MRL3701
Assignment 1 Semester 1 2025
Unique Number:
Due Date: 25 March 2025
QUESTION 1 (3 ANSWERS PROVIDED)
Maria, as a creditor, must satisfy the court that she has locus standi (legal standing), that
Thabo has committed an act of insolvency or is factually insolvent, and that sequestration
would be to the advantage of creditors.
Maria’s Legal Standing as a Creditor
Under Section 9(1) of the Insolvency Act, a creditor can apply for sequestration if they have
a liquidated claim of more than R100.00.
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QUESTION 1 (3 ANSWERS PROVIDED)
Maria, as a creditor, must satisfy the court that she has locus standi (legal standing),
that Thabo has committed an act of insolvency or is factually insolvent, and that
sequestration would be to the advantage of creditors.
Maria’s Legal Standing as a Creditor
Under Section 9(1) of the Insolvency Act, a creditor can apply for sequestration if
they have a liquidated claim of more than R100.00. Maria meets this requirement as
she is owed R320,000, an amount that is due and payable. Her failure to receive
payment despite the debt being due further strengthens her legal standing.
Act of Insolvency or Factual Insolvency
A debtor's estate may be sequestrated if they commit an act of insolvency under
Section 8 of the Act or if they are factually insolvent—meaning their liabilities exceed
their assets.
1. Factual Insolvency:
Maria’s investigation into Thabo’s financial affairs revealed that his liabilities exceed
his assets. His total liabilities amount to R2,567,374, while his known assets consist
of an apartment valued at R2,250,000 and furniture worth R300,000—a total of
R2,550,000. Since his debts exceed his assets, Thabo is factually insolvent, fulfilling
one of the key requirements for sequestration.
2. Act of Insolvency - Preferential Payment (Section 8(c))
Thabo made an early repayment of R400,000 to his cousin, even though this debt
was only due on 30 April 2025. This constitutes an act of insolvency under Section
8(c), as the repayment had the effect of prejudicing his other creditors by preferring
one creditor over others. Courts do not require intent to prejudice creditors—the
effect of the transaction alone is sufficient. This act of insolvency strengthens Maria’s
case.
Advantage to Creditors
The court will only grant a sequestration order if it finds that sequestration will be to
the advantage of creditors. This means there must be a reasonable expectation that
