Cross-border insolvencies have become increasingly prevalent in modern commercial practice. This trend is driven largely by the growing mobility of individuals, who frequently hold assets both within South Africa and abroad. In addition, the rise in international financing through foreign banks, investors, and private equity structures has significantly increased the likelihood of insolvency proceedings spanning multiple legal systems.

As a result, insolvency can no longer be viewed as a purely territorial exercise. Insolvent estates often span multiple jurisdictions, giving rise to competing claims and complex legal questions regarding the recognition, control, and distribution of assets. Against this backdrop, a critical issue emerges: can a surplus realised in a South African insolvent estate be applied to satisfy a deficit in a foreign jurisdiction?

This question was considered by the Supreme Court of Appeal (SCA) in Scheer v Wagner N.O. and Others (1109/2024) [2026] ZASCA 32. The Court was required to determine the proper interpretation of “surplus” as contemplated in section 116 of the Insolvency Act 24 of 1936, and whether a foreign trustee is entitled to claim against a South African insolvent estate to settle a deficit arising in a foreign jurisdiction.

Section 116 of the Insolvency Act 24 of 1936 provides:

“If after the confirmation of a final plan of distribution there is any surplus in an insolvent estate which is not required for the payment of claims, costs, charges or interest, the trustee shall, immediately after the confirmation of that account, pay that surplus over to the Master, who shall deposit it in the Guardians' Fund and after the rehabilitation of the insolvent shall pay it out to him at his request.”

In purely domestic matters, the provision is relatively straightforward: once all claims and costs have been settled, any remaining surplus is preserved for the benefit of the rehabilitated insolvent.

However, the application of this principle becomes far less certain in a cross-border context.

In the Scheer case, the SCA was confronted with a complex factual matrix involving insolvency proceedings in both Austria and South Africa:

Mr Scheer’s Austrian estate was sequestrated in 2017, followed by his South African estate in 2018. At the time of the Austrian sequestration, he was domiciled in Austria, where most of his creditors were located. A shortfall of over €4.4 million was recorded in the Austrian estate, while the South African estate yielded a surplus. 

The central issue was how the South African surplus should be treated considering the substantial deficit in the Austrian estate.

The SCA recognised that section 116 does not operate neatly in such circumstances. It found, in substance, that a surplus existing in South Africa cannot always be treated in isolation when the same debtor has an outstanding deficit in another jurisdiction. Instead, that surplus may be claimed for the benefit of the foreign estate by a duly appointed foreign trustee.

A foreign trustee cannot, however, automatically exercise authority over South African assets. To access a surplus, the trustee must first obtain formal recognition from a South African court. This is done by filing an application with the High Court.

The relief sought should include the recognition of the foreign insolvency proceedings and the confirmation of the foreign trustee’s authority, with specific reference to the assets or property concerned. It is important to note that recognition remains discretionary. It is generally granted, provided it does not prejudice the interests of local creditors or conflict with South African insolvency principles. To this end, the court may impose conditions to safeguard domestic priorities, such as the ranking of claims and the protection of secured creditors. 

The SCA in Scheer also addressed a conceptual difficulty: whether a “surplus” in one jurisdiction truly constitutes a surplus when the debtor’s global estate remains insolvent. The Court acknowledged that treating the South African estate in isolation could produce an anomalous outcome. While a surplus might exist locally, the debtor’s overall financial position, considered across all jurisdictions, may still reflect a substantial deficit.

In this context, the Court emphasised a more holistic approach. It held that the existence of a foreign shortfall may prevent the operation of section 116 in the conventional sense. Notably, the insolvent’s rehabilitation would remain unavailable for as long as a material deficit persisted in the foreign estate.
This reasoning reinforces the principle that, in appropriate cases, insolvency should be viewed as a composite, cross-border process rather than a strictly territorial one.

The decision in Scheer clarifies that a surplus realised in a South African insolvent estate does not automatically trigger the application of section 116 where a corresponding deficit exists in a foreign jurisdiction. Such a surplus cannot simply be transferred to the Master for the benefit of a rehabilitated insolvent. Instead, the surplus may be subject to a claim by a duly recognised foreign trustee, acting within the framework of cross-border insolvency and principles of comity.

Importantly, this entitlement is not automatic. It must be actively pursued through an application for recognition in the South African courts. Until such recognition is obtained, the surplus effectively remains in abeyance - neither distributed locally nor available to foreign creditors.

The judgment underscores the evolving nature of insolvency law in a globalised economy, where courts are increasingly required to balance domestic statutory provisions with the realities of cross-border financial relationships.


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