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MRL3701 - 6 Oct Exam Q&A (Flashcard )
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Explain why the court in Ex Parte Arntzen (Nedbank Ltd as Intervening Creditor) 2013 (1) SA 49 (KZP) held that creditors are more vulnerable in voluntary surrender applications than in compulsory sequestration which then gives rise to the requirement of a higher level of disclosure (10)
Explain why the court in Ex Parte Arntzen (Nedbank Ltd as Intervening Creditor) 2013 (1) SA 49 (KZP)...
In Ex parte Arntzen! the applicant requested the court for a voluntary sequestration order in terms of the Act. The court held that the requirements for a voluntary sequestration order are set out in S6(1) of the Act. These requirements are inter alia that the debtor has sufficient assets to cover the sequestration costs that is to be paid from the free residue and that the sequestration of the estate will be to the advantage of the creditors.
The court emphasised the need for full and comprehensive disclosure from the side of the debtor in an application for voluntary surrender and explained that the advantage to creditors’ requirement is more strictly dealt with by the court in these applications compared to applications for forced sequestration because there is a greater risk of abuse and the potential of undermining the creditors' rights in a voluntary surrender of the insolvent estate. Therefore there is an onus upon the applicant to relay detailed evidence! which includes the disclosure of all available documentation to the court in order to prove that all the necessary requirements are complied with.
The applicant in this particular case failed to fully disclose all the information required and hence failed to convince the court that his assets will cover the sequestration costs and that there will be an advantage to his creditors. The voluntary sequestration was therefore not granted.
Dumisani approaches you for advice. He informs you that his brother, Benson, owes him R24 000 for gardening services rendered by his company. Dumisani explains to you that despite various attempts to get Benson to pay his debts, he has yet to make any payment. Dumisani is especially upset because he has heard a rumor that Benson and his wife have apparently now relocated their home from Johannesburg to Cape Town because his wife is ill and needs medical treatment at a care facility in Stellenbosch. Dumisani wants to know from you whether you can assist him to apply for the compulsory sequestration of Benson’s estate, because his brother has fled from his home and therefore his responsibilities. Refer to the relevant act of insolvency, including a reference to the relevant legislation. (10)
Dumisani approaches you for advice. He informs you that his brother, Benson, owes him R24 000 for ga...
Compulsory sequestration results when a creditor, inter alia, can prove that the liquidity or realistic valuation of a natural person’s estate is less than his immediate indebtedness, or where a person has committed a so-called act of insolvency - section 9 of the Insolvency Act).
The proceedings are initiated by issuing an application for sequestration in the form of a notice of motion. The notice of motion is the first document that will reach the sheriff’s office and is to be served on the respondent. Section 10 of the Insolvency Act provides that when a creditor applies for the compulsory sequestration of a debtor’s estate, the court needs to be satisfied that there is reason to believe that sequestration of the debtor’s estate will be to the advantage of his creditors.
If the court is satisfied that the applicant has proved his case a provisional sequestration order will be issued. The provisional sequestration order will have a return date and has to be served by the sheriff. The provisional sequestration order is a rule nisi and therefore by implication an interim order, until the court finally decides on the facts contained in the relevant application. The court will, in the absence of proof that the estate is solvent, issue a final sequestration order.
Dumsani may petition the Court for the sequestration of the estate of the debtor because the debtor committed an act of insolvency in terms of Section 8(a) of the insolvency act.
With reference to section 29 of the Insolvency Act 24 of 1936, state which form of impeachable disposition this refers to. In your answer, also discuss whether there is an exception to section 29, and if so, what it is, and which test would be applied to determine if it would apply. (5)
With reference to section 29 of the Insolvency Act 24 of 1936, state which form of impeachable dispo...
Section 29 of the Act regulates 'voidable dispositions', where an insolvent disposes of any property in his estate less than 6 months before his sequestration which has the effect of preferring one of his creditors over another. Voidable preferences do not apply to property disposed of in accordance with the rules of an exchange or property disposed of in terms of an agreement on an informal market.
An objective test is followed to determine if this disposition would apply. The court must ask whether it is an agreement that solvent persons would have concluded under the same circumstances. If the agreement applied to a special type of business, the court would also consider the proven customs of that kind of business.
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