O’Shea N.O. v Van Zyl N.O. and Others

The joint liquidators of Sapphire Finance (Pty) Ltd applied for the compulsory sequestration of the O’Shea Family Trust, alleging that Sapphire Finance was a creditor of the Trust in the amount of approximately R2.68 million and that the Trust had committed an act of insolvency under s 8(g) of the Insolvency Act 24 of 1936. The liquidators relied primarily on admissions allegedly made by Patrick O’Shea, a former trustee, during a private enquiry conducted under s 417 of the Companies Act 61 of 1973, as well as a letter from his attorneys referring to those admissions. The Trust opposed the application, disputing both the liquidators’ locus standi as creditors and the existence of an act of insolvency. The Western Cape High Court granted a final sequestration order, and the Trust appealed to the Supreme Court of Appeal.

The appeal was upheld with costs. The final sequestration order was set aside, and the provisional sequestration rule nisi was discharged. The Trust was awarded costs, including the costs of two counsel, and ancillary cost orders were made in relation to intervening parties and an application to adduce further evidence.

This judgment is an important authority on the evidentiary limits of statements made during s 417 Companies Act enquiries and confirms that such statements are generally inadmissible against third parties, including trusts, in later proceedings. It also reinforces core principles of trust law, particularly that trustees must act jointly and cannot be bound by unauthorised admissions of a single trustee. The case clarifies what constitutes an act of insolvency under s 8(g) and protects trusts from sequestration based on procedurally or evidentially defective claims.