, MRL3701 SELF STUDY QUESTIONS & MEMORANDUM
1. It is noted that the requirement of “advantage to creditors” is more
strenuous in Voluntary Surrender than in Compulsory Sequestration. Explain
the reasons for this statement.
The requirement of “advantage to creditors” is more demanding in voluntary
surrender because the application is initiated by the debtor rather than a creditor.
Courts recognise that such applications can be abused by debtors seeking to avoid
paying debts, conceal assets, or favour particular creditors. Therefore, the court
insists that the debtor must provide convincing evidence that sequestration will yield
a real and measurable benefit to all creditors collectively — for example, by showing
that the sale of assets will produce a meaningful dividend (Kanamugire, 2014). In
compulsory sequestration, however, the process is initiated by a creditor, and the
Insolvency Act 24 of 1936, section 12(1)(c), only requires that there be reason to
believe sequestration will benefit creditors. Because creditors act independently and
have already established a liquidated claim, the evidentiary threshold is lower. The
difference reflects a policy concern: voluntary surrender places control in the debtor’s
hands and carries greater risk of collusion, while compulsory sequestration
safeguards the collective interest through creditor-driven oversight.
Reference:
Kanamugire, J.C. (2014). The Requirement of Advantage to Creditors in South
African Insolvency Law. Journal of Law, Policy and Globalization, 28(3), 45–53.
2. Discuss Epstein v Epstein 1987 (4) SA 606 (C).
In Epstein v Epstein (1987 (4) SA 606 (C)), the debtor’s mother applied for the
sequestration of her son’s estate — a clear case of friendly sequestration. The son
had admitted insolvency and allowed funds to be deposited in the attorney’s trust
account to create the illusion of an estate capable of paying creditors. The court
found that the debtor had no substantial assets and that sequestration would provide
1. It is noted that the requirement of “advantage to creditors” is more
strenuous in Voluntary Surrender than in Compulsory Sequestration. Explain
the reasons for this statement.
The requirement of “advantage to creditors” is more demanding in voluntary
surrender because the application is initiated by the debtor rather than a creditor.
Courts recognise that such applications can be abused by debtors seeking to avoid
paying debts, conceal assets, or favour particular creditors. Therefore, the court
insists that the debtor must provide convincing evidence that sequestration will yield
a real and measurable benefit to all creditors collectively — for example, by showing
that the sale of assets will produce a meaningful dividend (Kanamugire, 2014). In
compulsory sequestration, however, the process is initiated by a creditor, and the
Insolvency Act 24 of 1936, section 12(1)(c), only requires that there be reason to
believe sequestration will benefit creditors. Because creditors act independently and
have already established a liquidated claim, the evidentiary threshold is lower. The
difference reflects a policy concern: voluntary surrender places control in the debtor’s
hands and carries greater risk of collusion, while compulsory sequestration
safeguards the collective interest through creditor-driven oversight.
Reference:
Kanamugire, J.C. (2014). The Requirement of Advantage to Creditors in South
African Insolvency Law. Journal of Law, Policy and Globalization, 28(3), 45–53.
2. Discuss Epstein v Epstein 1987 (4) SA 606 (C).
In Epstein v Epstein (1987 (4) SA 606 (C)), the debtor’s mother applied for the
sequestration of her son’s estate — a clear case of friendly sequestration. The son
had admitted insolvency and allowed funds to be deposited in the attorney’s trust
account to create the illusion of an estate capable of paying creditors. The court
found that the debtor had no substantial assets and that sequestration would provide
