THE TIMING OF A PROPOSED SETTLEMENT IN INSOLVENCY CAN BE A GAMBLE: Corruseal Corrugated KZN v Zakharov [2023] ZAWCHC 48

Abstract

In Corruseal Corrugated KZN v Zakharov ([2023] ZAWCHC 48), the court considered whether a donation made to a debtor after a provisional sequestration order (but before the final order of sequestration) with a view to enabling the debtor to settle debts against their estate did in fact settle the debtor’s debts to the sequestrating creditor, thereby leaving the sequestrating creditor without locus standi to pursue a final order of sequestration. The court also enquired whether the respondent debtor was factually insolvent. The general legal position is that, upon sequestration of a person’s estate, all their assets at the date of sequestration and all assets acquired after (during) sequestration (except for exempt or excluded assets) vest in the Master of the High Court, and thereafter in the trustee once appointed. Thus, a donation accepted and received by the insolvent after sequestration also vests in the insolvent estate.

This case note discusses the judgment in Corruseal Corrugated, focusing on whether the court should have granted the final sequestration order under the circumstances, and if the matter should or could have been approached differently. The pertinent aspect to be addressed in this case note is, however, to consider the construction to be used if a third party, perhaps a family member or a friend, wants to give financial assistance to a debtor to avoid the final sequestration of their estate following an order of provisional sequestration.