MRL3701
EXAM PACK
, lOMoARcPSD|18222662
MRL3701-Exam Oct/Nov 2023
QUESTION 1
1.1 A formal defect in an application will be fatal if the defect causes a substantial
injustice to creditors and that prejudice cannot be put right by a court order. If a
formal defect (or irregularity) has not caused a substantial injustice, the court
may CONDONE the defect. Sec 157(1) – nothing done under the Act will be
invalid by reason of a formal defect/irregularity unless a substantial injustice has
been done thereby which in the opinion of the court cannot be remedied by any
order of the court.
1.2 The court held that the requirements for a voluntary sequestration order are set
out in S6(1) of the Act. In Ex parte Arntzen the applicant requested the court for
a voluntary sequestration order in terms of the Act. These prerequisites include,
among other things, the debtor's having enough assets to pay the sequestration
expenses, which are to come from the free residue, and the estate being
sequestered in a way that benefits the creditors.
The court emphasized that in an application for voluntary surrender, the debtor
must provide full and comprehensive disclosure. It further explained that the
court treats the advantage to creditors requirement more strictly in these
applications than in applications for forced sequestration because there is a
higher risk of abuse and the potential to undermine the rights of the creditors in a
voluntary surrender of the insolvent estate.
Therefore, in order to demonstrate that all conditions are met, the applicant has
the burden of providing the court with comprehensive evidence, which includes
disclosing all relevant documentation. In this instance, the applicant was unable
to persuade the court that his assets would be sufficient to pay the costs of
sequestration and that his creditors would benefit from the arrangement as he
did not provide all the information that was necessary. Thus, the request for
voluntary sequestration was denied.
The court held that creditors are more vulnerable in a voluntary surrender
application than in a compulsory sequestration which then gives rise to the
requirement of a higher level of disclosure because of the following:
A. as you would note, in a voluntary surrender the debtor himself is the one
applying for the sequestration and not the creditor.
B. notice of the application is given to the creditor, but service of the application
papers itself is not a requirement.
, lOMoARcPSD|18222662
C. the creditors has a limited time frame in which to decide on whether to
oppose the application or not.
D. should the creditor require more information then it must inspect the
statement of affairs or locate the application itself as soon as possible to
respond timeously
E. bearing in mind that an application can be given on a first appearance.
1.3 The different acts of insolvency that a debtor may conduct, and which serve as
grounds for requesting the sequestration of their estate are listed in Section 8 of
the Insolvency Act 24 of 1936. Declaring someone bankrupt and turning over
their assets to a trustee who will divide them up among creditors in accordance
with the law is known as sequestration. The major goals of Section 8 are to
protect the interests of creditors by allowing them to take legal action against a
debtor who is unable or unwilling to pay their debts and to give objective and
observable criteria for evaluating whether a debtor is insolvent or not.
Section 8 consists of eight subsections, each describing a different act of
insolvency. These are:
• Section 8(a): Leaving the Republic or being absent from their dwelling or
place of business with intent to evade or delay the payment of their debts.
• Section 8(b): Failing to satisfy or secure a judgment debt within ten days after
it has been executed, or after notice has been given that execution has been
stayed pending an appeal.
• Section 8©: Giving notice to any creditor that they are unable to pay any of
their debts, or making an offer of compromise to any creditor.
• Section 8(d): Giving or offering to give any preference to any creditor if they
are insolvent at the time, or if they become insolvent as a result of giving or
offering such preference.
• Section 8(e): Disposing of any property that is in their possession under a title
that is not absolute, or removing it from the Republic, with intent to prejudice
their creditors or prefer one creditor above another.
• Section 8(f): Publishing a notice of surrender of their estate, which has not
lapsed or been withdrawn, and which complies with the requirements of
section 4(3) of the Act.
• Section 8(g): Binding themselves under a general clause of sequestration in
any deed or contract.
• Section 8(h): Failing to pay over money received on behalf of another person,
which they are obliged by law to pay over, within the time and in the manner
prescribed by law.
The court may find someone insolvent for reasons other than those listed above,
such as evidence of actual insolvency (i.e., when their liabilities exceed their
assets) or evidence of commercial insolvency (i.e., when they are unable to pay
their debts when they become due). The clear and convenient foundation for
, lOMoARcPSD|18222662
asking for sequestration is provided by Section 8, which also gives information
about the debtor's finances and behaviour.
