Eamonn Courtney vs. Izak Johannes Boshoff NO & Others

South Africa

21.06.2024

Company

A court may issue a sequestration order, whether provisional or final

In present matter, Mr. Courtney, a citizen of the United Kingdom, who was resident in South Africa at the time, set up two companies, Salt House Investments (SHI) and Allied Mobile Communications (Pty) Ltd (AMC). He and his wife Mrs. Cole-Courtney, were the sole directors of the two companies. On 21 November 2014, Mr. Courtney irrevocably and unconditionally guaranteed payment by SHI of its liabilities to Absa, limited to the amount of R27 million. On 17 May 2018, he did the same in respect of AMC, limited to the amount of R27,5 million. His wife concluded identical guarantees.

By the end of 2018, AMC was under considerable financial pressure. Multiple companies had launched liquidation applications against AMC and on 21 May 2020, AMC was placed under a final liquidation order. Both SHI and AMC defaulted on their overdraft facilities to Absa. In addition, Mr. Courtney failed to make payment in terms of the guarantees. As a result, Absa launched an application to place Mr. Courtney’s estate under final sequestration, alternatively provisional sequestration.

Mr. Courtney launched an urgent application in the high court during April 2022 in order to set aside the final sequestration order on the basis that it was a nullity. Absa launched a conditional counter application to vary the final order of sequestration to a provisional order in the event that, the court set aside the final order of sequestration. The high court dismissed Mr. Courtney’s application but nevertheless varied the final order to a provisional order effective from the date of the final order. It also granted a costs order against the trustees in their personal capacities.

A court may issue a sequestration order, whether provisional or final. Because the high court was empowered to issue the final sequestration order, although it may have done so too early, the final order was not a nullity. Mr. Courtney’s only option was to apply for a rescission of the order under Rule 42(1)(a) of the Uniform Rules of Court or under the common law.A rescission may be granted in terms of rule 42(1)(a) of the Uniform Rules of Court on the basis that it was erroneously sought and erroneously granted in the absence of a party, alternatively the common law. He, however, did not participate in the application for his final sequestration, failed to put any defence and chose to ignore the order of final sequestration for two years. Rescission was not available to Mr. Courtney in these circumstances. Supreme Court dismissed the appeal. It set aside the order varying the final sequestration order to a provisional order and the personal costs order against the trustees.

Tags : Liquidation Final sequestration Participation

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