Sequestration proceedings are not designed to serve as an alternative debt-collection mechanism, a judge said in turning down an application to have a homeowner sequestrated for falling in arrears with levy payments.

Gauteng High Court, Johannesburg Judge Leonie Windell made it clear that sequestration proceedings are instituted not for the purpose of enforcing payment of a debt, but to set in motion the statutory machinery for the declaration of insolvency in the interests of creditors as a whole.

She said a sequestration order affects not only the rights of the immediate litigants, but also those of third parties.

“It is therefore not akin to an ordinary judgment entitling a creditor to execute against a debtor,” she said.

Her remarks were sparked by an application launched by the body corporate of a Johannesburg complex called Charlemagne, who asked for the sequestration of a homeowner only identified as LD (respondent), in terms of the Insolvency Act.

The respondent is the registered owner of a unit within the applicant’s sectional title scheme. She has failed to pay levies and related charges for several years.

The respondent did not contend that levies are, in principle, not payable. Her explanation for non-payment is that a dispute between the parties regarding the levies has persisted since at least 2011.

In June 2017, the parties concluded a written settlement agreement, made an order of court, in terms of which the respondent undertook to pay R379 000, which she never did.

Two unsuccessful attempts were made to execute against her movable property. When an order was at last obtained to sell the property at auction, this was never done.

The applicant instead now wants the respondent to be sequestrated as a means of paying the outstanding levies.

Judge Windell said the statutory requirements set out in the Insolvency Act must be strictly complied with before an application for sequestration of a person’s estate can be considered. These include the disclosure of the debtor’s marital status and the full particulars of any spouse, as well as service of the application on the Master and SARS.

The applicant has failed to demonstrate compliance with these requirements, the judge said.

She added that compliance with these provisions is not a matter of form, but it serves important protective and informational functions and must be strictly observed.

Even if statutory compliance were assumed in the applicant’s favour, the application falls short on the requirement of advantage to creditors. The Act requires the court to be satisfied that there is reason to believe that sequestration will be to the advantage of creditors.

The judge further remarked that the court papers are silent on whether the property owned by the respondent is bonded, the amount outstanding to any bondholder, or the ranking of secured claims.

“In the absence of this information, the court is unable to determine whether any proceeds would remain after the satisfaction of secured debts and the costs of realisation and administration so as to yield a dividend to concurrent creditors.”

Judge Windell also noted that the application was launched in 2022 but was only prosecuted three years later. No explanation is furnished for this delay, nor has the applicant placed updated information before the court regarding the respondent’s current financial position, the status of the immovable property, or the position of any secured or concurrent creditors.

The applicant has not identified any other creditors who would benefit from sequestration, nor has it demonstrated that the general body of creditors would receive a dividend.

“On the applicant’s own showing, it is equally plausible that sequestration would yield no benefit beyond advancing the applicant’s individual recovery. That does not satisfy the statutory requirement,” she said in turning down the application.

zelda.venter@inl.co.za

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