MRL3701 – MAY/JUNE 2022 EXAMINATION

XOLANI VINCENT MAHLANGU

STUDENT NUMBER: 57830932

DATE: 22 JUNE 2022

LECTURER: Ms. Z Taljaard

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Question 1

1.1. The problem before the court was whether a trust could, at law, be sequestrated. The
court was satisfied because of the following reasons.

1. There had been sufficient service of the papers on the trustee of the trust.

2. The one provisional liquidator of the applicant company had locus standi to apply for

provisional sequestration of the trust estate.

3. The applicant company had a claim against the trust for about R1,6 million which was
due and payable.

4. An act of insolvency in terms of s 8(g) of the Insolvency Act had been committed, and
the trust was insolvent.

5. It was to the advantage of trust creditors that its estate should be urgently sequestrated.

6. The necessary security bond had been lodged.

7. A trust falls within the definition of a “debtor”.

1.2. Dumisani can apply to the court for compulsory sequestration of Benson’s estate and
the court may grant an application for the sequestration of a Benson’s estate, because
his claim meets the requirements, in terms of section 12(1) of Insolvency Act 24 of 1936,
the court must be satisfied that the applicant creditor has established a liquidated claim
entitling him to apply in terms of terms of section 9(1) read with the definition of “debtor”
in section 2 of the Insolvency Act, Benson, owes him R24 000 for gardening services
rendered , for the sequestration of the debtor’s estate, that the debtor has committed an
act of insolvency or is insolvent, Benson has departed from his dwelling ,and that

There is reason to believe that the sequestration of the estate would be to the advantage
of the debtor’s creditors, the value of the claims by Dumisani against Benson is more than
R100. After the costs of sequestration had been paid, he would recover an amount that
was not negligible, as it was held on (Gardee v Dhanmanta Holdings & others 1978 (1)
SA 1066 (N) 1068-70).

1.3. in terms of section 9(4A) (a)(i)–(iii)) Insolvency Act 24 of 1936.The applicant must
furnish the debtor’s employees a copy of the application to: every registered trade union
that, as far as he can reasonably ascertain, represents any of the debtor’s employees;
the debtor’s employees themselves that are employed by any business of the debtor; and
the South African Revenue Service. It was, however, held in the case of Gungudoo &
another v Hannover Reinsurance Group Africa (Pty) Ltd & another [2012] 3 All SA 609
(SCA)), that there is no need to furnish a copy of the application to workers employed at
the debtor’s residence.

Because the acts states that the employees that are employed at the debtor’s business
and the latter case held that “there is no need to furnish a copy of the application to
workers employed at the debtor’s residence”, domestic employees are NOT entitled to be
informed of the sequestration of the estate of their employer.

1.4. Because of Constitutional Court's ruling in Sarrahwitz v. Maritz NO and Another 2015
(4) SA 491 (CC, the Alienation of Land Act, 1981 has been interpreted differently. The
statute did not allow for the transfer of a residence from the insolvent estate to protect a
vulnerable buyer from being left without a place to live. Within a year of the contract, the
buyer had completed payment of the full purchase price.

The Constitution of the Republic of South Africa, 1996 was deemed to be in conflict with
this decision, rendering it invalid. Now, the applicable provisions must be interpreted as
follows:

(a) The definition of "contract" at the end of section 1 is to be amended to read, "including
residential property paid for in full within one year of the contract, by a vulnerable
purchaser" (a).

(b) The following definitions must be added to those in section 1:

A buyer who could become homeless due to a seller's bankruptcy is referred to as a

"vulnerable purchaser."

(c) Section 4 of the Alienation of Land Act is amended to read as follows: "(1) This Chapter
shall not apply in respect of a contract in which the State, the Community Development
Board established by section 2 of the Community Development Act, 1966 (Act 3 of 1966),
the National Housing Commission mentioned in section 5 of the Housing Act, 1966 (Act
4 of 1966), or a local authority is the seller.

(2) However, in the case of a deed of alienation in which a vulnerable buyer of a residential
property paid the whole purchase price within a year of the contract, prior to the seller's
insolvency, the provisions of Sections 21(2) and 22, shall apply, with the necessary
modifications. Only the unfinished insolvent estate of a seller is covered by this decree.

1.5. In Brink v. Kitshoff 1996 4 SA 197 (CC), it was argued that because section 44(1)
and (2) of the Insurance Act discriminated against married women, its spirit and content
were incompatible with Chapter 3 of the Interim Constitution of 1993. In particular, it was
claimed that it broke section 8 of the interim constitution, which guaranteed everyone's
equality before the law and equal protection under the law. Additionally, that clause
outlawed any unfair discrimination, whether direct or indirect, based on factors like sex
and gender.
The former Section 44 of Insurance Act 27 of 1943 limited married women (and not men)
to a portion of the benefits of life insurance policies in cases where the husband's estate
was sequestrated (he had either ceded or executed such a policy on favor of his wife).
However, this section 44 of the Insurance Act was already under scrutiny under the
Interim Constitution. On a life insurance policy that a man's wife executed in his favor or
surrendered to him, the Act had no equivalent impact.

