Body Corporate Palm Lane v Masinge 2013 JDR 2332 (GNP): Discretion and Powers of the Court in Applications for Sequestration
21 Pages Posted: 22 Feb 2018
Date Written: February 13, 2018
In Body Corporate Palm Lane v Masinge (2013 JDR 2332 (GNP)) the court exercised its discretion in terms of section 12(1) of the Insolvency Act 24 of 1936 against the granting of a final order for sequestration even though all the requirements for the granting of such order in terms of section 12(1) were satisfied. The court thus came to the assistance of the respondent-debtor by allowing him the opportunity to pay off his debt rather than have his estate sequestrated and being obliged to surrender his assets and thus also being subjected to the stigma and restrictions of insolvency. In this respect, it is to be noted that it is currently a worldwide trend to accommodate insolvent or over-indebted debtors and to retreat from the principle of maximising returns for creditors as the only objective of consumer insolvency regimes. The following observation in a recent report of the World Bank is pertinent in this regard (see Working Group on the Treatment of the Insolvency of Natural Persons Report on the treatment of the insolvency of natural persons Insolvency and Creditor/Debtor Regimes Task Force, World Bank 2012 par 393 – available at - hereafter the World Bank Report): [A] regime for treating the insolvency of natural persons not only pursues the objectives of increasing payment to individual creditors and enhancing a fair distribution of payment among the collective of creditors, but, just as importantly, such a regime pursues the objectives of providing relief to debtors and their families and addressing wider social issues. In achieving those objectives, a regime for the insolvency of natural persons should strive for a balance among competing interests.
The court in Masinge did not elaborate much on its decision. References to relevant case law and provisions of the Insolvency Act are few and far between and the court’s viewpoints and reasons for its decision have to be deduced from what is read between the lines. The aim of this case discussion is thus, first of all, to discuss and analyse the court’s decision with specific reference to the applicable provisions of the Act and relevant case law that relate to the question as to what the discretion of the court pertaining to the granting or refusing of sequestration applications entails. Masinge concerned a compulsory sequestration application, but it should be noted that the Act also affords discretion to the court to grant or refuse a voluntary sequestration application even though the requirements in terms of the Act have been complied with. The provisions of the Act and relevant case law in this regard are therefore also investigated as it may shed some light on the issues under consideration. After discussing the issues relating to the court’s discretion, the implications of the ruling in Masinge and the powers of the court when refusing a sequestration order are discussed. In light of this discussion, proposals are made for the amendment of the relevant provisions of the Act in order to allow the court to make certain orders when exercising its discretion to dismiss an application for sequestration. Paragraph 4 contains our proposals for amendment of the Act and concluding remarks.
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