The Contract of Sequestration in the Light of the Civil Transactions Law and the Egyptian Civil Code

Sequestration is among the nominate civil contracts whose provisions the civil codes govern, the Egyptian Civil Code and the Civil Transactions Law among them. Given its practical importance, the Egyptian Civil Code devotes a separate chapter to it — the fifth chapter of the third title, on contracts bearing upon work. Conventional sequestration is dealt with in Article 729, while judicial sequestration occupies the remaining nine articles of that chapter.

What a contract of sequestration is

Article 517 of the Civil Transactions Law defines it as "a contract by which the sequestrator undertakes to preserve property in dispute, to administer it, and to return it with its proceeds to whoever establishes a right to it". Article 729 of the Egyptian Civil Code defines it as "a contract by which the two parties entrust to another person a movable, an immovable or a body of property over which a dispute has arisen or the right to which is not established, that person undertaking to preserve and administer it and to render it, with the proceeds received, to whoever establishes a right to it". Sequestration, as the commentators put it, is "the placing of property over which a dispute has arisen, or to which the right is not established and which is threatened by imminent danger, in the hands of a trustee who undertakes to preserve and administer it and to return it, rendering an account of it, to whoever establishes a right to it. The property is placed under sequestration either by agreement of the two disputing parties, in which case the sequestration is conventional, or by a judgment of the court, in which case it is judicial."

The elements of sequestration

1. Property placed under sequestration.
2. An agreement for sequestration, or a judgment ordering it.
3. The appointment of a sequestrator by agreement, or under a judgment.

The characteristics of the contract of sequestration

a. It is concluded between two persons in dispute, or between whom a right is established, and another person to whom is entrusted the task of preserving the thing in dispute.

b. It bears upon property only, as the Civil Transactions Law provides; or upon an immovable, a movable, or both together, as the Egyptian Civil Code provides.

c. The sequestrator, like a depositary, preserves the property and returns it when the sequestration ends; but differs from a depositary in that he administers the property, and in that he returns it to whichever of the two disputing parties establishes a right to it.

The kinds of sequestration

Sequestration is either conventional or judicial, and both are provisional measures that do not touch the substance of the right but are intended to preserve the property in the hands of a third party, away from the parties to the dispute. Both are governed by the same provisions. This is the tenor of the provisions of both the Egyptian Civil Code and the Civil Transactions Law.

One: conventional sequestration

This is what Article 729 of the Egyptian Civil Code sets out: "a contract by which the two parties entrust to another person a movable, an immovable or a body of property over which a dispute has arisen or the right to which is not established, that person undertaking to preserve and administer it and to render it, with the proceeds received, to whoever establishes a right to it". For conventional sequestration to arise it is enough that the litigants agree upon it in a separate contract, or that it come by way of a clause contained in a contract concluded between them — as where it is stipulated that, should the buyer fail to pay one of the instalments, the thing sold be placed under the sequestration of a named person.

Where the parties to the contract containing the agreement for sequestration are several, all of them must consent to the sequestration, to the task of the sequestrator and to his appointment. Failing unanimity on those elements, conventional sequestration does not arise, and nothing remains but judicial sequestration, if its conditions are met.

Article 518 of the Civil Transactions Law sets out how the sequestrator is appointed: "the sequestrator is appointed by agreement of those concerned. The court may appoint him where it considers that leaving the property in the hands of its possessor presents an imminent danger." Article 519 sets out how matters stand where more than one sequestrator is appointed: "where those concerned agree to deliver the property to two or more sequestrators, none of them may act alone in preserving or administering the property or disposing of the proceeds without the permission of the others".

Two: judicial sequestration

The Egyptian Court of Cassation has defined it as "the placing of property over which a dispute has arisen, or to which the right is not established and which is threatened by imminent danger, in the hands of a trustee who undertakes to preserve and administer it and to return it, rendering an account of it, to whoever establishes a right to it — and it is, according to the settled rulings of this Court, a provisional measure called for by necessity and drawing its existence from it". Appeal 1053 of year 58, hearing of 28 May 1990, vol. 414, p. 217.

It is thus a species of legal and judicial representation: the law fixes its compass and the court confers upon the sequestrator his character. It is a provisional conservatory measure that does not touch the substance. That is, it preserves the property and so prevents the debtor from disposing of or concealing it. And it is provisional, subsisting only so long as the circumstances that called for it subsist, the authority of the judgment following those circumstances in existence and in cessation alike. The judgment has no effect upon the substance.

The cases in which judicial sequestration may be sought

Article 730 of the Egyptian Civil Code sets out the cases of this sequestration:

"The court may order sequestration:

1. In the cases referred to in the preceding article, where those concerned have not agreed upon sequestration.
2. Where the person interested in a movable or an immovable has gathered reasonable grounds for fearing an imminent danger from the property remaining in the hands of its possessor.
3. In the other cases provided for by law."

Where the conditions of conventional sequestration are met under Article 729 of the Civil Code — a dispute over a movable, an immovable or a body of property, or the right being unestablished as between the two litigants — but they do not agree upon placing the property under sequestration, either of them may then seek a judgment placing it under sequestration, pursuant to the first paragraph of Article 730 of the same Code.

Judicial sequestration may likewise be sought in the case of a real tender of property that cannot be deposited in the court's treasury, the debtor bringing an action to place the object of his obligation under sequestration by way of performance of that obligation.

The second paragraph of Article 730 of the Egyptian Civil Code, cited above, is framed in absolute terms: it permits any person interested in a movable or an immovable who has gathered reasonable grounds for fearing an imminent danger from the property remaining in the hands of its possessor to bring an action to place it under sequestration, even where the property is not in dispute and even where the right to it is not unestablished. It is enough that there be reasonable grounds for fearing that the possessor may misappropriate the property, destroy it wholly or in part, or alter it; and once the judge is satisfied that this is possible, the imminent danger threatening the applicant is made out and the apprehension is established that requires the property to be placed under judicial sequestration for its preservation until the dispute over it is resolved.

The Commercial Circuit of the Board of Grievances held, in case 4408 of 1436, on appeal in case 4925 of 1436, that "the imposition of judicial sequestration over companies requires that its grounds be met, and that the claimant have gathered such grounds as give give rise to a fear of imminent danger from the property remaining in the hands of its possessor — as where one of the partners appropriates the management and the profits to himself, so that it becomes dangerous for the property to remain in his hands"; and further that "the assessment of the seriousness of the dispute and of the existence of the imminent danger justifying sequestration is a question of fact falling within the circuit's power of assessment".