Jürgen Scheer's estate was sequestrated in Austria in 2017 where he was domiciled, and in South Africa in 2018. Raoul Wagner was appointed as trustee of the Austrian estate, and Johan Christian Gijsbers and Ntanganedzeni Frank Nemakwarani were appointed as joint co-trustees of the South African estate. The Austrian estate had a substantial shortfall (exceeding €4.4 million), with most creditors based in Austria. The South African estate had a surplus after satisfying local creditors. Wagner applied to the Western Cape High Court for recognition as receiver of the Austrian estate and for an order that any surplus from the South African estate be transferred to Austria to settle Austrian creditors. Scheer opposed the application, arguing that section 116 of the Insolvency Act 24 of 1936 mandatorily requires any surplus to be paid into the Guardians' Fund and thereafter to the rehabilitated insolvent upon request. The high court granted Wagner's application with costs on a punitive scale. Scheer appealed with leave.
1. The respondent was granted leave to adduce further evidence on appeal. The judgments of the Vienna Higher Regional Court of Austria were admitted into evidence. 2. The respondent was ordered to pay the costs of the application to adduce further evidence. 3. The appeal was dismissed with costs including the costs of two counsel, where so employed.
Section 116 of the Insolvency Act 24 of 1936 does not apply where, after distribution of assets in a South African insolvent estate, a surplus remains while a shortfall persists in the insolvent estate in the individual's country of domicile. In such circumstances, the common law principles of comity prevail and provide the applicable legal framework. A 'surplus' as contemplated by section 116 cannot exist if there is still a deficit in a foreign insolvent estate, particularly where the foreign trustee has been recognized in South Africa. Where a foreign trustee has been duly appointed to administer the insolvent estate in the country of the insolvent's domicile, that trustee is entitled to claim any surplus in the South African estate that is not required to settle claims of South African creditors. Section 116 does not demonstrate, either explicitly or by necessary implication, a legislative intention to alter this common law position. The presumption against statutory alteration of the common law requires that section 116 be reconciled with the principles of comity and the court's inherent discretion to recognize and assist foreign office-holders where local creditors are protected.
The Court observed that Scheer's interpretation of section 116 would lead to an anomalous outcome where the surplus would effectively remain beyond the reach of the insolvent, the foreign trustee, and the foreign creditors indefinitely, describing this as untenable rather than a statutory lacuna. The Court noted it is clearly in Scheer's best interests that any surplus be applied to settle his Austrian creditors, as otherwise he would remain subject to the ongoing consequences of insolvency in Austria for an indefinite period. The Court also commented on the discretionary principles governing admission of further evidence on appeal under section 19(b) of the Superior Courts Act 10 of 2013, requiring exceptional circumstances, materiality, and absence of prejudice. The Court affirmed the long-established principles from Ex Parte Palmer NO: In re Hahn regarding recognition of foreign trustees, including that recognition is discretionary but will generally be granted if it does not prejudice local creditors or contravene mandatory local insolvency rules.
This case provides important guidance on the interaction between statutory provisions in the Insolvency Act and common law principles of cross-border insolvency in South African law. It establishes that section 116's requirement to pay surplus funds into the Guardians' Fund does not apply where a surplus exists in a South African estate but a deficit exists in the insolvent's foreign estate in their country of domicile. The judgment affirms the continuing relevance and application of the common law principle of comity in cross-border insolvency matters, even in the presence of statutory provisions, where the statute does not clearly demonstrate an intention to alter the common law. It confirms that the presumption against alteration of the common law remains a vital interpretive principle. The case also demonstrates the practical application of the principle that statutes should be interpreted to avoid anomalous or unreasonable results. It provides clarity on when a foreign trustee may claim surplus funds from a South African estate and reinforces the protection of local creditors while facilitating efficient cross-border estate administration.