Sequestration and the Solvent Spouse

Vocabulary-style flashcards covering the legal effects of an order of sequestration on a solvent spouse, centered on Section $$21$$ of the Insolvency Act.

s21(1) of the Insolvency Act

A provision that vests the separate property of the solvent spouse in the Master and thereafter the trustee, as if it were the property of the insolvent estate, to prevent collusion or withholding of assets.

Solvent Spouse (Insolvency Act definition)

Includes a husband or wife married under any law or custom, a person living with a member of the opposite sex (though not married), and parties in a civil union under the Civil Union Act $17$ of $2006$.

Harksen v Lane NO & Others $1998$ (1) SA $300$ (CC)

A Constitutional Court case that held s21 is not unconstitutional, as it does not violate the right to equality or property rights (expropriation) and serves a legitimate purpose to assist the trustee.

Statement of Affairs

A document that the solvent spouse must lodge with the Master within $7$ days of being served a copy of the sequestration order, reflecting their financial state as at the date of sequestration.

Postponement of Vesting (s21(10))

A court order that may exclude the solvent spouse's property from immediate vesting if the spouse is a trader or would suffer serious prejudice, provided the assets are protected from alienation or damage.

Fraudulent Abandonment

Giving up ownership of property, such as throwing it away or leaving it with no intention to return, performed with deceitful intentions to deprive the insolvent estate.

Property Acquired under Marriage Settlement (s21(2)(b))

A category of property the trustee must release if acquired via a settlement, usually found in an antenuptial contract, provided the language is specific and not vague.

Valid Title (s21(2)(c))

A basis for property release involving assets acquired during marriage through genuine transactions in good faith, such as from earnings, personal property proceeds, or family donations.

Disposition Without Value

Any transfer or disposal of a right to property for no value, excluding those mandated by a court order, which may be set aside by the court under s26(1).

Onus of Proof

The legal burden placed on the solvent spouse to prove that their property falls under a specific category for release on a balance of probabilities.

Prohibitory Interdict

A court order a trustee can seek to prevent the solvent spouse from selling, mortgaging, or disposing of released property pending litigation to set aside the transaction.

Res Judicata (s21(12))

A legal principle stating that once a court has ordered the release of assets, the trustee is not permitted to rely on s21 to apply for the return of those specific assets.

Excussion

The act of exhausting legal proceedings against a debtor or his property before proceeding against the property of a person who is secondarily liable for the debt.

s26(1)(a)-(b) Timeframes

A disposition without value can be set aside if made more than $2$ years before sequestration while liabilities exceeded assets, or within $2$ years if the beneficiary cannot prove the insolvent was solvent after the transfer.