Kelvin Park Properties CC v A S Paterson NO

The insolvent, Schutte, operated a butchery business (Model Butchery) on immovable property owned by him in Stutterheim. After a fire severely damaged the premises in March 1994, Schutte sold the immovable property and the movable assets used in the butchery to Kelvin Park Properties CC in April 1994 for R175 000. The sale was recorded as a ‘sale of business’. No notice of intended transfer was published in terms of s 34(1) of the Insolvency Act 24 of 1936. At the time, Schutte owed trade creditors approximately R470 000. His estate was provisionally sequestrated in June 1994 and finally sequestrated in July 1994. The trustee sued for return of the property and movables (or their value), alleging that the transfer was void for non-compliance with s 34(1).

The appeal was dismissed with costs. The transfer of the property (and movables) was void as against the trustee due to non-compliance with s 34(1) of the Insolvency Act.

The case clarifies that a person remains a ‘trader’ for purposes of s 34(1) of the Insolvency Act even if active trading has ceased, provided business debts remain unpaid. It affirms a purposive interpretation of s 34(1) aimed at protecting creditors and provides guidance on when immovable property used for business purposes will be regarded as forming part of a trader’s business.