vereis deur artikel, 9(4)
van Wet 24 van 1936 is by my
ingedien
2. EK SERTIFISEER DAT
behoorlike sekuriteit gestel
is vir die betaling van alle
fooie en onkoste nodig vir
alle verrigtings in verband
met boge- noemde
sekwestresie en vir alle
koste in verband met die
bereddering van die boedel
totdat 'n kurator aangestel is,
en as geen kurator aangestel
word nie, van alle fooie en
onkoste nodig vir die
ontslag van die boedel uit
die sekwestrasie.
Ek is van geen feite bewus
wat die Hof sou regverdig
om die verhoor uit te stel of
om die versoek af te wys
nie.
In Afskrif van hierdie verslag is
aan die applikant se
verteenwoordiger gestuur.
97 | P a g e
ASST. MASTER OF THE MEESTER VAN DIE
HIGH COURT HOOGGEREGSHOF

MASTER'S OFFICE MEESTERSKANTOOR

WINDHOEK WINDHOEK

98 | P a g e
5. REHABILITATION

[Sections 124 - 130 of the Insolvency Act, 1936]

5.1 INTRODUCTION - EFFECTS IN GENERAL OF REHABILITATION

The most important effect of rehabilitating an insolvent person is to put an end to his/her
status as an insolvent.

Rehabilitation is a discretionary remedy and the Court may impose conditions in its order
rehabilitating the insolvent, for example that he consents to judgment in respect of the
balance of the unpaid claims against his estate or repays the contribution paid by creditors
towards costs. [See section 127(2)].

Provided the Court does not order a conditional rehabilitation, the rehabilitation of an
insolvent:

 puts an end to the sequestration;

 discharges all the debts of the insolvent, which were due, or the cause of which had
arisen, before the sequestration (and which did not arise as a result of any fraud on his
part);
 relieves the insolvent of every disability resulting from the sequestration.

[See section 129(1)]

NOTE: the rehabilitation of an insolvent does not automatically re-invest him with his estate,
save in one instance (section 129(2) read with section 124(3) - where an insolvent is
rehabilitated under section 124(3) i.e. where no claims have been proved against his insolvent
estate, the effect of his rehabilitation is to automatically re-invest him with his estate).

Thus property (excluding surplus money) of the insolvent estate vesting in the trustee and
unrealised at the date of rehabilitation remains vested in the trustee for purposes of realization
and distribution. If, however, circumstances warrant, the Court in the exercise of its
discretion under section 127(2) may make an order for the reinvestment of such property in
the insolvent. The insolvent has to make application for an order reinvesting his property in
him. Surplus monies available after confirmation of the liquidating and distribution account
are paid into the Guardian's Fund and after rehabilitation it is paid to the Insolvent at his
request.

99 | P a g e
5.2 WHO MAY APPLY FOR REHABILITATION AND TO WHICH
COURT?

The following persons may apply for the rehabilitation of an insolvent:

 the insolvent himself/herself - if a joint estate was sequestrated the spouses may be
rehabilitated separately or a joint application can be made.
 the insolvent's duly authorized agent where the insolvent himself does not reside in
Namibia (but not where the insolvent resides in Namibia);
 the widow/widower of an insolvent who was married in community of property to the
insolvent;
 the former spouse of an insolvent where they were married in community of property.

Rehabilitation may take place automatically, by lapse of prescribed period or by court order.
The Court to which the application for rehabilitation must be made is the Court which made
the sequestration order (Smith 296 citing Ex parte Garvie 1924 OPD 108).

5.3 WHEN APPLICATION MAY BE BROUGHT

[Section 124]

5.3.1 AFTER ACCEPTANCE OF A STATUTORY COMPOSITION BY CREDITORS

(Section 119(7) read with Section 124(1))

The Master must certify in terms of s119(7) that concurrent creditors (inclusive of creditors
who have not proved claims) whose votes amounted to three-quarters in number and value of
the votes of all creditors who proved claims, accepted a composition of not less than
50c/dollar of every claim proved and that the payment has been made or security for payment
has been furnished to the satisfaction of the Master (Section 124(1) read with Section 52(5)
and 120(1))

The full costs of sequestration and administration must have been paid;

Three weeks clear notice in the Government Gazette and to the trustee must be given - no
notice is given to the Master. Notice to the trustee is hand-delivered or sent per registered
post;

100 | P a g e
Full particulars of the composition must be given - also state whether there are creditors who
did not prove claims and if so their names, addresses and particulars of their claims must be
given;

A non-statutory composition is not a basis for rehabilitation but it could influence the Master
to exercise his discretion in terms of Section 124(2) in favour of the insolvent and to
recommend rehabilitation;

No recommendation by the Master is needed if the application is brought in terms of Section

124(1).

5.3.2 REHABILITATION IN TERMS OF SECTION 124(2)

Section 124(2)(a)

After twelve months have elapsed after confirmation by the Master of the first trustee's
account in the estate (provided the insolvent does not fall within the provisions of section
124(2)(b) or (c)).

Section 124(2)(b)

After three years have elapsed from such confirmation if the insolvent's estate has been
previously sequestrated (provided the insolvent does not fall within the provisions of section
124(2) (c)).

Section 124(2) (c)

After five years have elapsed from the date of the insolvent's conviction of any fraudulent act
in relation to his existing or any previous insolvency or any offence under sections 132-134
of the Insolvency Act.

Proviso

If application is brought within 4 years from date of sequestration, the Master's

recommendation is required;

Date of sequestration is date of the provisional order;

Test

Whether the Applicant is a fit and proper person to trade with the public on the same basis as
any other honest man - Kruger v The Master 1982(1) SA 574(W).

101 | P a g e
Whether, if he had traded in a negligent manner or so as to deceive others prior to his
becoming insolvent he has been subject to his insolvency long enough to ensure that he has
received a sufficiently severe lesson as to the necessity of trading honestly. The manner in
which the applicant had traded prior to his insolvency should therefore also be considered by
the Master in making his recommendation - Ex Parte Anderson 1995 (1) SA 40 (SECLD);
Greub v the Master & Others 1999(1) SA 746 (c).

However, it is not only with the interests of past creditors of the applicant that the Court is
concerned. The effect of rehabilitation is to restore the insolvent fully to the marketplace and
to the obtaining of credit. The Court is accordingly as concerned with probable future
behaviour of the insolvent as it is with his past. The information included in the affidavit
should therefore be as such as to suggest to the Court that the insolvent has learnt the lessons
of insolvency or that he has a genuine appreciation of the possible hardship which his
sequestration may have caused at least to certain of his creditors - Ex Part Le Roux 1996 (2)
SA 419 (c).

In furnishing his recommendation, the Master must make a proper decision, weighing up
factors in favour of the insolvent and factors adverse to him. The Master cannot simply leave
it to the Court to decide. See: Ex parte Anderson 1995 (1) SA 46 (SE); Ex parte Porrit 1991
(3) SA 866 (N)

The Master's decision is reviewable by the Court which then can consider the matter de novo
as a Court of appeal. (Greub's case).

In the case of Ex Parte Theron & Another, Ex Parte Smit; Ex Parte Webster 1999 (4) SA
136(O) the Master attempted to impose a condition on the rehabilitation of the insolvent,
namely that a certain amount of his salary be paid over to the trustee for the benefit of
creditors for a period of 18 months. The court refused to impose this condition and granted an
unconditional rehabilitation order. The court stated that exceptional reasons have to exist to
legitimise the imposition of a condition upon a rehabilitation. The court also held that in the
absence of complete information about the manner in which the Master had reached his
decision, the court was not prepared to "rubber stamp" the Master's decision.

In all of the above cases the insolvent is required to:

Give not less than six weeks written notice to the Master and to his trustee of his intention to
apply for his rehabilitation. (Six clear weeks)

Advertise notice of such intention in the Government Gazette not less than six weeks before
making the application. (See Form 6 of the Regulations).

5.3.3 NO CLAIMS PROVED

[Section 124(3)]

102 | P a g e
[No recommendation by the Master is needed]

An insolvent can apply after six months from date of provisional sequestration for his
rehabilitation provided-

 No claim has been proved against his estate;

 He has not been convicted of an insolvency offence
 His estate was not previously sequestrated
 He has given the Master and the Trustee six weeks’ notice in writing and has
published in the GG six weeks before making the application, notice of intention to
apply for his rehabilitation.

He may apply even if he was a partner in a partnership and claims were proven against the
partnership estate: - Ex parte Fernandez 1965(3) SA 726(O)

5.3.4 AFTER FULL PAYMENT OF ALL PROVED CLAIMS

[Section 124(5)]

Application can be brought on three clear weeks’ notice in writing to the Master and the
Trustee immediately after -

 The confirmation by the master of a distribution plan providing for full payment of all
proved claims
 Full payment of all sequestration costs
 Payment of all interest on the proved claims

No notice in the GG is necessary

5.3.5 BY EFFLUXION OF TIME

[Section 127(A)]

An insolvent automatically becomes rehabilitated after ten years from date of sequestration
(date of provisional sequestration) unless an interested party applies to Court before the
expiry of the ten years for an order preventing the automatic rehabilitation. The ten year
period runs from the date of provisional sequestration (Grevler v Landsdown en n ander NNO
1991 (3) SA 175 (T))

If the Court grants an order in terms of 2 above, the Registrar of Deeds must enter a caveat
against the insolvent's title deed to his property and against every bond registered in his name
or which belongs to him. [Section 127A(2) -(4)].

103 | P a g e
A partnership can never be rehabilitated. [Section 128]

5.4 GENERAL

The six weeks and thee week periods must be calculated by excluding both the first and last
days.

The four year period is calculated with reference to the date when the provisional order was
granted.

No notice of intention to apply for rehabilitation need be given to creditors, save for the
notice in the Government Gazette.

Notice in the Gazette must be by way of Form 6 read with regulation 5 containing the
following information:

 Number (at the Masters Office) of insolvent estate;

 Ground for application
 Full name and description of insolvent, including ID, date of birth, and CURRENT
place of business/residence and present occupation, and also where and under what
name he was trading at the time of his sequestration and also his address, occupation
or status at the time of sequestration, especially where the Insolvent no longer resides
at the place where he was conducting business when sequestrated - Ex Parte van Zyl
1997 (2) 438 (E).
 Date of sequestration;
 Date, time and division of High Court where application will be made.

There is authority to the effect that short service in the Government Gazette cannot be
condoned. Errors in the information contained in the notice can be condoned if it is a formal
defect and if there is no possibility of prejudice to interested parties Ex parte Sedeman 19502
(2) SA 689 (C); Ex parte Anderson 1995 (1) SA 40 (SECLD) and sec 157(1) of the Insolvency
Act. See Ex parte Minnie et uxor 1996 (3) SA 97 (c) and also Ex parte Van Zyl 1997 (2) SA
438 (E).

Late lodging of the bond of security in terms of s125 is a fatal defect which cannot be cured
by a postponement of the application. See Ex Parte Elliot 1997 (4) SA 292 (W) and cases
cited therein.

104 | P a g e
Since the Master is required to report to the Court on the application (s27), a copy of the
application must be served on the Master. Short service to the Master and Trustee can be
condoned, so long as the Master has had sufficient time to investigate the matter and prepare
his report to the Court in terms of s27(1).

In certain circumstances it is possible to elect to have the sequestration order set aside rather
than to apply for rehabilitation. [Section 54(5)]

Section 125 requires security for an application for rehabilitation to be furnished to the
Registrar of the Court three weeks before the application is made. The late furnishing of such
security is a fatal defect and cannot be cured by a postponement of the application - Ex Parte
Elliot 1997(4) SA2(W).

5.5 FORM OF APPLICATION

Short Form (Form 2) is used and service is also effected on the Master but not the Trustee. If
the relief which is applied for will also affect the records of the Registrar of Deeds, the
Application must also be served on him.

5.6 CONTENTS OF AFFIDAVIT

Name of Applicant, present occupation and address - show locus standi.

Personal knowledge.

Date of sequestration and particulars of Court which granted the order and applicant in that
matter.

Date of confirmation by Master of first liquidation account. (If relying on Section 124(2)). If
relying on Section 124(5), date of confirmation of plan of distribution providing for full
payment of claims.

Reasons for sequestration.

Total amount of assets and liabilities as at date of sequestration.

Total amount of all claims proved against the estate; state which concurrent, secured, and
preferential claims are.

What dividend was paid to creditors; give details of what dividend paid to secured,
preferential and concurrent creditors.

Amount of contribution levied (if applicable).

105 | P a g e
Statement of assets, liabilities and earnings as at date of application for rehabilitation.

Information regarding what further assets in estate available for realisation and estimated
value thereof.

Particulars of further assets obtained after sequestration, e.g. immovable property obtained
with trustee's consent.

Present income and expenditure, including income of spouse.

Where there has been a statutory composition, full particulars thereof should be given.
(Where relying on Section 124(1)).

Particulars of previous sequestration (if any) or statement that applicant was not sequestrated
before. (If relying on Section 124(2) or 124(3)).

Particulars of criminal prosecutions and offences under the Insolvency Act (if any) or a
statement that he has not committed any such offences. (If relying on Section 124(2) or
124(3)).

A statement that he has completely surrendered his estate and has not granted or promised
any benefit to any person or entered into any secret agreement with intent to induce his
trustee or any creditor not to oppose the rehabilitation.

An allegation that notice was published timeously in the Government Gazette. (Annex
tearsheet)

An allegation that the Master was duly notified of this application. (Annex copy of written
notice to the Master and his acknowledged of receipt)

An allegation that the trustee was duly notified of this application. (Annex copy of written
notice)

An allegation that security for the application was lodged with the Registrar of the Court for
Rehabilitation. (Section 125)

An allegation that a Master's report will be laid before the Court. (Section 127(1))

5.7 PRAYERS

[See also XIII and XIV infra]

That applicant be rehabilitated.

106 | P a g e
A declaratory order vesting in applicant of the immovable property obtained after date of
sequestration.

That the Register of Deeds be authorised to register any actions of the applicant with regard
to his immovable property without the assistance of his trustee.

5.8 LIST OF SUPPORTING DOCUMENTS / ANNEXURES

Page of Government Gazette in which notice appeared.

Master's acknowledgement of receipt of written notice.

Trustee's acknowledgement of receipt of written notice or copy of registered letter plus

registered slip verified by affidavit of posting.

If applicant relies on Section 124(1), a Master's certificate with regard to the statutory
composition.

Certificate of security for N$500.00 at the Registrar of the Court. [Section 125 - security to be
furnished at least 3 weeks before application is heard].

Master's recommendation (if applicable) (Section 124(2)).

5.9 PROCEDURE

Take full instructions from client to apply for rehabilitation and give special attention to the
following:

 marital regime
 whether the Court has jurisdiction
 time lapse since sequestration.

Arrange for deposit by client of approximately N$5000.00

Complete Form 6 (Notice of intention to apply for rehabilitation)

Arrange for publication of Form 6 in Government Gazette (3 weeks/6 weeks)

Give notice to trustee (delivery or per registered post) (3 weeks/6 weeks)

Give notice to Master (6 weeks)

File security bond for N$500.00 (stamped 25c) with Registrar (at least 3 weeks before date of
hearing).

107 | P a g e
Do full search at Master's Office to satisfy yourself that applicant qualifies for rehabilitation
and to obtain sufficient information necessary to finalise. Give special attention to the
following:

 When the first liquidation and distribution account was confirmed.

 Whether the final liquidation and distribution account has been confirmed.
 On what date the final liquidation and distribution account was confirmed.
 How many secured and preferential claims were proved against the insolvent estate in
total.
 How much in respect of secured and preferential was paid out of the estate.
 What the shortfall was on the secured and preferential claims.
 How many concurrent claims were proved against the insolvent estate in total.
 How much was paid out in respect of proved concurrent claims.
 What the shortfall was on concurrent claim.
 Whether a contribution was levied against creditors that had proved a claim.
 Draft Affidavit for applicant utilising the check list.
 Arrange for Attesting of affidavit.
 Draft Notice of Motion.
 Obtain tear sheet of Notice in Government Gazette.
 Make copies of papers and annexures, affix stamps on original (N$5.00).
 Serve on Master.
 Issue at Registrar's office and serve on Master.
 Check that Trustee reports to the Master timeously.
 Obtain Master's Report and file with Registrar.
 Brief Counsel.
 Attend Court.
 Report to client.
 Uplift Brief.
 Pay Counsel.
 Uplift rehabilitation order.
 Account to client.

5.10 MASTER'S REPORT

108 | P a g e
Usually refers to trustee's report to him. Some divisions have a practice that the trustee's
report should also be filed at Court with the Master's report.

Must report to the Court on all relevant facts known to him as well as any unfavourable
remarks appearing in the trustee's report to him.

If contribution levied, he usually recommends rehabilitation provided that insolvent pays

contribution to trustee.

If application is made before the 4 year period has elapsed, the Master's recommendation is
necessary.

See Anderson's case 1995 (1) SA 46 (SE) and Porrit's case 1991 (3) SA 866 (N) regarding
Master's recommendation.

5.11 POWERS OF COURT

The Court always has a discretion which must be exercised judicially.

Application can be granted, refused, postponed, or granted under certain conditions, eg.
Section 127(4).

Declaratory order that immovable property obtained by applicant after sequestration vests in
him.

5.12 EFFECT OF REHABILITATION

It ends the insolvent's sequestration [Section 129(1)(a)] and the insolvent is once again
allowed to trade with the public without the assistance of his trustee.

He is discharged from liability for all debts due or which arose before sequestration, except
those who arose out of fraud on his part [Section 129(1)(b)]. This also includes foreign debts,
see North American Bank Ltd (In liquidation) v Granit 1998(3) SA 557(W).

Any surplus in the estate after all creditors have been paid must be repaid to the insolvent at
his request [Section 116(1)].

It relieves him of every disability resulting from his sequestration, e.g. he can once again
serve as a director of a Company [Section 129(1) (c)].

It has no effect on the liability of a Surety [Section 129(3)(d)].

5.13 GENERAL (DECLARATORY ORDERS)

109 | P a g e
[When to ask for a declaratory order as stated in VII 2 and 3 supra]

Basic Principle: All property acquired by the insolvent during his sequestration - i.e. the
period up to his rehabilitation - shall belong to his estate and therefore it shall vest in his
trustee - Section 23(1).

Property which does not vest in his trustee (eg. Section 23(5), (7) and (9) - and also inclusive
of property acquired by the insolvent with monies which are his - is not affected by his
rehabilitation and no declaratory order is needed in relation to such property unless it is
necessary to obviate uncertainty.

If his property vests in his trustee no declaratory order is necessary when he rehabilitates in
terms of Section 124(3) [vide Section 129(2)] - otherwise a declaratory order will always be
necessary and if it is not obtained, such property will remain vested in the trustee,
notwithstanding his rehabilitation. Thus, for example, if the insolvent received an inheritance
during his insolvency which would vest in the trustee, he has to apply for the reinvestment of
the balance thereof in himself on his rehabilitation. See Ex parte Grobbelaar 1977 (4) SA 584
(O).

Section 58(2) of the Deeds Registries Act 47 of 1937 provides that where immovable
property vested in the trustee and now automatically re-invests in the insolvent (vide Section
129(2), Section 120(2)); then the insolvent can deal (transfer, mortgage etc) with such
immovable property only after his title deed has been endorsed by the Registrar of Deeds to
the effect that such immovable property is restored to him - no formal transfer of property is
however necessary.

In terms of Section 58(1) of the aforesaid Act, if the Insolvent's immovable property vested in
his trustee but it does not in terms of the Insolvency Act automatically reinvest in him, the
trustee must formally transfer such immovable property to him. The Insolvent may perform
on act of registration in respect of his immovable property only after such transfer has taken
place.

5.14 PROCEDURE TO BE FOLLOWED WHERE APPLICATION IS TO

BE MADE FOR A DECLARATORY ORDER IN TERMS OF XIII

5.14.1 PROPERTY WHICH DID NOT VEST IN THE TRUSTEE

[Declaratory order only necessary to obviate uncertainty]

110 | P a g e
Form 6 (notice in the GG) should contain a footnote giving a description of the property and
mention how it was acquired and from what financial resources. It must also be stated that it
is the intention of the Applicant to apply for a declaratory order in respect of ownership.

Written notice must also be given to the trustee and the Master providing them with all the
aforegoing particulars.

The founding affidavit should show in detail how the property was acquired. If it was
purchased, then whence the money was obtained must be disclosed - Ex parte Potgieter
1967(2) SA 310(T).

5.14.2 PROPERTY WHICH VESTED IN THE TRUSTEE

[Seeking an order reinvesting the insolvent with his property]

The same requirements as to notice as set out in the preceding paragraph (1-3) are applicable.

The notice should also specifically state that the Master, the trustee and the creditors are
requested to waive their rights in relation to the property - Ex parte Oliver 1984(2) SA 545 (c)
at 554.

Deal with the aforesaid particulars in your founding affidavit.

Where you are asking for immovable property to be reinstated, include a prayer in notice of
motion asking that the Court to direct the trustee to transfer the property back to the insolvent
applicant.

Where the immovable property automatically re-invests in the insolvent, include a prayer
asking that the Registrar of Deeds be directed to endorse the title deeds to the effect that the
property is restored to the applicant.

5.15 INSOLVENCY INTERDICTS

When a sequestration order is issued, a caveat is entered in respect of the insolvent and his
spouse, against:-

 the transfer of their immovable property;

 the cancellation or cession of every Bond registered in their name or belonging to
them [Section 17(3)(a)].

The aforesaid caveat expires 10 years after the date of the sequestration order [= provisional
order] [Section 17(3)(b)].

111 | P a g e
After the expiry of a caveat, the Insolvent can perform any act of registration in respect of
that property in spite of the fact that such property formed part of his insolvent estate [Section
25(3)] -no declaratory order is therefore necessary.

A caveat can also be registered in terms of Section 18B or 127A.

5.16 CHECK LIST

Applicant

Personal knowledge

Details of insolvency

Confirmation of the first liquidation account

Reasons for insolvency

Total assets and liabilities as at date of sequestration

Total claims proved

What dividend was paid?

Contribution levied?

112 | P a g e
Assets, liabilities and earnings as at date of application

Income and expenses

Statutory composition? Particulars of

Previous sequestration? Particulars of

Details of criminal prosecutions, if any

Complete surrender of estate - no benefit promised to anyone

Proof of notice - Government Gazette, Master, Trustee

Security for the application duly lodged.

EXAMPLES

NOTICE OF MOTION

IN THE HIGH COURT OF NAMIBIA

CASE NO.
113 | P a g e
In the matter of:-

Michael Nelissen ` First Applicant

Kaseli Nelissen Second Applicant

___________________________________________________________________________

NOTICE OF MOTION

___________________________________________________________________________

BE PLEASED TO TAKE NOTICE that application will be made to the abovementioned

Honourable Court on the 28 day of NOVEMBER 1995 at 10h00 or so soon thereafter as
counsel may be heard, for an order in the following terms:-

[a] For the rehabilitation of the Applicants;

[b] Other or alternative relief.

BE PLEASED TO TAKE FURTHER NOTICE that the affidavits of the Applicants, which
affidavits are annexed hereto, will be used in support hereof.

Kindly place the matter on the roll for hearing accordingly.

DATED AT WINDHOEK ON THIS THE 17 DAY OF OCTOBER 1995.

