MRL3701 – INSOLVENCY LAW

ONLINE TEACHING AND LEARNING

Learning Unit 1: Introduction to Insolvency Law

Magnum Financial Holdings (Pty) Ltd (in Liquidation) v Summerly and another NNO
1984 (1) SA 160 (W)

Dear Students,

And? How did you do? Could you follow the steps on how to summarise a case? We hope
that it was a positive experience for you!

PLEASE NOTE: The below is NOT how you should summarise or critically discuss a
case note and is therefore NOT a suggested answer to the memo!

Also remember that you will find all the prescribed cases on the E-Reserves of the
Library Website.

You will have to include your own additional information to “close the gaps”. You MUST
also always bear in mind the AMOUNT of MARKS allocated to the question.

By now as a third-year level student, you should be able to critically discuss a case note.
Whereas a 10-mark question in an assessment or in the exam to simply discuss the case
would require no more than half a page, a 20-mark question to “critically discuss and apply
the case to the facts” type of question would suggest that you rather apply your mind to more
information, let’s say about a page long. However, what I have assisted you with below, is
to take the information I shared with you in the Introduction Lessons posted to show
you the type of information we would like you to at least include in your answers.

Remember that this is supposed to enhance your learning experience, it is not compulsory
and does not need to be submitted. Look at the outline below, and remember that learning
should also be fun, so enjoy this journey with us!

Good luck, and best wishes for your studies!!

Best wishes and warm regard,

Mrs Taljaard
 Magnum Financial Holdings (Pty) Ltd (in Liquidation) v Summerly and another NNO
1984 (1) SA 160 (W)

Summary:

It is important to note that a trust can be a debtor is the usual sense of the word in terms of
the Insolvency Act 24 of 1936. However, be reminded that a company should be wound up as
it is a juristic person and not a natural person.

Facts:

This was an unopposed urgent matter before court for a sequestration order. The respondents
were the trustees of the family trust and in that capacity sued. The trust was sequestrated.

The Court’s Reasoning:

The problem was whether a trust can be sequestrated because only a debtor can be
sequestrated. See section 2 of the Insolvency Act 24 of 1936.

The court held that because the trust could, through its trustees, acquire property and incur
liabilities, and because it is not a body corporate, it did fall within the definition of “debtor” in
the “usual sense of the word”. Creditors could therefore look to the trust property for
satisfaction of claims. See also Ex Parte Milton NO 1959 (3) SA 347 (SR).

Summary of the Court:

Should follow Ex Part Milton. Also quoted with approval by Mars “The Law of Insolvency in
South Africa” 7th ed at 28; Smith The Law of Insolvency 2nd ed at 10. The trust thus enabled
to possess an estate and incur liabilities and can therefore be seen as “a debtor in the usual
sense of the word”. Provisional sequestration order was confirmed.