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Waiver of rights in insolvency
By
Moffat
Ndou
T
Kroese and Kroese (NWM) (unreported case no 145/13,
18-4-2013) (Landman J) and Hattingh and Hattingh (NWM)
(unreported case no 144/13, 18-4-2013) (Landman J)
he North West High Court,
Mafikeng in the unreported
judgment of Kroese and Kroe–
se (NWM) (unreported case no
145/13, 18-4-2013) (Landman
J) and Hattingh and Hattingh (NWM)
(unreported case no 144/13, 18-4-2013)
(Landman J) had the opportunity to consider whether the waiver of the rights
provided in s 82(6) of the Insolvency Act
24 of 1936 (the Act) is an infringement of
a constitutional right of the applicants.
Section 82(6) reads as follows: ‘From
the sale of the movable property shall
be excepted the wearing apparel and
bedding of the insolvent and the whole
or such part of his [or her] household
furniture, and tools and other essential
means of subsistence as the creditors, or
if no creditor has proved a claim against
the estate, as the Master may determine
and the insolvent shall be allowed to retain, for his [or her] own use any property so excepted from the sale.’
The judgment is in respect of two
separate applications for two separate
estates. The court gave one judgment in
respect of these two applications as, in
both applications, the applicants intended to waive assets that were afforded a
measure of protection by s 82(6) of the
Act. The waivers were done in order to
increase the value of the realisable assets and in order to show that the surrender of the respective estates would be
to the advantage of creditors.
Both applicants were married in community of property and both applications were for the voluntary surrender of
their respective insolvent estates. All the
formalities required for an application to
surrender an estate had been complied
with. The court had to decide whether
the waiver by the applicants was permissible because without it there would be
no advantage for creditors.
The applicants relied on the full Bench
decision in Ex parte Anthony en ’n Ander en Ses Soortgelyke Aansoeke 2000
(4) SA 116 (K) in their submission that,
in order to establish an advantage to
creditors, the applicant may waive the
protection afforded by s 82(6) of the Act.
The court noted that the Anthony case
was distinguishable because in that case
the court did not consider whether the
waiver would be an infringement of the
equivalent of a constitutional right of the
applicant.
The court raised two concerns regarding the applicants’ waiver of their enti-
tlements to their property referred to in
s 86(2) of the Act. First, the court was
concerned with the discretionary nature
of s 82(6). The court refrained from deciding the constitutional validity of the
provision, but decided that it will intervene if the discretion was not exercised
reasonably.
Secondly, the court was concerned
whether the applicants could validly
waive their entitlement to basic necessities. The court departed from the decision in the Anthony case, because that
court paid insufficient attention to the
principle that a waiver ‘was subject to
certain exceptions, of which one was
that no one could renounce a right contrary to law, or a right introduced not
only for his [or her] own benefit but in
the interests of the public as well’. The
court made it clear that s 82(6) of the Act
must be read in the context of the constitutional dispensation.
The court proceeded to interpret the
provisions of s 82(6) of the Act in the
context of the right to life and dignity.
The court noted that the purpose of
s 82(6) was to provide measures that are
intended to preserve the right to life and
dignity of an insolvent and his or her or
their dependents and to place them in a
position to rebuild their lives.
In placing the entitlement as regards
necessities in context, the court refers,
inter alia, to a passage in Prof RG Evans’
article titled ‘Legislative exclusions or
exemptions of property from the insolvent estate’ [2011] (14) 5 PER 28 (www.
saflii.org.za/journals/PER/2011/28.pdf,
accessed 30-1-2014):
‘Although South African insolvency
law is based on the policy of the collection of the maximum quantity of assets
available, to the advantage of the creditors of the insolvent estate, a further
policy, that of allowing a debtor to keep
a part of his [or her] estate, has also been
entrenched, originally through the common law. It would appear that originally
the rationale behind this policy, as it developed through the common law, was
to ensure that the insolvent and his [or
her] family were not deprived of their
dignity and basic life necessities. It is
submitted that this remains the cornerstone upon which this policy rests, but
that the requirements of modern society,
socio-political developments in most societies, and human rights requirements
have necessitated a broadening of the
classes of assets that should be excluded
DE REBUS – APRIL 2014
- 45 -
or exempted from insolvent estates’ (at
para 42).
With reference to Bafana Finance Mabopane v Makwakwa and Another 2006
(4) SA 581 (SCA) and S v Makwanyane
and Another 1995 (3) SA 391 (CC), the
court accepted that the right to dignity
is at least one of the human rights that
are inalienable.
The court considered the applicants’
submission by dividing it into four
points and made the following findings:
• The court found that the contention
that the goods mentioned in s 82(6) of
the Act are divisible into two categories was not relevant to the question of
waiver.
• With regard to the contention that
the waivers related to the applicants’
personal capacity and that no public
policy was involved, the court pointed
out that the Act and other legislation
that provides for protection of debtors
were enacted for the benefit of debtors
and for the wellbeing of the society. The
court further remarked that it is not in
the state’s interest that citizens should
renounce their assets and become a burden on society.
• With regard to the applicants’ open and
frank account of their financial situation
and their eagerness to assist the court,
the court pointed out that the law does
not allow them to make the sacrifice they
were attempting to make.
• The applicants submitted that they had
a right to freedom of trade, which encompasses the right to dispose of their
property at their own and free will. The
court answered the submission by pointing out that most rights can be limited
and that the protection afforded to their
right to life and dignity in terms of the
Act was not theirs to waive.
The court made it clear that it was not
possible to waive a right to basic necessities. The court refused to grant the
voluntary surrender application on the
basis that the applicants failed to show
sufficient advantage for their respective
creditors.
Moffat Ndou LLB (UJ) is a law
researcher at the North West High
Court in Mafikeng.
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