ABSA Bank Limited v Cupido N.O and Another

ABSA Bank Limited applied for the provisional sequestration of the TJ & NO Cupido Family Trust ('the Trust'). The Trust was indebted to ABSA under a mortgage loan agreement and under a suretyship agreement. ABSA relies on a letter dated 24 April 2023 from the Trust's attorneys offering to pay the debt in monthly instalments as evidence that the Trust committed an act of insolvency. The Trust opposed the application, delivering its answering affidavit nearly five months late, requiring a condonation application. The Trust disputed the quantum of its indebtedness but did not provide a clear basis for its dispute.

• Whether condonation should be granted for the late filing of the Trust's answering affidavit
• Whether the Trust committed an act of insolvency under s 8(g) of the Insolvency Act 24 of 1936 by giving written notice of inability to pay its debts
• Whether ABSA established a prima facie case for provisional sequestration under s 10 of the Insolvency Act
• Whether sequestration would be to the advantage of the Trust's creditors
• Whether the court should exercise its residual discretion in favour of the Trust

The court granted the provisional sequestration order. A rule nisi was issued calling upon the respondents and interested parties to show cause why a final sequestration order should not be granted and why costs should not be costs in the sequestration. Service was ordered on the respondents, the Master of the High Court, SARS, any employees, and relevant trade unions.

A debtor who gives written notice that it will only be able to pay its debts in the future effectively gives notice of inability to pay, constituting an act of insolvency under s 8(g) of the Insolvency Act. A request for time to pay a debt that is due and payable ordinarily gives rise to an inference that the debtor is unable to pay, and where coupled with an undertaking to pay by instalments, constitutes an act of insolvency. A notice of inability to pay debts does not cease to be an act of insolvency due to subsequent circumstances. Where the requisites for a provisional sequestration order are established on a prima facie basis, the court should ordinarily grant the order absent special circumstances, and it is for the respondent to establish those circumstances.

The Trusts conduct in delivering its answering affidavit almost five months out of time appeared designed to bring about a postponement and was manifestly self-serving. ABSA and its attorneys could not be faulted for refusing a postponement in these circumstances. The tender of costs would in any event be meaningless if, as ABSA contends, the Trust is unable to pay its debts and is insolvent.

This case reaffirms the principles governing acts of insolvency under s 8(g) of the Insolvency Act 24 of 1936, particularly that a written request for time to pay coupled with an instalment proposal constitutes notice of inability to pay and amounts to an act of insolvency. It illustrates that subsequent payments do not cure the commission of an act of insolvency. The judgment also clarifies that a respondent opposing provisional sequestration must place concrete evidence of solvency and sustainable income before the court, and that vague, unsubstantiated allegations will not suffice to resist the order or to persuade the court to exercise its residual discretion in the respondent's favour.