Mercantile 312
(Law of Insolvency)
notes
Compiled by Mari Louw in 2021. DO NOT DISTRIBUTE.
Louw, MM, Mej []
, 1
Contents
Introduction......................................................................................................................................5
1.1. Meaning of Insolvency..........................................................................................................5
1.2. Purpose of a sequestration order...........................................................................................5
1.3. Who or what is being sequestrated?......................................................................................8
Compulsory sequestration v voluntary surrender.....................................................................8
Miller V Janks 1944 (n/p)........................................................................................................8
Meaning of ‘debtor’.................................................................................................................9
1.4. Jurisdiction of the court.......................................................................................................19
Which court has jurisdiction?.................................................................................................19
Jurisdiction in litigation against 3rd parties.............................................................................21
Historical overview....................................................................................................................21
Voluntary surrender........................................................................................................................23
Who may apply?.........................................................................................................................24
Substantive requirements...........................................................................................................26
1) Debtor’s estate insolvent....................................................................................................26
2) Free residue sufficient to pay costs of sequestration:........................................................28
3) Sequestration to be to the advantage of creditors:.............................................................29
Preliminary requirements/formalities: S4 IA.............................................................................30
6) Notice of intention to surrender:........................................................................................30
Ex Parte Harmse (prescribed)................................................................................................31
7) Notice to creditors and other parties:.................................................................................32
8) Preparing and lodging a statement of affairs:....................................................................34
Effect of notice of surrender:.....................................................................................................34
First Rand Bank Limited v Consumer Guardian Services (prescr)........................................34
Ex Parte Viviers 2001:...........................................................................................................36
, 2
Court’s discretion:......................................................................................................................36
Ex Parte Ford: Prescribed.......................................................................................................36
Compulsory Sequestration:............................................................................................................38
Substantive requirements for application...................................................................................38
Creditor must have locus standi S9(1)...................................................................................40
Debtor insolvent or commits act of insolvency:.........................................................................40
s8(a) leaving SA with intent to evade or delay payment........................................................42
S8(b) failure to satisfy a writ of execution.............................................................................43
S8(c) disposition with effect of prejudicing creditors............................................................44
8(d) removal of property with intent to prejudice creditors...................................................45
8(e) lesser sum offered in settlement of full debt...................................................................45
8(f) non-compliance after notice of surrender........................................................................46
8(g) notice in writing of inability to pay................................................................................46
8(h) inability to pay debts after notice of transfer of business...............................................47
8A 47
Advantage for the creditor..........................................................................................................48
Stratford v Investec................................................................................................................48
Cohen v Jacobs (prescr).........................................................................................................51
Friendly sequestrations...............................................................................................................53
Epstein v Epstein....................................................................................................................53
Application process....................................................................................................................54
VBS Mutual Bank v Ramavhunga 2018................................................................................55
VBS Mutual Bank v Ramavhunga 2019................................................................................57
The effects of sequestration........................................................................................................60
Legal Position of the Insolvent...............................................................................................60
The vesting of the assets of the insolvent:..............................................................................68
The insolvent and his estate...................................................................................................70
, 3
Spouse of the insolvent..........................................................................................................75
Vesting of the assets of the solvent spouse:...............................................................................84
Vesting of assets in trustee:....................................................................................................84
Protection for the solvent spouse: s21(4)...............................................................................92
Creditors of the solvent spouse:.............................................................................................92
Collection of estate assets..............................................................................................................94
Preservation of the estate pending the trustee’s appointment:...................................................94
Notice of sequestration and entry of caveats:.........................................................................94
Service of order and attachment of property:.........................................................................95
The election of the trustee..........................................................................................................96
Fey & Whiteford v Serfontein 1993 2 All SA 137 (A).........................................................100
Rights and duties of the trustee................................................................................................101
Duties of the insolvent:............................................................................................................102
Impeachable dispositions.........................................................................................................103
actio pauliana available to creditors....................................................................................103
S26 disposition without value..............................................................................................105
S29 Voidable preferences.....................................................................................................112
S30 undue preference to creditors........................................................................................119
S31 collusion........................................................................................................................126
S34 voidable sale of business...............................................................................................130
Summary of differences between impeachable dispositions:..............................................137
Distribution of proceeds by trustee to creditors...........................................................................141
Meeting of creditors and proof of claims.................................................................................141
Betterbridge v Masilo & others 2015 (GP)..........................................................................144
Voting and resolution of creditors:...........................................................................................146
Realization of the estate assets:....................................................................................................147
Creditor’s claims and their ranking:.........................................................................................148
(Law of Insolvency)
notes
Compiled by Mari Louw in 2021. DO NOT DISTRIBUTE.
