Jacobs and Another v Van Niekerk N.O and Others

The appellants, married out of community of property, had their respective estates finally sequestrated following a judgment debt owed to the first respondent, the executor of a deceased estate. The sequestration was based on a 'nulla bona' return of service. The appellants made a conscious decision not to oppose the final sequestration orders. They sought rescission of the sequestration orders years later, alleging fraud and misrepresentation by the petitioning creditor. The immovable property of the estates had been sold and transferred to the fourth respondent, and the liquidation and distribution accounts had been confirmed.

• Whether the court a quo misdirected itself in finding that the appellants failed to meet the threshold requirements for rescission of the sequestration orders
• Whether the sequestration orders were erroneously granted on the basis of fraud and misrepresentation
• Whether the appellants were in wilful default
• Whether exceptional circumstances existed to justify rescission in the interests of justice
• Whether it was undesirable or practically impossible to rescind the sequestration orders

The applications for condonation were granted. The appeal was dismissed with costs, with the appellants held jointly and severally liable for costs of the appeal and condonation applications on a party-and-party scale.

Where sequestration orders are sought to be set aside based on subsequent events, the test is whether the continuance of the sequestration would be unnecessary or undesirable. The test is either satisfied or it is not; it does not involve a choice between permissible alternatives. A court should not exercise its discretion in favour of rescission if undesirable consequences would follow, such as when liquidation and distribution accounts have been confirmed and assets have been transferred to third parties.

The court observed that the appellants' novel approach – suggesting that the petitioning creditor had an obligation to make a case for their solvency on the return day of the provisional sequestration orders – does not attach to South African jurisprudence and would undermine insolvency legislation if permitted. The court also noted that the appellants could apply for rehabilitation once the one-year period from confirmation of the liquidation and distribution account expires.

The case clarifies the test for rescission of sequestration orders based on subsequent events, distinguishing it from the exercise of a 'true' discretion. It confirms that a conscious decision not to oppose proceedings constitutes wilful default, and that offering to pay a judgment debt by instalments can itself constitute an act of insolvency under section 8(g) of the Insolvency Act. It also affirms the finality of sequestration orders where accounts have been confirmed and assets transferred to bona fide third parties.