_________________________________________

SOLOMON NICOLSON REIN & VERSTER INC

Attorneys for Applicants

7th Floor

NBS Building

Pretorius Street

Windhoek

114 | P a g e
 [Ref.. Mr Foot]

TO: THE REGISTRAR

HIGH COURT OF NAMIBIA

AND TO: THE MASTER

HIGH COURT OF NAMIBIA

AFFIDAVIT

IN THE HIGH COURT NAMIBIA

CASE NO

In the matter of:-

115 | P a g e
Michael Nelissen ` First Applicant

Kaseli Nelissen Second Applicant

___________________________________________________________________________

AFFIDAVIT

___________________________________________________________________________

I, the undersigned,

Michael Nelissen

do hereby make oath and state:-

1.

I am a major male businessman of 14 Hydro Avenue. Van Riebeeck Park, Windhoek.

1.2 The facts hereinafter deposed to by me fall within my personal knowledge and are to the
best of my belief true and correct.

1.3 I am the First Applicant herein.

2.

2.1 The Second Applicant is Kaseli Nelissen, a major female secretary who resides at 14
Hydro Avenue, Van Riebeeck Park, Windhoek.

2.2 The Second Applicant is my spouse to whom I am married in community of property.

3.

The marriage between myself and the Second Applicant took place on 10 July 1982. No
change has taken place in the marital regime of myself and the Second Applicant since the
inception of the Matrimonial Property Act, 88 of 1984.

116 | P a g e
 4.

My identity number is 630623100477 and that of the Second Applicant is 65050500991.

5.

At the time of my sequestration I was a businessman and I was resident at 16 Pretorius Road.
Van Riebeeck park, Windhoek.

6.

It is respectfully submitted that I and the Second Applicant are domiciled within the area of
jurisdiction of the above Honourable Court.

7.

Our joint estate was sequestrated provisionally by an order of the above Honourable Court
issued under case number 21627192 on the 3rd day of November 1992.

8.

A final order was issued on 24 November 1992.

9.

The sequestration was occasioned at the instance of one MARCO KOOYMAN to whom I
was lawfully indebted to in the amount of N$500.00 by virtue of monies having been lent and
advanced to me by the said KOOYMAN during 1992.

10.

Our estate has not previously been sequestrated and neither I nor the Second Applicant has
been convicted of any fraudulent act in relation to our existing insolvency or at all, nor have
we committed any offence under Sections 132, 133 or 134 of the Insolvency Act, 24 of 1936.

11.

Prior to the sequestration of our estate, I was the sole shareholder and a director of Associated
Truck Parts (Pty) Ltd.

12.

117 | P a g e
The facts that led to the sequestration of our estate were:-

12.1 I suffered a severe heart attack on the 21st of April 1992. The severity of the
aforementioned heart attack was such that I was compelled by doctors instructions not to
work for a period of three months;

12.2 At the time of the aforesaid heart attack, the aforementioned company employed 27
members of staff, all of whom were on a relatively junior level consisting mainly of drivers,
pickers and packers and internal salesmen. The members of staff were not qualified to attend
to the management of the said company in an effective manner and most certainly were not
able to perform the functions which I had previously performed on a daily basis;

12.3 I was advised by my doctors that the heart attack was brought about by pressure of
work. The pressure at the time of the heart attack was caused chiefly due to problems with
non-payment of monies outstanding to the aforesaid company by various debtors;

12.4 A large number of the debtors who owed vast sums of money to the company were
either sequestrated or liquidated at a time when the economy reached an all-time low;

12.5 The fact that such large sums of money could not be recovered by the company led to
severe pressure being exerted upon the company;

12.6 As the sole shareholder and director of the said company, I had bound myself as surety
and co-principal debtor towards the Company's creditors, in particular. I had bound myself in
respect of amounts due and payable to the landlord of the company, being SAGE
PROPERTIES, the company's bankers, being NEDBANK, and various other large creditors,
including PRO POWER, MAN, ADE MASTER PARIS and also in respect of various lease
creditors, including NEDFIN, STANNIC and WESBANK,'

12.7 I confirm that my "Private" debts at the time of our sequestration were nominal as
opposed to my liability created by virtue of the various Deeds of Suretyships referred to.

13.

This application for rehabilitation is brought under Section 124 [2] of the Insolvency Act, 24
of 1936, as amended, and I state I have given notice as follow:-

13.1 On 26 May 1995 my attorneys, Messrs Solomon Nicolson Rein & Verster Inc. wrote to
the Master of the High Court and I annex hereto marked "A" a copy of the letter,

13.2 On 3 April 1995 my said attorneys notified the trustee of my insolvent estate of my
intention to apply for rehabilitation and I annex hereto marked "B" a copy of the said letter
together with a copy of the letter from the said trustee annexed hereto as Annexure "C";

118 | P a g e
13.3 Notice of my intention to apply for rehabilitation was duly published in the Government
Gazette on 13 October 1995 and I annex hereto marked Annexure "D" a copy of the relevant
page from the said Gazette.

14.

On 10 March 1993 MR LESLIE COHEN and PIETER CHARLES BOTHOMLEY of West

Trust, 3rd Floor, FHS House, 15 Girton Road, Windhoek, was appointed as provisional
trustee of my estate and these persons were duly appointed as trustees.

15.

We have made a complete surrender of our estate and have not granted or promised any
benefit whatever to any person or entered into any secret agreement with the attempt to
induce our trustee or creditor not to oppose this application for rehabilitation.

16.

In terms of the First and Final Liquidation and Distribution Account and as appears more
fully from Annexure "D" hereto, there was only one claim approved in the estate.

17.

The First and Final Liquidation and Distribution Account in our insolvent estate was
confirmed by the Master of the High Court on 9 December 1993.

18.

I state that there are no further assets in our estate available for realisation.

19.

A nominal shortfall of N$326.72 existed in our insolvent estate, which amount has been paid
to the trustee and as a result of which the trustee has indicated that he has no objection to the
application for rehabilitation. I annex proof of payment of the contribution hereto as
Annexure "E".

20.

At various stages during our insolvency, the trustee granted me consent to:-

20.1 take up shares in ANGLO AUTOMOTIVE INDUSTRIES (PTY) LTD;

119 | P a g e
20.2 to repurchase my residence, which had been repossessed by STANDARD BANK OF
NAMIBIA LTD;

20.3 to operate a current banking account.

21.

21.1 I did not exercise the rights in terms of the aforesaid consent due to conservative
attitudes being adopted in regard to our finances.

21.2 I have lived on a strictly cash basis and have no debt outstanding whatsoever.

21.3 In respect of income the Second Applicant is employed as a secretary by LATEGAN,

SMITH & VAN DER LINDE and TECPRO, a firm of consulting engineers where she
receives a gross income of N$4 500.00 per month and a net income of N$3 147.00 per month.

21.4 I am employed as the general manager of ANGLO AUTOMOTIVE INDUSTRIES

(PTY) LTD.

21.5 My gross salary is N$7 500.00 per month and my nett monthly income is N$4 800.00
per month.

21.6 My monthly expenses are as follows:-

[a] School fees N$ 175.00

[b] After-care centre N$ 240.00

[c] Maid salary. N$ 350.00

[d] Telephone N$120. 00

[e] Water and Electricity N$569.00

[f] Food [including meat, groceries etc] N$2 200.00

[g] Rental N$2 000.00

[h] Petrol N$ 400.00

[I] Clothing N$220.00

[j] Life insurance for self N$574.00

[k] Life insurance for Second Applicant N$ 260.00

120 | P a g e
Total N$7 108.00

22.

22.1 My mother, ANNA [formerly ], who is presently 65 years of age and has recently
undergone a triple bypass heart operation is the sole shareholder and director of ANGLO
AUTOMOTIVE INDUSTRIES (PTY) LTD, my employer.

22.2 My mother has had approximately 42 operations performed upon her and has various
medical problems relating to inter alia her stomach, chest and appendix. She has recently
started suffering from loss of memory and suffers from a hearing deficiency. As a result of
my mother's physical condition, and advancing age, she has become less and less active in the
day to day affairs of the aforementioned company.

22.3 As a result of the aforegoing, I have of necessity become more and more involved in the
overseeing and management of the said company.

22.4 My functions in the company are, inter alia:

(a) the day to day management of the business' affairs;

(b) overseeing the business in its entirety:

(c) marketing for additional business;

(d) managing the vast growth of the company;

(e) liaising with clients, bankers etc;

(f) overseeing financial matters.

I point out that although I am supported by able management. The business and its success
are to a large extent dependent upon my input.

22.5 The main business of the company is that of panel beating and refurbishing of
commercial motor vehicles.

22.6 It is respectfully submitted that it would be in the interest of the company, its 72 staff
members, the community at large which deals with the company and myself, if our estate
were rehabilitated.

23.

We have not acquired any assets since the sequestration of our estate except for small
personal belongings.

121 | P a g e
 24.

Neither my wife, nor 1 have any other assets or liabilities.

25

Security for costs as contemplated by Section 125 of the Insolvency Act, 24 of 1936, as
amended has been furnished by the Registrar of the aforementioned Honourable Court.

26.

The Master of the above Honourable Court has recommended our rehabilitation. This appears
from Annexure "F" hereto.

27.

I annex hereto as Annexure "G" an affidavit by the Second Applicant, who supports this
application.

28.

In the premises I humbly pray that it may please the Honourable Court to grant an order in
terms of the Notice of Motion filed herewith.

_____________________

DEPONENT

I certify that on the 13th day of October 1995 in my presence at Windhoek the Deponent has
signed this declaration and declared that:

1. He knew and understood the contents hereof;

2. He had no objections to taking this Oath;

3. He considered this Oath to be binding on his conscience,

He then uttered the words: "so help me God, before me

_________________________

COMMISSIONER OF OATHS

122 | P a g e
ANNEXURE A

ANNEXURE "A"

LETTERHEAD

123 | P a g e
Attorneys Notaries and Conveyancers

Prokureurs Notarisse & Aktebesorgers

The Master of the High Court

Namibia

Date/Datum 26 May 1995

Dear Sirs

RE: INSOLVENT ESTATE: NELISSEN

Master’s reference no: 652192

Application for rehabilitation in terms of section 124(2)

The above matter refers.

We act herein on behalf of our client Nelissen who has instructed us to make application for
his rehabilitation

We enclose copy of letter received from Nelissen's trustee consenting to the said application.

We shall be pleased to learn of your attitude herein.

Yours faithfully

SOLOMON NICOLSON REIN & VERSTER INC

PER:

ANNEXURE B

ANNEXURE "B"

LETTERHEAD

124 | P a g e
Westrust

DX 199

Windhoek

Dear Sirs

RE: INSOLVENT ESTATE: NELISSEN

The above matter and the telephone conversation between the writer hereof and Mr
Bothomley on the 3rd of April 1995 refers.

We confirm having received instructions from Nelissen to attend to the Application for
Rehabilitation of his estate.

We will be pleased if you will kindly confirm that you consent to the aforementioned
application and furthermore receive an indication from you as to what amount you would
require client to make payment of to yourselves in regard to any shortfall which may have
been incurred in regard to this estate.

We look forward to hearing from you.

Yours faithfully

SOLOMON NICIDILSON REIN & VERSTER INC

PER:

ANNEXURE C

ANNEXURE "C"

LETTERHEAD

Westrust

125 | P a g e
Solomon Nicolson Rein Verster

012 328-3136

We refer to your letter of 3 April 1995 and confirm that we have no objection to an
application being brought for the rehabilitation of the insolvent In terms of Section 124 of the
Insolvency Act provided that the contribution of N$326.72 is paid.

Yours faithfully

BMHOKLEY

Joint Trustee

ANNEXURE D

ANNEXURE "D"

102 No. 16756

GOVERNMENT GAZETTE, 13 OCTOBER 1995

T4652/92-

126 | P a g e
Nelissen, 24 May 1957, businessman, 14 Hydro Avenue. Van Riebeeck Park. Windhoek. 3
November 1992, 16 Pretorius Road, Van Riebeeck Park, Windhoek, director and shareholder
of Associated Truck Parts (Pty) Ltd,

and Nelissen, 4 August 1953, secretary, 14 Hydro Avenue, Van Riebeeck Park, Windhoek
Park-, 3..November 1992. 16 Pretorius Road. Van Riebeeck Park. Windhoek, secretary.

Windhek, 28 November 1995. 10:00. Section 124 (2) of Act No. 24 of 1936, and by virtue of
a recommendation by the Master of the High Court.

ANNEXURE E

ANNEXURE "E"

LETTERHEAD

Attorneys Notaries and Conveyancers

Prokureurs, Notarisse & Aktebesorgers

127 | P a g e
Westrust (Pty) Ltd

DX 199

Windhoek

Vow Reflu V&W Peter Bothornley

ckr Rorlons vww Mr Foot/sw/174153

Solomon Nicolson Rein &Verster

Dear Sirs

RE: INSOLVENT ESTATE -1 _NELISSEN

The above matter and your letter dated the 11th of April 1995 refer.

We enclose herewith our client's cheque in your favour in the amount of N$326.72.

Yours faithfully

SOLOMON NICOLSON REINA VERSTER INC

PER:

ANNEXURE F

ANNEXURE "F"

ANNEXURE G

ANNEXURE "G"

AFFIDAVIT 2

IN THE SUPREME COURT OF NAMIBIA

CASE NO:

In the matter:-

Michael Nelissen ` First Applicant

128 | P a g e
Kaseli Nelissen Second Applicant

___________________________________________________________________________

AFFIDAVIT

___________________________________________________________________________

I, the undersigned,

NELISSEN

do hereby make oath and state:-

1.

1.1 I am a major female of 14 Hydro Avenue. Van Riebeeck Park, Windhoek.

1.2 All facts hereinafter deposed to by me fall within my personal knowledge and are to the
best of my belief true and correct.

1.3 I am the Second Applicant herein.

2.

I have read the affidavit of the First Applicant and confirm the correctness thereof and
particularly confirm that the affidavit deposed to by the First Applicant correctly sets out our
position insofar as the joint estate is concerned and as relates to the joint estate for the period
since sequestration.

I respectfully pray for an order in terms of the Notice of Motion.

DEPONENT

6. COMPOSITION

[Sections 119 - 123]

6.1 WHEN

A debtor who is in financial difficulty or whose estate has been provisionally sequestrated
can avert insolvency by entering into a compromise with his creditors (Mahomed v Lockhat
Brothers & Co Ltd 1944 AD 230 241). And a debtor whose estate has been sequestrated
finally may obviate the usual process of liquidation of estate assets and shorten the period of
his insolvency by making a compromise with his creditors in terms of sectin 119 of the

129 | P a g e
Insolvency Act. These two forms of compromise, known as common-law compromise and
statutory compromise respectfully follow:

6.1.1 COMMON LAW COMPOSITION

A Common Law compromise can be entered into at any time whether before sequestration or
after a provisional order has been granted. It is based on a contract.

To be effective it must be accepted by all creditors. (De Wit v Boathavens CC (King and
Another Intervening) 1989 (1) SA 606 (C)).

If entered into before sequestration, the debtor's assets remain vested in him.

Usually the arrangement makes provision for monthly payments to a person appointed to
administer the composition scheme.

A Common Law composition entered into after a provisional order of sequestration has been
granted, is usually conditional upon the provisional order being discharged.

The duties of the provisional trustee must be ascertained from the terms of the compromise
agreement.

6.1.2 COMPOSITION UNDER INSOLVENCY ACT

[Between Insolvent and his concurrent creditors] (Section 119(7) read with Section 52(5) and
Section 120(1))

A written offer of composition can be made at any time after the first meeting of creditors
[Section 119(1)].

Acceptance of the offer is in the nature of a statutory notation. It discharges the debts of the
unsecured creditors and substitutes therefore rights which are determinable under the
provisions of the composition.

6.2 PROCEDURE

6.2.1 TRUSTEE FEELS CONCURRENT CREDITORS WILL ACCEPT OFFER

At any time after the first meeting of the creditors, insolvent submits written offer of
composition to trustees (s119(1)).

The trustee delivers or sends per registered post to every proved creditor a copy of the offer
plus his own report thereon (s119(2)).

130 | P a g e
If the trustee opines that the creditors may not accept the offer, he must inform the insolvent
that the offer is unacceptable and that he does not propose to send a copy of it to the creditors
(s119(3)).

Insolvent may appeal to the Master, who after considering the report from the Trustee, may
direct trustee to post or deliver the copy (s119(4)).

Simultaneously convene and give notice of a meeting for the purpose of considering the offer
(s119(5)).

Date of meeting between 14 and 28 days after despatch of notice to creditors.

Notice of meeting to be published in Government Gazette and in one or more newspapers

circulating in the district where insolvent resides [Section 41 and 40(3)].

6.2.2 TRUSTEE FEELS CONCURRENT CREDITORS WILL NOT ACCEPT OFFER

Trustee informs insolvent that offer is unacceptable.

Insolvent may appeal to Master.

Master, after considering trustee's report, may direct trustee to forward offer to creditors.

Trustee need not attach his report.

General meeting is convened by trustee in the same manner as stated above.

6.3 MEETING OF CREDITORS

Creditors who have lodged claims, must first be permitted to prove them before offer is
considered.

The Master presides at the meeting.

If offer provides for security, the nature thereof must be fully specified.

If security consists of a surety bond/guarantee, every surety must be named.

The offer should include a term providing for the payment of the costs of sequestration.

A partnership cannot enter into a composition because sequestration results in the dissolution
of the partnership.

131 | P a g e
6.4 MAJORITIES

Offer must be accepted by at least 75% (in value and number) of all proved concurrent
creditors. (See Section 120(1))

Payment in terms of offer must have been made or security for payment given.

Insolvent then entitled to Master's certificate stating that offer has been accepted.

When Master issues certificate to the effect that the composition provides for payment of a
dividend of at least 50c/dollar, the insolvent can apply for rehabilitation on 3 weeks notice.

Secured creditors can vote only in respect of the unsecured balances of their claims [Section
52(5)].

6.5 EFFECTS

The offer, if accepted, binds all concurrent creditors, proved or unproved - [Ilic v Parginos
1985(1) SA 795(A) at 804]. The rights and obligations of the parties are now determined by
the provisions of the composition.

The claim of a secured or preferential creditor remains unaffected unless he has waived his
preference in writing [Section 120(1)].

If it is a condition that property should be restored to insolvent, the acceptance of the offer re-
vests the property in the insolvent.

A composition does not affect the liability of a surety for the insolvent.

A composition has the affect of res judicata and bars proceedings on the original cause of
action.

A composition is in the nature of a statutory novation.

A composition is not binding on the creditors of the solvent spouse, whose separate assets
revest in her [Section 122].

Creditor who has been paid in full has no vote.

6.6 OTHER CASES ON COMPOSITIONS

132 | P a g e
6.6.1 GENERAL

Vlachos and Another v Supermeats Mtuba (Pty) Ltd 1968 (4) SA 35 (D)

Lurie NO v Mahomed 1952 (3) SA 194 (N)

6.6.2 SECTION 119 INSOLVENCY ACT

Blou v Lampert and Chipkin NNO and Others 1970 (2) SA 185 (T)

Trade & Industry Acceptance Corporation Ltd v Burgers and Another 1970 (2) SA 250 (T)

7. LIQUIDATION OF COMPANIES

Chapter XIV

(Sections 337-426 of the Companies Act, 61/1973)

7.1 INTRODUCTION

Companies may be liquidated by the Court for a variety of reasons (see s344 of the
Companies Act).

133 | P a g e
In this course we are concerned with those grounds for liquidation which involve insolvency
or an inability to pay debts (see s 344(f) and s 344(h) of the Companies Act).

It is important for you to distinguish between ACTUAL INSOLVENCY and

COMMERCIAL INSOLVENCY.

Whereas in sequestration applications you had to establish actual insolvency (unless you
could establish an act of insolvency), in liquidation applications you merely have to establish
commercial insolvency.

Commercial insolvency means an inability to pay debts as and when they become due in the
ordinary course of business.

7.2 METHODS

[Section 343]

Compulsory Liquidation by Court

Voluntary Liquidation

A creditor's voluntary winding-up

7.3 WINDING-UP BY THE COURT

[Section 344-348]

7.3.1 JURISDICTION

Only the High Court is competent to entertain an application for liquidation:

 where registered office is situated; or

 where main place of business is [Section 12(1)].

Main place of business means "head office" or principal place of business.

7.3.2 THE APPLICANT - LOCUS STANDI

[Section 346]

134 | P a g e
The Application can be made by -

 the Company [s 346(1)(a)]

 by special resolution [Section 344(a)].

NOTE: The passing of a special resolution to wind a company up, is a separate substantive
ground for winding up by the court which may not involve insolvency

 by an ordinary member's / shareholder's resolution (as opposed to special see

Henochsberg's commentary on the Companies Act at p718.)
 by a resolution by the board of directors. See Ex Parte Graaff Reinet Rollermeule
(Edms) Bpk 2000 (4) SA 670 (ECD) and Ex Parte Tangent Sheeting (Pty) Ltd 1993 (3)
SA 488 (W).

(Contra Ex Parte Screen Media Ltd 1991(3) SA 462(W) and Ex Parte Russlyn Construction
(Pty) Ltd 1987(1) SA 33 (D)).

There is thus a conflict in the law in this regard. The Graaff Reinet Rollermeule and Tangent
Sheeting cases follow a more practical approach which will probably be followed in the
future.

If the articles of the company specifically empower the directors to wind up the company
then there is no doubt – they can validly resolve to do so.

 the creditor(s) (including contingent or prospective creditors); [s 346(1)(b)]

That the creditor may also be a contingent one such as a surety, see Wilde and another v
Wadolf Investments (Pty) Ltd and Others 2005 (1) SA 354 (W)

Where the account has been paid by money deposited into the trust account of the creditor's
attorney, that person ceases to be a creditor and has no right to proceed with liquidation
application. See Corigrain Trading SA v Resora (Pty) Ltd 2004 (2) SA 348 (W).

 the member(s) [s 346(1) (c)] (see also Section 103(3)) provided such member who has
been registered as such for at least 6 months prior to the date of application and only
upon the limited grounds set out in Section 346(2)

NOTE: A member cannot apply for liquidation on the basis of inability to pay debts

 jointly by any or all of the parties above; [s 346(1)(d)]

 a provisional judicial manager on the discharge of a provisional judicial management
order; [s 346(1)(f)]

135 | P a g e
  a final judicial manager (if he is of the opinion that the company will not become a
successful concern) on 14 days notice per registered post to all members and creditors
[Section 433(l)];
 the Master - only in the case of a voluntary liquidation; [s 346(1)(e)]
 the Minister in the case of fraud (Section 262 read with Section 258).


7.3.3 CIRCUMSTANCES IN WHICH COMPANY MAY BE LIQUIDATED BY COURT

[Section 344(a) and (h)]

By Special Resolution: [s 344(a)]

 Requirements for special resolution [Section 199]

 Registration thereof [Section 200]
 Lapsing thereof [Section 201]

Commencement of Business before Certificate to Commence Business [Sec 172] has been
issued. [s 344(b)]

Company failed to commence business within one year from incorporation or has suspended
its business for one whole year. [s 344 (c)]

In the case of a public company, the number of members has been reduced to below 7. [s
344(d)]

75% of issued share capital of company has been lost or has become useless for the business
of the company. [s 344(e)]

If an external company has been dissolved in its country of incorporation, or has ceased to
carry on business, or is carrying on business only for purposes of winding-up its affairs. [s
344(g)] See Ward v Smit and others : In Re Gurr v Zambia Airways Corp Ltd 1998(3) SA 175
(SCA).

If it is just and equitable that company should be wound up, e.g. its substratum has
disappeared, e.g. the realisation of its object has become impossible; or in the case of a
deadlock in a 'domestic' company. [s 344(h)]. An applicant who relies upon the just and
equitable provision to obtain a winding-up order must not himself have been wrongfully
responsible for the situation which has arisen - Emphy and Another v Pacer Properties (Pty)
Ltd 1979 (3) SA 363 (D) at 368H.

