Background

Clive Malcom Ellison, the appellant, was declared bankrupt in the UK in 2000 (UK bankruptcy order). It was later discovered that he owned property in Pretoria, which formed part of his insolvent estate. The trustee appointed in the UK, along with a South African trustee, sought recognition of the UK bankruptcy order in South Africa to administer these assets.

Judge Kollapen granted an order (Kollapen order) recognising the UK bankruptcy order and authorised the South African trustee to manage Ellison’s assets “as if a local sequestration order had been issued”. That is, the Kollapen order entitled the South African trustee to administer the assets of Ellison within South Africa in terms of the South African Insolvency Act 24 of 1936 (Insolvency Act). Ellison later challenged this interpretation on appeal to the full bench of the Gauteng Division of the High Court, arguing that the Kollapen order effectively amounted to a new South African insolvency order.

What the full bench decided

The full bench firmly rejected Ellison’s argument. It clarified that the Kollapen order did not create a new insolvency proceeding in South Africa, but merely recognised the UK bankruptcy order and empowered the local South African trustee to act accordingly and in terms of the Insolvency Act. The court emphasised that the original UK bankruptcy order remained valid and binding, as Ellison had not been rehabilitated in the UK.

Legal principles applied

The judgment reaffirmed key principles from earlier cases:

• Ex parte Palmer NO: In re Hahn1993(3) SA 359 (C): This case established that immovable property in South Africa is governed by local law, but a South African court may, for reasons of convenience and comity (mutual respect between legal systems), allow a foreign trustee to administer both movable and immovable assets located in South Africa in terms of the Insolvency Act.
• Lagoon Beach Hotel v Lehane 2016 (3) SA 143 (SA), which endorsed the Palmer dictum: The Supreme Court of Appeal confirmed that recognising a foreign trustee’s authority over South African assets is entirely at the discretion of the local court. This discretion is exercised based on practicality and international co-operation.

Why the Cross-Border Insolvency Act did not feature

Interestingly, none of the parties nor the Court relied on the Cross-Border Insolvency Act. The reason? The act is currently of no practical use because the Department of Justice has not yet designated any countries to which it applies. Without such designation, the act cannot be invoked, leaving courts to rely on common law principles and judicial discretion.

Final outcome

The appeal was dismissed by the full bench, and the original order recognising the UK bankruptcy order remains in force. This case highlights the importance of judicial discretion in cross-border insolvency matters and underscores the importance of common law principles and current limitations of South Africa’s statutory framework.