Appointment of Trustee; Effects of Sequestration

Section 21

Effect of sequestration on property of spouse of insolvent

(1) The additional effect of the sequestration of the separate estate of one of two spouses who are not living apart under a judicial order of separation shall be to vest in the Master, until a trustee has been appointed, and, upon the appointment of a trustee, to vest in him all the property (including property or the proceeds thereof which are in the hands of a sheriff or a messenger under a writ of attachment) of the spouse whose estate has not been sequestrated (hereinafter referred to as the solvent spouse) as if it were property of the sequestrated estate, and to empower the Master or trustee to deal with such property accordingly, but subject to the following provisions of this section.

(2) The trustee shall release any property of the solvent spouse which is proved—

(a)    to have been the property of that spouse immediately before her or his marriage to the insolvent or before the first day of October, 1926; or
(b)    to have been acquired by that spouse under a marriage settlement; or
(c)    to have been acquired by that spouse during the marriage with the insolvent by a title valid as against creditors of the insolvent; or
(d)    to be safeguarded in favour of that spouse by section twenty-eight of this Act or by the Insurance Act, 1923 (Act No. 37 of 1923); or
[Para. (d) amended by s. 12 of Act No. 16 of 1943 and by s. 1 of Act No. 49 of 1996.]
(e)    to have been acquired with any such property as aforesaid or with the income or proceeds thereof.

(3) If the solvent spouse is in the Republic and the trustee is able to ascertain his or her address, the trustee shall not, except with the leave of the court, realize property which ostensibly belonged to the solvent spouse, until the expiry of six weeks’ written notice of his intention to do so, given to that spouse. Such notice shall also be published in the Gazette and in a newspaper circulating in the district in which the solvent spouse resides or carries on business, and shall invite all separate creditors for value of that spouse to prove their claims as provided in subsection (5).

(4) The solvent spouse may apply to the court for an order releasing any property vested in the trustee of the insolvent estate under subsection (1) or for an order staying the sale of such property or, if it has already been sold, but the proceeds thereof not yet distributed among creditors, for an order declaring the applicant to be entitled to those proceeds; and the court may make such order on the application as it thinks just.

(5) Subject to any order made under subsection (4) any property of the solvent spouse realized by the trustee shall bear a proportionate share of the costs of the sequestration as if it were property of the insolvent estate but the separate creditors for value of the solvent spouse having claims which could have been proved against the estate of that spouse if it had been the estate under sequestration, shall be entitled to prove their claims against the estate of the insolvent spouse in the same manner and, except as in this Act is otherwise provided, shall have the same rights and remedies and be subject to the same obligations as if they were creditors of the insolvent estate; and the creditors who have so proved claims shall be entitled to share in the proceeds of the property so realized according to their legal priorities inter se and in priority to the separate creditors of the insolvent estate, but shall not be entitled to share in the separate assets of the insolvent estate.

(6) If any property of the solvent spouse (other than property mentioned in paragraph (d) of subsection (2)) has been released by virtue of subsection (2) or (4) the separate creditors of that spouse shall only be entitled to share in the proceeds of any property of the solvent spouse which has been realized by the trustee, after the property so released and any property of that spouse acquired by her or him since the sequestration, have been excussed.

(7) Before awarding any such creditor a share in such proceeds, the trustee may require the creditor to lodge with him, within a period to be determined by the Master, an affidavit, supported by such evidence as may be available, setting forth the result of such excussion and disclosing the balance of his claim which remains unpaid. He shall then be entitled to share as aforesaid in respect of that balance only: Provided that any creditor who has incurred costs in excussing the separate property of the solvent spouse and has been unable to recover those costs from the proceeds of that property shall be entitled to add the amount of those costs to the amount of his claim as proved.

(8) If, during the period determined by the Master, any such creditor has failed either to lodge with the trustee such an affidavit as aforesaid, or to excuss any separate property of the solvent spouse still available for the satisfaction of his claim, he shall be debarred from sharing as aforesaid unless the court otherwise orders.

(9) A creditor of the solvent spouse who has proved a claim as provided in subsection (5) shall not be liable to make any contribution under section one hundred and six, and shall not be entitled to vote at any meeting of the creditors of the insolvent estate held in terms of section forty, forty-one or forty-two; but any direction of the creditors of the insolvent estate which infringes the rights of any first-mentioned creditor may be set aside by the court on the application of such creditor.

(10) If the solvent spouse is carrying on business as a trader, apart from the insolvent spouse or if it appears to the court that the solvent spouse is likely to suffer serious prejudice through the immediate vesting of the property of that spouse in the Master of the trustee, and the court is satisfied in either case that the solvent spouse is willing and able to make arrangements whereby the interest therein of the insolvent estate in the said property will be safeguarded without such a vesting, the court, either when making the sequestration order or at some later date, but subject to the immediate completion of such arrangement as aforesaid, may exclude that property or any part thereof from the operation of the order, for such period as it thinks fit. During that period the solvent spouse shall lay before the trustee the evidence available in support of her or his claim to such property and within that period the trustees shall notify the solvent spouse in writing whether or not he will release such property in accordance with subsection (2). If the property has not been so released, then upon the expiry of the said period that property shall vest in the Master or in the trustee, but subject to the provisions of this section.

(11) If application is made to the court for the sequestration of the estate of the solvent spouse on the ground of an act of insolvency committed by that spouse since the vesting of her or his property in the Master or the trustee of the insolvent estate, and the court is satisfied that the act of insolvency alleged in that application was due to such vesting, then if it appears—
(a)    that an application is being or, if necessary, will be made under subsection (4) for the release of any property of the solvent spouse; or
(b)    that any property of the solvent spouse has been released since the making of the sequestration order, and that the solvent spouse is now in a position to discharge her or his liabilities,

the court may postpone the hearing of the said application or may make such interim order thereon as to it may seem just.

(12) If the trustee has in accordance with the preceding provisions of this section released any property alleged to belong to the solvent spouse, he shall not be debarred thereby from proving that it belongs to the insolvent estate and from recovering accordingly.

(13) In this section the word “spouse” means not only a wife or husband in the legal sense, but also a wife or husband by virtue of a marriage according to any law or custom, and also a woman living with a man as his wife or a man living with a woman as her husband, although not married to one another.