Company is unable to pay its debts as meant in Section 345. [s 344(f)]

136 | P a g e
NOTE: Only certain of the circumstances mentioned are available to members who apply for
the liquidation of the company -Section 346(2). A member cannot rely on s 344(f) (inability
to pay debt).

A creditor may also in certain circumstances rely on the section 344(h) just and
equitable grounds to liquidate a company. See Sweet v Finbain 1984 (3) SA 441 (W) that
was quoted with approval in Kia Intertrade Johannesburg (Pty) Ltd v Infinite Motors (Pty)
Ltd [1999] 2 All SA 268 (W).

The amount of a creditor's claim is only relevant where he relies on Section 345(1)(a), in
which case it must be N$100.00 or more. Otherwise it can be any amount.

7.3.4 WHEN IS THE COMPANY DEEMED (A REBUTTABLE PRESUMPTION) UNABLE TO PAY ITS
DEBTS

[Section 344(f) read with section 345]

Section 344(f) must be read with section 345(1) which provides that a company will be
deemed to be unable to pay its debts in the following circumstances:

A creditor who has a claim of not less than N$100.00 which is then due, has served on the
company, by leaving at its registered office, a demand requiring the company to pay the sum
and the company has for three weeks thereafter neglected to pay the sum (or to secure for it to
the satisfaction of the creditor) (section 345(1)(a));

Any process issued on a judgment in favour of a creditor of the company is returned by the
Sheriff with an endorsement that he has not found any disposable property or that any
property found did not upon the sale satisfy such process (i.e. a nulla bona return) (section
345(1)(b);

It is proved to the satisfaction of the Court that the company is unable to pay its debts (section
345(1) (c)).

In determining for the purposes of section 345(1) whether a company is unable to pay its
debt, the Court shall also take into account the contingent or prospective liabilities of the
company (section 345(2)). These include, for example, liabilities on suretyships.

For section 345(1) to operate, the debt has to be due and payable. The debt must not be
disputed by company bona fide on reasonable grounds. See Kalil v Decotex 1988 (1) SA 943
(A) and Van Zyl NO v Look Good Clothing CC 1996 (3) SA 523 (SECLD). Although the
respondent bears the onus of showing that the debt is bona fide disputed on reasonable
grounds, the Court will exercise caution before shutting the doors of the court to a
respondent. Porterstraat 69 Eiendomme v PA Venter Worcestor 2000 (4) SA 598 (CPD).

137 | P a g e
There is some doubt as to whether it suffices to post the 345(1)(a) letter by registered mail.
The more cautious approach is to deliver the letter by hand. If you use registered post, you
must prove not only posting but delivery.

The letter has to go to the registered office of the company. If it goes to the wrong address by
mistake, the deeming provision in 345(1)(a) cannot be relied upon. See Van Zyl v Look Good
Clothing 1996 (3) SA 523 (SECLD).

There must be strict compliance with the service requirements of the section in order to rely
on the presumption of inability to pay. See Afric Oil (Pty) Ltd v Ramadaan Investments CC
2004(1) SA 35 (N).

The conclusion of law that a respondent is deemed unable to pay its debts following on its
receipt of a 345(1)(a) letter is one which may be "assailed" by respondent. See Ter Beek v
United Resources CC and Another 1997 (3) SA 315 (CPD).

What is required of section 345(1)(b) to operate, is similar to the requirements of section 8(b)
of the Insolvency Act. The meaning of disposable property is the same, ie. disposable
embraces both movable and immovable property.

Section 345(1) (c) enables the Court to liquidate if it is proved to the satisfaction of the Court
that the company cannot pay its debts. On a consideration of all the affidavits before the
Court the Applicant has to establish a case for the liquidation on a balance of probabilities.
See Van Zyl's case supra.

The company's inability to pay its debts may be proved by adducing any facts from which
one can infer that the company is unable to pay its debts, e.g.

 failure to pay, on demand, a debt which is due;

 a number of creditors have sued the company for payment of monies due to them;
 the company has written a letter asking for time to pay or stating that it is unable to
pay;
 assets of the company are being attached;
 a negotiable instrument of the company has been dishonoured;
 a balance sheet which shows that the company is in fact insolvent (liabilities exceed
assets).

NOTE: the distinction between actual insolvency and commercial insolvency. Actual
insolvency refers to the situation where the company's liabilities exceed its assets.

Commercial insolvency refers to the situation where the company's assets may exceed its
liabilities on paper, but it is unable to pay its debts as and when they fall due. It is sufficient

138 | P a g e
to establish commercial insolvency for the purposes of liquidating a company or close
corporation (whereas in the case of a sequestration one has to prove actual insolvency if one
is not able to establish an act of insolvency).

Factual insolvency of a company is not, however, irrelevant. It may in certain cases be

indicative of the company's inability to pay its debts and therefore be a relevant factor in the
exercise of the Court's discretion whether to grant a winding-up order: Johnson v Hirotech
(Pty) Ltd 2000 (4) SA 930 (SCA).

"The concept of commercial insolvency as a ground for winding-up of a company is

eminently practical and commercially sensible. The primary question which a court is called
upon to answer in deciding whether or not a company carrying on business should be wound-
up as commercially insolvent is whether or not it has liquid assets or readily available assets
available to meet its liabilities as they fall due to be met in the ordinary course of business
and thereafter to be in a position to carry on normal trading - in other words, can the company
meet current demands on it and remain buoyant? It matters not that the company's assets,
fairly valued, far exceed its liabilities.: once the court finds out that it cannot do this, it
follows that it is entitled to, and should, hold that the company is unable to pay its debts
within the meaning of section 345(1) (c) as read with section 344(f) of the Companies Act, 61
of 1973 and is accordingly liable to be wound-up." (per Berman J, Absa Bank Ltd v
Rhebokskloof (pty) Ltd & Others 1993 (4) SA at 436 - 440 F - H)

NOTE: There is no requirement to prove advantage to creditors in a liquidation application.

Section 347 provides that the Court may not refuse to grant a winding-up order on the ground
ONLY that the assets of the company are totally mortgaged or that the company has no
assets. Caltex Oil (SA)(Pty) Ltd v Govender's Fuel Distributors 1996 (2) SA 552 (N) at 557 b-
c.

Liquidation is a discretionary remedy (section 344 - "a company may be wound-up by the
Court"). The quantum of proof for the granting of a final winding-up order is "a clear balance
of probabilities" (per Margo J in Wackrill v Sandton International Removals (Pty) Ltd and
Others 1984 (1) SA 282 (W) at 286A).

The Court has a discretion whether or not to grant a liquidation order even where the
Applicant has established that the company is unable to pay its debts as described in section
345. In Rosenbach & Co (Pty) Ltd v Singh's Bazaars (Pty) Ltd 1962 (4) SA 593 (D), Caney J
held (at 597) that:

"If the company is in fact solvent, in the sense of its assets exceeding its liabilities,
this may or may not, depending on the circumstances, lead to a refusal of a winding-
up order; the circumstances particularly to be taken into consideration against the
making of an order are such as to show that there are liquid assets or readily realisable
assets available out of which, or the proceeds of which, the company is in fact able to
pay its debts."

139 | P a g e
Even where there are realisable assets available, however, the Court's discretion is very
limited where there is a creditor whose debt the company cannot pay and the application is
not opposed by other creditors, since an unpaid creditor who cannot obtain payment and who
brings his claim within the Act is, as against the company, entitled ex debito justitiae to a
winding-up order; he is not bound to give the company time.

See Service Trade Supplies (Pty) Ltd v Dasco & Sons (Pty) Ltd 1962(3) SA 424 (T); SAA
Distributors (Pty) Ltd v Sport and Spel (Edms) Bpk 1973(3) SA 371 (c). But if creditors
oppose the application, the Court should have regard to their wishes. In order for the wishes
of creditors to be considered by the Court, they have to be proved by sufficient evidence.
Vaguely coached letters will not suffice. It has to be clear that the creditors have knowledge
of and have applied their minds to the financial position of the company. Porterstraat 69
Eiendomme v PA Venter Worcestor 2000(4) SA 598 (CPD).

The general rule that an applicant in motion proceedings has to make out his case in his
founding affidavit and may not introduce new matter in his replying affidavit (see Shepherd v
Mitchell Cotts Seafreight (SA) (Pty) Ltd 1984 (3) SA 202 (T) at 205(E)) also applies to
Insolvency and Liquidation matters.

See the case of Ter Beek v United Resources CC and Another 1997 (3) SA 315 (CPD) on the
effect of a counterclaim on an application for liquidation: can be a defence to ward off the
liquidation provided:

 that it is not a case of the applicant seeking to enforce a disputed debt by liquidation
proceedings, and
 the respondent has the onus to show why the court should not exercise its discretion to
grant a winding up order.

A party challenging an application for the winding-up of a company as an abuse of the

process of the Court (on the grounds that the applicant's claim against the company is
disputed) must show: (a) that the claim is disputed, (b) that it is bona fide disputed and (c)
that the grounds for disputing the claim are reasonable. It does not have to be established,
even on the probabilities, that the company would, a matter of fact succeed in any action
which the applicant might bring to enforce the disputed claim. The court need merely be
satisfied that he grounds upon which the claim is disputed are not unreasonable - Hülse -
Reutter v Heg Consulting Enterprises (Pty) Ltd 1998(2) SA208 (c).

7.3.5 CONTENTS OF AFFIDAVIT

Description of applicant [Section 346]: Marital status of Applicant to be given. If Applicant is

a creditor-company, resolution is to be attached.

140 | P a g e
Personal knowledge of allegations in founding affidavit.

The Respondent :

name and registration number of company

share capital - authorized and issued (not essential)

main business

nature of company

registered office/main place of business

Jurisdiction (Should appear from description of Respondent)

Locus standi: if creditor, describe amount, cause and nature of claim. If company itself, deal
with the resolution authorising the proceedings and refer (if relevant) to the articles of
association.

Basis of application [Section 344 read with Section 345]:

If inability to pay debts, why ? - Facts must be given to support the conclusion in law that the
Company is unable to pay its debts;

Bare allegation not sufficient, must be properly proved;

Possibly just and equitable.

Security for costs to be furnished with the Master's office [s 346(3)] and copy of papers to be
lodged with Master.

Copy of the application to every registered trade union that, as far as the applicant can
reasonable ascertain, represents any of the employees of the company.

Copy of the application to employees of the company by affixing it to any notice board to
which the applicant and employees have access inside the premises of the company. (If there
is no access to the premises, by affixing it to the front gate and if that is not possible, to the
front door of the premises.

Copy of the application to the Receiver of Revenue.

[The service on the RoR and labour is peremptory. Compare Standard Bank of SA Ltd v
Sewpersadh and Another 2005 (4) SA 148 (C)]

141 | P a g e
Copy of the application to the company unless the application is made by the company itself
or the court is satisfied that it is in the interests of the company or creditors to dispense with it

Intention to serve on Master [s 346(4)]

Advantage to creditors - not necessary to allege/prove - if however you can prove an

advantage, you should do so because it influences the Court's discretion in your favour.

If a provisional order is insisted upon by the creditor, adequate reasons therefore must be
given in the supporting affidavit. The mere prospect of a composition in terms of section 311
of the Companies Act, 1973 is not by itself a good reason because that can also be achieved
even if the company is not in provisional liquidation. [Practice Manual TPD & WLD - par
FC3.2]

NOTE: The practice in the cape division is almost always to apply for a provisional order
first. The practice in the TPD, however, is that the Court has a discretion to grant a final order
without a provisional order having been issued first. See Johnson v Hitotec (Pty) Ltd 2000(4)
SA 930 (SCA).

Prayers:

In the TPD a final order can usually be issued immediately. Therefore the applicant should
seek such order the court can then on its own decide whether a provisional order should
instead be granted. In the CPD a provisional order should always be sought.

Sometimes a provisional order of winding up is granted so as to give creditors and other

interested parties an opportunity to object on the return day of the rule nisi.

7.3.6 ANNEXURES TO AFFIDAVIT AND SUPPORTING DOCUMENTS

If applicant is a legal entity - resolution authorising deponent to bring application.

CM22 showing Respondent's registered address i.e. if the return of service does not state that
the place of service is the registered office of the company.

Photocopy of nulla bona return, if relied on (must not be older than 6 months otherwise the
application should be served on the Company and it must be shown that the judgment debt
has not as yet been paid).

Financial statements of Respondent or other documentary proof of inability to pay, if relied

on.

Special resolution or ordinary shareholders' resolution by the members of Respondent to

apply for its liquidation, if relied on.

142 | P a g e
If directors are applying, extract from Articles which indicate they have power to do so. (Or
Director's resolution alone if you are going to rely on the Tangent Sheeting case.)

Letter of appointment of (provisional) judicial manager, should he be the applicant.

Letter of demand and proof of service thereof (if applicable).

Certificate by Master as to security for costs (not more than 10 days before date of
application = date when Notice of Motion is signed and filed with the Registrar)

If service of application takes place at company's principal place of business, the correctness
of this fact must be confirmed in a supporting affidavit by someone who can say that he has
personal knowledge thereof.

(Section 346(4A)(b) Companies Act) An affidavit by the person/s who furnished a copy of
the application to the registered trade unions, the employees, the Receiver of Revenue and the
company must be filed before or during the trial setting out the manner in which the copy was
furnished.

7.3.7 FORM OF APPLICATION

Notice of Motion [Form 2(a)]. (Cape practice - Form 2)

Urgent application [Form 2]

(Service must still take place, even if it is informal)

The Practice Manual (par FC 3.1) of the TPD and WLD determines as follows:

The notice of motion should seek final liquidation. The court will decide whether there
nevertheless should first be provisional liquidation bearing in mind (a) that the Companies
Act does not require final liquidation to be preceded by a state of provisional liquidation (nor
that a rule nisi be issued); (b) that there is no need to prove advantage to creditors and
therefore usually no room for opposition by other creditors because advantage to creditors is
lacking. There may, however, be concern (more particularly in the case of "family"
companies or "partnership" companies), that a shareholder is seeking to gain his way against
the wishes of other shareholders who may be unaware of his attempt to liquidate the
company. An applicant should therefore set out to prove absence of reasons for such concern
in such cases where a company requests its own winding up.

Neither an application by a company for its own winding up, nor for its own provisional
winding up need be served on itself - Practice Manual (TPD and WLD) par CB2.

143 | P a g e
In the CPD the usual practice is to seek a provisional order of liquidation and a rule nisi.

Generally cannot have joinder of more than one respondent in a liquidation application. See
Caltex Oil (SA) (Pty) Ltd v Govender's Fuel Distributors 1996 (2) SA 552 (N) and cases cited
at 556 A-E. You may in special circumstances be able to join more than one Respondent in a
liquidation application where there is a complete identity of interests between Respondents -
but it is wiser simply to bring separate applications and then ask to consolidate them if
necessary.

7.3.8 PROCEDURE

See Flow Chart

7.3.9 POWERS OF COURT

[Section 347]

Court always has discretion and is not obliged to liquidate company

Grant provisional/final order. The standard of proof required for a final order is proof on a
balance of probabilities. Ter Beek supra at 339 B.

Dismiss application

Adjourn application (conditionally or unconditionally) e.g. to ascertain wishes of

creditors/members.

Refer matter for hearing of evidence.

Make any other order it deems fit.

Any other provided for in Section 347(3)(4).

As to approach the Court where faced with a dispute of fact on the affidavits, see Reynolds v
Mecklenburgh (Pty) Ltd 1996 (1) SA 75 (W).

NOTE: The practice in the TPD and WLD is that in the event of a provisional order being
made and the Court additionally requiring that other creditors be informed, delivery of a copy
of the order by telefax will in the absence of a different direction by the Court, be acceptable
compliance [Practice Manual, par FC 3.3]

7.3.10 COMMENCEMENT OF LIQUIDATION

[Section 348]

144 | P a g e
Date of presentation to Court of the Application = Date of filing of Notice of Motion with the
Registrar together with proof of compliance with section 364 (4).

Date of commencement of winding-up = date of presentation of application to Court as

defined above First National Bank Ltd v EU Civils (Pty) Ltd 1996 (1) SA 924 (c) at 933 H.

The MV Nantai Princess: Nantai Line (Co) Ltd and Another v Cargo Laden on the MV
Nantai Princess and other Vessels and Others 1997 (2) SA 580 (D).

Filing of application with the Registrar has the same effect as a provisional order provided
that the order is eventually granted [See Section 341(2) read with 348].

Where a provisional order of liquidation is granted at the instance of one creditor but then
discharged with a final order being granted at the instance of another creditor on the same day
as the discharge, the winding-up commences on the date of presentation of the application
which resulted in a final order. Nel v Others NNO v The Master & Others 2000(2) SA 728
(WLD).

7.3.11 URGENT APPLICATIONS

[Luna Meubelvervaardigers 1977(4) SA 135(W) is strictly applied]

May be presented Ex Parte [Form 2].

Service or at least informal notice to the company must still take place.

Utmost good faith must be observed.

All material facts must be disclosed.

Service not required only if it appears to the Court's satisfaction from supporting affidavit
that service will probably frustrate the purpose of the relief sought.

If application is urgent in order to stop a sale in execution, service must be effected on

execution creditor (or his attorney).

In Kwa-Zulu Natal the position is that where the Company itself applies for its own
liquidation, notice of the application must be given to the creditors, albeit in an informal
manner, e.g. by registered post, and the papers must be available for inspection at the
attorney's offices. (See Ex Parte Three Sisters (Pty) Ltd 1986(1) SA 592 (D).

Provisional order only will be granted.

145 | P a g e
7.3.12 CONSEQUENCES OF LIQUIDATION

[Section 341(2) and 348]

Transfer of shares after commencement of winding-up is void.

Disposition of property after commencement of winding-up is void.

All civil proceedings against company are suspended as from date of Court Order until
appointment of a final liquidator [Section 359(1)(a)]

Any attachment/execution put in force against company after commencement of winding-up

is void [Section 359(1)(b)].

Directors cease to be in charge of the company after the company has been liquidated;
however they are still entitled to oppose the granting of a final order after a provisional order
has been made - Absa Bank Ltd v Rhebokskloof (Pty) Ltd and Others 1993 (4) SA 436 (c).

The property of a Company/CC upon its winding-up is to be deemed to be in the custody and
under the control of the Master until a provisional liquidator is appointed and has assumed
office (section 363(1)) and therefore a liquidator is entitled - where property of the
Company/CC was attached and sold in execution before winding-up but which property has
not yet been transferred to the purchase thereof - to repudiate the judicial sale of the property
in the interest of the body of creditors - Schoerie NO v Syfrets Bank Ltd and Others 1997(1)
SA 764 (D & C).

NOTE: Within 4 weeks after appointment of a liquidator, any person wishing to continue
with legal proceedings already initiated against the company must give 3 weeks notice in
writing to the liquidator of intention to continue with such legal proceedings against, failing
which such proceedings will be considered to be abandoned [Section 359].

The liquidators or provisional liquidators of a company which is being wound-up do not

require the consent of the Court to oppose an application which has been brought against the
Company - Turnover Holdings (Pty) Ltd v Saphi (Pty) Ltd 1997 (1) SA 263 (T). Neither do
they need the authority of the Master to approach the court for an order protecting company
property- Fourie NO v Le Roux and Others 2006 (1) SA 279 T.

Sections 417 and 418 of the Companies Act empowers the Master, the Court or the
Commissioner to summon and examine various people to protect company assets and obtain
documentation. A request for documents relating to the affairs of a company prevail over the
right to privacy (even where an ulterior motive for requesting the documents is suspected.)
See Gumede and Others v Subel NO and Others 2006 (3) SA 498 (SCA).

146 | P a g e
In later civil trials, the court has a discretion to allow section 417 and 418 evidence. It may be
used to cross-examine a witness in a subsequent related trial. See Cordiant Trading CC v
Daimler Chrysler Financial Services (Pty) Ltd 2005 (4) SA 389 (D).

In Maritz and Another v Maritz & Pieterse Inc (In Liquidation) 2006 (3) SA 481 (SCA) the
effect of the Liquidation of an Incorporated professional practice on the directors of the
company is discussed.

7.4 VOLUNTARY LIQUIDATION

7.4.1 MEMBER'S VOLUNTARY WINDING-UP

Procedure

By special resolution.

Effective only if registered in terms of Section 200: and if

Prior to registration, security has been furnished to Master for payment of the debts of the
company within 12 months after commencement of winding-up, or

The Master has dispensed with security because –

 the directors declared under oath that the company has no debts;
 the auditor of the company certified that the company has no debts.

Within 28 days after the special resolution has been registered, a certified copy thereof must
be lodged with the Master plus (if a further resolution was passed appointing a liquidator) a
certified copy thereof [Section 356(2)(a)].

In order for the Master to value the adequacy of the security, the company's last balance sheet
must be provided.

Notice of voluntary winding-up must be published in the Government Gazette within 28 days
after special resolution has been registered.

A copy of the special resolution must, within 14 days after registration thereof be transmitted
by the company to:

 the Sheriff of the province where its registered office is;

 the Sheriff of every province in which it appears that the company owns property;

147 | P a g e
  every Registrar of Deeds who maintains a register which shows that the company
owns property;
 every Sheriff who holds property of the company under attachment. [Section 357(3)].

Effective Date

[Section 352]

Date of Registration of the special resolution.

7.4.2 CREDITORS' VOLUNTARY WINDING-UP

[Section 351 and Section 363]

Procedure

Members must adopt a special resolution stating that it is a creditors' winding-up.

The special resolution must be registered in terms of Section 200.

A statement of the company's affairs verified under oath by the directors must serve before
the Meeting where the special resolution is to be adopted [CM100].

Two certified copies thereof to be lodged with Master, within 28 days after the resolution has
been registered

Special resolution to be lodged with Master, within the aforesaid 28 days Publication of
Voluntary winding-up in the Government Gazette, within the aforesaid 28 days

Give effect to Section 357(3) - see 1.8 supra.

NOTE: Principal difference between a members' voluntary winding-up and a creditors'

winding-up is that, in the former, the liquidator exercises his powers subject to directions of
the company in general meeting, whereas in the latter he does so subject to the directions of
the creditors [Section 386(3)(b) and (c)].

It is not competent to have a section 417 enquiry in the case of a creditors' voluntary winding-
up, unless the Master or a creditor applies to Court in terms of s346(1)(e) to have the
company wound up by the Court. South African Philips (Pty) Ltd v The Master 2000(2) SA
841(N).

148 | P a g e
7.5 CLOSE CORPORATIONS

[Section 66 - 81, Act 26 of 1988)

7.5.1 LIQUIDATION BY COURT

[Section 68]

7.5.1.1 Grounds

Members who hold more than one half of votes, sign a written resolution to this effect - the
meeting must have been called for that purpose (68(a)).

CC has not commenced business within one year of its registration or has suspended its
business for one year. [s 68(b)]

CC is unable to pay its debts. [s 68 (c)]

Just and equitable [s 68(d)], e.g. internal disputes make it impossible to carry on business i.e.
a "deadlock" situation exists between members;

It is impossible for CC to achieve its main object;

Those in control are guilty of gross misconduct.

NOTE: An applicant who relies upon the just and equitable provision to obtain a winding-up
order must not himself have been wrongfully responsible for the deadlock situation which has
arisen - De Franca v Exhaust Pro CC (De Franca intervening) 1997 (3) SA 878 at 897 B-C.

7.5.1.2 Inability to pay debts

[Section 69]

A CC is deemed (a rebuttable presumption) to be unable to pay its debts, if -

Failure to pay/secure or compound its debt within 21 days after service of letter of demand [s
69(1)(a)] on the registered office of the CC.

