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  5. Mercantile Law 312

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Summary Law of Insolvency 312
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This document contains an accurate, well-structured, and well-referenced summary of all the material you need to understand in order to obtain a distinction for this module. It contains thorough case summaries, lecture material, and theory.

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  • April 23, 2022
  • 168
  • 2021/2022
  • Summary

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Mercantile 312
(Law of Insolvency)
notes
Compiled by Mari Louw in 2021. DO NOT DISTRIBUTE.

Louw, MM, Mej [22862439@sun.ac.za]

, 1



Contents
Introduction......................................................................................................................................5

1.1. Meaning of Insolvency..........................................................................................................5

1.2. Purpose of a sequestration order...........................................................................................5

1.3. Who or what is being sequestrated?......................................................................................8

Compulsory sequestration v voluntary surrender.....................................................................8

Miller V Janks 1944 (n/p)........................................................................................................8

Meaning of ‘debtor’.................................................................................................................9

1.4. Jurisdiction of the court.......................................................................................................19

Which court has jurisdiction?.................................................................................................19

Jurisdiction in litigation against 3rd parties.............................................................................21

Historical overview....................................................................................................................21

Voluntary surrender........................................................................................................................23

Who may apply?.........................................................................................................................24

Substantive requirements...........................................................................................................26

1) Debtor’s estate insolvent....................................................................................................26

2) Free residue sufficient to pay costs of sequestration:........................................................28

3) Sequestration to be to the advantage of creditors:.............................................................29

Preliminary requirements/formalities: S4 IA.............................................................................30

6) Notice of intention to surrender:........................................................................................30

Ex Parte Harmse (prescribed)................................................................................................31

7) Notice to creditors and other parties:.................................................................................32

8) Preparing and lodging a statement of affairs:....................................................................34

Effect of notice of surrender:.....................................................................................................34

First Rand Bank Limited v Consumer Guardian Services (prescr)........................................34

Ex Parte Viviers 2001:...........................................................................................................36

, 2


Court’s discretion:......................................................................................................................36

Ex Parte Ford: Prescribed.......................................................................................................36

Compulsory Sequestration:............................................................................................................38

Substantive requirements for application...................................................................................38

Creditor must have locus standi S9(1)...................................................................................40

Debtor insolvent or commits act of insolvency:.........................................................................40

s8(a) leaving SA with intent to evade or delay payment........................................................42

S8(b) failure to satisfy a writ of execution.............................................................................43

S8(c) disposition with effect of prejudicing creditors............................................................44

8(d) removal of property with intent to prejudice creditors...................................................45

8(e) lesser sum offered in settlement of full debt...................................................................45

8(f) non-compliance after notice of surrender........................................................................46

8(g) notice in writing of inability to pay................................................................................46

8(h) inability to pay debts after notice of transfer of business...............................................47

8A 47

Advantage for the creditor..........................................................................................................48

Stratford v Investec................................................................................................................48

Cohen v Jacobs (prescr).........................................................................................................51

Friendly sequestrations...............................................................................................................53

Epstein v Epstein....................................................................................................................53

Application process....................................................................................................................54

VBS Mutual Bank v Ramavhunga 2018................................................................................55

VBS Mutual Bank v Ramavhunga 2019................................................................................57

The effects of sequestration........................................................................................................60

Legal Position of the Insolvent...............................................................................................60

The vesting of the assets of the insolvent:..............................................................................68

The insolvent and his estate...................................................................................................70

, 3


Spouse of the insolvent..........................................................................................................75

Vesting of the assets of the solvent spouse:...............................................................................84

Vesting of assets in trustee:....................................................................................................84

Protection for the solvent spouse: s21(4)...............................................................................92

Creditors of the solvent spouse:.............................................................................................92

Collection of estate assets..............................................................................................................94

Preservation of the estate pending the trustee’s appointment:...................................................94

Notice of sequestration and entry of caveats:.........................................................................94

Service of order and attachment of property:.........................................................................95

The election of the trustee..........................................................................................................96

Fey & Whiteford v Serfontein 1993 2 All SA 137 (A).........................................................100

Rights and duties of the trustee................................................................................................101

Duties of the insolvent:............................................................................................................102

Impeachable dispositions.........................................................................................................103

actio pauliana available to creditors....................................................................................103

S26 disposition without value..............................................................................................105

S29 Voidable preferences.....................................................................................................112

S30 undue preference to creditors........................................................................................119

S31 collusion........................................................................................................................126

S34 voidable sale of business...............................................................................................130

Summary of differences between impeachable dispositions:..............................................137

Distribution of proceeds by trustee to creditors...........................................................................141

Meeting of creditors and proof of claims.................................................................................141

Betterbridge v Masilo & others 2015 (GP)..........................................................................144

Voting and resolution of creditors:...........................................................................................146

Realization of the estate assets:....................................................................................................147

Creditor’s claims and their ranking:.........................................................................................148

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