IN THE HIGH COURT OF SOUTH AFRICA

(WITWATERSRAND LOCAL DIVISION)

CASE NO:  2007/31743

In the Ex Parte Application of:

VAN DER MERWE, LOUIS BAREND				            Applicant

J U D G M E N T

MOSHIDI, J:

INTRODUCTION

[1] 	This is an application in which the applicant seeks the following relief:

“That the applicant be revested by virtue of the provisions of s 58(1) of the Deeds Registries Act 47 of 1937 with the immovable property known as:  

Erf 1590 Uvongo Extension 2 Township
Registration Division E.T., Province of Kwa-Zulu Natal
In Extent 1403 (One Thousand Four Hundred and Three) Square Meters.”

[2] 	The application is not opposed by the Master of the High Court, nor the trustee of the applicant nor any creditor(s).

[3] 	When the matter initially came before me in the unopposed motion court, I had certain concerns and reservations to grant the order due to the unique and unusual nature of the circumstances of the matter and the relief sought.  I requested counsel for the applicant, Mr Ernesto Dos Santos Soares, to research the matter further and prepare Heads of Argument in order to assist the Court to resolve the matter in a just and equitable manner.  The matter was then postponed for such purpose. Prior to the next hearing, counsel for the appellant kindly provided Heads of Argument as well as supplementary affidavits from the applicant and the trustee, for which I am extremely grateful.  However, regrettably, the Heads of Argument do not address the hub of the matter on which my initial reservations were based.  I however, granted an order in terms of a draft order prepared by counsel in the following terms:  “That the applicant is and declared entitled, by virtue of the provisions of section 58 of the Deeds Registries Act 47 of 1937, to the immovable property known as Erf 1590 Uvongo Extension 2 Township, Registration Division E.T., Province of Kwa-Zulu Natal In Extent 1403 (One Thousand Four Hundred and Three) Square Meters (‘hereinafter the immovable property’).”

THE FACTUAL BACKGROUND

[4] 	It is convenient to set out the facts which I consider to be relevant.  

4.1 	Prior to the sequestration of his estate in 2002, the applicant was the registered owner of the immovable property held by Deed of Trust T15729/1970.  It is a vacant stand situated in an unpopulated area close to the N3 toll road on the Kwa-Zulu Natal South Coast. 

4.2	The estate of the applicant was placed under final sequestration by order of this Court granted on 22 November 2000.  In consequence thereof Mr J M Oelofsen was appointed as the trustee (“the trustee”), by the Master of the High Court. The sequestration application was launched by a firm of attorneys, Hartman Zanner & Partners of Roodepoort (“Hartman”).  

4.3	The immovable property falls under the jurisdiction of the Hibiscus Coast Municipality (“the municipality”).

4.4	According to the applicant, the only claim that was submitted against his insolvent estate was that of the current creditor, Hartman, which was in the amount of R12 976,03. He has since paid the amount of R1 424,27 to Hartman in respect of the contributions levied against Hartman at the time of his sequestration, as indicated later herein.

4.5	The applicant states that consequent upon his sequestration, all his creditors, including the municipality, were notified of the sequestration and invited to lodge their claims in the usual manner, against the estate. The location of the immovable property is in an unfavourable area, next to the N3 toll road, and becomes waterlogged in the rainy season.  At the time of the sequestration of the applicant, the rates and taxes owing to the municipality in respect of the immovable property, appeared to have exceeded the value of the property.  However, the municipality did not lodge any claims based on such outstanding amounts.

4.6	The trustee subsequently offered to abandon the immovable property in favour of the municipality in exchange of the arrear rates and taxes owing on the immovable property. However, the municipality did not respond to the offer.  Thereafter, the trustee proceeded to finalise the first and final liquidation and distribution account without reflecting the immovable property as an asset in the insolvent estate. 

4.7	In the current application, the trustee confirms that after several attempts to settle the matter with the municipality, as indicated above, he elected to abandon the immovable property in favour of the municipality in exchange for the squashing of the arrear rates and taxes owing to the municipality at the time.  He therefore proceeded to finalise the final liquidation and distribution account without including the immovable property as an asset in the estate.

4.8	In the meantime, the applicant was rehabilitated by an order of this Court on 17 October 2006.  In his rehabilitation application, which was also served on the Master of the High Court and the trustee, the applicant gave the cause of his insolvency as follows in para 3 of his founding affidavit:

“3.1 	I suffered substantial losses in a commercial property transaction that did not materialise and which ultimately caused my financial demise.  I was as a result of the losses sustained from the aforementioned venture, not in a position to settle my creditors and ultimately one of my creditors, Hartman Zanner & Partners (now known as Hartman and Associates) successfully applied for the sequestration of my estate.  
 