Nulla bona return in respect of disposable property [s 69(1)(b)].

Proof to the satisfaction of the Court of inability to pay debts i.e. commercial insolvency or
its liabilities exceed its assets [s 69(1) (c)].

NOTE: The creditor's claim must be for at least N$200.00, which is due and payable, where
the creditor relies on s 69(1)(a).

149 | P a g e
There must be strict compliance with the service requirements of the section in order to rely
on the presumption of inability to pay. See Afric Oil (Pty) Ltd v Ramadaan Investments CC
2004(1) SA 35 (N).

The deemed inability referred to in Section 69 may be rebutted by the CC - Ter Beek v United
Resourced CC and Another 1997 (3) SA 315 (c) at 331F.

7.5.1.3 Nature of Proceedings

Motion proceedings are specifically prescribed for the winding-up of close corporations (see,
Ter Beek v United Resources CC and Another 1997 (3) SA 315 (c) at 328 I) and therefore it
must subject to viva voce evidence in appropriate circumstances, be decided on the papers.

7.5.1.4 Applicant

[Section 66]

[Section 346 excluding 346(2) of the Companies Act applies]

[See Liquidation of Companies: "The Applicant", supra]

NOTE: A member of a close corporation is entitled to apply for liquidation even if he is a

member for a period of less than six months; and not only on the limited grounds referred to
in Section 346(2) of the Companies Act, i.e. a member of a close corporation may rely on the
inability of the close corporation to pay its debts.

7.5.1.5 Jurisdiction

[Section 7]

High Court has concurrent jurisdiction with Magistrate's Court.

Registered office or main place of business must be within Court's jurisdiction.

7.5.1.6 Procedure

Process same as in the liquidation of a company.

When you choose whether to bring the application in the High Court or the Magistrates
Court, consider the cost implications carefully. It is sometimes difficult to obtain costs on the
High Court scale if the matter could have been brought in the Magistrates Court.

The decision in Rynders v Bankorp Ltd 1995 (2) SA 494 is to the effect that an application for
liquidation of a close corporation in the Magistrate's Court cannot be brought ex parte and the
procedure in Rule 55 (1) (with notice of 10 days to the Respondent) has to be followed. [This

150 | P a g e
decision does not deal with rule 9(14) of the Magistrate's Court Rules which enables the
Court to shorten the notice period in applications on good cause shown].

7.5.1.7 General

The Court's discretion in regard to the winding-up of a CC operates even in those instances
where the application for winding-up is based on a deemed inability on the part of the CC to
pay its debts.

The practice under our common law which permits the suspension of judgment on an
admitted liquid claim in convention pending finalisation of an illiquid claim in reconvention,
also applies to winding-up proceedings - Ter Beek v United Resources CC and Another 1997
(3) SA 315 (c) at 333C - 334C, subject to the qualifications that:

The applicant should not be using liquidation proceedings to enforce a debt which is the
subject of a bona fide dispute

The Respondent bears the onus to show the Court why it should suspend judgment on the
main claim pending finalisation of the counterclaim and not grant a liquidation order
immediately.

7.5.1.8 Proof of Service

The service of the application on the respondent Close Corporation, the registered trade
unions, the employees and the Receiver of Revenue are the same as for companies.

Section 346(4A)(b) of the Companies Act requires an affidavit by the person/s who furnished
a copy of the application to the registered trade unions, the employees, the Receiver of
Revenue and the company to be filed before or during the trial, setting out the manner in
which the copy was furnished.

[The service on the Receiver of Revenue and labour is peremptory. Compare Standard Bank
of SA Ltd v Sewpersadh and Another 2005 (4) SA 148 (C)]

7.5.2 VOLUNTARY LIQUIDATION

[Section 67]

Member's or Creditor's Voluntary Liquidation

All the members must attend a meeting called for this purpose and sign a resolution that the
corporation be wound-up voluntarily by members or creditors, as the case may be.

151 | P a g e
Resolution takes effect once it has been registered (in duplicate) with the Registrar within 28
days after date of passing of resolution. Failing registration within 90 days of the passing of
the resolution, it lapses.

All other provisions of the Companies Act referred to above, apply.

FLOW CHART

Take full instructions from client to apply for the liquidation of the Respondent giving special
attention to the following:

Whether the applicant has locus standi

Whether the Court has jurisdiction over the Respondent

What the Applicant's matrimonial property system is

Basis for application

Take deposit from client of approximately N$5000.00

Do search in respect of Respondent if all particulars are not available e.g. registered address
and obtain proof of registered office from Registrar's Office (CM22).

Draft affidavit for applicant.

Arrange for attesting of affidavit.

Supporting Affidavit to be drafted if service is to take place at principal place of business: -

someone who can verify under oath the whereabouts of same.

Draft Notice of Motion.

152 | P a g e
Prepare draft Provisional Winding-up order (if applicable)

Lodge security [Section 346(3)]

Uplift certificate by Master that security has been given.

Ensure that all annexures have been obtained and are attached to the affidavit.

Complete cover for papers.

Make adequate number of copies of application.

Affix stamps to the original (N$5.00)

Have application issued and filed with Registrar

Arrange for service on Respondent by Deputy Sheriff (not necessary if company or CC is

applicant or if reliance is placed on nulla bona return which is not more than six months old).

Serve on Master

Ascertain that return of service is correct.

Pay Deputy Sheriff.

153 | P a g e


Uplift and lodge Master's report (if any) in Court file [Section 346(4)(b).

Furnish copies to registered trade unions, employees and Receiver of Revenue.

Draft and file affidavit by person who furnished copies to registered trade unions, employees
and Receiver of Revenue stating how it was furnished.

Instruct Attorney or Advocate and deliver brief.

Attend Court.

Report to client.

Uplift brief.

Pay the Attorney or Advocate that was instructed.

Uplift provisional liquidation order at Registrar (if applicable). (If company is applicant, no
service is necessary although publication may still be necessary).

Arrange for service of provisional liquidation order as prescribed in the order itself
(publication in GG and daily newspapers and service at registered office).

Check that return of service of provisional liquidation order is correct.

154 | P a g e


Obtain Government Gazette + newspaper and return of service and draft affidavit that there
has been compliance with provisional order.

Pay Deputy Sheriff

Check that original provisional liquidation order and affidavit with tear sheets and return of
service are in Court file

Instruct Attorney or Advocate to appear on return day. An extension of a return day will only
be allowed if an affidavit has been timeously filed explaining the fairness of an extension -

Attend Court

Uplift Final Court order

Report to client

Uplift brief

Pay the instructed Attorney or Advocate

Draft bill of costs for taxation

Ascertain who was appointed liquidator

155 | P a g e


Despatch consent to taxation [Rule 70(4)(b)].

Submit bill of costs for taxation

Claim costs from Liquidator and account to client.

EXAMPLES

ORDER

STANDARD - (T) PROVISIONAL WINDING-UP:

COMPANY and CLOSE CORPORATION

IT IS ORDERED:

1 That the abovementioned Respondent* Company# is hereby placed under provisional

winding-up.

respondent/applicant

company/close corporation

2 That all persons who have a legitimate interest are called upon to put forward their reasons
why this court should not order the final winding up of the Respondent* Company# on the
day of 19 at 10:00.

3 That a copy of this order be forthwith served on the Respondent* at its registered office and
be published once in the Government Gazette (##... and in a daily newspaper which circulates
through Windhoek)

## optional: The alternative is a manual choice to insert e.g. the name of a newspaper.

4 That this order be served by the Sheriff of this Honourable Court on the Respondent
personally and on all the registered trade unions representing the employees of the respondent
(being…), the employees of the Respondent, and the Receiver of Revenue as prescribed.

156 | P a g e
When required by the court, add: ("5. That a copy of this order be forthwith forwarded to
each known creditor by prepaid registered post or electronically receipted by telefax
transmission.")

157 | P a g e
NOTICE OF MOTION

(U) FINAL WINDING-UP: COMPANY

IT IS ORDERED:

That the above-named Respondent* Company# be and is hereby placed under final winding-
up.

IN THE HIGH COURT OF NAMIBIA

CASE NO:

In the matter between

JOE BLOGGS Applicant

and

DEF (PTY) LTD Respondent

___________________________________________________________________________

NOTICE OF MOTION

___________________________________________________________________________

BE PLEASED TO TAKE NOTICE that the above-named Applicant intends to make

application to the above Honourable Court on Friday the 12th day of October 1996 at 10:00 or
so soon thereafter as Counsel may be heard for an Order in the following terms:-

1 Dispensing with the forms and service provided for in the Rules of the above Honourable
Court and entertaining this matter as one of urgency in terms of Rule 6(12).

2 That the Respondent be placed under a provisional order of liquidation in the hands of the
Master of the above Honourable Court.

3 That a rule nisi be issued calling upon Respondent and all persons interested to show cause,
if any, on Friday 30th November 1996, by the above Honourable Court, as to why Respondent
should not be placed under a final order of liquidation;

4 That service of this Order be effected by:

4.1 the Sheriff at the registered office of the Respondent.

4.2 one publication in each of The Namibian and Die Republikein newspapers.

158 | P a g e
4.3 the Sheriff of this Honourable Court on all the registered trade unions representing the
employees of the Respondent (being...)

4.4 the Sheriff of this Honourable Court on the employees of the respondent

4.5 the Sheriff of this Honourable Court on the Receiver of Revenue as prescribed in the
Insolvency Act

5 That the costs of this application be costs in the liquidation.

6 Such further and/or alternative relief as the above Honourable Court may deem fit in the
premises.

TAKE FURTHER NOTICE that the affidavit of attached hereto will be used in support
hereof.

Kindly place the matter on the roll accordingly.

DATED AT Windhoek on this day of OCTOBER 1996.

__________________

Applicant's attorneys

6th Floor, 2 Long Street

Windhoek

TO : THE REGISTRAR

HIGH COURT OF NAMIBIA

AND TO : THE MASTER

HIGH COURT OF NAMIBIA

AND TO : Registered Office

C/O Aiken & Peat, Levinson Arcade

21 Riebeeck Street

Windhoek

159 | P a g e
AFFIDAVIT

IN THE HIGH COURT OF NAMIBIA

CASE NO:

In the matter between:

Applicant

and

Respondent

___________________________________________________________________________

AFFIDAVIT

___________________________________________________________________________

I, the undersigned,

do hereby make oath and say that:

1. I am the Applicant herein, being an adult male businessman of Windhoek.

2. The facts herein contained are, save where the context otherwise indicates, within my
personal knowledge.

3. The Respondent is (PTY) LIMITED, a company having a share capital, duly registered and
incorporated in accordance with the company laws of Namibia and which:

3.1 bears the registration number

3.2 has its registered office at Levinson Arcade, 21 Riebeeck Street, Windhoek;

3.3 has its principal place of business within the jurisdiction of this Honourable Court at
Tarquin House, 45 Shortmarket Street, Windhoek where it conducts business as a supplier of
office furniture and equipment.

4. I am the sole shareholder of the Respondent, as well as being the sole director of the
Respondent.

160 | P a g e
5. I am also a creditor of the Respondent inasmuch as I have a loan account in the
Respondent in an amount of N$242 000.00.

6. Inasmuch as I am both a member and a creditor of the Respondent, it is respectfully

submitted that I have the necessary locus standi to bring this application in terms of Sections
346(1)(b) and 346(1)(c) of the Companies Act, Act No. 61 of 1973 ("the Act*).

7. It is respectfully submitted that the Respondent should be wound up for the following
reasons:

7.1 The Respondent is unable to pay its debts as contemplated in Section 344(f) as read with
Section 345(1)(c) of the Act;

7.2 It would be just and equitable for the Respondent to be wound up.

8 In amplification of my allegation in paragraph 7.1 above I state as follows:

8.1 As the managing director of the Respondent, I have firsthand knowledge of the financial
affairs of the Respondent;

8.2 To the best of my knowledge and belief, the Respondent's financial position as at 2
October 1992 is as set out hereunder

ASSETS

Stock N$85 000.00

Fixed Assets N$5 000.00

Debtors N$62 000.00

N$152 000.00

LIABILITIES

Trade Creditors N$230 000.00

First National Bank (overdraft) N$62 000.00

Director's loan account N$225 000.00

N$517 000.00

9. As is evident from the aforegoing:

161 | P a g e
9.1 The Respondent's liabilities substantially exceed its assets.

9.2 The Respondent does not have the necessary cash on hand or current assets with which to
pay its trade creditors.

9.3 The Respondent is both commercially insolvent in that it is unable to pay its debts, as
well as being actually insolvent in that its liabilities exceed its assets.

10. In explanation of the Respondent's financial situation I set out the following facts by way
of background:

10.1 During the last three years the recessionary economic climate prevailing in Namibia has
caused large office furniture suppliers, such as Nictus, to sell directly to the public whereas
they used previously to sell exclusively through dealers such as the Respondent. This has
resulted in a considerable loss of business for the Respondent which is unable to compete
with the lower prices which these larger concerns are able to offer.

10.2 As a result the Respondent has suffered a steady decrease of turnover, from an average
of N$350 000.00 per month in 1989 to N$100 000.00 per month in 1992.

10.3 When the Respondent's declining fortunes became apparent to me approximately a year
ago, I injected a substantial sum of my personal funds into the Respondent in the hope that
the business would improve and that the Respondent would be able to trade out of the "bad
patch".

10.4 It has, however, become evident to me that the business of the Respondent has not
improved during the last twelve months, as I had hoped, but has, in fact, declined. I see no
prospect in the foreseeable future of an increase in the Respondent's turnover which would
improve its financial position and enable it to pay its creditors.

11. Inasmuch as it is apparent that the Respondent is not only commercially insolvent in that
it is unable to pay its debts, but is actually insolvent in that its liabilities exceed its assets, it is
respectfully submitted that the Respondent is liable to be wound up in terms of Section 344(f)
as read with Section 345(1)(c) of the Act.

12. It is further respectfully submitted that it would be just and equitable for the Respondent
to be wound, up for the reasons set forth hereunder.

12.1 A liquidator would be in a position to take immediate control of the Respondent's

business, to sell the Respondent's assets and distribute the proceeds thereof to the
'Respondent's creditors in accordance with the legal order of preference;

12.2 The Respondent's creditors would be prevented from incurring unnecessary expense in
attempting to recover the Respondent's indebtedness to them by way of legal proceedings.

162 | P a g e
13. Due security has been given to the Master of the above Honourable Court for payment of
all fees and charges necessary for the prosecution of all winding up proceedings and of all
costs of administering the Respondent in liquidation until a provisional liquidator has been
appointed, as will appear from the Master's report to be filed herewith.

14. A copy of this application will be lodged with the Master of this Honourable Court and
furnished to the Respondent personally, all the registered trade unions representing the
employees of the respondents (being…), the employees of the Respondent, and the Receiver
of Revenue as prescribed.

15. I, accordingly, humbly pray that the above Honourable Court may deem fit to grant an
order in terms of the Notice of Motion to which this affidavit is annexed.

I hereby certify that on the day of OCTOBER1992, in my presence at WINDHOEK the

deponent signed this affidavit, and swore and acknowledged that he knew and understood the
contents thereof, had no objection to taking this oath and considered the oath to be binding,
on his conscience and uttered the words " I swear that the contents of this declaration are true,
so help me God".

COMMISSIONER OF OATHS

163 | P a g e
MASTER'S REPORT

IN THE HIGH COURT OF NAMIBIA

Case No.

In the matter between:

Applicant

and

Respondent

___________________________________________________________________________

MASTER'S REPORT

___________________________________________________________________________

A copy of the Applicant's petition with annexures has been lodged with me as required by
section 346(4)(a) of Act 61 of 1973.

I HEREBY CERTIFY THAT due security has been found for payment of all fees and
charges necessary for the prosecution of all winding-up proceedings end of all costs of
administering the Company in liquidation until a Provisional Liquidator has been appointed
and if no Provisional Liquidator is appointed of all fees and charges necessary for the
discharge of the Company from winding-up.

I know of no facts which would justify the Court in postponing the bearing
or dismissing the petition.

A copy of this report has been transmitted to the applicant's agent and to
the Company.

ASST. MASTER OF THE HIGH COURT

WINDHOEK

164 | P a g e
AFFIDAVIT 2

IN THE HIGH COURT OF NAMIBIA

CASE NO:

In the matter between:

Applicant

and

Respondent

___________________________________________________________________________

AFFIDAVIT

___________________________________________________________________________

I, the undersigned,

do hereby make oath and say that.

1. I am a candidate attorney in the employ of Inc., attorneys of record for the Applicant
herein.

2. The facts herein contained are, save where the context otherwise indicates, within my
personal knowledge.

3. On 8 October 1992 at approximately 10h00, I served a copy of the Notice of Motion and
Founding Affidavit of on the receptionist at the registered office of the Respondent, being the
offices of accountants KPMG Aiken & Peat, Levinson Arcade, 21 Riebeeck Street,
Windhoek and explained the nature and exigency of the document to them.

4. On 9 October 1992 I served a copy of this Application notice and supporting documents on
ZYX Trade Union, being the only registered trade union representing the employees of the
respondents. I served it by posting the copies to its head office at 57 Plein Street, Windhoek.

5. On 9 October 1992 I furnished a copy of this Application notice and supporting documents
on the employees of the Respondent by affixing it to the front door of the premises of the
respondent at (physical address of company). The respondent company has no front gate or
notice boards on its premises.

165 | P a g e
6. On 9 October 1992 I served a copy of this Application notice and supporting documents on
the Receiver of Revenue by posting the copies to its Windhoek office at Private Bag…,
Windhoek.

I hereby certify that on the 8th day of OCTOBER 1992, in my presence at WINDHOEK the
deponent signed this affidavit, and swore and acknowledged that she knew and understood
the contents thereof, had no objection * to taking this oath and considered the oath to be
binding on her conscience and uttered the words "I swear that the contents of this declaration
are true, so help me God".

COMMISSIONER OF OATHS

166 | P a g e
BOND OF SECURITY

In the matter of the application of -

IN THE HIGH COURT OF NAMIBIA

In the matter between

and

KNOW ALL MEN BY THESE PRESENTS THAT

INC of

Floor, Long Street

WINDHOEK

are held and firmly bound to the Master of the High Court for a sum not exceeding TEN
THOUSAND DOLLARS (N$10,000.00) to be paid on demand to the said Master, or his
order, in case the above named Applicant shall fail when required by the said Master to pay
all fees and charges necessary for the prosecution of all liquidation proceedings and of all
costs of administering the Respondent in, the above matter until the appointment of a
liquidator, of all fees and charges necessary for the discharge of the Respondent from
liquidation, which payment to be well and truly made, we bind ourselves firmly by these
presents, and we expressly renounce the beneficium ordinis seu excussionis, the meaning and
effect of which we acknowledge ourselves to be fully acquainted.

DATED at WINDHOEK on this 6th day of OCTOBER 1992

AS WITNESSES:

1.

2.

DIRECTOR

167 | P a g e
RETURN OF SERVICE

IN THE HIGH COURT OF NAMIBIA

CASE NO

In the matter between

MR EUGENE DEREK.BENADIE. .APPLICANT

and

URBAN TRADING (PTY) LIMITED – RESPONDENT

___________________________________________________________________________

RETURN OF SERVICE

___________________________________________________________________________

On the"20th day of November 1995 at 15h00 and at

25 GRISWOLD ROAD 9 TOWN SQUARE, WINDHOEK

The annexed NOTICE OF MOTION, AFFIDAVIT & ANNEXURES was served on the
Respondent Company by affixing a copy of the original to the main door at the above address
pursuant to being unable to find a responsible employee or other person thereat willing to
accept service, being the registered office of Respondent Company, in terms of Rule 4(1) (a)
(v).

At the address of service there is no registered office notice board indicating that the given
address is Respondent Company's registered office, in terms of the Companies Act.

Please note given address is a residential address.

Dated at Windhoek this 21st November 1995

HACK STUPEL AND ROSS

P 0 BOX 2000

WINDHOEK

Your ref * MR STUPEL/ML VS 7*2311

Our ref.: 002/1694B9/TH35

168 | P a g e
(To comply with section 346A (2) of the Companies Act, similar returns should also be filed
in respect of service of the order on every applicable registered trade union, the employees,
the Receiver of Revenue. The Sheriff must also state on the relevant return that he or she
established whether the employees of the company are represented by a registered trade
union and whether there is a notice board inside the premises of the company to which the
employees have access.)

169 | P a g e
NOTICE OF MOTION

IN THE HIGH COURT OF NAMIBIA

Case Number:

In the matter between:

Applicant

and

Respondent

___________________________________________________________________________

NOTICE OF MOTION

___________________________________________________________________________

1. BE PLEASED to take notice that EUGENE DEREK BENADIE (hereinafter referred to as

the Applicant) intends to make Application to the above Honourable Court for an Order in
the following terms: -

1.1. That the abovementioned Respondent Company be and hereby is placed under
provisional liquidation up in the hands of the Master of the High Court.

1.2. That a Rule Nisi be issued calling upon all persons concerned to appear and to show
cause. if any, to this Court, on a date to be determined by the above Honourable Court, why
the said Respondent Company should not be placed under final winding-up.

1.3. That a copy of this Rule Nisi be served on the Respondent Company at its registered
office and be published forthwith once in the Government Gazette and in the Citizen and that
this order be served by the Sheriff of this Honourable Court on all the registered trade unions
representing the respondent's employees (being…), the employees of the Respondent, and the
South African Revenue Services as prescribed in the Insolvency Act.

1.4. That the Costs of this Application be paid out of the assets of the Respondent Company.

1.5. Further and/or alternative relief.

2. TAKE FURTHER NOTICE that the Affidavit of EUGENE DEREK BENADIE together
with annexures thereto, will be used in support of this Application.

170 | P a g e
3. TAKE * FURTHER NOTICE that the Applicant has appointed Hack Stupel & Ross,
Church Square, Windhoek at which address it will accept notice and service of all processes
in the proceedings.

4. TAKE FURTHER NOTICE that if you intend opposing this Application you are required:

4.1. notify the Applicant's Attorneys in, writing of your intention to do so on or before
MONDAY 23 NOVEMBER 1995 and in such notice to appoint an address referred to in
Rule 6 (5) (b) at which you will accept notice and service of all documents in these
proceedings ; an

4.2. within fifteen (15) days of the service of the notice referred to in paragraph4A above, to
file your answering affidavit, if any.

5. If no such notice of intention to oppose be given, the Application will be made on

FRIDAY, the, 27th day of NOVEMBER 1995 at 10H00 or so soon thereafter as Counsel may
be heard.

DATED AT WINDHOEK ON THIS THE 23RD DAY OF OCTOBER 1995.

_______________________________

(snd) V STUPEL

HACK STUPEL & ROSS ATTORNEYS

2nd Floor, Standard Bank Chambers

Church Square

Windhoek

Ref : Mr Stupel

AND TO: THE MASTER OF THE HIGH COURT

NAMIBIA

AND TO:

URBAN TRADING (PTY) LIMITED Having it's registered office at :

25 GRISWOLD ROAD

171 | P a g e
TOWN SQUARE

WINDHOEK

Service by Sheriff

172 | P a g e
AFFIDAVIT 3

IN THE HIGH COURT OF NAMIBIA

In the matter between

Case Number:

MR EUGENE DEREK BENADEE Applicant

And

URBAN TRADING (PTY) LTD Respondent

___________________________________________________________________________

AFFIDAVIT

___________________________________________________________________________

I, the undersigned

EUGENE DEREK BENADIE

do hereby make oath and say . -

1 I am the Applicant in this matter and the facts and allegations contained herein are true and
correct.

2. I am a Chartered Accountant and I carry on business under the name and style of EUGENE
DEREK BENADIE C.A at 25 Griswold Road, Town Square.

