How to stop a debtor from getting rid of their assets
Your debtor owes you money but instead of doing the honourable thing, they're likely to try dissipate their assets to frustrate your claim. Here's what to do.
One of the most frustrating things to find in business, and in life in general, is that so many people have no sense of honour. You expect that, after doing good work for a customer or client, they'll pay their bill. Sadly, there is little honour or sense of obligation in commerce nowadays - which is why our office is so busy with litigation work.
Unfortunately, the same pattern repeats itself time after time.
You render your services to a debtor, and they don't pay their bill. 30 days pass. 60 days. 90 days. A new excuse every time you follow up. Then they go quiet - or worse, become aggressive - and suddenly you realise all the pretense of honouring their obligation meant nothing. Eventually you have to make a decision whether it's too embarrassing to keep asking - and here's where many small businesses sadly give up and let the debtor get away with it again - or to take legal action.
Your debtor has no intention of letting you take any of their assets.
Most litigation is based on the assumption that you can seize a debtor's assets if they refuse to pay you. It is rare nowadays that you get a court order against a debtor and they respond "alright, fair enough, here's the money". Usually, a debtor is a debtor because they have either (a) not managed their finances properly or (b) fallen on hard times. Either way, they're not paying you and you need to satisfy your claim by seizing / repossessing their assets.
Unfortunately, some debtors have no intention of allowing you to take anything from them, even if it means breaking the law. A debtor may try to sell their cars or immovable property (buildings) to liquidate the assets and move the money elsewhere, before you obtain judgment against them. If you suspect this may happen, you need to consider an Anti-Dissipation Interdict / Mareva Injunction.
How to stop a debtor from hiding assets?
If someone owes you money, the usual legal process is to serve summons on them, obtain a judgment and then, if they still don't pay, attach and execute (aka "seize") their assets. But if you suspect someone intends to dissipate their assets to frustrate your claim, for example by moving money out of their accounts, transferring property, or otherwise putting their assets beyond your reach, you may be able to approach the court for an Urgent Anti-Dissipation Interdict, commonly referred to as a Mareva Injunction.
What is an Anti-Dissipation Interdict?
An Anti-Dissipation Interdict is a court order designed to prevent someone from disposing of assets where doing so will defeat your claim. You can obtain an Anti-Dissipation Interdict without having first obtained a judgment for the debt, provided your evidence is sufficient.
The court is concerned with whether there is a real and reasonable apprehension that the debtor may deal with their assets in a manner that will make them unavailable to satisfy the claim.
How do you stop someone from selling property?
A creditor seeking this type of relief generally needs to establish the requirements applicable to an interim interdict, together with the particular requirements for anti-dissipation relief. The evidence is therefore critical.
It may include evidence that the debtor:
is selling or transferring valuable assets;
is moving money between entities or jurisdictions;
is disposing of property for no apparent commercial reason;
has previously attempted to put assets beyond creditors' reach;
is rapidly reducing the assets available to satisfy the claim; or
is taking steps that, viewed objectively, create a reasonable apprehension that assets will be dissipated to defeat enforcement.
A mere allegation that "the debtor might dispose of their assets" is generally not enough. The crucial question: is there a reasonable apprehension of dissipation? The court must be presented with concrete facts from which the alleged risk can properly be inferred. Ordinary commercial transactions, legitimate expenditure, or the mere fact that a debtor is in financial difficulty do not automatically amount to dissipation.
There is an important distinction between a debtor spending or dealing with assets in the ordinary course of business and deliberately dealing with assets in a manner intended, or reasonably likely, to frustrate enforcement.
Can the order be obtained urgently?
Yes - in fact this is usually the only way to obtain this type of interdict because it is urgent by its nature. Bringing such an application on a non-urgent basis may cause it to be dismissed.
This makes timing extremely important. If you wait until the debtor's assets have already disappeared, obtaining effective relief may become substantially more difficult.
Act before the assets disappear
If you have a substantial claim against a debtor and there are concrete indications that assets are being moved, sold or transferred to defeat enforcement, the appropriate response may be an urgent application for an anti-dissipation interdict. The critical issue is not simply whether the debtor owes you money; it is whether the evidence demonstrates a genuine and legally sufficient risk that the debtor will put assets beyond your reach.
Our experience in Anti-Dissipation Interdicts
As Commercial Litigation Attorneys in Pretoria, our firm has advised clients on many types of commercial disputes, including anti-dissipation interdicts. We are experienced in both the prosecution and defence of these interdicts as well as urgent applications in general. See our latest case here: [currently waiting for court publication].
Contact us
If you suspect a debtor is moving assets to avoid payment, obtain legal advice immediately.
Once assets are gone, the problem becomes considerably harder to solve.
The above information is for illustrative purposes only and does not take into account your specific circumstances. It therefore does not constitute legal advice. Please contact us for comprehensive advice to address your circumstances. Under no circumstances should any person use the above information in an attempt to circumvent the provisions of legislation or contract, or to cause damage to any other person. Always ensure you and your company are in compliance with the law in all dealings. This information is accurate as of the date of publication. All persons, characters, businesses and events depicted herein are fictitious and are used for illustrative purposes only. Any resemblance to actual persons, living or deceased, real businesses, organisations, events or circumstances is purely coincidental and unintended.
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