Question 1 1. Which acts relates to sequestration of natural persons and winding up of juristic persons? (2)

Insolvency Act The old Companies Act The new Companies Act Close Corporations Act

2. How has the legislative position changed since 1.5.11?

There is now the new Companies Act which has been implemented. This Act replaces the provisions of the old Companies Act and the Close Corporations Act pending the new consolidated insolvency legislation to come into effect.

3. Define insolvency in respect of natural persons (2)

According to Venter v VolkskasLtd, insolvency is when debtors liabilities (fairly valued) exceed his assets (fairly valued). The court in Realizations Ltd v Agerheld that Proof of an inability to pay debts is only prima facieevidence of insolvency not necessarily insolvency.

4. The difference between voluntary and compulsory sequestration as regards to the advantage to creditors.

The distinction lies in who bear the burden of proof and who must discharge it. In voluntary sequestration, debtor must show that sequestration is going to advantage the creditors. In compulsory sequestration, the creditor must show only a reasonable belief of advantage from sequestration.

5. What did the court in R v Meer held?

[T]he Insolvency Act was passed for the benefit of creditors and not for the relief of harassed debtors

6. Explain the main purpose of a sequestration order

The main purpose of a sequestration order is to ensure the orderly and fair distribution of a debtor's assets if his assets are not sufficient to pay all his creditors in full.

7. Give reasons why a sequestration order may not be granted if a debtor has only one creditor or if there are not enough assets to cover the costs of sequestration

If a debtor has only one creditor, there are no conflicting interests between creditors which must be equitably resolved. If the debtor's assets are not sufficient to cover the costs of sequestration, creditors will derive no advantage from the process of sequestration. Consequently, in such a case sequestration would merely amount to a waste of time and money.

8. Explain whether a debtor whose estate is under sequestration may obtain a new estate which does not form part of the sequestrated estate.

Because some assets which a debtor has or acquires do not form part of his insolvent estate, it is indeed possible to build up a new estate which does not form part of the estate under sequestration.

9. State the basic difference between voluntary surrender and compulsory sequestration

In the case of voluntary surrender, the debtor himself applies for the sequestration of his estate. In the case of compulsory sequestration, a creditor applies for the sequestration of the debtor's estate.

10. Explain whether one of the partners or one of the spouses respectively may apply for the sequestration of a partnership estate or the joint estate of persons married in community of property.

In terms of section 3(2) of the Insolvency Act, all the partners (except partners en commandite) must apply for the surrender of the partnership estate. In terms of section 17(4) of the Matrimonial Property Act 88 of 1984, in a marriage in community of property both spouses must apply for the surrender of their joint estate

11. Describe what the court must be convinced of prior to granting an order for the voluntary surrender of Tenza's estate.

In terms of section 6(1) of the Insolvency Act, the court must be satisfied that (a) all the prescribed formalities have been adhered to (notices, etc); (b) Tenza's estate is indeed insolvent; (c) there is sufficient realisable property in the free residue of Tenza's estate to defray the costs of sequestration; and (d) it will be to the advantage of Tenza's creditors if his estate is sequestrated. 12. What is the "free residue" of an insolvent estate?

The free residue of an insolvent estate is that part of the estate which is not subject to any right of preference by reason of a special mortgage, legal hypothec, pledge, or right of retention.

13. Suppose Tenza's brother Alf applies for the voluntary surrender of his estate. It appears that his wife receives a good income and that from this she contributes a substantial amount towards the payment of his debts, but that she will definitely not continue to do so if Alf's estate is sequestrated. Should the court dismiss the application merely because it would be more to the advantage of Alf's creditors if Alf'swife were to continue helping to pay his (Alf's) debts? Give reasons for your answer

This question relates to the decision of the court in Ex parte Henning 1981 (3) SA 843 (O). In the Henning case it was decided that this factor is too vague or uncertain to take into account in evaluating whether sequestration will be to the advantage of the creditors. The court will therefore not dismiss the application merely because the creditors will be in a better position if Alf's wife continues to assist him in paying his debts.