3. The Respondent is URBAN TRADING (PTY) LIMITED, a duly registered Company with
limited liability in accordance with the Company Laws of Namibia, and having it's registered
office at 25 Griswold Road, Town Square as will appear from a Certificate of the Registrar of
Companies annexed hereto marked "A".

4. The Respondent has its registered office and carries on business within the jurisdiction of
the above Honourable Court.

5. The Respondent is truly and lawfully indebted to me in the sum of N$2000.00 in respect of
professional serviced rendered by me to Respondent at latter's special instance and request
which amount is due owing and payable and for which amount I hold no security.

173 | P a g e
6. On the 10th of August 1995, I caused written demand to be served upon the Respondent at
its registered office, for payment of the said sum of N$2000.00 and the Respondent has for
three weeks thereafter neglected to pay the sum, or to secure or compound for it to my
reasonable satisfaction. I attach hereto marked "B" a copy of the written demand to which I
respectfully refer the above Honourable Court. I also attach hereto marked "C" the Sheriffs
return of service wherein he confirms that he served the said Annexure "B" upon the
Respondent at its registered office and I respectfully refer the above Honourable Court to the
said return of service.

7. I respectfully state that by virtue of the aforegoing the Respondent is in terms of Section
345 (1)(a)(i) of the Companies Act No 61 of 1973 as amended, unable to pay its debts and
that under the circumstances, the Respondent is liable to be wound up by the above
Honourable Court pursuant to the provisions of Section 344 (f) of the Companies Act No 61
of 1973 as amended.

8. Attached hereto, marked "D" is a certificate by the Master of the High Court that security
has been found for payment of all fees and charges necessary for the prosecution of all
winding-up proceedings and costs of administering the Respondent in liquidation until a
liquidator is appointed, or if no Provisional Liquidator is appointed, of all fees and charges
necessary for a discharge of the Respondent from the winding-up.

9. A copy of this application will be lodged with the Master of this Honourable Court and
furnished to the Respondent personally, all the registered trade unions representing the
employees of the respondents (being…), the employees of the Respondent, and the Receiver
of Revenue as prescribed.

10. I accordingly pray for an Order in terms of the Notice of Motion herein.

DEPONENT

I CERTIFY THAT THE Deponent has acknowledged that he knows and understands the
contents this affidavit and finds same binding on his conscience. Signed and swore before me
at Pretoria on this the 7thday of October 1995.

COMMISSIONER OF OATHS

174 | P a g e
LETTER OF DEMAND

LETTERHEAD

Dear Sir

RE: OUR CLIENT: MR EUGENT DEREK BENADIE

We are advised by above client that you are indebted to him in the sum of N$2000.00 in
respect of professional services.

We are advised that the amount aforementioned is due, owing and payable and the purpose of
this letter is to advise you that should payment of the aforesaid amount not be received by
yourselves or our clients, within three (3) weeks from date of receipt hereof, or should you
not secure or compound for it within the aforesaid three (3) week period, our clients will take
further steps against you for recovery thereof.

This letter of demand is being sent to you as a demand contemplated in terms of Section 345
(1)(a)(1) of the Companies Act as amended.

The original hereof is being hand delivered to you by the Sheriff.

YOURS FAITHFULLY

HACK STUPEL & ROSS

NB NOTES:

1. If the Letter of Demand is in respect of a credit agreement, section 129 and 130 of the
National Credit Act 34 of 2005 apply. Section 130 prohibits a credit provider to
approach the court if the section 129 proposal has not been made to the consumer in
debt.

The above letter would then be adapted as set out below:

LETTERHEAD

Dear Sir

RE: OUR CLIENT: MR EUGENT DEREK BENADIE

We are instructed by above client of 123 Sudoku Avenue, Wernhill Park, that you are
indebted to him in the sum of N$2000.00 in respect of professional services.

175 | P a g e
You owe our client the above amount of two thousand rand, being the balance due in respect
of a credit agreement for services rendered to you during or about 3 January 2008. You have
been in default since 31 January when the payment became due.

The purpose of this letter is to advise you that should payment of the aforesaid amount not be
received by yourselves or our clients, within three (3) weeks from date of receipt hereof, or
should you not secure or compound for it within the aforesaid three (3) week period, our
clients will take further steps against you for recovery thereof.

This letter of demand is being sent to you as a demand contemplated in terms of Section 345
(1)(a)(1) of the Companies Act as amended.

The original hereof is being hand delivered to you by the Sheriff.

We specifically draw your attention to the Credit Agreements Act and propose that you refer
the credit agreement to a debt counsellor, alternative dispute resolution agent, consumer court
or ombudsman with jurisdiction, with the intent that the parties resolve any dispute under the
agreement or develop and agree on a plan to bring the payments under the agreement up to
date.

Yours faithfully

HACK STUPEL & ROSS

2. While the matter is before a debt counsellor, alternative dispute resolution agent,
consumer court or an ombudsman with jurisdiction, section 130(3) prohibits the court
from determining a matter. If the letter of demand is drafted after the debt counselling
has failed, the above letter should be adapted as follows:

LETTERHEAD

Mr [Debtor's/Consumer's name]

[Debtor's/Consumer's address]

AND TO:

Mrs OPQ

The Debt Counsellor [Insert the official address of the debt counsellor as provided by the
debt counsellor]

AND TO:

The National Credit Regulator

176 | P a g e
127 – 15th Road

Auspannplatz

Windhoek

BY REGITERED MAIL or BY HAND-

Dear Sir

RE: OUR CLIENT: MR EUGENT DEREK BENADIE AND YOURSELF:

[In particular, your default to pay your outstanding debt and notice to terminate the debt
review]

We are instructed by above client of 123 Sudoku Avenue, Wernhill Park, that you are
indebted to him in the sum of N$2000.00 in respect of professional services.

Notice is hereby given that the debt review that you applied for on 2 February 2008 is hereby
terminated.

You owe our client the above amount of two thousand rand, being the balance due in respect
of a credit agreement for services rendered to you during or about 3 January 2008. You have
been in default since 31 January when the payment became due.

The purpose of this letter is to advise you that should payment of the aforesaid amount not be
received by yourselves or our clients, within three (3) weeks from date of receipt hereof, or
should you not secure or compound for it within the aforesaid three (3) week period, our
clients will take further steps against you for recovery thereof.

This letter of demand is being sent to you as a demand contemplated in terms of Section 345
(1)(a)(1) of the Companies Act as amended.

The original hereof is being hand delivered to you by the Sheriff.

3. Remember that the Credit Agreements Act does not apply if:

3.1 the agreement is not a credit agreement;

3.2 the consumer is a juristic person with assets or annual turnover exceeding one million
rand; or

3.3 the consumer is a juristic person and the transaction has a value which exceeds
N$250 000.00; or

3.4 the consumer is a juristic person and the transaction is a mortgage agreement

177 | P a g e
8. JUDICIAL MANAGEMENT

Chapter 15 of the Companies Act, 1973

Sections 427 – 440

8.1 INTRODUCTION

Judicial Management differs principally from winding-up because winding-up intends to

bring about the dissolution of the company, whilst Judicial Management intends to save the
company.

The process of Judicial Management is intended to be a means for affording a Company time
to surmount its problems where it has suffered a temporary setback.

8.2 APPLICANT

[Section 427(2)]

Any person entitled to apply for liquidation, can apply for Judicial Management (See
Liquidation II2 par).

8.3 JURISDICTION

The position is the same as with an application for liquidation.

(See Liquidation - II1)

8.4 GROUNDS FOR JUDICIAL MANAGEMENT

[Section 427(1)]

By reason of mismanagement (or for any other cause e.g. war, strikes, labour unrest, etc.)

The Company must be unable to pay its debts or meet its obligations (e.g. to construct a
building or manufacture and supply something); and

Be prevented from becoming a successful concern.

Reasonable probability must exist at the time when the provisional order is sought that if the
company is placed under judicial management -

The Company will be able to pay all of its debts and meet all its obligations within a
reasonable time; and

178 | P a g e
Will become a successful concern, i.e. it will be able effectively to carry on its operations in
accordance with its main object and yield a return to its shareholders.

It is just and equitable to grant a judicial management order - this is to be determined with
reference to the members and creditors of the Company in all the circumstances of the case.

These conditions are cumulative and the onus of establishing them rests on the applicant for
judicial management.

See Ben-Tovim v Ben-Tovim and Others 2000(3) SA 325 (CPD).

The Courts are generally reluctant to act against the wishes of creditors, particularly major
creditors: Le Roux Hotel Management (Pty) Ltd v E Rand (Pty) Ltd 2001 (2) SA 727 (CPD).
Judicial Management is a discretionary remedy. A court may grant and order for judicial
management only if it appears to the Court that it would be just and equitable to do so. It is a
special privilege given in favour of the company and will only be authorised in very special
circumstances.

Porterstraat 69 Eiendomme v PA Venter Worcester 2000(4) SA 598 (CPD).

8.5 CONTENTS OF AFFIDAVIT

Locus standi of applicant [Section 346]

Personal knowledge

The Respondent:

Name and registration number

Share capital - authorised and issued

Main business

Nature of company

Registered office/principal place of business

Jurisdiction

Basis of application [Section 427] : facts showing that there has been mismanagement:

 Degree of mismanagement
 Nature of mismanagement
 Management levels where mismanagement occurred

179 | P a g e
  if you rely on any other cause, full particulars thereof, e.g. temporary illiquidity,
liquidity, financial difficulties because of strikes or other labour disputes etc

Proof that there is a reasonable probability that the company can become a successful
concern, and can pay its debts and meet its obligations.

That it is just and equitable in the interests of the shareholders and creditors that a judicial
management order be granted.

Prayers

8.6 FORM OF APPLICATION AND PROCEDURE

The position is the same as with an application for liquidation (See Liquidation - par II.6 and
par II.7)

8.7 FORM OF COURT ORDER

[Section 428]

A provisional judicial management order is usually granted with a return day.

See Form 2Y

Provisional order must be served on the company at its registered office and published in the
Government Gazette and a local newspaper.

The Registrar of the High Court forwards a copy of the order to the Master and the Registrar
of Companies [Section 14]

8.8 RETURN DAY AND POWERS OF COURT

[Section 432]

The return day will not be later than 60 days after date of provisional order.

On the return day the Court considers:

The opinion and wishes of creditors and members [Section 431(3)]

Provisional judicial manager's report [Section 430 (c)]

180 | P a g e
Master's report [Section 346(4)(b) read with Section 427(2)(3)]

Registrar of Companies' report [Section 14]

The number of creditors who did not prove claims and the amounts and nature of their claims

In terms of Section 432(2) the Court is empowered to make any one of the following orders:

 a final judicial management order

 discharge the provisional order
 extend the return day
 liquidate the company


8.9 DUTIES OF THE JUDICIAL MANAGER

See sec 433(1)

8.10 CONSEQUENCES OF JUDICIAL MANAGEMENT

Company is granted a moratorium

Control by Directors is replaced with control by Judicial Manager

FLOW CHART

Take full instructions from client to apply for the judicial management of the Respondent and
give special attention to the following:

 whether he has locus standi

 whether the Court has jurisdiction over the Respondent
 what the Applicant's matrimonial property system is.
 basis for application.

Take deposit from client of approximately N$5000.00

181 | P a g e


Do company search in respect of Respondent if all particulars are not available, e.g.
registered address and obtain copy of CM22.

Draft Affidavit for applicant with the aid of the check lists.

Arrange for attestation of the affidavit.

Supporting affidavit if service to take place at principal place of business

Draft Notice of Motion

Ensure that all annexures have been obtained and are attached to affidavit.

Prepare Draft Order (ZY)

Complete cover for pages.

Make adequate number of copies of application

Affix stamps on original (N$5.00)

Have application issued and filed with Registrar

182 | P a g e
Arrange for service on Respondent

Serve on Master

Ascertain that return of service is correct.

Pay Deputy Sheriff

Uplift Master's Report [Section 427(2)] and file in Court file

Brief Counsel

Attend Court

Report to client

Uplift Brief from Counsel

Pay Counsel

Uplift provisional judicial management order from Registrar

Arrange for service of provisional judicial management order as stated in the order and
publish in government

183 | P a g e


Gazette and daily newspaper.

Ascertain that return of service of provisional order is correct.

Obtain Government Gazette and newspaper and draft affidavit that there has been compliance
with the provisional order.

Pay Deputy Sheriff

Ensure that original provisional judicial management order and original return, affidavit and
tear sheets are in the Court file.

Attend Section 429 meeting on behalf of client (if applicable).

Ensure that:

Chairman's report [Section 431(3)];

Master's report [Section 432(2)(d)];

Judicial Manager's report [Section 430 (c)]

Registrar of Companies report [Section 432(2)(e)] are in the Court file

Brief Counsel to appear on the return day

Attend Court


184 | P a g e
Uplift final order

Report to client

Uplift Counsel's Brief

Pay Counsel

Prepare Bill of Costs for taxation

Ascertain name and address of Judicial Manager

Despatch consent to taxation [Rule 70(4)(b)]

Submit Bill of costs for taxation

Claim costs from Judicial Manager and account to client

185 | P a g e
EXAMPLES

JUDICIAL MANAGEMENT

IT IS ORDERED:

1 That the Respondent Company be, and is hereby placed provisionally under Judicial
Management in terms of the Companies Act, 61 of 1973.

2 That while this Order is in force the Company be under the management, subject to the
supervision of the Court, of a provisional Judicial Manager or managers appointed by the
Master.

3 That as from this date any other person or persons vested with the management of the
Company's affairs be divested thereof.

4 That the provisional Judicial Manager or Managers discharge the duties prescribed by
section 430 of Act no 61 of 1973.

5 That the provisional Judicial Manager or Managers appointed by the Master be empowered
without the authority of the Shareholders but subject to the authority of Creditors and the
Master to borrow money with or without security on behalf of the said Company for the
purpose of paying essential running expenditure in and about the business of the said
Company including salaries, wages and rental for business premises required by the said
Company including salaries, wages, rental for business premises required by the said
Company and to pledge the credit of the said Company for any goods or services required.

6 That while the Company is under judicial management all actions, proceedings, the
execution of all writs, summonses and other processes against the Company be stayed and be
not proceeded with without the leave of this Court being had and obtained.

7 That the rate of remuneration of the provisional Judicial Manager or Managers be fixed by
the Master in accordance with the services rendered and disbursements incurred, or should
the Master to request the said rate of remuneration shall be fixed by the Court after the
Master has reported thereon.

8 That a rule nisi do hereby issue calling upon all persons concerned to appear and to show
cause, if any, to this Court at 10h00, on the day of...:

8.1 why a final Judicial Management Order should not be granted;

8.2 why the following directions should not be included in the said final Order

8.2.1 that the management of the Company shall vest, subject to the supervision of the Court,
in the final Judicial Manager or Managers;

186 | P a g e
8.2.2 that the provisional Judicial Manager or Managers shall forthwith hand over all matters
and account for his or their administration of the property, business and affairs of the
Company to the final Judicial Manager or Managers;

8.2.3 that the provisional Judicial Manager or Managers may be discharged from their duties,
but that he or they remain obliged to account to the final judicial Manager or Managers as
aforesaid, and to the Master;

8.2.4 that the provisions of paragraphs 5.6 and 7 hereof, should apply mutatis mutandis;

8.2.5 that the final Judicial Manager or Managers discharge the duties prescribed by section
433 of Act No 61 of 1973;

8.3 and why the costs of this application should not be costs in the Judicial Management.

9 That this Order be published forthwith in each of the Government Gazette and a daily
newspaper appointed by the Court.

10 That service of this Order be effected upon the Respondent Company at its registered
office.

BY THE COURT

REGISTRAR

187 | P a g e
JUDICIAL MANAGEMENT OF COMPANY

IN THE HIGH COURT OF NAMIBIA

In the matter between:

CASE NO

X. . Applicant

and

Y. . Respondent

___________________________________________________________________________

AFFIDAVIT

___________________________________________________________________________

I, the undersigned,

XXXXXXX

Do hereby make oath and say:

1.

Applicant is X (name), a Director of Companies and a boxing manager and trainer of

(address) Windhoek.

2.

The Respondent is Y (name), a company duly incorporated with limited liability according to
the Company Law of Namibia having its registered offices at 94 Struben Street, Windhoek,
and there carries on business as a garage, which sells motor cars, does repairs and panel
beating.

3.

Applicant holds 50% of the shares in the respondent and is also a Director of the Respondent.
Applicant is further a creditor of the Respondent in the sum of N$10 000.00 for money lent
and advanced and for which applicant holds no security whatsoever. The said amount is due
and payable by the Respondent.

188 | P a g e
 4.

The only other shareholder and Director of the Respondent is one Z.

5.

The said Z is today the Namibia Light Heavy-weight professional boxing champion who
fights under the name of W and is hereinafter referred to as W. A number of years ago, when
W became a professional boxer, Applicant became his manager and trainer and the said
association has existed ever since.

6.

Early in 1983 Applicant and the said W decided to buy the shares of the Respondent as they
were aware that it was a good and flourishing business.

7.

Accordingly they purchased all the shares in the respondent in equal shares and on the 7th of
March 1983, they became the two sole Directors of the Respondent and are today the only
Directors therein.

8.

Applicant and the said W were given to believe by the previous directors and shareholders of
the Respondent, that the Manager of the Respondent, one V, was a very competent person.
Because of this assurance and because of Applicant's and the said W's numerous
commitments in boxing activities in Namibia and overseas, they left the day to day running of
the Respondent to the said V whom they then believed to be a competent manager.

9.

Applicant and the said W intended to build up the Respondent as an investment and have
never drawn salaries and/or Director's fees from the Respondent. In fact, despite having put
money into the Respondent, they have not drawn a penny from the Respondent, although
Respondent has shown a net profit of approximately N$5 000.00 per annum since they
acquired their interest as aforesaid. The said net profits were put back into the Respondent
and were appropriated to the Appropriation Account.

10.

On 30th June 1985, the Appropriation Account of the Respondent was the sum of
N$10 000.00 to which Appropriation Account was added the net profits of the Respondent
for the financial year ending 30th June 1985.

189 | P a g e
 11.

Applicant annexes hereto annexures "A", "B" and "C", statement of account, profit and loss
account and balance sheet of the Respondent as at 30 June 1985. The said documents have
been prepared by the Respondent's auditor, one O, and they were prepared on the 4th February
1986.

12.

During 1985 the boxing commitments of Applicant and the said W were extremely heavy and
Applicant and the said W were out of Namibia on a number of occasions and for considerable
periods. While in Namibia their boxing programme was likewise heavy and they were fully
occupied with it.

13.

When Applicant and the said W took over the business of the Respondent, they informed the
manager, the said V, that he was not to give credit to customers except to old and trusted
clients of the Respondent and that all other transactions should be conducted on a cash basis.
At that stage Applicant and the said W did not know any of the customers of Respondent
personally. Further the said V was instructed not to purchase large amounts of spare parts and
business requirements on credit, and as far as possible to purchase such requirements on a
cash basis. During or about November 1985, Applicant became aware that the said V had
given large amounts of credit to Respondent's clients. At that stage annexures "A", "B" and
"C" hereto had not been drawn and completed but Applicant became aware of the large
amounts of credit given and that no security was held for this credit. Applicant humbly refers
this Honourable Court to annexure "C" hereto from which will appear that on the 30th June
1985, Sundry Debtors amounted to a figure of N$100 000.00 whereas Sundry creditors
amounted to N$70 000.00.

14.

Applicant and the said W thereupon investigated the management of the Respondent by the
said V and as a result thereof dismissed him in January 1986.

15.

Applicant humbly avers that the affairs of the Respondent were seriously mismanaged by the
said V in the following respects:-

(a) He had recklessly and indiscriminately granted credit to a large number of persons
without obtaining any security for the repair work to motor vehicles, or investigating whether
credit ought to have been given to them at all, and such activities were contrary to the direct
and explicit instructions given by Applicant and the said W to him.

190 | P a g e
(b) In order to effect repairs the said V bought vast amounts of new and second-hand spares
on credit.

(c) The said V failed almost entirely to collect amounts outstanding from the said debtors
despite the increase in the number and amount of their obligations to the respondent.

(d) He in fact made no attempt to collect monies owing to the Respondent despite the fact
that many of the said debts were long outstanding and overdue.

(e) Applicant makes mention for instance that V repaired a motor car involved in an accident
on credit. The said client was not known to respondent, its Directors and the said V, and the
amount of the repair work done was in the sum of over N$5 000.00. V arranged with the
client that the latter would pay off the amount at the rate of N$100.00 per month. No security
was asked for or given and no enquiries were made as to the client's ability to pay. In fact,
although the work was done in about February 1986, the client had paid approximately
N$150.00 and no attempt whatsoever has been made to collect the said money.

(f) The said V having ordered goods recklessly on credit and which goods were mainly used
for the repair work set out above, made no attempt to liquidate the amount owing to the said
creditors.

(g) Furthermore the Respondent was obliged to pay wages to skilled workmen, whose
services were used for the repairs done for the large amounts to persons who obtained credit
from V, although the said V was well aware that the Respondent would have to pay them
their salaries fell due and not when the debtors paid their accounts.

(h) The said V was very grossly negligent in the management of the affairs of the Respondent
and Applicant takes that he allowed the telephone account to be in arrear until it reached the
amount of approximately N$5000.00.

16.

Applicant, when he discovered the true position at the end of 1986, in consultation with the
said V, curtailed credit, except in the case of a few trusted clients and immediately
commenced collecting from debtors. Applicant has now reduced the amounts outstanding by
debtors to the sum of approximately N$50 000.00. Applicant with the short time at his
disposal has not been able to obtain the exact figures here for.

17.

In January, 1986, the said W and Applicant installed U as Manager of Respondent,

instructing him to carry on business of Respondent on a cash basis except for old and trusted
clients. The said U has done so and despite curtailment of credit, the turnover of Respondent
is large although slightly less than it was when V was giving the indiscriminate credit. The
monies Respondent then obtained were used to pay the running expenses of the Respondent

191 | P a g e
and in repayment of the respondent's creditors' accounts. Applicant makes mention that the
Respondent was not placed under obligation to pay the salary of the said U. Any
remuneration he received was of a private nature between the Directors personally and the
said U.

18.

For reason of prior boxing contracts Applicant and the said W proceeded overseas to Berlin
at the end of January 1987. The said W has two fights in Germany during the period of
February and March 1987 and, as scheduled, a fight in London, England on the 25th April
1987. While in Germany Applicant received a cable to return to Namibia immediately
because of the Respondent's position and Applicant did so immediately, arriving in
Windhoek on the evening of the 24th March 1987.

19.

The said W was unable to come by reason of his boxing contract.

20.

Applicant has now discovered that the creditors, who have now started pressing the
Respondent for payment of their accounts, are not prepared to wait any longer. The collection
of Respondent's debts and the cash turnover profits are not sufficient to meet the creditor's
immediate claims and pay all debts.

21.

Applicant, on the 25th March 1987, discovered that a number of creditors had taken judgment
against the Respondent and two sales in execution have been advertised, one for 1st April
1987 and the other for 10th April 1987. Applicant humbly avers that the creditors who have
not sued Respondent will do so immediately by reason of the fact that the other creditors have
now sued Respondent. Applicant has ascertained that the claims of Respondent's creditors at
the moment total the sum of approximately N$30 000.00. Applicant draws the attention of the
Honourable Court to the fact that since he curtailed credit and started collecting debts, the
amounts of creditors have been reduced by approximately N$40 000.00. Over and above this
the running expenses of Respondent since the beginning of this year have been paid on a cash
basis.

