The appellant, Louisa Du Plessis, was married in community of property. In 1983 she inherited farms, equipment and livestock from her father. The will stipulated that the inheritance was not to form part of the joint estate, not to be subject to her husband’s marital power, and not to fall within any possible insolvent estate of her husband or vest in a trustee. The husband’s moneylending business, carried on for the benefit of the joint estate, failed. On 19 March 2000 the Transvaal Provincial Division finally sequestrated the spouses’ joint estate. The first and second respondents, as trustees of the insolvent estate, claimed the appellant’s separate property for the benefit of creditors. The appellant then applied to the High Court for orders declaring that the property did not form part of the insolvent estate, prohibiting its sale, and compelling its restoration to her. Van der Westhuizen J dismissed the application, following Badenhorst v Bekker NO en Andere 1994 (2) SA 155 (N), but granted leave to appeal to the Supreme Court of Appeal.
The appeal was dismissed with costs. The separate property inherited by the appellant formed part of the insolvent estate and was available to the joint creditors.
Spouses married in community of property are jointly and severally liable for debts incurred by either spouse during the marriage; they are co-debtors, not merely representatives of an estate. An order of sequestration against a joint estate renders both spouses insolvent debtors under the Insolvency Act 24 of 1936. The Insolvency Act divests the insolvent of the entirety of their estate and makes all property of the insolvent, including separately owned property, available to creditors; there is no provision for partial sequestration or for a debtor to ring-fence part of their estate from creditors. Therefore, separate property owned by a spouse married in community of property forms part of the insolvent estate upon sequestration and is available to satisfy the claims of joint creditors. A testator or donor cannot by stipulation alter this ordinary legal consequence so as to exclude property from the insolvent estate of a spouse married in community of property.
The court noted that there are exceptions to the general rule that debts incurred by one spouse married in community of property accrue to both spouses, but those exceptions were not relevant to the appeal. The court also observed that prior to the commencement of the Matrimonial Property Act 88 of 1984, a husband could be cited alone in sequestration proceedings, but even then the effect of the order was to render both spouses insolvent, illustrating that the subsequent statutory requirement that both spouses be cited did not alter the substantive insolvency consequences for both debtors.
This case is a leading authority on the relationship between matrimonial property law and insolvency law in South Africa. It firmly establishes that spouses married in community of property are jointly liable for debts incurred by either spouse, and that upon sequestration of the joint estate both spouses are insolvent debtors whose entire estates—including any separate property—vest in the trustee for the benefit of creditors. It rejected prior contrary authority (Ex parte Oberholzer and Van Wyk v Groch) and affirmed that neither a spouse nor a testator can unilaterally immunise property from the claims of creditors by excluding it from the joint estate or from insolvency.
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