14. What is the time period allowed to for publishing a notice if intention to surrender in a case of voluntary surrender (2)

Not less than 14 days but not more than 30 days. The purpose is to alert the creditors about the intended application.

15. What was the approach of the court in EX ParteHarmse with regard to non-compliance?

Failure to comply is a formal defect or irregularity, which does not invalidate the application unless it has caused a substantial injustice ha which in the opinion of the court cannot be remedied by any court order

16. What is a concursus creditorum?

Coming together of a general body of creditors for the purpose of sequestration. The concept entails that the rights of the creditors as the group are preferred to the rights of individual creditors. It is created as soon as the order of sequestration has been granted. The purpose of it is to ensure fair payment of all creditors according to a predetermined procedure and to ensure that no creditor benefit ahead of other creditors and that whatever follows is to advantage the the body of all creditors. Walker case

17. Define friendly sequestration

An application for compulsory sequestration brought by a creditor who is not at arms length with the debtor. Courts look on it with a sceptical eye because it raises possibility of collusion between parties to abuse process for benefit of insolvent rather than creditors. Craggs v Dedekind- A friendly petitioner should supply the court with sufficiently detailed evidence to satisfy a sceptical court that he/she indeed has a claim against the respondent. 18. As identified by Satchwell J in Esterhuizen v Swanepoel, Friendly sequestrations seem to share certain characterics. These are

Debtor is in financial straitsThere is an agreement with a 3rdparty to initiate sequestration proceedings to aid the debtor Te 3rdparty masquerades as a creditor claiming a non-existent debt An act of insolvency is the basis of the applicationWhy going the friendly sequestration route instead of the voluntary sequestration

According to Catherine Smith, (i) In voluntary sequetstion, there is a stricter burden of prove that sequestration is to the advantage of the creditors (ii) Formalities must be complied with eg, notice to creditors and the accessibility for inspection of a statement of affairs.

1. What is the definition of a debtor in terms of the Insolvency Act 24 of 1936? (4)

A debtor means a person or a partnership or the estate of a person or a partnership which is a debtor in the usual sense of the word, except a body corporate or a company or other association of persons which may be placed in liquidation under the law relating to companies.

2. What is the purpose of a notice of surrender? (2)

The purpose of the notice of surrender is to alert creditors as to the intended application in case they wish to oppose the application.

3. State the requirements which must be proved before the Court will grant a voluntary sequestration order. (4)

1. The preliminary formalities have been observed. 2. The debtors estate is in fact insolvent. 3. The debtor owns realizable property of sufficient value to defray all costs of the sequestration. 4. Sequestration will be to the advantage of creditors.

4. What is the meaning of the term spouse for the purposes of the term solvent spouse under section 21 of the Insolvency Act? (3)

For the purpose of section 21, spouse has an extended meaning and includes a wife or a husband married according to any law or custom, and also a person living with a member of the opposite sex, although not married to her or him (s 21(13)).

According to Chaplin NO v Gregory, on the insolvency of a married man or woman who is living with a third person (i.e., not the legal spouse), the property of only the legal spouse, and not that of both the spouse and the third person, vests in the trustee.

5. State the two maximum limits (in time and in money) to the employees preferent claim for arrear salary or wages in terms of section 98A of the Insolvency Act. (2)

Salary or wages due to an employee, for a period not exceeding three months and to a maximum of R12 000.

6. State three grounds on which the Master may remove a trustee from office. (3)

Any three of the following: 1. he was not qualified for appointment or that his election or appointment was illegal or he has become disqualified ; 2. he has failed to perform any of his duties satisfactorily or comply with a lawful demand of the Master; 3. he is mentally or physically incapable of performing satisfactorily his duties as trustee; 4. the majority of creditors have requested in writing that he be removed; 5. he is no longer suitable in the opinion of the Master, to be the trustee of the estate concerned.

