By Sanette Viljoen
John donates a number of valuable possessions to his wife just before he is sequestrated. He and his wife are married out of community of property and they are under the impression that the creditors cannot touch his wife’s assets. Is this really the case?
In this case the legislator thought it fit to adapt the Insolvency Act (Act 24 of 1936) to the extent that the assets of the solvent spouse also pass, first to the master of the supreme court and then to the curator. This is done to limit fraudulent actions like those above. The curator will then examine the assets of the solvent spouse for conspiracy.
The position regarding donations is governed by section 22 of the Matrimonial Property Act (Act 88 of 1984). This, in short, means that no transaction entered into between a husband and wife before or after the commencement of this act can be invalid simply because it amounts to a donation. The effect of this is that should the solvent wife obtain an asset donated to her by the insolvent husband, the burden of proof will rest on the curator to determine whether this donation was reasonable and was a disposition without value or a conspiracy to mislead the creditors, etc.
The curator will examine the assets and determine whether indeed they belong to the solvent spouse. The following are examples of such assets: assets that belonged to the solvent spouse before they were married ─ these assets will definitely be protected by the curator; assets of the solvent spouse that were inherited from another person will also not form part of the insolvent estate. These assets should not have been given as security for the debt of the insolvent spouse.
If a donation was made shortly before insolvency, it will be investigated with a view to conspiracy. The insolvent person knew about his pending sequestration for some time before it happened. If, in these circumstances, he makes a donation to the detriment of creditors, the creditors could claim that the debtor defrauded them and that there was intent or disposition without value. This could then easily be set aside by a court and form part of the insolvent estate.