22.

Applicant humbly avers that it is just and equitable that the Respondent be placed under
judicial management and for the following reasons:

(a) The Respondent has always had, a large turnover and a great volume of trade is available
to Respondent.

192 | P a g e
(b) The Respondent's assets exceed its liabilities, although Applicant is not able to say with
certainty what amount of the sundry debtors remaining is a bad debt. Applicant humbly avers
that such amounts will be small although it will take time and litigation to collect all the
debts.

(c) A respite will enable most of the debtors of the Respondent to be recovered and creditors
to be paid in full.

(d) The Respondent has always has a large goodwill and flourishing trade which, despite the
curtailment of credit, has not noticeably decreased at all.

(e) Should liquidation order be granted against the Respondent, the Respondent will lose this
goodwill to a very large extent which Applicant humbly avers not only attaches to
Respondent as a successful garage as such, but also the fact that Applicant and especially the
said W are associated with Respondent.

(f) The Respondent has always been run at a profit since its incorporation and that the present
difficulties are due entirely to the fact that the said V has mismanaged Respondent as
aforesaid.

(g) A sale in execution would automatically cripple Respondent's running efficiency and all
creditors would thereupon sue for the amounts outstanding and sell Respondent's assets
piecemeal in execution. Applicant humbly avers that on a sale in execution the assets of
Respondent would be sold for below their actual value which is generally the position in sales
in execution.

(h) The turnover at present is sufficient to pay for requirements of Respondent in cash and
pay its running expenses and pay off a certain amount of creditors monthly.

(i) In terms of Respondent's agreement with the Vacuum Oil Company of Namibia Limited,
the latter is obliged to make available to Respondent a grant of approximately N$30 000.00
shortly which would alleviate Respondent's position greatly. Should Respondent be
liquidated or sales in execution take place, the said grant will not take place.

23.

Applicant has not been able in this short time at his disposal since his return to Namibia from
Germany on the 24th March 1987 to obtain a Balance Sheet from Respondent's auditor.
Applicant humbly avers that the position is approximately the same as set out in annexures
"A", "B" and "C" hereto, except that the debtors have been reduced to the sum of
approximately N$50 000.00 and creditor's accounts to the sum of N$30 000.00.

193 | P a g e
 24.

Applicant makes mention to this Honourable Court of the fact that the said W fully approves
any action taken by Applicant.

25.

Applicant humbly avers that the matter is now one of urgency as a creditor on the 25th March
1987, threatened to apply forthwith and by urgent application to this Honourable Court to
liquidate Respondent. Applicant humbly avers that if this were done irreparable harm would
be done to Respondent due to aforegoing reasons.

26.

Applicant humbly avers that Mr T, an auditor and accountant of Windhoek, is a fit and proper
person to be appointed Judicial Manager of Respondent and the said T is willing and able to
act as Judicial Manager should this Honourable Court so appoint him, as will more fully
appear from his affidavit hereto annexed, marked "D".

27.

Applicant hereto annexed annexures "D" and "E" respectively, affidavits by the aforesaid S
and U, to which Applicant humbly refers this Honourable Court.

28.

Applicant has provided security to the satisfaction of the Master of this Honourable Court as
is required by law, as will more fully appear from the Certificate by the Master hereto
annexed marked "G".

29.

Applicant humbly avers that in the premises of the aforegoing, the Respondent will pull
through its difficulties and all its creditors will be paid in full and it will become a flourishing
business should an Order of Judicial Management be granted.

WHEREFORE Applicant prays that it may please this Honourable Court to grant an order:-

(a) Placing the Respondent under Judicial Management;

(b) appointing T as Judicial Manager;

(c) that the costs of this application be costs in the Judicial Management;

(d) any other or alternative relief.

194 | P a g e
SIGNED this day of ... at Windhoek.

I certify that the Deponent acknowledged that he understands the contents of the declaration
and the Deponent uttered the following words "I swear that the contents of this declaration is
true, so help me God" before me at Windhoek on this day of ...

COMMISSIONER OF OATHS

195 | P a g e
9. COMPROMISE

Section 311 of the Companies Act, 1973

9.1 PURPOSE

The Section 311 procedure exists for a company to negotiate and reach a binding agreement
with its members or creditors with a view to modifying their claims in the common interest of
all parties concerned.

Section 311 therefore creates the machinery which enables a company to negotiate with the
members of a group of shareholders and/or creditors collectively and then to bind all the
members of that group to the agreements reached by the majority of members of that group.

The main object of Section 311 is to rearrange the company's liabilities by compromise.

9.2 UNDER WHAT CIRCUMSTANCES

The application of Section 311 is not limited to companies which are insolvent - Ex Parte
Payne Bros Ltd 1945 NPD8.

A compromise contemplated by Section 311 is of the widest character and the only
limitations are that the scheme cannot authorise something contrary to the law or ultra vires
the company.

The compromise is made between

 the company and its creditors (as a whole) or any class of them;
 the company and its members or any class of them; or
 the company and any combination of creditors and members or any class of them.

A person who is not party to a compromise is not bound even if the Court's order sanctioning
the compromise purports to include - Barclays National Bank Ltd v. H J de Vos Boerdery
Ondernemings (Edms) Bpk 1980 (4)

9.3 WHO MAY APPLY?

"Compromise" means an agreement between the persons referred to in par 9.2 above which
terminates a dispute about -

196 | P a g e
  the rights of the parties which are to be compromised;
 some difficulty in enforcing such rights.

When a compromise is proposed, any of the following persons can approach the Court for an
order to convene a meeting of the creditors (or class of creditors) or members (or class of
members) to consider the proposal.

 the company itself;

 any creditor of the company;
 any member of the company;
 the liquidator of a company being wound up, which includes the provisional
liquidator;
 the (provisional) judicial manager of a company under judicial management.

The application is made Ex Parte.

9.4 PROCEDURE

9.4.1 THE APPLICATION TO SUMMON

9.4.1.1 Contents of affidavit

Locus standi of applicant

Personal knowledge

Formal details of company in order to establish jurisdiction:

Date of registration

Registered address

Place of business

Sufficient detail of the meetings to be summoned to enable Court to give directions as to the
manner of convening, the method of holding and conducting the meetings and the person to
be appointed to act as chairman.

All relevant facts relating to the proposed scheme including its effect and consequences.

197 | P a g e
The circumstances under which the scheme has arisen must be stated.

An indication as to the classes of creditors/members to be summoned to the meeting.

9.4.1.2 Prayers

9.4.1.3 Documents to be attached

The written proposal with all its terms

The explanatory statement in terms of Section 312 (optional)

If the company is in liquidation, the liquidator's report on the business merits of the proposal.

If the company is under judicial management, a report by the judicial manager as to the
business merits of the proposal.

9.4.2 MEETINGS

9.4.2.1 Convening the meeting

The meeting is summoned in accordance with the directions in the court order.

It is convened in the name of the chairman appointed in the court order.

Notice of the meeting must be accompanied by the explanatory statement in terms of Section
312 explaining the effect of the compromise.

The scheme of compromise to be considered must be attached to the notice.

A proxy form must be sent with the notice.

A copy of the court order must be served on every person affected by the order - service can
be effected informally.

9.4.2.2 Conduct of meetings

The meeting is conducted in accordance with the directions in the court order.

The procedure at meetings of creditors is not governed by insolvency law.

198 | P a g e
The compromise must be agreed to by -

 a majority in number representing 75% in value of the creditors/class of creditors; or

 a majority representing 75% of the votes exercisable by the members/class of
members.

The respective majorities referred to in 3 are those of creditors and members who are present
in person or by proxy and who vote at the meeting.

9.4.2.3 The Chairman

He should comply strictly with the terms of the court order.

He should qualify himself in order to furnish to the meeting all relevant information to be
considered.

He should conduct the meeting fairly and afford each person present the opportunity to ask
questions and state his position.

He should comply with the order of court to file and report on a certain date to report the
result of the meeting.

In his report he should indicate -

 details of attendances
 details of proceedings at the meeting
 the views of those in favour and against the compromise and the main reasons there
for
 all rulings made and all directions given by him.

9.4.2.4 Registration of Court Order sanctioning the Scheme

The application to court to sanction the scheme is Ex Parte and brought by the same person
who applied under par 9.3 above.

The court shall sanction the compromise if -

 all statutory formalities have been complied with; and

199 | P a g e
  it is fair and reasonable to the members/creditors concerned.

The court order duly takes effect once a certified copy thereof has been registered by the
Registrar of Companies - Section 311(6)(a).

A copy of the court order must be annexed to every copy of the memorandum of the
company.

9.4.2.5 Proving of claims by creditors

In practice, a Receiver is appointed and creditors prove their claims with him within a
specified period after the sanctioning of the scheme.

If they fail to do so and they received notice of the offer and the meeting, they are deemed to
have abandoned their claims.

The scheme must state that the Receiver must pay any creditor who was not given notice.

9.4.2.6 Discharge of Liquidation or Judicial Management Order

If in terms of the compromise the liquidator/judicial management is to be set aside, the

Court's order sanctioning the compromise cannot itself operate to set aside the winding-
up/judicial management.

The Court must set aside the liquidation/judicial management in proceedings brought under
Section 354(1).

Section 311(4) provides that if the compromise provides for the discharge of a winding-up
order the liquidator must lodge 2 reports with the Master, viz

 a report in terms of Section 400(2) relating to offences committed under the Act by
the company, directors or officers of the company.
 a report stating whether any directors/officers should be held personally liable for the
debts of the company.

200 | P a g e
9.5 AUTHORITIES TO BE CONSULTED

Ex Parte Federale Nywerhede Bpk 1975 (1) SA 826 (W) : In re Hellenic & General Trust Ltd
[1975] 3 All ER 382(Ch)

Ex Parte Venter : In re Rapid Mining Supplies (Pty) Ltd 1976 (3) SA 267 (0)

Ex Parte Satbel (Edms) Bpk : In re Meyer v Satbel (Edms) Bpk 1984 (4) SA 347 (W)

Ex Parte Natal Coal Exploration Co Ltd 1985 (4) SA 279 (W)

Ex Parte Suiderland Development Corporation 1986 (2) SA 442 (c)

Ex Parte NBSA Centre Ltd 1987 (2) SA 783 (T)

Ex Parte Kaplan : In re Robin Consolidated Industries Ltd 1987 (3) SA 413 (W)

Ex Parte Millman : In re Multi-Bou (Pty) Ltd 1987 (4) SA 405 (c) [Followed Ex Parte
Kaplan]

Ex Parte Strydom : In re Central Plumbing Works (Natal) (Pty) Ltd 1988 (1) SA 616 (D) [Ex
Parte Kaplan not followed]

Sackstein v Boltstone (Free State) (Pty) Ltd 1988 (4) 556 (0)

Ex Parte Lebowa Development Corporation Ltd 1989 (3) SA 71 (T)

Cooper v A&G Fashions (Pty) Ltd : Ex Parte Millman NO 1991 (4) 204 (K)

Ex Parte Mielie-Kip Ltd 1991 (3) 449 (W)

De Villiers and Others NNO v Electronic Media Network (Pty) Ltd 1991 (2) 180 (W)

Ex Parte De Villiers NO : In re MSL Publications (Pty) Ltd (in liquidation) 1990 (4) 59 (W)

Ex Parte Garlick Ltd 1990 (4) 324 (K)

Morris NO v Airomatic (Pty) Ltd t/a Barlows Airconditioning Co 1990 (4) 376 (A)

Pressma Services (Pty) Ltd v Schuttlen & Another 1990 (2) 411 (K)

Incorporated General Insurances Ltd v Cement Distributors (South Africa) 1990 (1) 132 (A)

Mercian Investments (Pty) Ltd v Johannesburg City Council 1990 (1) 560 (W)

Singer NO v MJ Greeff Electrical Contractors (Pty) Ltd 1990 (1) 530 (W)

201 | P a g e
Namex (Edms) Bpk v Kommissaris van Binnelands Inkomste 1994 (2) SA 265 (A)

Ex Parte De Villiers and Another NNO: In re Carbon Developments (Pty) Ltd (In
Liquidation) 1993 (1) SA 493 (A)

Lovdan v Dusky Dawn Investments (In Liquidation) (Pearmain and Another Intervening)
1998 (4) SA 519 (SE)

Ex Parte Griffin Shipping Holdings Ltd 1999 (1) SA 754 (D)

Ex parte Liquidator, Vautid Wear Parts (Pty) Ltd (In Liquidation) 2000 (3) SA 96 (W)

Gainsford and Others NNO v HIAB AB 2000 (3) SA 635 (W)

202 | P a g e
EXAMPLE

STANDARD ORDER

SECTION 311 - COMPROMISE

IT IS ORDERED:

1. That meetings in terms of section 311(1) of the Companies Act, 1973, ("the Act") of:

secured creditors; (mention each further class of creditors who have to meet)

of (... Ltd) ("the Company"), be held on (12 November 1998) at (e.g. 10h00, 10h15, and
10h30 respectively) at (address) for the purpose of considering by way of casting votes, the
acceptance, with or without modification, of the offer of compromise made by (insert name
of offeror), which is an annexure to the application.

2 That (insert name) or when he is unavailable (name) is appointed as chairperson, holding

offices for all relevant purposes at (insert address) (herein called "the official offices"),

with power to adjoin a meeting if it is advisable;

with power to require a claim or a right attaching to a claim to be confirmed under oath or
affirmation;

with the duty to report on the said meetings to this Court on (e.g.31 December 1999) at
10h00.

3 That the said meetings shall be summoned by the chairperson forthwith publishing a copy
of this order in:

an official Gazette and

in (as determined by the Court)

4 A proxy which a creditor wishes to use must be filed at the official offices at least 24 hours
before the meeting. It must be in the prescribed form of which a copy can be obtained free of
charge at the official offices.

5 That a copy of the offer of compromise, a statement of the values of assets of the company,
a list of its creditors and of the statement in terms of section 312 of the Act,

may be inspected by a creditor free of charge during business hours at the official offices.

will upon written request to the chairperson be provided to a creditor free of charge.

203 | P a g e
6 That a copy of the chairperson's report to the court will for four days from the Tuesday
preceding the aforesaid date for reporting to the court, be available at the official offices for
inspection by any creditor.

7 That to entitle him to vote on any other basis than the information about the amount of the
claim and the extent of its preference or security stated to the creditor by the chairperson, he
must lodge a proof of claim in a form which complies with section 366(1)(a) of the Act with
the chairperson at the official offices at least 24 hours before the meeting. If an affidavit
proves the amount and nature of the claim and adequate reasons for lateness, the chairperson
may until the casting of votes begins, condone late compliance if he is convinced that late
attention to the claim will not cause undue delay.

COMPANIES ACT APPLICATIONS

SECTION 311

1. It must be proved that the proposed chairperson is not a professional advisor of and has no
direct or indirect interest in the offeror, in the company or in a holding company or a
subsidiary of any of them.

2.

2.1 The proposed statement in terms of section 312 must be attached to the application. To
limit costs, the facts therein which require proof must be repeated in the affidavit only by way
of an appropriate reference to the statement as is meant in Ex part De Villiers 1993 (1) SA
493 (A) at508H-I.

2.2 The statement must not amount to an abbreviated repetition of the terms of the
compromise but must explain its impact in terms of which are readily understandable by a
layman.

2.3 The statement may be compiled by an accountant, liquidator or other person with
adequate knowledge of the facts and must state the name of its author.

3 The court must be informed about the extent to which parties who are entitled to vote are
not from the Windhoek area (if the application is heard in Windhoek. If the court is not so
informed it will incline to require publication in a newspaper with national circulation in its
dominant language and in another official language in either a national newspaper which is in
circulation in the province wherein the company carried on business.

4 The chairperson must forthwith

204 | P a g e
4.1 cause the order to be published in an official gazette and such newspapers as the court
directs, on a date which is at least two weeks prior to the date of the meeting; and

4.2 send the following by prepaid registered post to each creditor of the company:

(a) a copy of the court order.

(b) a copy of the offer of compromise;

(c) a copy of the statement in terms of sections 312(1) and (2) of the Act;

(d) a form which can be used as proxy.

(e) a statement showing:

the amount for which the creditor is reflected in the company's records as a creditor of the
company and the extent to which he is reflected as a preferential or secured creditor;

the company's assets and the values thereof;

the aggregate amounts due to (a) secured, (b) preferential and (c) concurrent creditors;

the amount which directors claim to be owing to them; the validity of those claims; and what
security is held there for;

5 If reason arises for regarding one or more creditors as a class of creditors which possibly
should, in the order authorising the convening of the meetings, have been recognised as a
further class of creditors, the votes of any creditor who may be in that class shall be cast,
counted and reported on separately.

6 The chairperson must report to the court on

6.1 the grounds, if any, for concluding that one or more creditors constitute such an additional
class of creditors;

6.2 the number of creditors who attended in person;

6.3 the number of creditors who were represented by proxies and which thereof was
represented by the chairperson in terms of proxies;

6.4 the amount of the claims of those creditors;

6.5 which proxies were rejected;

205 | P a g e
6.6 each resolution taken at any meeting with particulars of the number of votes cast in
favour and against each resolution and the number of abstentions, stating the number of votes
cast by the chairperson by virtue of proxies;

6.7 each ruling of the chairperson at a meeting;

6.8 the salient qualities of every other offer of compromise which was open for consideration
at a meeting.

COMPROMISE

An arrangement between xyz (proprietary) limited (in liquidation) and its creditors, in terms
of section 311 of the companies act no.61 of 1973, as amended, which has been proposed by
Joe Soap.

INTRODUCTION 1

1.1 This document is signed by the proposer (who thereby binds himself to all its terms and
conditions insofar as they affect him) and the receiver (who thereby binds himself to perform
the duties imposed upon him).

1.2 The proposer intends to acquire all the shares in the company and to provide it with
sufficient additional capital to enable it to effect a composition with its creditors, which will
restore it to solvency after this composition. The provisional liquidator will be appointed as
receiver in order to manage the distribution of these funds.

DEFINITIONS

2 Unless inconsistent with or otherwise indicated by the context:

2.1 "assets" means all the assets of the company as at the fixed date;

2.2 "Act" means the Companies Act No. 61 of 1973, as amended;

2.3 "acquittance" means a document executed by a creditor in terms of which that creditor
advises the receiver that he will not look to the company or the receiver for payment of any
dividend or other benefit under the arrangement, to the extent of the amount stated in the
acquittance;

2.4 "arrangement" means the arrangement contained herein in terms of Section 311 of the
Act, between the company and its creditors and, for purposes of interpretation includes the
synopsis of the arrangement;

206 | P a g e
2.5 "capital sum" means the sum of N$ ( . Dollar) to be provided by the proposer to the
company, and to be paid by the receiver on behalf of the company to creditors, which sum
shall be utilised as additional capital of the company, for this purpose;

2.6 "chairman" means Joe Doe of Joe Doe & Co. (Proprietary) Limited, 1 First Road,
Windhoek, 2000 or any other person who may be appointed by the Court to this office;

2.7 "company" means XYZ (Proprietary) Limited (in Liquidation), a company having a share
capital, duly incorporated in accordance with the company laws of the Namibia;

2.8 "Court" means the Division of the High Court of Namibia;

2.9 "effective date" means the date of sanction;

2.10 "final date" means the date on which the order is registered by the Registrar of
Companies, in terms of the Act;

2.11 "fixed date" means the date on which the company was placed under Provisional
Liquidation;

2.12 "Insolvency Act" means the Insolvency Act, No. 24 of1936, as amended;

2.13 "liquidator" means the provisional or final liquidator of the company, as the case may
be;

2.14 "meetings" means the meetings (or any adjourned meetings) of creditors to be convened
by an order of Court for the purpose of considering the arrangement;

2.15 "order" means the order of Court sanctioning the arrangement;

2.16 "proposer" means Joe Soap, the person who provided the capital sum to the company in
order to effect a composition with its creditors;

2.17 "receiver" means Joe Doe referred to in 2.6, or any person/s who will be appointed to act
as receiver/s for the creditors under the arrangement;

2.18 "review" means an application to Court in which the applicant merely proves his
rejected or partially rejected claim, or any security or preference, as a fact, whereupon the
Court may order the receiver to act in accordance with such proved facts;

2.19 "sanction" means sanction of the arrangement by the Court in terms of Section 311 of
the Act;

2.20 any reference in the arrangement to the singular shall include the plural and vice versa.

207 | P a g e
CONDITIONS PRECEDENT

3 This arrangement is subject to the conditions precedent that -

3.1 prior to the commencement of the first of the meetings, but subject to the arrival of the
final date -

3.1.1 the liquidator cancels, with effect from sanction, all agreements to which the company
is a party as the proposer may in writing request the liquidator to cancel, provided the
liquidator may lawfully cancel such agreements, and any claim arising from such cancellation
shall rank as a concurrent claim for purposes of the arrangement, subject however, to any
secured or preferential rights which the other contracting party may have against the
company under such agreements;

3.1.2 written agreements to the satisfaction of the proposer are entered into providing for the
acquisition by and transfer to the proposer of the entire issued share capital of the company;

3.1.3 written arrangements to the satisfaction of the proposer are entered into relating to the
occupation by the company of such leased premises as the proposer in his sole discretion may
deem fit;

3.1.4 written arrangements to the satisfaction of the proposer are entered into providing for
the proposer to take possession of the assets and the business of the company and to use and
conduct the same pending sanction, upon such terms and conditions as may be agreed upon in
writing between the proposer and liquidator;

3.2 the following documents are delivered to the chairman prior to the commencement of the
meetings, to be held in trust by the chairman pending sanction, all such documents to be
expressed to be effective from the effective date -

3.2.1 the written resignations of all the company's directors;

3.2.2 the written resignations of the auditors, secretary and public officer of the company, of
required by the proposer;

3.2.3 a copy of the resolution of the directors of the company, certified by the chairman of the
meetings at which the resolution is passed, consenting to the transfer of the entire issued
share capital of the company to the proposer's nominee and appointing the proposer's
nominees as directors of the company;

3.2.4 share certificates and share transfer forms, duly signed in blank as to the transferee, in
respect of the entire issued share capital of the company, all such documents to be
surrendered to the proposer forthwith after the final date;

208 | P a g e
3.3 on the fixed date and on the final date the company will be the lawful owner and in
possession of the assets;

3.4 the company, on the date of sanction, is discharged from liquidation;

3.5 the capitalisation envisaged in 1.3 has been accomplished to the satisfaction of the court.

3.6 It is specifically recorded that the conditions set forth in 3-

3.6.1 are imposed for the benefit of the proposer alone;

3.6.2 shall, at the option of the proposer, be separate, divisible and distinct from one another;

3.6.3 must all be fully complied with unless waived in terms of 3.6.4; and

3.6.4 may at any stage be waived or abandoned in whole or in part by the proposer on written
notice to that effect addressed to the chairman or to the receiver.

SUBSTANCE OF ARRANGEMENT

4.

4.1 Payment and securing of capital sum

4.1.1 For the purposes of the arrangement, payment of the capital sum shall be made by the
company to the receiver after the final date, upon demand by the receiver to the company,
and, pending such demand, payment of the capital sum shall, prior to the commencement of
the first meetings, be secured to the chairman's satisfaction, by way of a banker's or other
guarantee approved of by the chairman and the receiver.

4.1.2 If the capital sum of any part thereof is paid to the chairman or the receiver at any date
prior to the date of payment of dividends in terms thereof, such amount shall be invested in
an interest bearing account with a registered commercial bank approved of by the liquidator,
in the name of the chairman or the receiver and be applied by him together with the capital
sum in the manner and for the purposes set out in the arrangement.