3.2	At the time of my sequestration, the total amount of my liabilities amounted to R136 189,76.”

The first and final liquidation account was confirmed by the Master on 2 September 2002.  Only one claim was proved against the estate, being that of Hartman in the sum of R14 400,30.  The contribution of R1 424,27 levied against Hartman was duly paid by the applicant. Neither Hartman nor the Master opposed the rehabilitation application.  In fact, both supported it.   Of significance, is that the immovable property was not reflected in the liquidation and distribution account.

4.9	The applicant states that at all material times, including the time of his application for rehabilitation, he was under the impression that his trustee had disposed of the immovable property in the winding-up of the estate.  The municipality as well did not liquidate the immovable property but instead, obtained default judgment against the applicant in respect of the arrear rates and taxes, and noted an interdict against the immovable property with the Registrar of Deeds.  In January 2008, the applicant was contacted by an estate agent from Margate in Kwa-Zulu Natal who sought from the applicant a sole mandate to market and sell the immovable property.  This, undoubtedly, prompted the present application, which is not opposed by either the trustee or Hartman. The applicant has since paid in full the arrear rates and taxes owing to the municipality.

[5]	The application poses an interesting and unusual legal issue in that the applicant seeks to be revested with the immovable property which the trustee abandoned in his estate.  It is not the usual scenario of assets acquired by an insolvent during sequestration, or assets concealed to avoid liquidation.  The trustee appears to have bona fide abandoned the immovable property by excluding it from the final liquidation and distribution account.  The question which arises is whether the applicant should be allowed to benefit from the trustee’s abandonment of the immovable property.

THE LEGAL POSITION

[6] 	There is no doubt that the immovable property in question falls within the definition of “immovable property” as defined in s 2 of the Insolvency Act 24 of 1936 (“the Act”).  It is trite law that the effect of sequestration of the estate of an insolvent is to divest the insolvent of his estate and to vest it in the Master until a trustee has been appointed, and, upon the appointment of a trustee, to vest the estate in the trustee.  In this regard, s 20 of the Act provides as follows:

“20. 	Effect of sequestration on insolvent property: (1)  The effect of the sequestration of the estate of an insolvent shall be –

(a)	to divest the insolvent of his estate and to vest it in the Master until a trustee has been appointed, and, upon the appointment of a trustee, to vest the estate in him;

(b)	to stay, until the appointment of a trustee, any civil proceedings instituted by or against the insolvent save such proceedings as may, in terms of section twenty-three, be instituted by the insolvent for his own benefit or be instituted against insolvent: Provided that if any claim which formed the subject of legal proceedings against the insolvent which were so stayed, has been proved and admitted against the insolvent’s estate in terms of section forty-four or seventy-eight, the claimant may also prove against the estate a claim for his taxed costs, incurred in connection with those proceedings before the sequestration of the insolvent’s estate;

(c)	as soon as any sheriff or messenger, whose duty it is to execute any judgment given against an insolvent, becomes aware of the sequestration of the insolvent’s estate, to stay that execution, unless the court otherwise directs; 

(d)	to empower the insolvent, if in prison for debt, to apply to the court for his release, after notice to the creditor at whose suit he is so imprisoned, and to empower the court to order his release, on such conditions as it may think fit to impose.  

(2)	For the purposes of subsection (1) the estate of an insolvent shall include –

(a)	all property of the insolvent at the date of the sequestration, including the property or the proceeds thereof which are in the hands of a sheriff or a messenger under writ of attachment;

(b) 	all property which the insolvent may acquire or which may accrue to him during the sequestration, except as otherwise provided in s twenty-three.”

In Walker v Syfret N.O. 1911 AD 141 at 166 Innes J stated:

“And with this object all the debtor’s rights are vested in the Master or the trustee from the moment insolvency commences. The sequestration order crystallises the insolvent’s position; the hand of the law is laid upon the estate, and at once the rights of the general body of creditors have to be taken into consideration.  No transaction can thereafter be entered into with regard to estate matters by a single creditor to the prejudice of the general body.  The claim of each creditor must be dealt with as it existed at the issue of the order.”

[7] 	The functions of a trustee are essentially to control and administer the property and affairs of the estate and to liquidate it in accordance with the applicable law.  In this regard, s 69 of the Act provides:

“69. 	Trustee must take charge of property of estate. –  (1)  A trustee shall, as soon as possible after his appointment, but not before the deputy sheriff has made the invents referred to in subsection (1) of section nineteen, take into his possession or under his control all movable property books and documents belonging to the estate of which he is trustee and shall furnish the Master with a valuation of such movable property by an appraiser appointed under any law relating to the administration of estates of deceased persons or by a person approved by the Master for the purpose.

(2)  If the trustee has reason to believe that any such property, book or document is concealed or otherwise unlawfully withheld from him, he may apply to the magistrate having jurisdiction for a search warrant mentioned in subsection (3).

