Standard Bank of South Africa Limited v Moody N.O and Others

The applicant, Standard Bank of South Africa Limited, concluded a written home loan agreement with Erf 10190 Fernkloof Investment Trust (the Trust) in March 2007. The Trust breached the agreement by failing to make timely monthly instalments. The full outstanding balance became due and payable. The applicant sought the provisional sequestration of the Trust on the basis that it was de facto insolvent and had committed an act of insolvency under Section 8(c) of the Insolvency Act by preferring other creditors. The application was served in December 2023. The matter was adjourned multiple times for settlement negotiations, which failed. The Trust delivered an answering affidavit in April 2024 and the applicant replied in June 2024. In June 2024, the Trust settled the full outstanding balance with accrued interest, rendering the sequestration application moot. Only the issue of costs and the Trust's counter-application for dismissal remained.

• Whether the sequestration application had become moot after the Trust settled its indebtedness.
• Whether the applicant would have succeeded in establishing a prima facie case for sequestration under Section 10 of the Insolvency Act.
• Whether the Trust had committed an act of insolvency as envisaged in Section 8(c) of the Insolvency Act.
• Whether the Trust's counter-application for dismissal of the sequestration application should be granted.
• Which party should bear the costs of the application.

The respondents were ordered jointly and severally to pay the costs of the application on a party-and-party scale, taxed at Scale A. The Trust's counter-application to dismiss the main application was refused with costs on the same scale.

Where a sequestration application is rendered moot by the debtor settling the full indebtedness after the application has been launched, and the applicant would have succeeded in establishing a prima facie case for sequestration on the papers, the applicant is the substantially successful party and is entitled to costs on the ordinary principle that costs follow the result.

The court expressed understanding of why the Trust felt aggrieved by being mulcted for costs after requesting and receiving a settlement figure, noting that it would ordinarily be expected that a settlement figure would be inclusive of legal costs. The court declined to make a punitive costs order despite the applicant's argument that the Trust's opposition constituted an abuse of process, because the Trust's intention to settle the matter in full was clear.

This case illustrates the application of the doctrine of mootness in the High Court and confirms that a High Court cannot decide abstract or hypothetical issues. It also provides guidance on the costs consequences where a sequestration application is rendered moot by late settlement by the debtor, and reinforces the principle that the test for a provisional sequestration order is whether the creditor has established a prima facie case, including whether payments to other creditors constitute an act of insolvency under Section 8(c) of the Insolvency Act.