March 7, 2017
“Pyrrhic victory”, n.
A victory gained at such great cost that it is actually a defeat
Joe Debtor owes you a fortune but does everything he can to frustrate your debt collection attempts. He strings you along with spurious queries and false promises, and when you issue summons he defends your action with every delaying tactic he can come up with.
Joe, you suspect, has one reason and one reason only for this delay – he needs time to get rid of all his assets so that when you finally get your judgment against him he has nothing left worth attaching, and you are left with a classic Pyrrhic victory and a large legal bill to pay.
The good news is that our law comes to your rescue in such cases with an “anti-dissipation interdict” (you might hear lawyers referring to it as a “Mareva Injunction” after a famous English case) which effectively freezes the debtor’s assets and preserves them until your litigation is finished.
The delaying debtor who sold all her properties
A recent High Court judgment paints a typical picture and nicely encapsulates our law on the matter –
- The creditor in this case had lent money to a close corporation (CC), which was then liquidated
- A surety had disclosed three immovable properties as being her only assets
- The creditor sued the surety for almost R600,000 and in defending the claim she entered a “terse” plea (her answer to the claim) acknowledging the suretyship but baldly denying everything else and putting the creditor to the proof thereof. She was then unwilling to attend a pre-trial conference, saying that the date set for it wasn’t suitable but then not responding when offered alternative dates
- When the creditor found out that the debtor had sold her three properties, it asked her for an unconditional undertaking to hold back transfer until the litigation was finalised
- Again, silence from the debtor, and when it became clear that transfer of the properties was imminent, the creditor asked the Court for an urgent anti-dissipation interdict
- The debtor failed to file any intention to oppose, nor did she lodge any answering affidavit. Her legal team did however appear for her at the hearing, to argue that the interdict should not be granted.
What you must prove; and the outcome
Stopping someone from dealing freely with their own assets is of course a pretty drastic remedy but our courts will do so when necessary to prevent a dishonest debtor from perverting the course of justice and causing an injustice to a creditor. What you must show, said the Court, is that –
- The debtor is wasting or getting rid of assets, or is likely to do so; and
- The debtor has “a particular state of mind”, i.e. the debtor is getting rid of assets, or is likely to do so, “with the intention of defeating the claims of creditors”.In all the circumstances of this case the Court found that the debtor was delaying the inevitable in order to transfer all her properties to the creditor’s prejudice, and accordingly it ordered the transferring attorneys to hold in their trust account, pending finalisation of the litigation against the surety, both the R600k and an additional amount of R100k.