(3)  If it appears to a magistrate to whom such application is made, from a statement made upon oath, that there are reasonable grounds for suspecting that any property, book or document belonging to an insolvent estate is concealed upon any person, or at any place or upon or in any vehicle or vessel or receptacle of whatever nature, or is otherwise unlawfully withheld from the trustee concerned, within the area of the magistrate’s jurisdiction, he may issue a warrant to search for and take possession of that property, book or document.

(4)  Such a warrant shall be executed in a like manner as a warrant to search for stolen property, and the person executing the warrant shall deliver any article seized thereunder to the trustee.”

The powers of a trustee to take possession of the assets of the insolvent estate are not limited to unencumbered property.  For example, in Roux en Andere v Van Rensburg N.O. 1996 (4) SA 271 (A), it was held, inter alia, that with regard to the duty of the trustee to take possession of the assets of the insolvent estate, there was in principle no reason to differentiate between encumbered movable and immovable assets.  Further that, the trustee of an insolvent estate was in terms of the common law entitled to take possession of immovable property which was the subject of a lien for improvements.

[8] 	In terms of s 25(1) of the Act, the estate of an insolvent shall remain vested in the trustee until the insolvent is reinvested therein pursuant to certain occurrencies.  In this regard s 25(1) of the Act provides as follows:

“Estate to remain vested in trustee until composition or rehabilitation – (1) The estate of an insolvent shall remain vested in the trustee until the insolvent is reinvested therewith pursuant to a composition as in section 119 provided, or until the rehabilitation of the insolvent in terms of section 127 or 127A:  Provided that, subject to the provisions of subsection (3), any property which immediately before the rehabilitation is vested in the trustee shall remain vested in him after the rehabilitation for the purposes of realisation and distribution.”

In Moodley, N.O. v Milne N.O. 1965 (1) SA 154 (D), at 160 James J said:  “Subject to certain statutory exemptions in regard to matters such as the insolvent’s wages, subsequently acquired assets vest in the trustee, see s 23(1) of Act 24 of 1936, and in my judgment such subsequently acquired assets will only become the property of the insolvent if they are included in the estate which is re-vested in him in terms of a deed of composition, or if they are the subject of a special order to that effect made by the Court on the occasion of the insolvent’s rehabilitation.” In the present matter, the applicant did not enter into an offer of composition as envisaged in section 119 of the Act.  However, the applicant was rehabilitated by this Court in terms of s 124(2) of the Act on 17 October 2006.  The Master, the trustee, the municipality and the only creditor that proved, that is Hartman, did not oppose the rehabilitation application which was brought to their attention.  The first and final liquidation and distribution account in the sequestration, which was not opposed by the Master on 2 September 2002, excluded the immovable property.  In this regard, the applicant’s explanation is that he was under the impression, though mistaken, that the trustee had liquidated the immovable property, until he received an enquiry about the immovable property from the estate agent, as indicated above.

[9] 	S 129 of the Act deals with the effect of rehabilitation. It states:

“129. 	Effect of rehabilitation. – (1) Subject to the provisions of sub-section (3) and subject to such conditions as the court may have imposed in granting a rehabilitation, the rehabilitation of an insolvent shall have the effect –

	(a) 	of putting an end to the sequestration;

(b)	of discharging all debts of the insolvent, which were due, or the cause of which had arisen, before the sequestration, and which did not arise out of any fraud on his part;

(c)	of relieving the insolvent of every disability resulting from the sequestration.

(2)  A rehabilitation granted on an application made in circumstances described in sub-section (3) of section one hundred and twenty four shall have the effect of re-investing the insolvent with his estate.

(3)	A rehabilitation shall not affect –

(a)	the rights of the trustee or creditors under a composition;

(b)	the powers or duties of the Master or duties of the trustee in connection with a composition;

(c)	the right of the trustee or creditors to any part of the insolvent’s estate which is vested in but has not yet been distributed by the trustee, but subject to the provisions of the sub-section (2);

(d)	the liability of a surety for the insolvent;

(e)	the liability of any person to pay any penalty or suffer any punishment under the provisions of this Act.”

In Hockly’s Insolvency Law, 8 ed par 19.3 p 200, the following is said:

“Rehabilitation has the fact of putting an end to the sequestration. It relieves the insolvent of every disability resulting from sequestration and discharges all his debts (other than debts arising out of fraud on his part) which were due or the cause of which arose before sequestration (s 129(1)), including foreign debts reinforced by judgment of a foreign court granted after sequestration (North American Bank Ltd (in Liquidation) v Granit 1998 (3) SA 557 (W) 565-7.”

In Ex Parte Noriskin 1962 (1) SA 856 (D), in an application for rehabilitation as well as for a declaratory order entitling the applicant to certain assets acquired during sequestration, the Court held that:  “That follows from the provisions of sec 129(2) of Act 24 of 1936 where it is provided that, on the grant of an application of rehabilitation under the provisions of sec 124(3) of the Act, the insolvent is reinvested with his estate.  See also Ex Parte Mavromati 1948 (3) SA 886 (W) at p 891.”  In Mars, The Law of Insolvency in South Africa, 7 ed p 461, the following is stated:  “Subject to any special conditions that may be attached thereto by the court the effect of an order of rehabilitation is to put an end to the sequestration, but any property which was vested in the insolvent’s trustee before rehabilitation remains so vested in him for the benefit of his creditors, save where it is specially provided in a composition that it should revest in the insolvent.”