7. Name three circumstances in which the Master may refuse to confirm the appointment of a person nominated as a trustee. (3)

Any three of the following: 1. he was not properly elected; 2. he is disqualified from being a trustee; 3. he has failed to give the required security; 4. if in the opinion of the Master, he should not be appointed as trustee to the estate in question.

8. When will a disposition made in compliance with a court order qualify as a disposition under section 2 of the Insolvency Act? (3)

The disposition will qualify as a disposition under section 2 if the creditor obtained the court order by fraud or collusion with the insolvent and with the intention of prejudicing other creditors (Sackstein & Venter NNO v Greyling).

The onus of proving fraud or collusion lies on the party seeking to set aside the disposition (Dabelstein & Others v Lane & Fey NNO).

9. A provisional order for the winding up of Bafana (Pty) Ltd has been granted by the High Court. A provisional liquidator has to be appointed at the same time. Name two of the most important obligations of a provisional liquidator. (2)

1. The provisional liquidator must give security to the satisfaction of the Master for the proper performance of his duties. 2. He is required to hold office until the appointment of a liquidator.

10. Name two grounds on which a close corporation may be wound up by the court. (2)

Any two of the following: 1. resolution of the members; 2. failure to commence business or continue with business; 3. inability to pay debts 4. just and equitable.

11. What the meaning of property is as defined in section 2 of the Insolvency Act 24 of 1936? (5) Property means movable or immovable property wherever situated in the Republic and includes contingent interests in property but excludes the contingent interests of a fidei commissary heir or legatee. 12. Under what circumstances may a court having jurisdiction over a debtor refuse (or postpone) the surrender or sequestration of the debtors estate? (3)

If it appears equitable or convenient that the estate should be sequestrated in another court within the Republic; or

the debtor is domiciled in a state which has not been designated in terms of the Cross- Border Insolvency Act 42 of 2000 and it appears to the court equitable or convenient that the estate should be sequestrated by a court outside the Republic.

13. Discuss Epstein v Epsteinin respect of friendly sequestrations. (6)

This is an example of a friendly sequestration.

The applicant was the respondent's mother. He committed an act of insolvency by notifying her in a letter that he was unable to repay her a loan of R6000.

The court pointed out that the purpose of the Insolvency Act is to effect a just and orderly distribution of a debtors estate to his creditors. Therefore it is important that the requirement of advantage to creditors must be proved before a sequestration order may be granted. This requirement is even more important in a friendly sequestration where a creditor applies for the sequestration of a debtors estate with the sole aim of providing relief for the debtor. This aspect was emphasised by the courts view that friendly sequestrations should not be automatically refused, but they should be carefully scrutinised.

Therefore particular emphasis is placed on the requirement of advantage to creditors. 14. State the requirements which must be proved before the Court will grant a voluntary sequestration order. (4)

1. The preliminary formalities have been observed. 2. The debtors estate is in fact insolvent. 3. The debtor owns realizable property of sufficient value to defray all costs of the sequestration. 4. Sequestration will be to the advantage of creditors.

15. Name briefly and without discussion any two acts of insolvency. (2)

Any two of the following: 1. Absence from the Republic or dwelling. 2. Failure to satisfy a judgment. 3. Disposition prejudicing creditors or preferring one creditor. 4. Removal of property with intent to prejudice or prefer. 5. Offer of arrangement. 6. Failure to apply for surrender. 7. Notice of inability to pay. 8. Inability to pay debts after notice of transfer of business.

16. Explain the concept "liquidated claim" and state three examples of such a claim. (6)

A liquidated claim is a claim for money, the amount of which is fixed by agreement, judgment, or otherwise.

The examples of such a claim given by Hockly include the following: 1. a claim for the price of goods sold and delivered; 2. a claim based on judgment for provisional sentence; and 3. a claim for the return of the price paid under a sale which has been cancelled because of the sellers repudiation.