4.2 Application of the capital sum and other moneys

Subject to the terms and conditions contained in the arrangement, the receiver shall, on behalf
of the company, pay the capital sum and all interest envisaged in 4.1.2, to creditors in full
settlement of their claims in the following manner -

209 | P a g e
(a) the secured portion of the claims of all secured creditors in full to the extent of the value
of such security any balance not so ranking constituting concurrent claims ranking for
participation in the distribution to concurrent creditors in terms of the arrangement; thereafter

(b) the preferential portion of the claims of all preferential creditors in full to the extent and in
the order of preference as set out in the Insolvency Act, any balance not so ranking for
participation in the distribution to concurrent creditors in terms of the arrangement; and
thereafter

(c) the balance remaining, towards the claims of concurrent creditors.

ADMINISTRATIVE PROVISIONS

Proof of claims for purposes

5.1 Creditors who are reflected in the books of account of the company as creditors, shall be
regarded by the receiver as creditors for the amounts for which they so appear to be creditors,
and as secured or preferential creditors to the extent that such security or preference is
reflected in the books of account and records of the company, unless the receiver in writing,
by registered mail, advises any particular creditor that he rejects such claim or security or
preference, in which event that creditor shall be required to prove his claim in terms of the
provisions of 6 and 7 within a period of 60 (sixty) days after receipt of such written advice.

5.2 Creditors who allege that they are creditors for amounts which differ from that appearing
in the books of account of the company, are required to lodge their claims in accordance with
the provisions of 6 and 7.

6 Creditors with claims rejected or not reflected in the books of account and records of the
company

6.1 Creditors envisaged in 6 must lodge their claims with the receiver at within a period of 60
(sixty) days after the final date, provided that any creditor who has lodged his claim with the
liquidator, or has proved his claim during the winding-up of the company, shall not be
obliged to relodge such claim for proof.

6.2 Claims shall be proved to the satisfaction of the receiver if he were the presiding officer at
a meeting for the proof of claims within the meaning of Section 44 of the Insolvency Act, as
read with Section 366 of the Act, supported by affidavits which are to contain such
information and are to be accompanied by such supporting documents as are required for
proving claims in accordance with the aforegoing statutory provisions.

6.3 The receiver's decision shall be subject to review by the Court upon the application of any
party affected thereby, provided that any such review of proceedings shall be brought within

210 | P a g e
30 (thirty) days of receipt of advice of that decision in writing from the receiver, acting in that
capacity. Should the affected party fail to make such an application, he shall be deemed to
have waived his right to dispute such decision and shall thereafter be debarred from bringing
any such review proceedings.

7 Secured creditors with claims or security rejected or not reflected in the books of account
and records of the company

7.1 Each secured creditor, if obliged to prove his secured claim in terms of 6, is obliged,
when proving his claim, to place a value on his security, and the receiver shall (subject to his
rights in terms of 6) admit as the secured portion of the claim of such creditor, the lesser of
the amount of that claim and an amount equal to the value placed on such security by the
creditor, or in the event that such value is unacceptable to the receiver, a value agreed upon in
writing between the receiver and the proposer on the one hand, and the secured creditor on
the other hand, provided that if there is a dispute in regard to the value to be placed on the
security, such dispute shall be referred to an independent person agreed to between the
receiver, the proposer and the secured creditor or, failing agreement, one nominated by the
President for the time being of the Law Society. This person shall determine the dispute and
assess the value, summarily, as an expert and his decision shall be final.

7.2 The receiver shall, in admitting the secured portion of the claim in terms of 7.1 make
provision in his determination thereof for the continued accrual of interest in favour of the
relevant secured creditor until the date upon which payment is made to such secured creditor
or any guarantee for such payment becomes payable, whichever is the earlier, provided that
the secured portion of the claim, including such interest shall not exceed the value of the
security as determined in 7.1. The applicable rate of the interest shall be in accordance with
the agreement in terms of which security was provided and in the absence of any such
agreement, shall be at the statutory rate applicable at the time to the calculation of mora
interest.

7.3 The proposer shall be entitled, by notice given in writing to the receiver, to require a
secured claim to be satisfied by the award to such creditor of his security at the value
determined in terms of 7.1 and by the delivery of the security so claimed to the creditor
concerned, who shall furnish an acquittance in respect of the secured portion of his claim. In
this event, the capital sum shall be reduced by the amount of the value of the security which
is delivered to the secured creditor.

8 Conditional claims

8.1 If obliged to prove his claim in terms of 6, a creditor may prove a conditional claim in
terms of 6. If the condition to which any claim is subject has been fulfilled before the final
distribution under the arrangement, the receiver shall admit the claim as if it had been
unconditional.

211 | P a g e
8.2 If a dividend has been awarded on a conditional claim, the receiver shall deposit the
amount of that dividend in a special account together with a registered commercial bank and
shall pay over the dividend, together with any interest earned thereon, to the creditor when
the condition has been fulfilled. If the condition is not fulfilled, then the dividend plus the
interest thereon shall be distributed amongst the other concurrent creditors on a pro rata basis
unless the arrangements provides for a specified dividend to concurrent creditors and such
dividend has been paid to them. If, in the opinion of the receiver, the costs of making the
distribution will be disproportionate to the value of the portions which creditors will receive,
then the receiver shall refund to the company the dividend, plus accrued interest.

9 Late proof of claims

9.1 Creditors whose claims are not recorded in the books of account of the company as
envisaged in 6, and creditors otherwise obliged to prove their claims as provided for in this
clause 5, and who have received proper notice of

the -

(a) submission of the arrangement; and

(b) terms of the arrangement; and

(c) meetings; and

(d) sanction of the arrangement by the Court, and who have been furnished, together with a
notification of the sanction, with a copy of the text of clause 5 to 9 and who fail to submit
their claims within the period stipulated in 6.1, shall be deemed to have abandoned their
claims free of consideration.

9.2 A creditor, other than a creditor as envisaged in 9.1, ("the late creditor") not having been
given proper notice of the –

(a) submission of the arrangement; or

(b) terms of the arrangement; or

(c) meetings; or

(d) sanction of the arrangement by the Court, and not having had his attention specifically
directed to the contents of clauses 5 to 9, shall be entitled to prove his claim in the proper
manner stipulated in 6, within 60 (sixty) days after receiving proper notice of the matters
referred to in 9.2(a) to 9.2(d) inclusive, failing which he shall be deemed to have abandoned
his claim.

212 | P a g e
9.3 If the claim of the creditor is proved after the distribution by the receiver of the capital
sum, or if the moneys he will have on hand for distribution are not sufficient to pay the late
creditor, the company shall pay to such creditor the dividend, if any, to which he would have
been entitled had he proved a claim timeously.

9.4 The company shall have the right to recover from any creditor ("the overpaid creditor")
who has received any payment under the arrangement prior to the receipt of the late claim of
the creditor, the amount by which the dividend paid to the overpaid creditor exceeds the
amount which should have been paid to him had the claim of the late creditor been proved
timeously.

9.5 A certificate under the hand of the receiver as to the amount so refundable by any
overpaid shall be prima facie proof thereof in any proceedings instituted against any overpaid
creditor for recovery thereof.

10. Duties and powers of the receiver

10.1 The receiver shall, after the final date forthwith notify -

10.1.1 all known creditors that the arrangement has been sanctioned, and in particular draw
their attention to the provisions of 5 to 9 of the arrangement and their rights and obligations
there under;

10.1.2 all creditors reflected in the books of account of the company that they are regarded by
him as being creditors for purposes of participating in the distribution in terms of the
arrangement, and for the amounts for which they so appear to be creditors in the books of
account of the company, stating such amount; and

10.1.3 all creditors envisaged in 10.1.2 that their claims for purposes of participating in the
distribution in terms of the arrangement will be deemed to be as advised to them in terms
thereof

10.1.2, unless creditors establish some other claim or a claim for some other amount, in the
manner envisaged in 6 and 7;

10.2 provided he is satisfied that the claim of any particular creditor, as it appears in the
books of account of the company, is incorrect of for any other reason rejectable by him,
advise such creditor in writing of the fact that he rejects such claim, and that such creditor
thereupon is obliged to prove its claim in terms of the provisions of 5.2, 6 and 7;

10.3 have the right, to the exclusion of the creditors to -

10.3.1 take all steps necessary to enforce due compliance by the company and the proposer of
any obligations imposed upon or assumed by the company and/or the proposer in terms of the
arrangement;

213 | P a g e
10.3.2 institute any proceedings against any person which may be required to give effect to
this arrangement;

10.3.3 defend any proceedings brought against him arising out of this arrangement;

10.4 if the arrangement is accepted by the requisite majority of creditors as provided for in
Section 311 of the Act, and sanctioned by the Court consequent thereupon, as soon as
practicably possible after sanction cause a copy of the order to be published once in two
official languages one of which must be in English or Afrikaans in a newspaper circulating
where substantial numbers of creditors carry on business;

10.5 be entitled to dispute any claim, or the validity of any preference or security claimed by
any creditor or the valuation placed by any secured creditor on any security;

10.6 be entitled in his discretion to compromise and/or otherwise determine by agreement the
amount of any claim proved or to be proved in terms of 5;

10.7 be entitled to engage the services of legal and other professional advisors in connection
with any matter concerning his functions and duties, to dispense with taxation of and to agree
the amount of the reasonable fees and charges of such legal and other professional advisors
and to pay the remuneration and disbursements of the person so engaged;

10.8 have the right and option, in addition to any other rights available to him in terms hereof
or in law, upon the written instructions in this regard of the proposer, to take over any
security as provided for in 7 mutatis mutandis;

10.9 at all times have access to all books, records, documentation and trading figures of the
company as he may reasonably and properly require for the execution of his duties as
receiver in terms of the arrangement;

10.10 in his discretion be entitled to settle any disputes with the proposer with regard to the
assets, or the implementation of the arrangement;

10.11 be entitled to pay a claim as and when he deems fit, notwithstanding that all claims
against the company have not yet been proved or that the liquidation and distribution account
referred to in 11 has not yet been finalised;

10.12 be entitled and obliged to accept acquittances from creditors up to the amount which
would have been awarded and paid by him to such creditor as a dividend on his claim in
terms hereof. In that event the capital sum shall be reduced by the amount of such
acquittance, but not exceeding the dividend which would otherwise have been due on such
creditor's claims and, if the capital sum is paid to the receiver prior to the calculation of the
reduction, the amount of the reduction shall be refunded to the company when calculated.

11 Liquidation and distribution Account

214 | P a g e
11.1 As soon as reasonably possible after final determination of the claims of creditors, the
receiver shall draw a liquidation and distribution account ("the account") as if he were the
liquidator under a winding-up order.

11.2 Such account shall inter alia reflect the name of each and every creditor whose claim has
been duly proved or admitted, the amount of the claim and the amount of the dividend to be
awarded to such creditor under the account.

11.3 Notice by registered post shall be given by the receiver to the proposer and to all known
creditors of the company that the account is lying for inspection for a period of not less than
14 (fourteen) days calculated from the third business day succeeding that upon which the
notice is despatched, but the failure if the receiver to give such notice shall in no way entitle
any person to initiate a late objection nor shall such failure invalidate such account or any
distribution made pursuant thereto.

11.4 Any person objecting to the account shall be obliged to lodge notice of his objection
(stating the full grounds thereof) with the receiver before the expiry of the said period of 14
(fourteen) days referred to in 11.3, failing which the account shall be deemed to be accepted
by all interested parties. The receiver shall rule on any objection so lodged and shall give the
creditor written notice of his ruling, which notice shall be delivered by registered post.

11.5 Any objector referred to in 11.4, or any other person, aggrieved by any ruling of the
receiver, shall be entitled to institute review proceedings in the Court within 14 (fourteen)
days of the receipt by the creditor concerned of the notice referred to in 11.4. Failing
institution of review proceedings as aforesaid the right of objection shall lapse and the
objector shall be deemed to have accepted the account.

11.6 Notwithstanding any provisions to the contrary contained in 11.1 to 11.5 inclusive
above, the receiver shall be entitled to prepare a liquidation and distribution account in
respect of payment of dividends in terms of the arrangement to secured and preferential
creditors, despite finality not yet having been reached regarding the nature and extent of the
claims of concurrent creditors or the identity of all concurrent creditors, subject to the
receiver having made under proper provision for the payment of any dividend due to any
creditor whose claim has not yet been admitted.

12 Domicilium and Notices

12.1 The company chooses domicilium citandi et executandi at all processes arising out of or
in connection with the arrangement may validly be delivered to or served upon it.

12.2 Each creditor is hereby deemed to have chosen domicilum citandi et executandi for all
purposes arising out of or in connection with the arrangement at the address stated by that
creditor in his proof of claim form or as reflected in the books of account and records of the
company.

215 | P a g e
12.3 Notices despatched by the chairman or the receiver in accordance with the arrangement
shall-

12.3.1 be deemed to have been received by the addressee reflected on such notices on the
fifth business day after despatch thereof by pre-paid registered post to the addressee's
domicilum citandi;

12.3.2 be presumed to have been received by the addressee reflected on such notices on the
fifth business day after despatch thereof by pre-paid registered post to the addressee's last
recorded address with the company.

SIGNED at ____________________on_______________________20______ AS
WITNESSES :

1 _________________________ For : _______________________

JOE SOAP, PROPOSER

2 _________________________

SIGNED at ____________________on________________________20______

AS WITNESSES :

1 _________________________ For: ________________________

PROPOSED RECEIVER

2 _________________________

216 | P a g e
10. MEETINGS OF CREDITORS AND PROOF OF CLAIMS

10.1 INTRODUCTION

Meetings of creditors serve to give creditors the opportunity to prove their claims, elect a
trustee and to give instructions to the trustee on the winding-up of the estate.

First meeting (Section 40(1)) - the purpose is to give creditors the opportunity to prove their
claims against the estate and to elect a trustee.

Second meeting (Section 40(3)(a)) - the purpose is to enable creditors to prove claims, to
receive the trustee's report and to give the trustee instructions on the winding-up of the estate.

Special meetings - the purpose is to give creditors the opportunity to prove claims (Section
42(1)) or to interrogate the insolvent, provided however that the Master's consent has been
obtained (Section 42(2)).

General meetings - convened by the trustee for the purpose of obtaining instructions from
creditors in connection with any matter relevant to the administration of the estate (Section
41).

A creditor can only share in the distribution of the proceeds of the insolvent estate, if he
proves a claim against the insolvent estate.

The general rule is that a creditor is entitled to prove his claim at any time before the final
distribution of the estate (Section 44(1)). If a claim is not proved within three months after
conclusion of the section meeting of creditors, the creditor can prove his claim only if he
obtains leave from the Master or the Court and payment of such amount as the Master/Court
may direct in order to cover the costs occasioned by the late proof of claim.

In terms of Section 104(1) a late claim may still be proved after date of submission of the
Liquidation and Distribution account by the trustee to the Master but before confirmation
thereof by the Master provided however that the Master is satisfied that the creditor has a
reasonable excuse for the delay in proving his claim.

10.2 PROCEDURE FOR PROOF OF CLAIMS

The procedure laid down by the Act is applicable to both liquidated and unliquidated claims.

A claim is proved by way of an affidavit which substantially complies with Forms C or D in

the First Schedule to the Act (Section 44(4)).

217 | P a g e
Form D is used for the proof of a claim based on a promissory note or other bill of exchange
and Form C is used for the proof of any other claim.

The affidavit is made by the creditor or by any person "fully cognisant" of the claim.

The affidavit must set forth the following information:

 the facts on which his knowledge of the claim is based;

 the nature and particulars of the claim;
 whether the claim was acquired by cession after sequestration proceedings
commenced;
 the nature and particulars of the security held by the creditor and the value thereof;

If the creditor has realised the security (see Section 83) he must attach to the affidavit a
statement of the proceeds realised and of the facts on which he relies for his preference
(Section 83(5) and (10)).

If the claim is for payment of the purchase price of goods sold and delivered on an open
account, the affidavit must be supported by a statement showing the monthly total and giving
a brief description of the purchases and payments for the full period of trading or for a period
of 12 months immediately prior to date of sequestration, whichever is the lesser (Section
44(6)).

If the claim is based on a document (e.g. mortgage bond) the document or a copy thereof
must be attached to the affidavit.

The claim form, affidavit and annexures must be delivered to the office of the presiding
officer not later than 24 hours before the advertised time of the meeting (Section 44(4)).

It is not necessary for the creditor to attend a meeting in order to prove his claim but it is
prudent to do so in order to deal with objections or other queries.

A creditor who submits a claim may be called to submit to interrogation under oath in regard
to his claim (Section 44(7)). If he is not present he may be summoned to appear (Section
44(8)) and if he fails to do so his claim may be rejected.

A claim must be proved to the satisfaction of the presiding officer but prima facie proof is
sufficient.

If a claim is rejected, the creditor is not debarred from proving it at a subsequent meeting or
from establishing his claim by an action at law (Section 44(3)).

218 | P a g e
TAKE NOTE: However that litigation instituted against the insolvent before sequestration
lapses three weeks after date of the first meeting unless the claimant has given notice within
that period to the trustee/Master that he intends to continue with his litigation and if he in fact
does continue within three weeks after date of such notice and prosecutes that litigation with
reasonable expedition (Section 75).

The admission of a claim may still be disputed by the trustee but then he bears the onus of
disproving the claim (Section 45(3)).

If the presiding officer disallows a claim, the creditor can institute an action against the
trustee in order to compel him to allow the claim against the estate but this should be done
before confirmation of the liquidation and distribution account (Section 75(2)).

In terms of Section 78(3) the trustee is entitled, if so authorised by creditors, to compromise

or admit a disputed claim, provided it has been tendered for proof.

In terms of Section 151 any person who is aggrieved by the decision of the Master/presiding
officer may have it reviewed.

A creditor may include in his claim arrear interest up to date of sequestration, provided
interest was payable by agreement or as a result of the insolvent being in mora (Section
50(1)).

Debts which are owing before date of sequestration but only become payable thereafter may
be proved for the full amount of the debt as if it were payable on date of sequestration, but
such debt which is payable after sequestration is to be reduced by 8% of the amount of the
claim (interest included, if applicable) and reckoned from date of sequestration to the due
date of the debt (Section 50(2)).

Conditional claims are proved in the ordinary way (Section 48). If the condition will be
fulfilled within a year of sequestration, all dividends awarded on the claim are paid to the
Master who will only pay the creditor if the condition is fulfilled. If the condition is not
fulfilled the Master must pay the dividends to the trustee for distribution among the other
creditors (Section 48(a)).

If the condition will not be fulfilled within a year of sequestration, the creditor may be
required to put a written valuation on the claim together with his reasons for the valuation and
the presiding officer must then either admit the claim or reject it.

If the conditional claim is unliquidated, the creditor is obliged to wait for the condition to be
fulfilled before he can prove his claim against the estate.

A secured creditor who states in his claim form that he relies for the satisfaction of his claim
solely on the proceeds of his security, shall not be liable for a contribution to the costs of

219 | P a g e
sequestration which are payable from the free residue (Section 89(2)). See also BOE Bank
Ltd v Bassage 2006 (5) SA 33 (SCA).

A secured creditor who relies solely on his security for the satisfaction of his claim, is
however not entitled to a concurrent claim - Eastern Free State Cape Co-Operative Ltd v The
Master & Others 1997(3) SA899(E).

10.3 THE RIGHT OF THE MASTER TO EXPUNGE THE PROVED

CLAIM OF A CREDITOR

The Master may expunge a proved claim in terms of section 45(3) of the Insolvency Act. In
such an event, the creditor is still entitled to prove the claim in court. See PG Bison Ltd v
Johannesburg Glasswork (Pty) Ltd (In Liquidation) and Others 2006 (4) SA 535 (W).

10.4THE RIGHT OF THE MASTER TO APPOINT A CO-LIQUIDATOR

See Janse Van Rensburg v The Master and Others 2004 (5) SA 173 (T).

10.5TAKING THE MASTER ON REVIEW

An application to review a decision of the Master must be brought within a reasonable time.
In PG Bison Ltd v Johannesburg Glasswork (Pty) Ltd (In Liquidation) and Others 2006 (4)
SA 535 (W) it was decided that where a creditor had knowledge of wipe out of a claim and
waited 13 months before launching review proceedings, the application to review should be
dismissed as a result of the unreasonable delay.

220 | P a g e
11. IMPEACHABLE TRANSACTIONS

11.1 DISPOSITIONS IN TERMS OF THE INSOLVENCY ACT

A disposition is defined in section 2 of the Insolvency Act as -

disposition means any transfer of abandonment of rights to property and includes a sale,
lease, mortgage, pledge, delivery, payment, release, compromise, donation or any contract
therefor, but does not include a disposition in compliance with an order of court. § 2

Simply stated, a disposition is an act whereby an insolvent has parted with an asset in his
estate. The trustee may ask the court to set aside certain dispositions made by the insolvent
before sequestration and may in certain circumstances, treat as void the transfer by the
insolvent of his business before sequestration.

The definition is very wide, but not exhaustive. See Langeberg Ko-op Beperk vs Inverdoorn
Farming and Trading Company Limited 1965(2) 589 (A) where suretyship was held to be a
contract for the payment of money, but there was also a contract for mortgage.

In that same case it was said that the words "any contract there for" relates to all the words in
the definition and not to donation only - at page 602.

A disposition may take the form of a contract which creates rights and obligations and it may
also take the form of an alienation of property. See Estate Jager vs Whittaker and Another
1944 A.D. 246 and 250/1.

"Court" here includes a magistrate's court - in terms of the definition in section 2 - which has
jurisdiction in the matter in question.

In Dabelstein and Other v Lane and Fey NNO 2001 (SA) 1222 (SCA), Hefer ADCJ did not
accept the view that an order by consent does not qualify as an order for the purposes of the
exclusion in § 2.

Thus a settlement agreement made an order of court by consent will qualify for the exclusion
in § 2 and compliance herewith will not be a disposition.

In Standard Finance Corporation Limited v Greenstein 1964(3) 573 (A) a disposition was
held not to be confined to a disposition to a creditor, but includes also a disposition to a third
party which has the effect of benefiting a creditor, e.g. a contract between the insolvent and a
party indebted to him in terms of which the latter party is required to pay the amount of the
debt to a creditor of the insolvent.

See also Reynolds and Others NNO v Mercantile Bank Ltd 2004 (5) 220 (SCA).

The types of disposition laid down by the act are -

221 | P a g e
Section 26 - Dispositions without value

Section 27 - Antenuptial contracts

Section 29 - Voidable preferences

Section 30 - Undue preferences

Section 31 - Collusive dealings

Section 32 deals with proceedings to set aside improper dispositions.

Section 33 deals with certain rights which are not affected by improper dispositions.

In terms of the Companies Act 1973 the provisions of sections 26, 29, 30, 31, 32 and 33 are
made applicable -

to companies in the course of being wound up, by section 340(2)

(provided that the company was unable to pay its debts at the time the winding up
proceedings commenced. See Sackstein NO v Proudfoot SA (Pty) Ltd 2006 (6) SA 358 (SCA);

to companies under judicial management, by section 436(1)(ii).

It is one of the anomalies of our Company Law that while it is clear law that a concursus of
creditors is not created by a judicial management order against a company the provisions of
the sections relating to dispositions nonetheless apply to such a company by virtue of section
436(1)(ii) of the Companies Act.