[10] 	Indeed, the central issue to be resolved in this matter, is whether the applicant should be revested with the immovable property based on the particular history and circumstances of the matter.  I could find no explicit provision in the Act that deals specifically with a situation posed by the instant application, nor could counsel for the applicant point me to any. The applicant, in prayer (1) of his Notice of Motion, seeks that the immovable property be revested with him in terms of s 58(1) of the Deeds Registries Act 47 of 1937.  The latter section provides as follows:

“Immovable property which has vested in a trustee in accordance with the law relating to insolvency and which has not in terms of that law been re-vested in the insolvent may, subject to the provisions of section 25(3) of the Insolvency Act, 1936 (Act No. 24 of 1936), whether before or after rehabilitation of the insolvent, be transferred only by the trustee, and may not after such rehabilitation be transferred, mortgaged or otherwise dealt with by the insolvent until it has been transferred to him by the trustee:  Provided that if after rehabilitation the trustee has been discharged or there is no trustee in existence, the Master shall, if satisfied that the rehabilitated insolvent is entitled to the property, give him transfer thereof in such manner as may be prescribed.”

The Heads of Argument of the applicant deal almost exclusively with the legal position where the insolvent acquired property during sequestration. This was, in my view, correctly conceded by counsel for the applicant.  The cases in question are: Ex Parte Steele 1948 (1) SA 1203 (W);  Ex Parte Kriel 1949 (1) SA 971 (O);  Ex Parte Potgieter 1967 (2) SA 310 (T);  Ex Parte Olivier 1948 (2) SA 545 (C);  Ex Parte Vorster 1958 (1) SA 91 (C); and Ex Parte Norton, N.O. 1958 (3) SA 120 (E).  Further, in regard to the cases just cited, it was once more correctly conceded by applicant’s counsel that these cases are distinguishable from the present application in that the property sought to be revested in the applicants was acquired after sequestration but prior to rehabilitation and could potentially be considered to have been acquired adverse to the trustees. However, the issue of prejudice to the creditors was a common threat in the abovementioned cases.  I deal later herein with some of the cases abovementioned.

[11] 	The present application was served on the Master on 10 December 2007, the applicant indicated therein that the application was set down for 15 January 2008. There has been no response.  The only creditor who proved a claim against the insolvent estate, Hartman, is aware of the application and has consented to the only prayer therein sought.  In fact, para 3 of Hartman’s confirmatory affidavit reads as follows:  “I have read the application and founding affidavit of Louis Barend van der Merwe and I confirm that I have no objection to the granting of the order as prayed for in the applicant’s notice of motion.”

The trustee, equally supports the present application. Paras 3-7 of his supplementary affidavit read as follows:

“3. 	I confirm that I was a Trustee of the erstwhile insolvent estate of Louis Barend van der Merwe.  

4. 	In the process of winding-up the applicant’s erstwhile insolvent estate I intended to contact Hibiscus Coast Municipality (hereinafter referred to as ‘the municipality’) so as to settle the arrear rates and taxes owed to them as arising from Erf 1590, Uvongo Extension 2, Township Registration Division E.T. Province of Kwa-Zulu Natal (hereinafter referred to as the property).

5. 	After several attempts, with no response forthcoming from the offices of the municipality I elected to abandon the property in favour of the municipality in exchange for the quashing of the arrear rates and taxes.

6. 	I presumed that as the municipality had neither responded to the publication of the sequestrated estate nor the offer of abandonment that they would not enforce balance owed to them.

7. 	I therefore settled the Final Liquidation and Distribution Account without including the property as an asset.”

RESOLUTION OF THE ISSUE

[12] 	In my view, and based on the above, the issue to be decided in this application can safely and reasonably be resolved on the basis that the trustee abandoned the immovable property when he decided to exclude such property from the final liquidation and distribution account.  This could account for the absence of any response or intervention from the Master.  

