The issue: Section 150 of the Insolvency Act 24 of 1936 (“the Insolvency Act”) deals with appeals for a final order of sequestration or an order setting aside an order of provisional sequestration only. Furthermore Section 150(5) expressly provides that “there shall be no appeal against any order made by the court in terms of this Act except as provided for in this Section”. A glaring omission from this Section is whether or not an aggrieved applicant can appeal an order of court dismissing an application for a provisional order of sequestration. A few days ago the SCA pronounced on this very point[1] and effectively set aside prior decisions of the lower courts to the effect that no such appeal was possible.
In reaching its decision the SCA reasoned as follows:
1. The conclusions reached in prior matters[2] were inconsistent with the principles that the dismissal of an application, whether for final or interim relief is in general appealable and that judgments “would nevertheless qualify as an appealable decision if it had a final and definitive effect on the proceedings or if the interests of justice required it to be regarded as an appealable decision”[3].
2. Therefore so concluded the SCA there appeared to be no reason to suggest why the legislator would have singled out “a provisional order” as an exception to this general rule.
3. It is trite in South Africa that the dismissal of an application for a provisional order of liquidation (as opposed to a provisional sequestration) is appealable[4]. Therefore it would be difficult to understand why the dismissal of an application for a provisional order of liquidation would be appealable but that the dismissal of an application for a provisional order of sequestration would not be.
4. “an order setting aside an order of provisional sequestration” is appealable. Therefore it was difficult for the courts to reconcile the express recognition of a right of appeal in this instance and the denial of an appeal against granting such an order. The courts were of the view that both such orders stand on the same footing and therefore there could be no “rational basis for the distinction between the two”[5]. Why then so the court reasoned would an applicant whose provisional order has been set aside, enjoy a right of appeal, but not an applicant whose application for a provisional order has been dismissed.
5. The courts interpreted Section 150(5) and concluded that it is capable of more than one meaning and that the denial of a right of appeal is not a necessary inference from the terms of this Section particularly when regard is had to the relevant interpretative aids. Therefore so it reasoned:
5.1 “It would thus seem that the only sensible and business like construction to be placed on the provision is that an order dismissing an application for a provisional sequestration order is not “an order made by a court” as contemplated by Section 150(5) of the Act. To hold otherwise would give rise to the various absurd anomalies alluded to. Moreover, sight cannot be lost of the fact that consideration must also be given to whether the provision can be read in a manner that is consistent with the constitution …. This means that the final word has been spoken on the application.
5.2 In the circumstances, the denial of a right of appeal may well mean that an obviously wrong judgment on the merits would not be open to correction and that could hardly be in the interest of justice and likely not be countenanced by the constitution, leaving as it does, a litigant in the position of the present appellant, remediless.[6]”
6. The court also endeavoured to justify this issue on the basis that a provisional sequestration order is one made by the court in terms of the Insolvency Act but an order dismissing an application for provisional order is not such an order. “In other words, in recognition of the fact that the grant of a provisional sequestration order (unlike the dismissal of an application for a provisional sequestration order) is one that “is made by the court in terms of [the] Act” within the meaning of Section 150(5), it was necessary for the legislator to especially provide for a right of appeal in respect of such an order. If it is accepted that an order dismissing an application for a provisional order of sequestration is not one encompassed by the provisions of Section 150(5) of the Act then, it must follow, it was not necessary for the legislator to have expressly provided for a right of appeal against that order”[7].
Finally then the courts held that on a proper conspectus of the evidence (in the various affidavits) the court a quo ought to have come to the conclusion in this matter that a provisional sequestration was both appropriate and necessary and that Liberty’s application should have succeeded before the High Court. This leaves open the question whether the appeal courts would have allowed an appeal had the merits of the sequestration application favoured the respondent.
Whatever the case this matter is now authority for the view that a court’s refusal of a provisional sequestration order is appealable.