In terms of the Close Corporations Act, 1984 the provisions of Section 340 of the Companies
Act, 1973 is made applicable to Close Corporations. § 66(1)

11.2 DISPOSITIONS WITHOUT VALUE - SECTION 26 -

11.2.1 Section 26 provides

26(1) Every disposition of property not made for value may be set aside if made by an
insolvent -

more than two years before the sequestration and it is proved that immediately after the
disposition his liabilities exceeded his assets; or

within two years of the sequestration and the person claiming under the disposition or
benefited thereby is unable to prove that, immediately after the disposition was made, the
assets of the insolvent exceeded his liabilities.

222 | P a g e
Provided that if it is proved that his liabilities, at any time after the making of the disposition,
exceeded his assets by less than the value of the property disposed of, the disposition may
only be set aside to the extent of such excess.

26(2) A disposition set aside under 26(1) or which was uncompleted by the insolvent shall
not give rise to any claim in competition with the creditors of his estate provided that if the
disposition was uncompleted and which -

was made by way of a suretyship, guarantee or indemnity; and

has not been set aside the beneficiary may compete with the creditors for an amount not
exceeding the amount by which the value of the insolvent's assets exceeded his liabilities
immediately before the making of that disposition.

11.3 WHAT IS MEANT BY "VALUE" IN SECTION 26?

In Blooms Trustee vs Fourie 1921 T.P.D. 599 at 601, de Waal J. said - (See Lipschitz v
SDDC)

"Value is the price which the property will command in the market ... otherwise a disposition
to a creditor could not be set aside if assets of large value are sold for entirely inadequate
consideration or for merely trifling consideration".

To qualify as "value" the reciprocal benefit need not be a monetary or tangible one, but it
must be adequate. Section 26 could apply where no value has been given or where inadequate
value has been given in the sense that what was given was either illusory or nominal. It would
not however, apply merely because what was given was less than the true value of the asset.
It would also not apply only when there is a total absence of value: Terblanche NO v
Baxtrans CC 1998(3) SA 912 (c).

The words "disposition not made for value" mean, in their ordinary signification, a
disposition for which no benefit or value has been received or provided as quid pro quo - per
Watermeyer C.J. in Jager's Estate vs Whittaker and Another 1944 A.D. 246.

In the Langeberg case 1965(2) 589 (A) at p 612 Holmes J.A. put it thus:

"For value to have been received some benefit must actually have accrued or at least have
been likely to accrue in the future".

11.3.1 EXCEPTIONS TO SECTION 26

Section 27 - Immediate benefits under an Antenuptial Contract

223 | P a g e
In terms of this section no bona fide immediate benefit (i.e. one completed by a transfer,
delivery, payment, cession, pledge or special mortgage within three months of the marriage)
under a duly registered antenuptial contract by a man to his wife or to any child to be born of
the marriage, shall be set aside as a disposition without value unless his estate is sequestrated
within two years of the registration of the antenuptial contract.

The settlement of a life insurance policy may be protected under Section 39-44 of the
Insurance Act, 1943 (see above)

11.4 VOIDABLE PREFERENCES - SECTION 29

Section 29(1) provides that every disposition made by a debtor (whether solvent/insolvent)
within six months of his sequestration (or six months of his death if his estate is sequestrated)
which has the effect (even if it was not made directly to that creditor) of preferring one
creditor above another may be set aside if immediately after the making of the disposition his
liabilities actually exceeded his assets, unless the person benefited thereby proves that such
disposition was made in the ordinary course of business and it was not intended thereby to
prefer one creditor above another.

On the meaning of "intention to prefer" see Cooper & Another NNO v Merchant Trade
Finance Ltd 2000(3) SA 109 (SCA). The test is a subjective test as to the actual intention of
the debtor. The court looks for the "dominant, operative or effectual intention in substance
and in truth"

Section 29(3) provides that if the disposition is made by virtue of a power of attorney granted
by the insolvent, a disposition under section 29 (or section 30) shall be deemed to have been
made at the time the property is transferred, delivered or mortgaged. § 29.3

In considering what constitutes "in the ordinary course of business" it was laid down in -

Hendriks N.O. vs Swanepoel 1962(4) 338 (A) that "the test postulated by the Legislature is an
objective one which relates to 'business done in the ordinary course of business'. In the
application of this test there can only be one standard applicable to any transaction and that is
whether the transaction would normally be entered into between solvent business men -
regard is had, not only to the terms of the disposition, but also the circumstances in which it
was made and also to the customs which apply in that field of business.

In Rex vs Abrahamson 1920 A.D. 283, Solomon J.A. said at page 286 –

"It is unnecessary to give any definition of what is meant by disposing of goods other than in
the ordinary course of business. Concrete examples of such disposal would be if the insolvent
had given the property away to his friends or had sold it at a substantial loss when there was
no need for him to do so."

224 | P a g e
Both the making and receiving of the disposition must be lawful to satisfy the "ordinary-
course-of-business" test. The transaction must not be regarded in isolation. The surrounding
circumstances are a relevant factor. (Gore and Others NNO v Shell South Africa (Pty) Ltd
2004 (2) SA 521 (C)).

The test whether a transaction falls within "the ordinary-course-of-business" is an objective

one.

Section 32 prescribes the order which the Court can make pursuant to the successful
invocation of Section 29 and Section 32(3) does not allow for interest to be claimed - Van Zyl
and Others NNO vs Turner and Another NNO 1998(2) SA 236 (c).

11.5 UNDUE PREFERENCES - SECTION 30

Section 30 provides -

30(1) A debtor makes a disposition when his liabilities actually exceed his assets, with the
intention to prefer one of his creditor above another, and his estate is at any time thereafter
sequestrated, the court may set aside the disposition.

30(2) For the purposes of sections 29 and 30 a surety, and a person in a position by law
analogous to that of a surety, shall be deemed to be a creditor of the debtor concerned.

The determination of the value of assets and the extent of liabilities was considered in Venter
vs Volkskas Limited 1973(3) 175(T), where it was said that the person "seeking to set aside
the disposition must show that the liabilities fairly estimated exceeded the assets fairly
valued, and this is to be determined objectively".

One method of proving the amount of the insolvent's liabilities at the relevant date was laid
down in - Ensor N.O. vs New Mayfair Hotel 1968(4) 462(N) where it was held that this can
be validly established by reference to the proofs of debt filed in the estate. This will apply to
the situation where disposition is made shortly prior to insolvency, but it will not be
completely applicable in the case where the disposition is made, say, more than two years
prior to the sequestration.

An "intention to prefer" is tested subjectively and will exist when the debtor intends to
disturb what would be the proper distribution of assets on insolvency. This must be the main
object.

"No question of undue preference can arise until the debtor contemplates sequestration but it
has been said that a debtor contemplates sequestration at any rate when he realized, when
making the disposition, that it was substantially inevitable".

Per Ramsbottom J in Pretorius N.O. vs Stock Owners Co-operative Company Limited

1959(4) 462 (A) at 472 the debtor had died a few weeks after the making of the disposition

225 | P a g e
and his deceased estate was then sequestrated. Ramsbottom J.A. laid down the following
propositions:

A question of intention involves a subjective assessment of the debtor's action in having

made the disposition. In the absence of direct evidence it must, generally speaking, be proved
that the debtor contemplated sequestration before the inference can be drawn.

It is not sufficient that the circumstances show that the debtor should have realised that the
effect of his action would be to prefer one creditor above another, they must show that he in
fact intended it to have that effect.

An intention to prefer is a question of fact which can be established either by direct evidence
or by inference from the circumstances under which the disposition was made.

Where a debtor pays a creditor "out of his turn" under great pressure or to avoid a criminal
prosecution or for some other reason which negatives that the intention to prefer was the
main object, the inference should not be drawn.

When, however, it is shown that the debtor contemplates insolvency and no other reason for
making the payment appears from the evidence, there is no reason why the inference should
not be drawn.

The question is not "ought the insolvent to have contemplated it" but "did he contemplate it".

Goosen vs Goosen 1 Buch. A.C. 414

It is to be noted, however, that otherwise impeachable transactions will in all likelihood not
be set aside if -

they would cause an ordinary businessman no surprise; and

they were honestly done.

A disposition of a debtor's property is not confined to a disposition to a creditor, but a

disposition to a third party which has the effect of preferring one creditor above another is a
disposition to that creditor. Standard Investment Corporation of S.A. Limited vs Greenstein
1964(3) 573 (A)

In the context of Section 30 "intention to prefer" means the "primary object" or the "dominant
motive" to prefer and in the absence of evidence to the contrary, the inference is justified that
an insolvent's dominant motive or primary object was in accordance with the consequences of
his actions.

226 | P a g e
11.6 COLLUSIVE DEALINGS - SECTION 31

Section 31 provides -

31(1) The Court may after sequestration set aside any transaction entered into by the debtor
before sequestration whereby, in collusion with another, he disposed of his property in a
manner which had the effect of prejudicing his creditors or preferring one of his creditors
above another.

31(2) Any party to a collusive transaction shall be liable to make good any loss to the estate,
and shall pay by way of penalty such sum as the Court may adjudge but not exceeding the
amount by which he could have benefited by such dealings if it had not been set aside; and if
he is a creditor he shall also forfeit his claim against the estate.

Collusion is a conniving together between the debtor and some other person with the
intention of defrauding the creditors of the debtor. See Gert de Jager (Edms) Beperk vs Jones
N.O. and McHardy N.O. 1964(3) 325 (A).

The provision that a person who has been party to a disposition hit by the section shall make
good the loss to the estate is peremptory and the section confers no discretion on the court.

To establish collusion the trustee must prove that the debtor and the other person knew that -
the debtor was insolvent; and the disposition would have the result of prejudicing creditors or
of preferring one above another.

11.7 REMEDIES - SECTION 32

Section 32 provides that proceedings to set aside any disposition under the act, or for the
recovery of compensation, or a penalty under section 31, may be taken by the trustee.

The trustee cannot cede or delegate this obligation and it is only he who is entitled to bring
such proceedings. See South African Board of Executors & Trust Company Limited v
Gluckman 1967(1) 534 (A).

The receiver under a compromise has no power to set aside an improper disposition nor does
he have any power to act under section 32. See S.A. Fabric Limited vs Millman N.O. and
Another 1972(4) 592 (A). Landsdown N.O. v Baldwins Limited 1973(3) 908 (W).

But if the trustee fails to take proceedings these may be taken by a creditor in the name of the
trustee upon his indemnifying the trustees against all costs thereof - section 32(1).

Any creditor proceeding in terms of section 32(1) can only sue in the name of the trustee - see
Gluckman's case (supra).

227 | P a g e
Sometimes more than one entity or person is liquidated in related matters. In such matters, if
the trustees and/or liquidators are uncertain who may litigate against the person that received
the benefit, all the trustees and/or liquidators may be joined as plaintiffs in one matter. Where
the causes of action differ, care should be taken to set out each of the different causes of
action fully. The defendant must be able to plead properly with regards to each plaintiffs
claim. (Sackstein and Others NNO v Du Preez 2004 (2) SA 459 (SE).)

A liquidator loses the right to claim where the company is released from liquidation in a
compromise reached in terms of section 311 of the Companies Act. (Gainsford and Others
NNO v HIAB AB 2000 (3) SA 635 (W)).

When the court sets aside a disposition it shall (in terms of section 32(3) declare the trustee
entitled:

to recover the property alienated; or

in default of such property, to recover the value thereof at the date of the disposition or at the
date on which the disposition is set aside, whichever is the higher.

The effect of an order under section 32 is to set aside the transaction with retrospective effect
so that it has become a nullity.

In the case of a collusive transaction it is peremptory for the court to order forfeiture of the
property and the imposition of the penalty.

In terms of section 104(3) any creditor who has instituted proceedings to set aside any
disposition or dealing with property or for the recovery of damages or a penalty in terms of
section 32(1) is entitled to recover his costs and claim in full from any property recovered
from such proceedings before the claims of any creditors who were not party to such
proceedings are paid or allowed to participate in the proceeds of such property.

A trustee or creditor (as the case may be) is entitled to apply to court for an interdict
restraining the person benefited from parting with the property disposed of pending the
determination of the proceedings to set aside the disposition or for an attachment of the
property pending such determination.

See Hawkins' Trustee vs Corio Saw & Planning Mills and Others 1923 W.L.D. 125.

11.8 ONUS OF PROOF AND DIFFICULTIES OF PROOF -

The test is whether the estate has been impoverished by the disposition, i.e. value could have
been furnished to the estate by a third party.

228 | P a g e
See: Estate Wege vs Strauss 1932 A.D. 76 at 84. Goode, Durrant & Murray Limited v Hewitt
and Cornell 1962(2) S.A. 286 (E) at 291. Langeberg Ko-operasie Beperk v Inverdoorn
Farming & Trading Company Limited 1965(2) S.A. 597 (A) at 604. Standard Finance
Corporation of South Africa Limited (in liquidation) 1964(3) S.A. 573 (A).

Section 26 - DISPOSITIONS NOT FOR VALUE

Under section 26(1)(a), if the disposition was made more than two years before the
sequestration, the onus is on the trustee to prove that the liabilities of the insolvent exceeded
his assets immediately after the disposition was made. § 26(1)(1).

Under section 26(1), if the disposition was made within two years of the sequestration, the
onus is on the person benefited to prove that immediately after the disposition was made the
assets of the insolvent exceeded his liabilities.

The method of proving the amount of an insolvent's liabilities at the relevant date in an action
to set aside a voidable preference or undue disposition was considered in Ensor N.O. vs New
Mayfair Hotel 1968(4) S.A. 462 (N), where it was held that this can be validly established by
reference to the proof of debts filed. See also Nicholls and Whitelaw N.N.O. vs Akoo 1948(1)
S.A. 197 (N).

What must be shown is that the liabilities, fairly estimated, exceeded the assets, fairly valued,
and this must be determined objectively. See Venter vs Volkskas Limited 1973(3) S.A. 175(T).

The way in which the intention to prefer is established has been dealt with in the discussion
on section 30 above.

The trustee must prove -

 that there was a disposition;

 within the relevant period;
 to a creditor (or a third party) in such a way that the creditor would benefit from the
disposition;
 that the debtor had the intention to prefer that creditor;
 that the disposition had the effect of preferring, i.e. the proper distribution envisaged
by the act has been disturbed;
 that immediately after the making of the disposition the debtor's liabilities exceeded
his assets.

229 | P a g e
Once the trustee has established these requirements the disposition may be set aside and the
onus has passed to the creditor concerned who must then, in his turn, prove -

 that the disposition was made in the ordinary course; and

 that it was not intended thereby to prefer the creditor.

See Michaelow N.O. v Premier Milling Company limited 1960(2) S.A. 59 (W) at 65;

 that he parted with property or security;

 in return for the disposition; and
 that he acted in good faith.

See Barclays National Bank Limited v Umbogintwini Land & Investment Co Limited (in
liquidation) & Another 1985(4) 407(D)

The question was: Were the overdraft facilities granted by the bank to the principal debtor,
Sandy's Supermarket in good faith or in consideration only for the original overdraft and loan
transaction between the bank and Sandy's? The bank's raising of this defence was disallowed.
See also Swanees Boerdery (Edms) Bpk (in liquidation) v Trust Bank of Africa Limited
1986(2) 850 (A).

The test of what is in the ordinary course of business is objective, i.e. "it must be one which
would not to the ordinary man of business appear anomalous or unbusinesslike or surprising".
See also Malherbe's Trustee v Dinner and Others 1922 O.P.D. 18 at 22.

In the case of collusive dealings, the onus is on the person seeking to set aside the collusive
disposition, and that onus is discharged on a balance of probabilities.

11.9 DISPOSITIONS IN TERMS OF THE COMMON LAW

In terms of the common law, the Actio Pauliana may be use to set aside the disposition if the
following can be proved:

 the disposition must have reduced the assets of the debtor

 The receiver of the property should not have received his own property
 the debtor must have had the intention to defraud his creditors. If the debtor received
value in return, the Actio Pauliana will only succeed if the receiver had knowledge of
the debtor's intention to defraud his creditors.
 the prejudice must have been caused by the debtor's fraud.

230 | P a g e
POSSIBLE DEFENCES AGAINST CLAIMS TO SET ASIDE DISPOSITIONS

PRESCRIPTION

The claim of the trustee/liquidator could have prescribed.

Prescription commences as soon as the trustee/liquidator knows the facts which gave rise to
the claim and knows who the debtor is. The correctness of Barnard and Lynn NNO v
Schoeman & another 2000 (3) SA 168 (N) at 171 and 172 which might be used as authority
to the contrary, was questioned in Burley Appliances Ltd v Grobbelaar NO & others 2004 (1)
SA 602 (C) 607 to 610.

ISSUE ESTOPPEL

Issue estoppel is similar to res judicata but the causes of action are not identical. In Janse
Van Rensburg and Others NNO v Myburgh and Two Other Cases 2007 (6) SA 287 (T) the
Plaintiffs had previously instituted proceedings to set aside those transactions as dispositions
not for value in terms of section 26 and as transactions which had caused undue preference in
terms of section 30. The previous proceedings had been finalized. The court held that a Plea
of Issue Estoppel was admissible to a claim to have transactions set aside under section 29 as
voidable preference.

SECTION 33

Section 33(1) of the Insolvency act provides a defence in that if the defendant acted in good
faith and had parted with any property or security or who had lost any right against another
person, the defendant does not have to restore the property or benefit received under the
disposition unless the trustee has indemnified the defendant for the loss.

Section 33(1) applies to investors in a pyramid scheme who have lost their capital in the
investment. See FourieNO and Others v Edeling NO and Others [2005] 4 All SA 393 (SCA.)

Section 33(2) protects third parties who acquired property in good faith and for value.

THE LEGAL ORDER OF PREFERENCE

Sections 95 to 103 of the Insolvency Act lay down the legal order of preference in accordance
with which the Trustee/Liquidator must pay creditors' claims. Note that the legal order of
preference was altered by the judicial matters Second Amendment Act, 1998, which elevated
the preferential claim afforded to employees of the insolvent for arrear salaries and wages.
The Insolvency Acts contained in Standard Text Books such as Smith and Hockley are thus
out of date at present in this regard and are to be used with caution.

231 | P a g e
The legal order of preference is as follows:

11.10.1 Secured Claims (Section 95)

Claims secured by a special mortgage (i.e. mortgage bond or special notarial bond),
landlord's legal hypothec, pledge or right of retention. (Note that in terms of section 89(1),
the costs of preserving/maintaining an asset subject to a secured claim are to be paid out of
the proceeds realised on such asset, as well as certain other costs of sequestration referred to
in section 89(1)).

If the secured creditor elects to rely on security when proving its claim in terms of section
89(2), it does not release a surety from liability to the creditor in respect of the shortfall. See
BOE Bank v Bassage 2006 (5) SA 33 (SCA).

11.10.2 Funeral and Death-bed Expenses (Section 96)

The funeral expenses of the insolvent (if he died before the trustee's first plan of distribution
was submitted to the Master) and the expenses of the funeral of the insolvent's wife or minor
child (if incurred within the three months prior to the sequestration) subject to a maximum of
N$300.00 in total.

The death-bed expenses of the insolvent (if incurred before the trustee's first plan of
distribution was submitted to the Master) and the death-bed expenses of the Insolvent's wife
or minor child (if incurred within the three months preceding the sequestration), subject to a
maximum of N$300.00 in total.

11.10.3 Salaries or Wages of Former Employees of the Insolvent (Section 98A)

Salaries or wages for a maximum of three months.

Leave pay accrued in the year of the insolvency or the previous year.

Any payment due for any other form of paid absence for a maximum period of three months
prior to the date of the insolvency.

Severances or retrenchment pay.

Contributions payable by the Insolvent in his capacity as employer in respect of any of his
employees to any pension, provident, medical aid, sick pay, holiday, unemployment, training
or other similar scheme or fund.

NOTE that an employee is defined as "any person ... who works for another person and who
receives, or is entitled to receive, any salary or wages, or who in any manner assists in
carrying on or conducting the business of an employer". Thus a Company Director is an
employee who is entitled to a preferential claim for salary in terms of Section 98A. However,

232 | P a g e
in terms of Section 98A (6), the Minister of Justice is empowered to exclude from the
operation of Section 98A a category of employees by reason of the particular nature of the
employment relationship between the employer and the employees or because there exists
any other type of guarantee which affords the employees equivalent protection. Thus it is
conceivable that the Minister might in future exclude Company Directors or other
Management level employees from the operation of this section.

NOTE in addition that the Minister of Justice may determine by Notice in the Government
Gazette the maximum amounts to be paid out in respect of any or all of the categories in 3.1
to 3.5 or in respect of any single employee or fund/scheme in 3.5.

The Minister is not obliged to set any maximum amount; the section merely says that he
"may" determine maximum amounts "

The Minister is also empowered to supplement, alter or withdraw the relevant maximum
amounts from time to time by notice in the Government Gazette.

At the present time no maximum amount payable under section 98A (1) has yet been
determined by the Minister. It is, however, likely that this will be done in the future.

Section 98 A (3) provides that an employee is entitled to salary, wages, leave or other such
pay even if he/she has not proved his/her claim therefore in terms of section 44 (as is required
of any other type of creditor). All that may be required of the employee is to submit an
affidavit in support of his/her claim for salary, wages, leave or other such payment.

11.10.4 The Costs of Sequestration (Section 97)

The costs of the sequestration (with the exception of the costs mentioned in Section 89(1)
dealing with costs associated with assets subject to secured claims) rank in the following
order of priority:

Sheriff's charges incurred since the sequestration.

Master's fees in connection with the sequestration.

Taxed costs of sequestration, trustee's fees and all other costs of administration, Master's
fees/expenses in terms of Section 152 (2) and salary or wages of any person employed by the
Trustee in connection with the administration of the insolvent estate. (These costs in (c) rank
pari passu and abate in equal proportions if necessary).

11.10.5 Costs of Execution (Section 98)

The taxed costs of the Sheriff/Messenger in connection with any execution on any property of
the insolvent and in connection with any proceedings which resulted in that execution.

233 | P a g e
11.10.6 Preference in regard to certain statutory obligations (Section 99)

Any amount due by the insolvent in his capacity as employer to the Labour Commissioner.

Any amount due by the Insolvent in terms of certain sections of the Income Tax Act, 1981 to
the Receiver of Revenue.

Any amount due by the Insolvent in his capacity as owner/former owner of a mine to the
General Council for Pneumoconiosis Compensation.

Customs/excise or sales duty or interest, fine or penalty due by the Insolvent in terms of the
Customs and Excise Act, 1998.

Any amount provided to the Insolvent by the State in terms of the national Supplies
Procurement Fund.

VAT, interest, fine or penalty due by the Insolvent in terms of the Value-Added Tax Act,
2000.

Any appreciation contribution due by the Insolvent to the Community Development Board in
terms of the Community Development Act, 1966.

Any amount due by the Insolvent in his capacity as employer to the Social Security
Commission in terms of the Social Security Act.

11.10.7 Taxes on Persons or the Incomes or Profits of Persons

Any tax on persons or incomes or profits of persons for which the insolvent is liable under
any Act of Parliament/Ordinance in respect of any period prior to the sequestration (e.g.
income tax due in terms of the Income Tax Act, 1981).

11.10.8 Preference under a General Bond (Section 102)

Any claims secured by a general mortgage bond (i.e. general notarial bond over movable
property).

11.10.9 Non-preferent Claims (Section 103)

The concurrent creditors are paid pro-rate in proportion t the amount of each claim. If the
concurrent claims have been paid in full, the balance of the free residue shall be applied in
respect of interest on the concurrent claims at 8% per annum (or such higher rate as is
stipulated in writing e.g. by virtue of an agreement to pay the prime lending rate of
interest/the bond rate charged by the bank) from the date of sequestration to the date of
payment of the claim, in proportion to the amount of each claim.

234 | P a g e