[13] 	In dealing with the effect of rehabilitation, Meskin, Insolvency Law, at 14-1 (Issue 21), states: “Independently of a composition providing otherwise, rehabilitation does not operate, save in one case, to reinvest the insolvent with his estate.  The effect of the relevant provisions in this regard is, it is submitted, this:  a composition providing otherwise, and the said exceptional case, apart, property vesting in the trustee as at the date of sequestration and property vesting in him during the sequestration, and unrealised as at the date of rehabilitation, remains vested in him notwithstanding rehabilitation for the purposes of realisation and distributions;  if however, the circumstances warrant such, the Court may make an order for the reinvestment of any such property in the insolvent, i.e. in the exercise of its discretion under section 127(2) of the Insolvency Act.”  Further, under the subject, “Automatic Rehabilitation”,  Meskin, Insolvency Law (ibid) at 14-2 (1), states: “It is submitted that the effects of this automatic rehabilitation are no different from those of a rehabilitation by the Court. Accordingly, where the insolvent seeks to establish the situation that he is to be reinvested with property otherwise vested in his trustee, it is submitted that he is bound to apply to the Court for such relief and he must give the requisite notice in this regard.”  The requisite notice referred to in the latter quotation, refers to the Master, the trustee, the creditors and publication in the Government Gazette, as was laid down in Ex Parte Potgieter, above.  However, in Ex Parte De Villiers 1973 (3) SA 291 (W), the insolvent applied for a declaratory order that certain immovable property acquired during his insolvency vested in him and not his trustee, and the Master took the view that notice to the creditors was necessary, the Court held that Ex Parte Potgieter above was not applicable, and consequently, the Master’s attitude could not be supported. It should however be noted that Ex Parte De Villiers above, dealt with immovable property acquired by the insolvent during sequestration, and not property acquired prior to sequestration, as in the present application.

[14] 	In Meskin, Insolvency Law (ibid), at 12-9 (Issue 2), the following is stated:  “The trustee’s powers to sell property of the estates include by implication, it is respectfully submitted, a power (with creditor’s authorisation) to abandon immovable or movable property held in security to the creditor concerned in settlement of his claim, i.e. effectively to sell the property to him for a price equal to the amount of his claim, or to such amount as may be agreed, payable by way of set-off. Such an abandonment effectively renders inoperative the provisions of the Insolvency Act otherwise regulating the realization of the security.”

Once more, the contents of the latter quotation are clearly distinguishable from the facts in the present matter.  In the present matter, the applicant held the immovable property free of any security of a creditor, and he acquired same before his sequestration.  In Hockly’s Insolvency Law, (ibid) para 19.4 p 201, the following is stated:  “If the insolvent can show that neither the trustee nor his creditors lay claim to an asset in his estate (for example, an asset inherited during his insolvency), he may, on applying for rehabilitation, or thereafter, ask for an order declaring that he is entitled to the asset (Ex Parte Parker 1946 CPD 536;  Ex Parte Kriel 1949 (1) SA 971 (O) 975.  The Court may grant the order on the basis that the trustee and creditors, by making no claim in respect of the asset, have waived whatever rights they might have had to it (Ex Parte Olivier 1948 (2) SA 545 (C) 554.”

Once more, the example made in the latter quotation relates to an asset acquired by the insolvent during insolvency, and not as in the present matter.  In United Building Society Ltd and Another N.O. v Du Plessis 1990 (3) SA 75 (W), it was held, inter alia, that a trustee was entitled to enter into a verbal agreement abandoning immovable property of an insolvent in favour of the bondholder.  Once more, the facts of the latter case are distinguishable from the present matter. The above examples emphasise the unique nature of the present application in many ways.

[15] 	As stated earlier, the case law referred to in the Applicant’s Heads of Argument, relate to assets acquired by the insolvent during insolvency.  Such cases also deal with instances where the insolvent in applying for rehabilitation, simultaneously applies for a declaratory order regarding immovable property or property acquired during sequestration.  In the current application, the applicant had already been rehabilitated when he launched the application for the present relief.  However, close examination of the case law contained in the Applicant’s Heads of Argument provides some helpful guidance. Examples thereof follow in the next paragraph.

[16] 	In Ex Parte Steele above, his Lordship Justice Ramsbottom held in reference to Ex Parte Kay (1942), (W) 11 and Ex Parte Moolman, N.O. (1943 (T) 258) that:  “Although there is no statutory authority for making such an order, the Court, on an application for the rehabilitation of the estate of an insolvent, will grant a declaratory order that immovable property acquired by the insolvent during sequestration was acquired adversely to his trustee and creditors if it appears that there is likelihood of difficulty arising when transfer comes to be passed. But before any such order is made, due notice of the insolvent’s intention to apply for the order should be given to the persons who may be interested, and in particular to the trustee ...”

