This blog was co-authored with Thokola Zungu, Candidate Attorney.
The Supreme Court of Appeal concluded that a right of action falls within the meaning of ‘movable property’ as defined in the Insolvency Act and vests in the trustees. Thus, by operation of the law, the trustees become the owners/holders of the right of action. They have a duty to deal with the right of action as an asset of the estate in terms of the Insolvency Act. Once it is established that the right of action has been abandoned by the trustees (as owners of the asset), the alleged right of action is extinguished. The fact that trustees abandoned a right of action does not entitle a rehabilitated insolvent to lay claim to it.
A rehabilitated insolvent sought a declaratory order from the court that the ‘right, title and interest’ in an action instituted before the insolvent was sequestrated and rehabilitated, be deemed not to form part of the insolvent’s insolvent estate. The insolvent alleged that the right, title, and interest in the claim was an asset in his estate, which the trustees (and creditors) effectively abandoned when they failed to lay claim to it. As such the trustees and creditors of the insolvent estate waived all the rights, they may have had in the claim and the respondent was thus entitled to pursue it.
The court affirmed section 20(1)(a) of the Insolvency Act which holds that ‘upon a declaration of insolvency by a court of law, an insolvent is divested of their estate which vests in the Master and upon their appointment, the trustee(s).’ In De Villiers NO Delta Cables (Pty) Ltd the Court held that:
‘It has always been accepted that a trustee becomes the owner of the property of the insolvent. The Legislature did not say so in so many words, but a transfer of dominium is clearly inherent in the terminology employed in s 20(1)(a) which provides that a sequestration order shall divest the insolvent of his estate and vest it first in the Master and later in the trustee…It also provides for a vesting in the trustee. True, the subsection does not speak of a divesting but it goes on to provide that the property so vests “as if it were the property of the sequestrated estate”. This can only mean that the property of the solvent spouse vests in the trustee to the same extent as does the property of the insolvent.’
In defining the right in this instance, the court looked, first, to the Insolvency Act, which defines movable property ‘as every kind of property and every right or interest which is not immovable property’, and secondly, to its own precedent in Stratgro Capital (SA) Ltd v Lombard NO and Others where it confirmed that a right of action ‘constitutes incorporeal property which may be attached at the instance of a judgment creditor and sold in execution’.
Thomas and Another v Thomas (1223/2021)  ZASCA 36 (31 March 2023)