Liberty Group Limited vs. Moosa - (14 Apr 2023)

Dismissal of an application for a provisional order of liquidation is appealable

Insolvency

The appeal was directed against an order of the high court which dismissed the application by the Appellant for the provisional sequestration of the estate of the Respondent. The high court thereafter also dismissed an application by the appellant for leave to appeal on the basis that its order is, in terms of Section 150(5) of the Act, not appealable. The issue was whether an appeal against the refusal of a provisional order of sequestration is precluded by Section 150(5) of the Insolvency Act, 1936.

The dismissal of an application for a provisional order of liquidation is appealable. In both sequestration and liquidation proceedings, the legal machinery which comes into operation is designed to ensure that whatever assets the debtor has are liquidated and distributed among all the creditors in accordance with a fair order of preference. Once a provisional order is granted, in either instance, a concursus creditorum is established. Section 150(1) provides that ‘an order setting aside an order of provisional sequestration’ is appealable.

The respondent’s answering affidavit in the application for sequestration in the high court raised more questions than answers and that he was obliged to be candid with the court and deal pertinently with the facts, particularly those that fall within his peculiar knowledge. It was also incumbent on him to annex copies of relevant documentary evidence, to enable the court to ascertain whether his version survives scrutiny. And, to put up confirmatory affidavits from persons, including his mother, to whom he was allegedly indebted.

Advantage to creditors may lie in the prospect of finding assets falling into the insolvent estate, which may have been concealed or improperly disposed of. It will be sufficient if the creditor, on an overall view on the papers, can show, for example, that there are reasonable grounds for coming to the conclusion that upon investigation and inquiry a trustee may be able to unearth assets that might then be attached, sold and the proceeds disposed of for distribution amongst creditors.

The high court was far too receptive to the respondent’s case and that a proper conspectus of the evidence ought to have led it to the conclusion that a provisional sequestration was, in the circumstances, not just appropriate, but indeed necessary.

Tags : PROVISIONAL SEQUESTRATION APPLICATION MAINTAINABILITY