The concept was taken further in Ex Parte Kriel above where De Beer J held in reference to Ex Parte Parker 1946 (C) 536 at 541 that:  “Whatever the rights of a trustee may be in relation to immovables acquired by an insolvent during insolvency, I am satisfied that where an insolvent has acquired land, or indeed any other asset, during insolvency and the time for his rehabilitation has arrived he must of necessity be entitled to approach the Court to settle what is to be done with the asset. If it is an asset that has vested in the trustee then it is the duty of the trustee to administer such asset: not only the creditors but also the insolvent have an interest in such asset for the insolvent is entitled to be paid any surplus there may be upon realisation after the claims of the creditors have met. If then the trustee with the full knowledge of the facts chooses not to administer the asset and if the creditors do not choose to see that the trustee claims the asset for realisation, there seems to be every reason why the insolvent should be entitled to approach the Court for an order vesting the asset in him. His only alternative course would be for him to institute proceedings against the trustee to compel him to realise the asset, a course which ex hypothesi neither the insolvent, not his trustee nor his creditors desire.  I am of opinion therefore that when an insolvent during his insolvency has acquired immovable property or any other asset and he can satisfy the Court at the time he applies for his rehabilitation or thereafter that both his trustee and his creditors will full knowledge of the facts lay no claim to the asset it is competent for the Court to make such order as will enable the insolvent to deal with the asset as his own.”  In reference to Ex Parte Executors Estate Church (1942 (N) 109) it was held:  “Where the trustee waives all claim to the property and assuming the creditors after notice do the same then clearly the insolvent is entitled to transfer – it cannot be left hanging in the air. If during insolvency the trustee is vested with immovable property purchased or inherited by the insolvent and he does not realise it and distribute the proceeds, I find no insuperable difficulty in making a declaratory order that the insolvent is entitled to transfer; nor is any difficulty anticipated by the Registrar of Deeds who offers no objection to an order in the form sought.  His Lordship Justice De Beer concluded:
“1. 	The notice of intention to apply for a declaratory order must fully describe the property and the manner in which the insolvent acquired it.

2. 	This notice must be published in the Government Gazette and must be served on the Master, the trustee, and, subject to what I have said about creditors who could not be contacted, on all creditors, proved or unproved, whose claims have not been satisfied.”  In Ex Parte Potgieter above his Lordship Justice Hiemstra held at p 311D-E:

“Dit skyn of […] daar geoordeel het dat die Transvaalse Afdeling in Ex parte Steele ook bedoel het dat daar persoonlike betekening van ‘n kennisgewing met volledige besonderhede aan bewese en onbewese skuldeisers moet wees. Die vorm van kennisgewing word egter nie daar vermeld nie en ek is van oordeel dat dit ‘n saak van goeddunke van die Hof moet wees.”

In Ex Parte Olivier, above, at p 553 [which was referred to and applied in Ex Parte Vorster above, his Lordship Justice De Villiers held that:  “The procedural machinery provided by sec. 58(4) (i.e. of Act 47 of 1937) does not, in my opinion, preclude the making of a declaratory order in favour of the applicant. The order would not of itself vest the property in him; it would merely declare that he was entitled thereto.”

In Ex Parte Norton, N.O. above, at 121B-D His Lordship Justice O’Hagan held that:

“The applicant is clearly entitled to an order for the rehabilitation of the estate she represents.  As far as the claim relating to the estate assets is concerned, full notice has been given to the survivor of the co-trustees in the insolvent estate and to all creditors who can be traced at this date; and none of these persons has raised any objection to the relief sought. The Registrar of Deeds has, however, suggested that the form of order should be governed by the provisions of sec. 58(4) of Act 47 of 1937. If this is so the Court could do no more than declare that the applicant was entitled to the property, and the applicant would then have to take transfer of the fixed property from the trustee vide Ex Parte Gouws, 1950 (1) SA 486 (T).  It is clear from the case of Gouws that sec. 58(4) applies only to instances where immovable property, acquired by the insolvent after sequestration, has by law vested in the trustee. Where such property is acquired adversely to the trustee, the dominium vests in the insolvent and there can be no question of the insolvent having to seek transfer from his trustee. In Ex Parte Vorster, 1958 (1) SA 91 (C), to which the Registrar of Deeds has referred, the usufruct had vested in the trustee in insolvency.”

[17] 	The facts in Ex Parte Allwright  1946 (T) 663, are more relevant to the present application.  At the time of his sequestration, the insolvent applicant was the registered owner of an undivided share in certain immovable property.  The immovable property, which was clearly an asset in the applicant’s insolvent estate, was not disclosed by the applicant to his trustee.  The immovable property was subject to the life usufruct of a third party (Edith Charlotte Parkyns).  The applicant’s explanation for his failure to disclose the property was unsatisfactory.  He alleged that he assumed that he was of the impression that the property belonged to his wife. The Master was equally of the view that the applicant’s explanation in this regard was unconvincing.  The applicant sought an order for his rehabilitation together with an order authorising and sanctioning that he be reinvested with his interest in the immovable property and other relief.  At 668 the Court said:  “If it is an asset which has vested in the trustee then it is the duty of the trustee to administer such asset;  not only the creditors but also the insolvent is entitled to be paid any surplus there may be upon realisation after the claims of the creditors have been met. If then the trustee with full knowledge of the facts chooses not to administer the asset and if creditors do not choose to see that the trustee claims the asset for realisation, there seems to be every reason why the insolvent should be entitled to approach the Court for an order vesting the asset in him …”.  In that case, although the Court found that the immovable property was still registered in the name of the applicant (as in the present application), it was, however, still vested in his trustee. Further that, there had since the applicant’s insolvency been no other transaction in connection with the property (once more as in the present application).  However, in spite of all that, the Court nevertheless declined to grant an order reinvesting the immovable property in the name of the applicant on the basis of the provisions of s 58(1) of the Deeds Registries Act 47 of 1937, as quoted above. The Court was, however, of the view that should a trustee refuse to transfer such property to the applicant, the latter might be entitled to an order compelling the trustee to pass such transfer. The Court, however, granted an order rehabilitating the applicant.  The facts in Ex Parte Allwright, just discussed, were however, clearly distinguishable from the present application in several respects. In the first place, in the present application, there is no application for rehabilitation, the applicant having been rehabilitated on 17 October 2006.  Secondly, unlike the applicant in Ex Parte Allwright, the present applicant made disclosure of the immovable property in question to his trustee.  Furthermore, there is no opposition to the present application by the Master, or any other affected person.

