Lourens N.O. and Another v De Cerff N.O. and Others

The ADC Family Trust ('the Trust') had as its trustees Alan Charles De Cerff ('De Cerff'), his wife Anthea Nicolette De Cerff (First Respondent), and his sister Carol Brenda De Cerff (who later resigned). De Cerff's estate was finally sequestrated on 26 March 2024. The Applicants were appointed joint trustees of De Cerff's insolvent estate. Their investigations revealed a loan account of approximately R9,152,000 in favour of De Cerff in the Trust. De Cerff's sister, Debra Virginia Heinrich (the Intervening Party), had obtained a judgment against De Cerff for R5,847,000 (effective from 1 October 2009) which with interest had grown to approximately R15 million. Heinrich was the main creditor in De Cerff's insolvent estate. The Trust owned three immovable properties; the Constantia property was sold for R8,750,000 in November 2023. Pursuant to an anti-dissipation order obtained by Heinrich, approximately R5,400,000 of the proceeds was held in trust. The Applicants discovered that De Cerff had paid mortgage bonds, municipal charges, and homeowners' levies for Trust properties, amounting to R3,531,961.20, creating a second component of his loan account. The Trust's liabilities were shown to exceed its assets by over R3 million. The First and Second Respondents filed an answering affidavit that failed to address paragraphs 41 to 125 of the founding affidavit.

• Whether the Applicants had locus standi to bring the application for sequestration of the Trust
• Whether the Applicants had established a liquidated claim against the ADC Family Trust
• Whether the ADC Family Trust was factually insolvent
• Whether it would be to the advantage of creditors for the Trust to be provisionally sequestrated
• Whether the Insolvency Act 1936 applies to the sequestration of a trust
• Whether the urgency requirements under Rule 6(12) were satisfied

The estate of the ADC Family Trust was placed under provisional sequestration. A rule nisi was issued calling upon the Trustees and all interested persons to show cause why the estate should not be placed under final sequestration. The order was to be served on the Trust's attorneys, the Master of the High Court, and the South African Revenue Services. Costs were made costs in the sequestration.

For provisional sequestration under sections 9 and 10 of the Insolvency Act 1936, the applicant must establish prima facie on a balance of probabilities: (1) a liquidated claim against the debtor; (2) that the debtor is insolvent or has committed an act of insolvency; and (3) that sequestration will be to the advantage of creditors. A trust falls within the definition of 'debtor' in section 2 of the Insolvency Act, and sequestration proceedings may be instituted against a trust by citing its trustees. Where a respondent files an answering affidavit that fails to engage meaningfully with material averments in the founding affidavit, the court is entitled to accept the applicant's allegations as established on a prima facie basis.

The court noted that the propriety or legality of the accounting practice of using a spouse's donations exemption to reduce a loan account through book entries (rather than actual payments) is beyond the scope of the judgment and is subject to further investigation. The court further observed that the issue of whether the Trust is a sham or the alter ego of De Cerff was not for decision in the application.

This case clarifies that a trust can be provisionally sequestrated under the Insolvency Act 1936, confirming that a trust falls within the definition of 'debtor' in section 2. It also illustrates the consequences of filing an inadequate answering affidavit — the court will accept an applicant's allegations as prima facie established where the respondent fails to engage meaningfully with the averments. The case demonstrates the robust approach courts may take in opposed provisional sequestration proceedings when respondents fail to dispute allegations properly.