Abstract
Full title: Sink or Swim? Debt Review's Ambivalent "Lifeline" ---- A Second Sequel To "… A Tale of Two Judgments" Nedbank V Andrews (240/2011) 2011 Zaecpehc 29 (10 May 2011); Firstrand Bank Ltd V Evans 2011 4 SA 597 (KZD) And Firstrand Bank Ltd V Janse Van Rensburg 2012 2 All SA 186 (ECP)The interface between the National Credit Act 34 of 2005 and the Insolvency Act 24 of 1936 has been the object of our courts' attention in a number of recent cases including Ex parte Ford and Two Similar Cases 2009 3 SA 376 (WCC), Investec Bank Ltd v Mutemeri 2010 1 SA 265 (GSJ), Naidoo v ABSA Bank Ltd 2010 4 SA 597 (SCA) and, more recently, Nedbank v Andrews (240/2011) 2011 ZAECPEHC 29 (10 May 2011), FirstRand Bank Ltd v Evans 2011 4 597 (KZD) and FirstRand Bank Ltd v Janse van Rensburg 2012 2 All SA 186 (ECP).The question raised in all of the three most recent cases was whether or not a debtor's application for debt review in terms of the National Credit Act constitutes an "act of insolvency" in terms of section 8 of the Insolvency Act, upon which a creditor may rely in an application for the compulsory sequestration of the debtor's estate. If it does, it would mean that by resorting to the debt relief measures provided by the National Credit Act a debtor commits the very act on which a creditor may base an application for a sequestration order which, if granted, will render the debtor's estate insolvent and bring about the liquidation of his assets. From the debtor's perspective, this is probably precisely the situation that he seeks to avert by applying for debt review. Further, sequestration would frustrate the stated purpose of the National Credit Act, which is that debtors should take responsibility for their debts by satisfying them in full. Concurrent creditors might also ultimately receive a dividend which falls far short of what is due to them The question of whether a debtor's resorting to debt review may or should be the very act that triggers his estate's sequestration and its attendant consequences is an important issue, the treatment of which impacts significantly on the efficacy of the South African consumer debt relief system. This article analyses the most recent judgments and considers whether or not statutory regulation of the position is required.KEYWORDS: National Credit Act 34 of 2005; act of insolvency; Insolvency Act 24 of 1936; debt review; debt restructuring; debt re-arrangement; sequestration; debt enforcement; notice of inability pay debts
Highlights
The relationship between the National Credit Act 34 of 20051 and the Insolvency Act 24 of 19362 has been the subject of discussion in three academic pieces published in successive volumes of this journal in the last three years.3 These concerned the judgments in Ex parte Ford and Two Similar Cases,4 Investec Bank Ltd v Mutemeri5 and Naidoo v ABSA Bank Ltd.6 Since the interaction between statutory provisions relating to debt review in terms of the NCA and sequestration in terms of the Insolvency Act has demanded the attention of the high court in at least three more judgments
It may be noted at this juncture that Van Heerden and Boraine considered that:12 a notice to a creditor that a consumer-debtor is bound to go for debt review may amount to an act of insolvency, the mere commission of an act of insolvency is not in itself sufficient to warrant the granting of a compulsory sequestration order
These judgments follow the precedent established in Investec v Mutemeri and Naidoo v ABSA, that where a debtor has applied for debt review in terms of the NCA this does not preclude a creditor from applying for the sequestration of that debtor's estate
Summary
The relationship between the National Credit Act 34 of 20051 and the Insolvency Act 24 of 19362 has been the subject of discussion in three academic pieces published in successive volumes of this journal in the last three years. These concerned the judgments in Ex parte Ford and Two Similar Cases, Investec Bank Ltd v Mutemeri and Naidoo v ABSA Bank Ltd. Since the interaction between statutory provisions relating to debt review in terms of the NCA and sequestration in terms of the Insolvency Act has demanded the attention of the high court in at least three more judgments. The relationship between the National Credit Act 34 of 20051 and the Insolvency Act 24 of 19362 has been the subject of discussion in three academic pieces published in successive volumes of this journal in the last three years.3 These concerned the judgments in Ex parte Ford and Two Similar Cases, Investec Bank Ltd v Mutemeri and Naidoo v ABSA Bank Ltd.. The interaction between statutory provisions relating to debt review in terms of the NCA and sequestration in terms of the Insolvency Act has demanded the attention of the high court in at least three more judgments These are Nedbank v Andrews, FirstRand Bank Ltd v Evans and, most recently, FirstRand Bank Ltd v Janse van Rensburg.. It is submitted that this is an important issue, the treatment of which impacts significantly on the efficacy of the South African consumer debt relief system and which merits further discussion
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