[18] 	In Ex Parte Olivier above, the trustee had not given his written consent, but the insolvent had nevertheless entered into a contract of the type requiring the trustee’s written consent, the Court held that such contract was not void but merely voidable at the option of the trustee. At pp 553-554 in considering the various applications where an insolvent applies for rehabilitation coupled with declaratory orders for assets acquired during sequestration, the Court at 554, held: 

“(d) 	In the fourth case the assets (such as an inheritance) may have vested in the insolvent estate, in which case the acquisition would not initially have been adverse to the trustee. The basis, however, of the claim in this case would be that after adequate notice and full knowledge of the position, the trustee and creditors have laid no claim to the asset, and have, therefore, waived whatever rights they may have had.  That they could waive such rights is not disputed.  The rights are statutory rights which, if so minded, they could, having full knowledge of all the particulars, waive.”

The facts in Ex Parte Van Rensburg 1946 (O) 64 were to some extent similar to the facts in the present application.  There the insolvent applied for the rehabilitation of his estate coupled with a declaratory order that certain immovable property, purchased by him during insolvency, to be his sole and absolute property.  The applicant also asked for an order authorising and directing the Registrar of Deeds to deal with the immovable property on the mandate of the applicant without the interference or assistance of his trustee and directing him (the Registrar) to make such endorsements on the deed of transfer as may be necessary to give effect to the order of Court.  The trustee did not oppose the rehabilitation prayer, and the Master equally, did not object to the prayer sought by the applicant.  In granting the rehabilitation prayer as well as the order relating to the immovable property, though in some modified form, the Court held that the immovable property never vested in the trustee.  Ex Parte Van Rensburg above was however, distinguished in Ex Parte Vorster  above at 92F.  

[19] 	In an unreported judgment of Christiaan Beyers Hofmeyr v P J Kotze and Others (T), Case No. 3024/2005, delivered on 26 April 2006, the facts were briefly as follows:  the applicant and others formed a trust called NPB Investment Trust on 1 September 1999.  On 7 September 1999 the applicant was sequestrated. The applicant had acquired a 25% share as beneficiary in NPB Investment Trust before his sequestration. The applicant had resigned in 1999 as trustee from NPB Investment Trust before his sequestration on 7 September 1999.  The Master wound up the applicant’s estate. On 12 May 2004 the applicant was rehabilitated by order of Court.  Upon his rehabilitation, the applicant asserted his claim to be recognised as a trustee in NPB Investment Trust.  The trustee (the Eighth Respondent) intervened when he became aware of the application.  He alleged that the applicant’s share in NPB Investment Trust vested in the insolvent estate of the applicant upon his sequestration.  The trustee was unaware of the immovable property at the time upon which he based his claim.  The applicant alleged that the trustee was not interested in NPB Investment Trust at the time of the applicant’s sequestration as it was regarded as being without any value.  Pretorius AJ, relying on s 20(1)(a), and s 20(2), and s 2 of the Act, held that:  “The rights, which Hofmeyr had prior to his sequestration as a beneficiary in the Trust, constituted such a contingent interest in property.  He was divested of his interest upon his sequestration and resignation from the Trust. That interest could not merely become reincarnated when he was rehabilitated.  The trustee, (the Eighth Respondent), of the insolvent estate has to deal with the Trust, which ought to be converted into cash and distributed amongst applicant’s creditors.  The applicant is of the opinion that there will be a residue after the trustee had paid all the creditors and that this residue, with interest, will revert to him.  That may be true, but still does not make him a trustee. The applicant admitted that there was still an amount owing to some of the creditors; but alleges that he would be entitled to receive the residue of the amount. It is therefore clear that the benefit of the Trust will have to revert to the eighth respondent to deal with according to the Insolvency Act.  This Court cannot merely declare the interest of the applicant in the NPB Investment Trust to vest in him subsequent to his rehabilitation on 12 May 2004, whilst from the applicant’s own observation, it is clear that an amount is owing to some creditors.”   Although I respectfully agree with the judgment of Pretorius AJ, the facts in that case were plainly distinguishable to the facts in the present application.  In that case, although the asset (25% share in NPB Investment Trust) was acquired by the applicant prior to his sequestration, as in the present application, his trustee was aware of the asset.  In the present application, the trustee was aware of the applicant’s ownership of the immovable property but chose to abandon it.  Furthermore, in that case, the applicant admitted that there was still an amount owing to some of his creditors.  In the present application, there is one creditor only who proved a claim against the applicant’s insolvent estate, namely Hartman.  The amount of R1 424,27 levied against Hartman as a contribution has been paid in full by the applicant to Hartman.  In addition, Hartman and the trustee support the present application.
[20] 	It will be noted that in all the decisions reviewed above, with the exception of Ex Parte Allwright and Christiaan Beyers Hofmeyr, the cases concerned applications for rehabilitation as well as declaratory relief in respect of property acquired by the insolvent during sequestration.  The present application, as stated earlier, is clearly not an application for rehabilitation, it also does not concern property acquired by the applicant during his sequestration, but prior to his insolvency. In the present application, the trustee was aware of the immovable property but abandoned it as being valueless, as was the case in Christiaan Beyers Hofmeyr above.  