1.4 n Khan v. Amod 1947 (2) SA 432 (N): The applicant's claim against the debtor
was less than the debtor's claim against the debtor. The debtor would no longer
have been able to pursue his claim against the son as a result of the estate
being sequestered. The applicant's claim against respondent was smaller than
the respondent's claim against the applicant's son. Respondent would have no
further claim against the son following sequestration. Under such conditions,
sequestration would not have benefited the creditors collectively, and the
application was rejected. Applicant filed an appeal.
The Legal question was ‘Could a court exercise its discretion in the granting of a
sequestration order?’ Indeed, the applicant was obviously abusing the process,
so the court was right to exercise its discretion in rejecting the application for
mandatory sequestration. The applicant's rightful course of action was to obtain
a warrant for the execution of his judgment against the debtor, after which the
debtor's claim against the applicant's son should be attached as payment for the
judgment debt.
It was evident that the applicant had filed the application solely to stop the debtor
from pursuing his claim against the applicant's son, even if it was assumed that
sequestration would have benefited the creditors. The applicant should always
be the target of the court's discretion because that amounted to an abuse of the
legal system.
The Alienation of Land Act of 1944 is the pertinent statute in this instance. This
Act governs the selling of real estate in South Africa and stipulates that all sales
contracts for such property must be in writing and bear the signatures of both
parties. The Act seeks to safeguard the interests of buyers and sellers in real
estate transactions and to establish legal certainty.
To guarantee the legality and enforceability of their agreements, parties to real
estate transactions should be aware of and abide by the Alienation of Land Act's
provisions. As demonstrated in the case of Amod v. Khan, if the Act's
requirements are not met, the agreement may be ruled unenforceable by the
court. The case of Amod v Khan 1947 (2) SA 432 (N) serves as a reminder of
the importance of complying with relevant legislation, such as the Alienation of
Land Act, when entering into contracts for the sale of immovable property.
1.5 The Insolvency Act 24 of 1936 permits the sequestration process, which results
in the deprivation of property rights. This section gives the court the authority to
distribute or sell the insolvent estate's assets in order to pay off creditors' claims.
EXAM PACK
, lOMoARcPSD|18222662
MRL3701-Exam Oct/Nov 2023
QUESTION 1
1.1 A formal defect in an application will be fatal if the defect causes a substantial
injustice to creditors and that prejudice cannot be put right by a court order. If a
formal defect (or irregularity) has not caused a substantial injustice, the court
may CONDONE the defect. Sec 157(1) – nothing done under the Act will be
invalid by reason of a formal defect/irregularity unless a substantial injustice has
been done thereby which in the opinion of the court cannot be remedied by any
order of the court.
1.2 The court held that the requirements for a voluntary sequestration order are set
out in S6(1) of the Act. In Ex parte Arntzen the applicant requested the court for
a voluntary sequestration order in terms of the Act. These prerequisites include,
among other things, the debtor's having enough assets to pay the sequestration
expenses, which are to come from the free residue, and the estate being
sequestered in a way that benefits the creditors.
The court emphasized that in an application for voluntary surrender, the debtor
must provide full and comprehensive disclosure. It further explained that the
court treats the advantage to creditors requirement more strictly in these
applications than in applications for forced sequestration because there is a
higher risk of abuse and the potential to undermine the rights of the creditors in a
voluntary surrender of the insolvent estate.
Therefore, in order to demonstrate that all conditions are met, the applicant has
the burden of providing the court with comprehensive evidence, which includes
disclosing all relevant documentation. In this instance, the applicant was unable
to persuade the court that his assets would be sufficient to pay the costs of
sequestration and that his creditors would benefit from the arrangement as he
did not provide all the information that was necessary. Thus, the request for
voluntary sequestration was denied.
The court held that creditors are more vulnerable in a voluntary surrender
application than in a compulsory sequestration which then gives rise to the
requirement of a higher level of disclosure because of the following:
A. as you would note, in a voluntary surrender the debtor himself is the one
applying for the sequestration and not the creditor.
B. notice of the application is given to the creditor, but service of the application
papers itself is not a requirement.
, lOMoARcPSD|18222662
C. the creditors has a limited time frame in which to decide on whether to
oppose the application or not.