17. Discuss Vorster v Steyn en andererespect of assets inherited by the insolvent whilst his estate is under sequestration. Do not discuss the issue of a declaratory order. (6)

Facts: A testator attempted to place the property bequeathed to his heir out of reach of the heirs creditors by providing that a trust should hold the inheritance if the heir is insolvent, until his rehabilitation; The case thus deals with the vesting of property inherited by the insolvent while his estate is under sequestration and he is not yet rehabilitated.

The court decided that a clause of this nature is void and that the assets vested in the trustee. A testator could validly state that the insolvent heir is substituted with another heir, for example, by stating that if his heir is an unrehabilitated insolvent at the time of his death then the assets would go to his brother. Another possibility is the creation of a discretionary trust which gives the trustee the exclusive discretion to name a substitute heir if the intended heir is insolvent at the death of the testator.

18. Name one of the ways in which a sequestration order can be brought about. (1)

Voluntary surrender (or debtor applies) OR Compulsory sequestration (or creditor/s applies). 19. Under what circumstances may a court having jurisdiction over a debtor refuse (or postpone) the surrender or sequestration of the debtors estate? (3)

If it appears equitable or convenient that the estate should be sequestrated in another court within the Republic; or

the debtor is domiciled in a state which has not been designated in terms of the Cross- Border Insolvency Act 42 of 2000 and it appears to the court equitable or convenient that the estate should be sequestrated by a court outside the Republic.

be appointed as trustee to the estate in question 20. Name one consequence of a composition in terms of section 119 of the Insolvency Act 24 of 1936. (1)

Any one of the following: all concurrent creditors are bound ; restoration of property to insolvent; restoration of property to solvent spouse; trustee to frame accounts, administer composition, and report to creditors; or right to prompt rehabilitation

21. Name one of the requirements that must be met before a company may be placed under judicial management by the court. (1)

In terms of section 427(1), the court may grant an order placing a company under judicial management where: the company, because of mismanagement or any other cause, is unable to pay its debts or is probably unable to meet its obligations; the company has not become or has been prevented from becoming a successful concern; there is a reasonable probability that, if the company is placed under judicial management, it will be enabled to pay its debts or meet its obligations and become a successful concern -- in other words there must be a reasonable probability, and not merely a possibility, that the company will recover; and it appears just and equitable to grant a judicial management order.

22. Explain the effect that the Insolvency Act has on the contractual capacity of the debtor. (2)

The Insolvency Act does not deprive the debtor of his contractual capacity generally. He retains a general competency to make binding agreements, but the Act protects creditors by imposing certain restrictions on the debtors capacity to contract. 23. Name three persons who are relatively disqualified from being a trustee in respect of a particular estate.(3)

The following persons are disqualified in respect of a particular estate: a person related to the insolvent in blood or by marriage within the third degree; a person having an interest opposed to the general interest of the creditors; a person who acted as the bookkeeper, accountant, or auditor, of the insolvent at any time during a period of 12 months immediately preceding the date of sequestration; or

24. What is the purpose of a notice of surrender? (2)

The purpose of the notice of surrender is to alert creditors as to the intended application in case they wish to oppose the application.

25. State the requirements which must be proved before the Court will grant a voluntary sequestration order. (4)

The preliminary formalities have been observed. The debtors estate is in fact insolvent. The debtor owns realizable property of sufficient value to defray all costs of the Sequestration. Sequestration will be to the advantage of creditors.

SECTION B A client, Mr Rusty Auld-Carr, carried out a major overhaul of a bakkie belonging to a customer, Mr Wrench, the sole proprietor of a local plumbing business, trading as U-Bend Plumbing Services. The cost of the overhaul was R30 000, of which Mr Wrench paid a deposit of R10 000 by means of a post-dated cheque in his own name. Payment of the balance was due on completion of the job, but on taking possession of the vehicle, Mr Wrench asked to be given a month to settle the account. This Mr Auld-Carr agreed to. Mr Wrenchs cheque was later dishonoured and three months later, despite repeated promises by Mr Wrench, no payment has been received. Mr Auld-Carr is now in desperate need of the money but has just been informed by Mr Wrench that he is in a hopeless financial position and is intending to hand his affairs over for debt-management. He has dropped off a note with the latest account that was submitted to him advising that all future enquiries relating to the outstanding account should be referred to his debt counsellor in due course. Mr Auld-Carr mentions that he cannot believe that Mr Wrench is in such financial straits because, apart from his home in Grahamstown, he owns a holiday home at the sea at which he regularly entertains friends very lavishly. He also owns a luxury vehicle and a Harley-Davidson motorbike. Mr Wrenchs wife, to whom he is married in community of property, also has her own hairdressing business, which appears to be doing very well.