[21] 	I now deal with the trustee’s abandonment of the immovable property in the instant application. His reasons for such abandonment are that the outstanding rates and taxes owing in respect of the property to the municipality had to be set off in favour of the municipality as against any possible advantage to the creditor(s) in the estate.  As a consequence, the immovable property was omitted from the first and final liquidation and distribution account subsequently approved by the Master. The immovable property remained registered in the name of the applicant, and this is currently still the position.  In Wille’s Principles of South African Law, 8  ed, p 284, the following is stated:  “Whether or not a thing has been abandoned by its owner is a question of fact. If the property has any value the intention of the owner to abandon it is not resumed.”  S 35 of the Act provides that the trustee can enforce or abandon a contract for the acquisition of immovable property concluded by the insolvent prior to the sequestration of his estate where transfer has not yet been passed to the insolvent. However, this provision is not applicable to the present matter as the applicant already owned the immovable property when he was sequestrated. The immovable property should properly have vested in the trustee upon the sequestration of the applicant (see s 82 of the Act).  However, this did not happen.  The trustee abandoned the property.  In any event, according to Jones, “Conveyancing in South Africa” 3 ed, p 328, the practical conveyancing is stated as follows:  “It would be as well here to deal with section 119 insofar as it affects conveyancing requirements.  At the onset it must be understood that property of the insolvent although vested in the trustee is never formally transferred to the trustee, nor are the title deeds in the name of the insolvent endorsed as regards such vesting.”

In any event, the trustee in the instant application cannot now be of any assistance to the applicant in revesting the immovable property in the applicant. The role of the trustee terminated when the liquidation and distribution was confirmed by the Master on 2 September 2002. See in this regard FNB of SA Ltd v Cooper NO and Another 1998 (3) SA 894 (W).

CONCLUSION

[22] 	I conclude therefore that the present application presents with unique and unprecedented circumstances where the insolvent acquired the immovable property prior to his sequestration.   He disclosed the immovable property to his trustee. The trustee duly investigated the matter, but thereafter elected to abandon the asset and excluded same from the first and final liquidation and distribution account.  It is trite that where assets are acquired adverse to the trustee the Court takes into consideration the potential prejudice the insolvent’s creditors may suffer and seeks to prevent the mala fide applicant from secreting away his assets to the detriment of his creditors.  In the instant matter, even though the property was acquired prior to the sequestration, the applicant has made no attempt to conceal the asset.  The property in question was simply not possible to liquidate, and the only potential creditor that would have suffered because of it, the municipality, has since been paid in full.  The applicant has at no time harboured the intent of depriving his creditors of any benefit due to them from his sequestrated estate, he has continuously taken the Court into his confidence by revealing his standing with his creditors, both proved and unproved.  He has disclosed the manner in which he learnt of the abandonment of the property and has subsequently sought the assistance of his legal advisors, in a matter where it appears no precedent exists, in approaching the Court for a declaratory order entitling him to the property.  There can obviously be no prejudice to any of the applicant’s creditors as he has satisfied not only his estate’s sole proven creditor, but has also taken steps to satisfy the municipality who failed to respond to the publication of his sequestrated estate.

[23] 	In the light of the aforegoing, I granted the order in favour of the applicant as mentioned above.

					    _________________________________
							   D S S MOSHIDI
						     JUDGE OF THE HIGH COURT
WITWATERSRAND LOCAL DIVISION

FOR THE APPLICANT 		ADV ERNESTO DOS SANTOS SOARES

INSTRUCTED BY			ATTORNEYS DE WET-VAN DER WATT
					(ROODEPOORT) INCORPORATED

DATE OF HEARING			15 JANUARY 2008 AND 8 FEBRUARY 2008

DATE OF JUDGMENT		8 FEBRUARY 2008