Explain the significance of section 21 in terms of the property of the solvent spouse?
Section 21 was introduced to prevent or at least hamper collusion between spouses to the detriment of creditors of the insolvent estate. It makes it difficult for insolvent to move his property to the solvent spouse’s estate.
What is the difference between the vesting of estate between the solvent spouse and the insolvent?
The estate/assets of the solvent spouse vest in the trustee, just like that of the insolvent. However, in the case of the solvent, the vesting is not intended to be permanent since the solvent spouse may secure the release (and regain ownership) of assets falling into the categories set out in section 21(2).
What is the significance of the Harksen v Lane case NO on the validity of section 21?
it was argued in this case that section 21 was invalid for violating the solvent spouse’s constitutional rights of:
1. right not to have property expropriated without compensation
2. the right to equality
3. right not to be unfairly discriminated against.
Name reasons why the Constitutional Court rejected the argument in Harksen v Lane NO case on the validity of section 21?
- This section cannot be said to expropriate property because the solvent spouse’s property is not permanently transferred to the trustee or the Master. The purpose of this section is merely to make sure that the insolvent estate is not deprived of property it is entitled to.
- Yes there is a differentiation between the solvent spouse and the other persons who might have had dealings with the insolvent. Yet the differentiation is legitimate and does not infringe the right to equality before the law because this section has legitimate purpose and the differentiation has a rational connection to that purpose.
- Differentiation does not constitute unfair discrimination because: it does not affect a vulnerable group/group that suffered discrimination in the past
it is intended to achieve a worthy and important societal goal of protecting the rights of the creditors.
it does not impair the fundamental dignity of the solvent spouse or bring about an impairment or a comparably serious nature.
What is the definition of “spouse”?
Includes a wife or a husband married according to any law or custom, and also a person living with a member of the opposite sex, although not married to him/her. the meaning has been extended for purposes of insolvency
What are the 3 requirements for the application of section 21?
- Presence of a solvent spouse
- Not married in community of property.
- Established relationship between the spouses.
IF:
a) if prior to sequestration, the relationship has been terminated, then sec 21 does not apply.
b) it does not apply to previous spouse or the surviving spouse in the case of the sequestration of the deceased insolvent spouse.
What is the duty of the solvent spouse in lodging a statement of affairs?
- One of the Sheriff’s duty on receiving a sequestration order is to serve a copy of the order on the solvent spouse is she has a separate estate that has not been sequestrated.
- Within 7 days of the service, the solvent spouse must lodge with the Master a statement of affairs as at the date of sequestration, framed substantially according to Form B in the First Schedule of the Act, verified by an affidavit.
Can the vesting of the solvent spouse’s estate be postponed?
Yes, it can be postponed IF:
1. spouse is carrying on business of a trader apart from the insolvent spouse
2. if it appears to the court that the solvent spouse is likely to suffer serious prejudice through the immediate vesting of the property. (Section 21(10))
Court may only postpone the vesting once it is satisfied that the solvent spouse is willing to and is able to make arrangements protecting the interests of the insolvent estate.
What should the solvent spouse do to obtain postponement?
- Furnish the court with full details of the NATURE and VALUE of the assets claimed.
- NATURE and ORIGIN of her TITLE to those assets
- PREJUDICE that she will suffer if postponement is denied
- Arrangements that the intends and is able to make to safeguard the interests of the insolvent estate
- Contigencies against which the insolvent estate must be protected
in each case, the court will ask whether the solvent spouse’s proposed arrangements offer adequate protection against all contigencies that could possible take place.
When is the trustee obliged to release the solvent spouse’s property?? NAME CATEGORIES
- Property owned BEFORE MARRIAGE to the insolvent
- property ACQUIRED under a MARRIAGE SETTLEMENT
- property acquired by VALID TITLE during the marriage
- Property PROTECTED UNDER certain provisions
5.Property acquired with PROCEEDS OF THE ABOVE.
What is the procedure for releasing property?
The act does not stipulate which procedure must be followed to obtain the release of the assets but the solvent spouse must apply for the release (VAN DYK V DONAVAN)
Solvent spouse can apply to the trustee and need not take the matter directly to court.
She is usually required to provide the trustee with an affidavit setting out the nature and origin of her title to the property and supporting documents of her allegations, affidavit by 3rd parties to vouch for her genuinness.
This is proven on a balance of probabilities, trustee cannot refuse.