D. should the creditor require more information then it must inspect the
statement of affairs or locate the application itself as soon as possible to
respond timeously
E. bearing in mind that an application can be given on a first appearance.
1.3 The different acts of insolvency that a debtor may conduct, and which serve as
grounds for requesting the sequestration of their estate are listed in Section 8 of
the Insolvency Act 24 of 1936. Declaring someone bankrupt and turning over
their assets to a trustee who will divide them up among creditors in accordance
with the law is known as sequestration. The major goals of Section 8 are to
protect the interests of creditors by allowing them to take legal action against a
debtor who is unable or unwilling to pay their debts and to give objective and
observable criteria for evaluating whether a debtor is insolvent or not.
Section 8 consists of eight subsections, each describing a different act of
insolvency. These are:
• Section 8(a): Leaving the Republic or being absent from their dwelling or
place of business with intent to evade or delay the payment of their debts.
• Section 8(b): Failing to satisfy or secure a judgment debt within ten days after
it has been executed, or after notice has been given that execution has been
stayed pending an appeal.
• Section 8©: Giving notice to any creditor that they are unable to pay any of
their debts, or making an offer of compromise to any creditor.
• Section 8(d): Giving or offering to give any preference to any creditor if they
are insolvent at the time, or if they become insolvent as a result of giving or
offering such preference.
• Section 8(e): Disposing of any property that is in their possession under a title
that is not absolute, or removing it from the Republic, with intent to prejudice
their creditors or prefer one creditor above another.
• Section 8(f): Publishing a notice of surrender of their estate, which has not
lapsed or been withdrawn, and which complies with the requirements of
section 4(3) of the Act.
• Section 8(g): Binding themselves under a general clause of sequestration in
any deed or contract.
• Section 8(h): Failing to pay over money received on behalf of another person,
which they are obliged by law to pay over, within the time and in the manner
prescribed by law.
The court may find someone insolvent for reasons other than those listed above,
such as evidence of actual insolvency (i.e., when their liabilities exceed their
assets) or evidence of commercial insolvency (i.e., when they are unable to pay
their debts when they become due). The clear and convenient foundation for
, lOMoARcPSD|18222662
asking for sequestration is provided by Section 8, which also gives information
about the debtor's finances and behaviour.
1.4 n Khan v. Amod 1947 (2) SA 432 (N): The applicant's claim against the debtor
was less than the debtor's claim against the debtor. The debtor would no longer
have been able to pursue his claim against the son as a result of the estate
being sequestered. The applicant's claim against respondent was smaller than
the respondent's claim against the applicant's son. Respondent would have no
further claim against the son following sequestration. Under such conditions,
sequestration would not have benefited the creditors collectively, and the
application was rejected. Applicant filed an appeal.
The Legal question was ‘Could a court exercise its discretion in the granting of a
sequestration order?’ Indeed, the applicant was obviously abusing the process,
so the court was right to exercise its discretion in rejecting the application for
mandatory sequestration. The applicant's rightful course of action was to obtain
a warrant for the execution of his judgment against the debtor, after which the
debtor's claim against the applicant's son should be attached as payment for the
judgment debt.
It was evident that the applicant had filed the application solely to stop the debtor
from pursuing his claim against the applicant's son, even if it was assumed that
sequestration would have benefited the creditors. The applicant should always
be the target of the court's discretion because that amounted to an abuse of the
legal system.
The Alienation of Land Act of 1944 is the pertinent statute in this instance. This
Act governs the selling of real estate in South Africa and stipulates that all sales
contracts for such property must be in writing and bear the signatures of both
parties. The Act seeks to safeguard the interests of buyers and sellers in real
estate transactions and to establish legal certainty.
To guarantee the legality and enforceability of their agreements, parties to real
estate transactions should be aware of and abide by the Alienation of Land Act's
provisions. As demonstrated in the case of Amod v. Khan, if the Act's
requirements are not met, the agreement may be ruled unenforceable by the
court. The case of Amod v Khan 1947 (2) SA 432 (N) serves as a reminder of
the importance of complying with relevant legislation, such as the Alienation of
Land Act, when entering into contracts for the sale of immovable property.
1.5 The Insolvency Act 24 of 1936 permits the sequestration process, which results
in the deprivation of property rights. This section gives the court the authority to
distribute or sell the insolvent estate's assets in order to pay off creditors' claims.