Louw, MM, Mej []
, 1
Contents
Introduction......................................................................................................................................5
1.1. Meaning of Insolvency..........................................................................................................5
1.2. Purpose of a sequestration order...........................................................................................5
1.3. Who or what is being sequestrated?......................................................................................8
Compulsory sequestration v voluntary surrender.....................................................................8
Miller V Janks 1944 (n/p)........................................................................................................8
Meaning of ‘debtor’.................................................................................................................9
1.4. Jurisdiction of the court.......................................................................................................19
Which court has jurisdiction?.................................................................................................19
Jurisdiction in litigation against 3rd parties.............................................................................21
Historical overview....................................................................................................................21
Voluntary surrender........................................................................................................................23
Who may apply?.........................................................................................................................24
Substantive requirements...........................................................................................................26
1) Debtor’s estate insolvent....................................................................................................26
2) Free residue sufficient to pay costs of sequestration:........................................................28
3) Sequestration to be to the advantage of creditors:.............................................................29
Preliminary requirements/formalities: S4 IA.............................................................................30
6) Notice of intention to surrender:........................................................................................30
Ex Parte Harmse (prescribed)................................................................................................31
7) Notice to creditors and other parties:.................................................................................32
8) Preparing and lodging a statement of affairs:....................................................................34
Effect of notice of surrender:.....................................................................................................34
First Rand Bank Limited v Consumer Guardian Services (prescr)........................................34
Ex Parte Viviers 2001:...........................................................................................................36
, 2
Court’s discretion:......................................................................................................................36
Ex Parte Ford: Prescribed.......................................................................................................36
Compulsory Sequestration:............................................................................................................38
Substantive requirements for application...................................................................................38
Creditor must have locus standi S9(1)...................................................................................40
Debtor insolvent or commits act of insolvency:.........................................................................40
s8(a) leaving SA with intent to evade or delay payment........................................................42
S8(b) failure to satisfy a writ of execution.............................................................................43
S8(c) disposition with effect of prejudicing creditors............................................................44
8(d) removal of property with intent to prejudice creditors...................................................45
8(e) lesser sum offered in settlement of full debt...................................................................45
8(f) non-compliance after notice of surrender........................................................................46
8(g) notice in writing of inability to pay................................................................................46
8(h) inability to pay debts after notice of transfer of business...............................................47
8A 47
Advantage for the creditor..........................................................................................................48
Stratford v Investec................................................................................................................48
Cohen v Jacobs (prescr).........................................................................................................51
Friendly sequestrations...............................................................................................................53
Epstein v Epstein....................................................................................................................53
Application process....................................................................................................................54
VBS Mutual Bank v Ramavhunga 2018................................................................................55
VBS Mutual Bank v Ramavhunga 2019................................................................................57
The effects of sequestration........................................................................................................60
Legal Position of the Insolvent...............................................................................................60
The vesting of the assets of the insolvent:..............................................................................68
The insolvent and his estate...................................................................................................70
, 3
Spouse of the insolvent..........................................................................................................75
Vesting of the assets of the solvent spouse:...............................................................................84
Vesting of assets in trustee:....................................................................................................84
Protection for the solvent spouse: s21(4)...............................................................................92
Creditors of the solvent spouse:.............................................................................................92
Collection of estate assets..............................................................................................................94
Preservation of the estate pending the trustee’s appointment:...................................................94
Notice of sequestration and entry of caveats:.........................................................................94
Service of order and attachment of property:.........................................................................95
The election of the trustee..........................................................................................................96
Fey & Whiteford v Serfontein 1993 2 All SA 137 (A).........................................................100
Rights and duties of the trustee................................................................................................101
Duties of the insolvent:............................................................................................................102
Impeachable dispositions.........................................................................................................103
actio pauliana available to creditors....................................................................................103
S26 disposition without value..............................................................................................105
S29 Voidable preferences.....................................................................................................112
S30 undue preference to creditors........................................................................................119
S31 collusion........................................................................................................................126
S34 voidable sale of business...............................................................................................130
Summary of differences between impeachable dispositions:..............................................137
Distribution of proceeds by trustee to creditors...........................................................................141
Meeting of creditors and proof of claims.................................................................................141
Betterbridge v Masilo & others 2015 (GP)..........................................................................144
Voting and resolution of creditors:...........................................................................................146
Realization of the estate assets:....................................................................................................147
Creditor’s claims and their ranking:.........................................................................................148