(a) Advise Mr Auld-Carr as to the possibility of successfully applying for the compulsory sequestration of Mr Wrenchs estate. (10)

A compousory sequestration is a second way of bringing an application of sequestration by the creditor.

The court may grant an application if it has been satisfied that (i) The applicant has established a claim that entitles him to apply for a sequestration order.

In terms of section 9(1) of the act,, a single creditor must prove a liquidated claim of R100 whilst R200 for two or more creditors (ii) The debtor must have committed an act of insolvency or must be an insolvent.

Removal of property with intent to prejudice is a good example of an act of insolvency. - De Villiers v Maursen Properties(iii) The reason to believe that it will be to the creditors advantage if the estate is sequestrated. Onus of proving the above elements as stated in Venter v Volkskasrests upon the applicant. The debtor is not required to prove any element. On the facts of this question, it is clear that the applicant will succed in proving a liquidated claim as the debtor owes more than 100 rand. Secondly, he might succeed in proving that sequestration is to his advantage as the debtor seems unable to pay on time. However, there is no a clear indication that the debtor has committed an act of insolvency. Although he has indicated that he is not able to pay, it must be noted that In Realisation v Ager, the court held that the proof of inability to pay is only a prima facie proof of insolvency but does not necessarily denotes a state of insolvency. Something more like a written notice of inability is required to satisfy this element- Optima Fertilizers v Turner.On this question, no written notice has been issued. However In Van Rooyen v Salzmann the court held that clear intentions to evade or delay payment constitute an act of insolvent.If he the issuing of the cheque by Mr Wrench was fraudulent then there court will be satisfied that there is an act of insolvency, the application will succeed.In my view, the application will not succeed because there is no an act of insolvency that has been committed. (b) Assuming that the application is successful, what is the soonest that Mr Wrench could be rehabilitated, and under what circumstances could he make such an application? (3)

The applicant may apply for rehabilitation after twelve months has lapsed, once the trustee has been paid and his estate has been finalised. If he has however been previously been sequestrated, he would be rehabilitated after three years. If not rehabilitated for ten years, after ten years, automatic rehabilitation occurs.

(c) What would your answer be to the previous question if it transpired I (i) that the issuing of the cheque by Mr Wrench was fraudulent

If he has been convicted of any fraudulent acts in terms of his insolvency, he may apply for the order of rehabilitation after 5 years

(iii) he was unco-operative with the Trustee during his insolvency

The application of rehabilitation will be rejected because it is a requirement that he should be cooperative for the order to be granted.

d) What is the effect of Mr Wrenchs sequestration on pending litigation against him, whether criminal or civil?Criminal cases cannot be affected by the debtors insolvency Sequestration will stop civil legal proceedings instituted by and against the debtor until the trustee is appointed. He can however sue in those civil matters that falls outside the sequestrated estate eg in divorce and maintenance of a child matters In those matters, he will be required to furnish security of coste

) If, during his insolvency, Mr Wrench received an inheritance in terms of a will, would such inheritance become part of his estate for the purposes of sequestration? In terms of sec 20(2) of the Act, the insolvent estate shall include all the property at the date of sequestration and those acquired during sequestration. Inheritance acquired during sequestration will be included in the insolvent estate unless the testator has made an express provision in the will that such inheritance must pass to the other person if the beneficiary is insolvent at the time of will execution.

f) Mr Wrench is married out of community of property. How is the estate of his solvent spouse, including a house she acquired before her marriage to Mr Wrench, affected by her husbands insolvency? The issue has been dealt by the court in Duplesis v Piennarin which the court held that Matrimonial Property Act created the existence of separate property in a relationship between two spouses but it does not affect the rights of the third parties. Held further is that the Act does not allow sequestration of only part of the debtors estate but rather the entire estate. The rationale behind this is the desire of our courts to prevent collusion between spouses to the detriment of creditors. The house in question will also be affected.

g) The term spouse has an extended definition for the purposes of insolvency. Explain.

