MRL3701 ASSIGNMENT 2 SEMESTER 2 - 2024
DUE DATE: 20 SEPTEMBER 2024
QUESTION:
Simphiwe owes a total of R3 million to various creditors. His creditors include Tebogo to whom he owes R400 000. He also owes R1,3 million to BFN Bank.
Last year Simphiwe invested in a get-rich-quick scheme and as ...
, QUESTION:
Simphiwe owes a total of R3 million to various creditors. His creditors include Tebogo to whom he
owes R400 000. He also owes R1,3 million to BFN Bank.
Last year Simphiwe invested in a get-rich-quick scheme and as a result he lost a lot of money. This
left him in a dire financial situation. By 31 October 2023 his liabilities exceeded his assets by R800
000. Over the past few months Simphiwe has failed to pay some of his debts. In particular he failed
to pay the R400 000 he owes to Tebogo. This debt was due and payable on 1 February 2024.
Disappointed at not having been paid back the R400 000 owed to her, Tebogo undertook an
investigation into Simphiwe’s financial situation. The investigation turned up unassailable proof
that Simphiwe had owed R100 000 to his father-in-law, and that Simphiwe repaid R80 000 to his
father-in-law on 3 February 2024. Mindful that he was technically insolvent and that one of his
creditors could apply for the sequestration of his estate at any time, Simphiwe had wanted to
ensure that whatever happened, his father-in-law would at least get something from his estate.
Hence, he repaid the loan that he had obtained from his father-in-law even though the amount was
only due and payable on 30 November 2024.
Tebogo has also established that Simphiwe owns a house in Mamelodi valued at R700 000,
household furniture valued at R300 000 and a motor vehicle valued at R800 000. Tebogo applies for
the compulsory sequestration of Simphiwe’s estate.
Answer the following questions based on the facts given above:
(a) Explain the concept of a voidable preference, and also discuss what a trustee must prove in
order to have such a transaction set aside by the court. (3 marks)
Voidable Preference under Section 29 of the Insolvency Act 1936:
A voidable preference under Section 29 of the Insolvency Act 1936 refers to a transaction made by a
debtor within six months before their sequestration (or death, if the estate is insolvent), which has
the effect of preferring one creditor over others. The objective of this provision is to prevent debtors
on the brink of insolvency from unfairly favouring certain creditors, which could jeopardize the
equitable distribution of assets among all creditors.
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