MRL3702 Assignment 2 (DETAILED ANSWERS) Semester 2 2024 - DISTINCTION GUARANTEED

MRL3702 Assignment 2 (DETAILED ANSWERS) Semester 2 2024 - DISTINCTION GUARANTEED - DISTINCTION GUARANTEED - DISTINCTION GUARANTEED Answers, guidelines, workings and references ..... QUESTION: Simphiwe owes a total of R3 million to various creditors. His creditors include Tebogo to whom he owes R400 000. He also owes R1,3 million to BFN Bank. Last year Simphiwe invested in a get-rich-quick scheme and as a result he lost a lot of money. This left him in a dire financial situation. By 31 October 2023 his liabilities exceeded his assets by R800 000. Over the past few months Simphiwe has failed to pay some of his debts. In particular he failed to pay the R400 000 he owes to Tebogo. This debt was due and payable on 1 February 2024. Disappointed at not having been paid back the R400 000 owed to her, Tebogo undertook an investigation into Simphiwe’s financial situation. The investigation turned up unassailable proof that Simphiwe had owed R100 000 to his father-in-law, and that Simphiwe repaid R80 000 to his father-in-law on 3 February 2024. Mindful that he was technically insolvent and that one of his creditors could apply for the sequestration of his estate at any time, Simphiwe had wanted to ensure that whatever happened, his father-in-law would at least get something MRL3701 Assessment 2 Semester 2 2024 3 from his estate. Hence, he repaid the loan that he had obtained from his father-in-law even though the amount was only due and payable on 30 November 2024. Tebogo has also established that Simphiwe owns a house in Mamelodi valued at R700 000, household furniture valued at R300 000 and a motor vehicle valued at R800 000. Tebogo applies for the compulsory sequestration of Simphiwe’s estate. Answer the following questions based on the facts given above: (a) Explain the concept of a voidable preference, and also discuss what a trustee must prove in order to have such a transaction set aside by the court. (3 marks) (b) Explain the concept of an undue preference, and also discuss what a trustee must prove in order to have such a transaction set aside. (2 marks) (c) Discuss fully whether, and on what basis, the trustee of Simphiwe’s insolvent estate would be able to recover the R80 000 paid by Simphiwe to his father-in-law. (5 marks)