For the purpose of section 21, spouse has an extended meaning in that it includes (i) a wife or a husband married according to any law or custom, (ii) Live in partners of opposite sex, although not married to her or him (s 21(13))

h) Several employees of Mr Wrenchs business approach you. They are owed their wages for a period of a month before his sequestration and for services which they are continuing to render since his sequestration as they were on one-year contracts. Advise them as to their legal position in so far as receiving payment for their outstanding wages is concerned, and also whether they are still bound by their employment contracts, as they have been invited to join another local plumbing concern.

Sequestration of an employee does not affect a contact of employment However, if the employer has been sequestrated, all the employment contracts are suspended with effect from the date on which the sequestration order has been granted. In terms of sec 38 of the Act, employees whose contracts have been suspended are not entitled to render service or remuneration in terms of these contracts. The trustee may however, terminate the suspended employment contracts but only after consultation with those employees or their trade union Where business is sold, the employment contract continues with the new owner on the same terms and conditions as with the insolvent employer Employees have a preferrent claim against the insolvent estate.

2 (a) (b) Discuss the effect of insolvency on an insolvents capacity to earn an income as an employee.

It is not a purpose of the act to render the insolvent destitute He is therefore allowed to follow any profession or occupation and make contracts necessary for that purpose Gerge v Lewe However, in terms of sec 23 (3) he may not carry a business as a general dealer or a manufacture If he is unrehabilitated insolvent, he is prohibited from earning a living as a trustee of another insolvent estate. The money earned by the insolvent in the course of his profession or employment is claimable by the trustee of his estate. He cannot dispose such money without the trustees consent

(c) What right does the Master have in terms of s 23(5) in relation to such earnings?

In terms of sec 23(5) of the Act, the insolvents earning became due to the trustee only once the master has expressed that the view that such money is not necessary for the support of the insolvent and his dependants.

(d) What is the effect of insolvency on an insolvents personal effects, and what discretion, if any, does the insolvent have in respect thereof?

Personal effects are protected by the act from being sequestrated. However, the debtor himself may renounce them in favour of the creditors thereby waving the protection that these assets have in terms of the Act.

(e) An insolvent, Mr H OTair, is running for election for Parliament at the time of his insolvency. Will he be able to take up the office, if elected?

He is precluded by the constitution to hold any political office position in the National and provincial government. But he is allowed to participated in the local government (f) What would be the position if Mr OTair held a representative position at local government level at the time of his insolvency?

he is allowed to participated in the local government. Only precluded in political office position in the National and provincial sphere.

(g) Mr OTair owns a block of flats at the time of his insolvency. How are the rights of his tenants affected by his insolvency, and what rights does the Trustee have in relation to such agreements.

In terms of sec 37 of the Act, a lease may not terminate upon sequestration of his estate. The trustee shall determine the lease either to terminate it or not. He can terminate it upon notice in writing to the tenants The tenants may have a claim in the insolvents estate for any loss incurred as a result of the termination They can have a claim for improvements to the house against the insolvent estate provided that they have enhanced its market value.

(h) What is the effect of insolvency on business premises occupied by Mr OTair as a tenant, and what right does the Trustee have in relation to such a lease? Insolvency of lease does not bring his lease to an end But his trustee may if he decides to Notice of termination must however be sent to the lessor Until the notice has been sent, the contract remains valid and rent must be paid. However, rent cannot be paid for more than 3 months in such cases.

