Effect of sequestration

In terms of section 21 of the Insolvency Act No 24 of 1936, the property of a spouse whose estate has not been sequestrated shall also vest in the Master, and, on appointment of the trustee, in the name of such trustee, as if it were the property of the sequestrated estate. In practice the same interdict noted against the insolvent will also be noted against the spouse and he/she will not be capable of dealing with his/her assets until such time as the trustee has released such property from the insolvent estate. The Practitioner's Guide to Conveyancing and Notarial Practice by AS West, Chapter 16, confirms this.

The Bloemfontein deeds office received a call from a member of the public who was sequestrated in 2001 and both he and his spouse were mentioned in the sequestration order. He demanded that the deeds office remove the sequestration order from his wife's name as he and his wife are married out of community of property. They are described in the sequestration order as follows:
Man ...........................................................
Identity Number ..........................................
Married out of community of property
Respondent of property to
Wife ...........................................................
Identity Number ..........................................

The deeds office refused to remove the sequestration from the wife's name in the light of section 18A read with sections 9 and 91. Section 21 requires the trustee to release the property of the spouse from the insolvent estate. The insolvent became livid about this and referred the matter to the Chief Registrar of Deeds for a ruling.

The deeds office enquired from certain sheriffs and conveyancers for their views about this situation and they did not agree with the noting of the sequestration against the wife's name when parties are married out of community of property. The office thereafter determined who the curator in the estate was and contacted him for further information. The office was duly informed that the wife of the person who phoned the office intends selling the property, which was registered in her name in 2000. The curator went back to his files and reported that the wife did not declare the property in the affidavits when the assets where declared at the time of sequestration.

The Chief Registrar of Deeds supported the Bloemfontein Deeds Office in the decision that was taken and is of the opinion that deeds examiners and registrars of deeds must take cognizance of the provisions of section 18A, read in conjunction with section 9 of the Insolvency Act, and apply the provisions thereof until such time as such provisions are declared unconstitutional.

The office practice when the registrar of deeds is notified by the Registrar of the High Court of any sequestration order is that such sequestration must be noted against the full names and date of birth/identity number of the solvent, and, if he/she is married, also against his/her spouse on the computer. There is no doubt where parties are married in community of property. The joint estate (both persons) cannot deal with the property because the joint estate is sequestrated. Where the parties are married out of community of property it is important that examiners distinguish between two cases:

  • Where the property was acquired by the solvent spouse prior to the insolvency order, the following must be noted. The trustee has the right in terms of section 21 of the Insolvency Act to release property of the solvent spouse. Accordingly, the Deeds Office will allow no dealings to be registered in regard to property of the solvent spouse acquired prior to the insolvency order unless a release signed by the trustee or an Order of Court is lodged as specified in the section.

  • Where the property was acquired by the solvent after the insolvency order, examiners must not call for a release signed by the trustee. It is therefore important that examiners must check the date of acquisition in the title deed of the solvent spouse and compare it with the date of the insolvency order. Where deeds controllers are not absolutely certain about the effect of the interdict, they must consult the management in this regard.
By S Liebenberg and P Weideman in the July SA Deeds Journal

Republished with permission

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