Wagner N.O. v Gijsbers N.O. and Others

Jürgen Scheer was declared bankrupt by the Commercial Court of Vienna on 19 June 2017, and the applicant, Raoul Gregor Wagner, was appointed as the official receiver of his Austrian estate. Scheer was domiciled in Austria, where the majority of his creditors and assets were located. His South African estate was sequestrated on 14 August 2018, and the first and second respondents were appointed joint trustees. It was anticipated that there would be a surplus in the South African estate after proved claims, costs, and charges were paid, but a dispute existed as to whether there would be a shortfall in the Austrian estate, largely due to disputes over the value of a luxury property, Gut Kellerhof. The applicant sought recognition in South Africa to enable removal of surplus funds from the South African estate for the benefit of Austrian creditors. Scheer opposed the application, arguing the applicant lacked locus standi and that the application was premature.

• Whether the applicant, as a foreign insolvency representative appointed in the debtor's domicile, has locus standi to seek recognition in a South African court
• Whether the application is speculative and premature in the absence of a confirmed shortfall in the foreign estate
• Whether, applying principles of comity, convenience and equity, the foreign receiver should be recognised for the purpose of removing surplus funds from the South African estate
• Whether section 116 of the Insolvency Act 24 of 1936 precludes the removal of surplus funds for the benefit of foreign creditors
• Whether a punitive costs order is warranted against the third respondent for unreasonable opposition

The court recognised the applicant as official receiver of Scheer's Austrian insolvent estate in South Africa. It ordered that upon conclusion of distribution of the South African estate in terms of section 113, the applicant may remove any surplus funds to the Austrian estate for Austrian creditors, subject to the Master's confirmation of the surplus amount and bank account details. The third respondent was ordered to pay costs on an attorney and client scale, costs of the interlocutory application, and the wasted costs of two postponements were made costs in the cause.

A foreign insolvency representative appointed in the debtor's country of domicile has locus standi to seek recognition in South Africa. Recognition of a foreign trustee is granted at the court's discretion based on comity, convenience and equity, without requiring a confirmed shortfall in the foreign estate. Where a foreign trustee has been recognised, surplus funds in the South African estate remaining after payment of local creditors, and where unpaid foreign creditors exist, do not constitute a 'surplus' under section 116(1) of the Insolvency Act, and may be removed for the benefit of foreign creditors.

The court observed that if Scheer had only been sequestrated in South Africa and his estate rendered a surplus under section 116, the argument against removal of funds might have applied, but it was not necessary to make a definitive finding. The court also noted it would have been inclined to grant a punitive costs order in the security for costs application had one been requested.

This case provides an important application of cross-border insolvency principles in South African law, affirming that a foreign insolvency representative from the debtor's domicile may be recognised under common law to recover assets in South Africa for the benefit of foreign creditors, even before a shortfall in the foreign estate is confirmed. It clarifies the interaction between section 116 of the Insolvency Act and the common law recognition of foreign trustees, holding that the section does not bar removal of funds when foreign creditors remain unpaid.