Qn 3. If Mr Wrenchs plumbing business, U-Bend Plumbing Services, was a company or a close corporation and it was liquidated on or after 1 May 2011: (a) How did the statutory position of such business entities change as of that date winding-up of solvent companies is regulated in terms of the new Companies Act of 2008 This Act replaces the provisions of the old Companies Act and the Close Corporations Act However, the court in HBT Construction & Plant Hireheld that old Act is still applicable in our law thus the applicant had to prove that company was insolvent not just that the liquidation will be just and equitable.

Explain the purpose of the Business Rescue provisions of the new legislation and its effect on judicial management proceedings. BR means proceedings to facilitate the rehabilitation of a company that is financially distressed Financially distressed is defined in s 128 (i) Reasonably unlikely that the co will be able to pay all of its debts as they become due and payable within the immediately ensuing six months. (j) Reasonably likely that the co will become insolvent within the immediately ensuing six months

Qn Condonation of irregularities In terms of Section 157(1) of the Act, irregularities in procedure can be condoned in the following instances: where the irregularity has not caused a substantial injustice; or where the irregularity has caused a substantial injustice, but the prejudice to creditors can be remedied by an order of court.

Qn. In terms of s 427(1) of the Companies Act 61 of 1973, the court may grant an order placing a company under judicial management where:

the company, because of mismanagement or any other cause, is unable to pay its debts or is probably unable to meet its obligations; the company has not become or has been prevented from becoming a successful concern; there is a reasonable probability that, if the company is placed under judicial management, it will be able to pay its debts or meet its obligations and become a successful concern; there must be a reasonable probability, not merely a possibility, that the company will recover; it appears just and equitable to grant a judicial management order qn.

What happens at the first meeting?

At the first meeting of creditors, creditors who have proved their claims may elect one or two trustees. If more than one person is nominated, the individual who obtains a majority of votes in both number and value must be elected as sole trustee. If one person obtains a majority in value, and another person a majority in number, both must be elected trustees. However, if either party declines a joint trusteeship, the other must be elected sole trustee. Should one person obtain a majority of votes in number and no other person obtain a majority in value, or vice versa, the party who obtains the majority must be elected as sole trustee. See section 54 of the Insolvency Act

REVISION TEST TWO 1. Suppose that Tenza publishes a notice of intention to surrender his estate 33 days before the advertised date on which the application will be made. Explain whether the court will grant his application for surrender.

Authority on this question is now divided. According to most of the authority in case law it is a fatal defect if the advertisement is published more than 30 days before the advertised date of the application (see, for example, Ex parte OosthuysenOn this authority the court will therefore dismiss the application. However, in Ex parte Harmse, it was held that such a failure is a formal defect or irregularity as envisaged by section 157(1) of the Insolvency Act. It does not therefore invalidate the application unless it has caused an injustice that cannot be remedied by a court order. On this authority the court will therefore not dismiss the application. So the answer to this question depends on whether the relevant application takes place in the jurisdiction of the Transvaal Provincial Division of the High Court (which follows the authority of its Full Bench in Ex parte Oosthuysen) or whether it takes place in the jurisdiction of the Natal Provincial Division of the High Court (which follows the authority of its Full Bench in Ex parte Harmse

2. Explain whether Tenza, as the applicant for voluntary surrender, is obliged to obtain an independent valuation of his assets for the purposes of his statement of affairs, or whether he may value his assets himself

Unless the Master orders otherwise, Tenza is not obliged to have his assets valued by an independent valuer. If he nevertheless does so, the costs of the valuation will not form part of the sequestration costs.

3. Suppose that the court authorises the sale of attached assets after a notice of intention to surrender has been published. What order will the court usually make with respect to the proceeds of the sale?

The court will order that the proceeds of the sale be kept by the Master or the sheriff, pending the outcome of the application for voluntary surrender. If the application succeeds, the proceeds will be paid to the trustee for distribution under the provisions of the Insolvency Act. If the application is dismissed, the proceeds will be applied in paying the judgment creditor(s).

