NIELD v UDC LTD 1989 (3) ZLR 142 (S)

Flynote

Insolvency — sequestration — debtor "commercially" insolvent though assets exceeded liabilities — whether creditors precluded from D applying for sequestration — lis alibi pendens — when can stop a petition for sequestration.

Headnote

The fact that a debtor's assets exceed his liabilities does not necessarily protect him from sequestration at the hands of his creditors. If he cannot pay his debts without selling his assets, but does not want to sell his assets because they produce his income, he is said to be "commercially insolvent". If his creditors so choose - and the choice is theirs, not his - they are entitled to seek his sequestration. It is for them to decide whether or not to rely on the fact that their debts are secured, bearing in mind that in a forced sale true values are seldom realised.

A plea of lis alibi pendens will not normally stop a petition for sequestration, merely because the debt whose non-payment is the basis of the action is also the basis for the petition for sequestration. Very commonly a creditor will institute proceedings on a debt but then, finding that other creditors are executing on similar debts and fearing that there will be nothing left for him, will petition for sequestration. The plea might succeed if the debtor could show that there had been a pactum de non petendo.