4. State when a notice of intention to surrender lapses

A notice of intention to surrender lapses if the court dismisses the application, if the notice is properly withdrawn, or if the debtor fails to apply for surrender of the estate before the lapse of 14 days after the day mentioned in the notice. 5. Explain whether the court is obliged to grant an application for voluntary surrender after the applicant has proved the requirements set out in section 6(1) of the Insolvency Act.

Even if the requirements concerned are proved, the court still has a discretion to dismiss the application.

6. What is the significance of the case R v Meer in our law Holmes J in R v Meer, who laid down two ways of guarding against the abuse of proceedings for sequestration. First, the court should pay more attention to the element of advantage to creditors, particularly if the facts of the case suggest that it is a friendly sequestration based on section 8(g). Secondly, the court should refuse to grant repeated adjournments of the rule nisi, unless satisfied, on affidavit, that it would be to the advantage of creditors Determine which requirements must be satisfied before the court may grant a final order for the compulsory sequestration of a debtor's estate Under section 12(1), the court must be satisfied that the applicant creditor has established a liquidated claim entitling him to apply in terms of section 9(1) for the sequestration of the debtor's estate, that the debtor has committed an act of insolvency or is insolvent, and that there is reason to believe that the sequestration of the estate would be to the advantage of the debtor's creditors.

Explain the concept "liquidated claim" and state three examples of such a claim

A liquidated claim is a claim for money, the amount of which is fixed by agreement, judgment, or otherwise. The examples of such a claim given by Hockly include the following: a claim for the price of goods sold and delivered; a claim based on judgment for provisional sentence; and a claim for the return of the price paid under a sale which has been cancelled because of the seller's repudiation

State which property is covered by the term "disposable property" in relation to section 8(b) (failure to satisfy a judgment).

"Disposable property" in relation to section 8(b) means property that may be attached and sold in execution, even if situated in some other locality. It may be immovable, movable, or incorporeal. It does not include immovable property that has been mortgaged, unless the applicant for compulsory sequestration is the first mortgageeA owes R40 000 to B and R30 000 to C, and both debts should have been paid a year ago.

A's sole asset of any value is a motorcar worth R80 000. A sells it to D for R50 000. On these facts, determine whether A has committed an act of insolvency, and give reasons for your answer.

In terms of section 8(c), a debtor commits an act of insolvency if he makes, or attempts to make, a disposition of any of his property which has or would have the effect of prejudicing his creditors or of preferring one creditor above another. A's sale of the motorcar falls within the definition of a "disposition" in section 2. In the examination of the effect of this disposition (not the intention with which it was made) it is relevant that more than one of A's debts have fallen due and have not been paid. Either B or C would be entitled to apply for the compulsory sequestration of A's estate, on the ground that the sale of the motorcar to D has prejudiced them. The applicant could allege that the sale of the motorcar for R50 000 (manifestly below its market value of R80 000) falls within the ambit of section 8(c) because it has rendered A insolvent. Previously, his assets (worth R80 000) exceeded his liabilities (R40 000 and R30 000), but now those liabilities exceed his assets (the R50 000 received for the motorcar). Therefore A has committed an act of insolvency in terms of section 8(c).

Compare section 8(c) with section 8(d) of the Insolvency Act by pointing out two differences between them.

First, section 8(c) requires a disposition of property, but a mere removal of property is sufficient under section 8(d). Secondly, in section 8(c) the effect of the debtor's disposition or attempted disposition is important, but in section 8(d) the intention of the debtor to prejudice his creditors or to prefer one of them above another is important

C publishes a notice of surrender of his estate. The statement of affairs which he lodges with the Master does not state that one of his creditors, Mr D, has a claim for R30 000. Advise C on the implications of these facts.

Under section 8(f), a debtor commits an act of insolvency if he files a substantially incorrect or incomplete statement of affairs. The omission of a claim for R30 000 is sufficiently important to have influenced C's creditors in deciding whether to oppose C's application for voluntary surrender. It follows that C has committed an act of insolvency.