According to O'Regan J’s judgement, section 44(1) and (2) regarded married women and
men differently, making married women less advantageous than married men. She ruled
that it was invalid because it violated section 8 of the interim constitution. The current
Constitution's Section 9 corresponds to Section 8 of the interim constitution.

The Long-Term Insurance Act 52 of 1998, which was enacted in response to Brink v.
Kitshoff, completely repealed the Insurance Act. Women who hold policies are now
treated on an equal footing with males. Section 63 of the new Long-Term Insurance Act
regulates this issue of gender equality between policyholders.

Question 2

2.1. A special meeting may be called for either of the following two purposes:

(i) Proof of claims

After the second meeting, the trustee may be called upon to convene, by notice in the
Gazette, a special meeting of creditors for the proof of claims against the estate. He is
obliged to convene the meeting whenever he is required to do so by any interested person
who at the same time tenders a payment of all expenses to be incurred in connection with
the meeting.
(ii) Interrogation of the insolvent

Provided the Master gives his consent, the trustee may at any time, and must if so
required by a creditor who has proved his claim against the estate, convene, by notice in
the Gazette, a special meeting of creditors for the purpose of interrogating the insolvent,
in terms of section 42(2) of the Insolvency Act.

A special meeting cannot be convened for the sole purpose of interrogating persons other
than the insolvent as it was on held on Bernard v Klein NO 1990 (2) SA 306 (W) 308).

2.2. Differences between trustee’s powers under s 30 and 29.

An undue preference may be set aside irrespective of when before sequestration it was
made, whereas a voidable preference can only be set aside if it was made not more
than six months before sequestration or the insolvent’s death (as the case may be).

For a disposition to be an undue preference, the debtor must actually be insolvent

when he makes it. A disposition may qualify as a voidable preference even if the debtor
is solvent when he makes it, provided he is insolvent immediately thereafter.

To have a disposition set aside as an undue preference, the trustee must prove that
the debtor intended to prefer one creditor above the others. On the other
hand, the trustee may establish a voidable preference by showing merely that the
disposition had the effect of preferring one creditor above another.

Section 30 does not grant a defence to the beneficiary of an undue preference,

whereas section 29 does, to the beneficiary of a voidable preference.

2.3. 1. is a special notarial bond.

2.3.2. is a general notarial bond.
Question 3

3.1. The grounds for the winding-up of a company are set out in section 344 (insolvent
company) and section 81(1) of Companies Act of 2008 (solvent company). Even though
it seems Go-Pro Trucking’s assets exceed its liabilities, on one of the grounds in section
81(1) the court, on the application of any interested person, may order that the company
be wound up as an insolvent company (s 79(3) of the 2008 Act).

In terms of section 345, a company is deemed to be unable to pay its debts, if a creditor,
to whom the company is indebted for at least R100 (then due), has left a demand for
payment at the company’s registered office and the company has neglected for three
weeks thereafter to pay, secure, or compromise the claim to the satisfaction of the creditor
(s 345(1)(a)). The requirement of delivery at the company’s registered office is
peremptory and must be strictly complied with (cf Afric Oil (Pty) Ltd v Ramadaan
Investments CC 2004 (1) SA 35 (N) 44). The tender of a lesser sum is not enough to
avoid liquidation (Body Corporate of Fish Eagle v Group Twelve Investments (Pty) Ltd
2003 (5) SA 414 (W) 426-7).

3.2. South Africa's insolvency legislation gives the impression of a still-moving world. The
Insolvency Act 24 of 1936 governs South African insolvency law today. It can be
characterized as a creditor-friendly arrangement that has remained largely unchanged
since 1936. The guiding principle is that creditors must benefit from the sequestration of
a debtor's estate. Recent court rulings in South Africa have centered on sequestration
applications that try to get beyond the need of advantage to creditors in this regard.

This conduct ultimately leads to abuse of the legal system. The impact of dishonesty in
insolvency procedures on creditors and the South African economy as a whole has
recently been brought up. The costs of sequestration may surpass the purported
difference between assets and liabilities, diminish the amount available for distribution to
creditors, and favor administrators over creditors, which constitutes an abuse.
When the costs of sequestration are more than the purported gap between assets and
liabilities, the amount available for distribution to creditors is reduced, and the costs favor
administrators over creditors, this abuse may arise. In this article, the courts' authority to
impose additional requirements for the voluntary surrender of debtors' estates,
compulsory sequestration actions, and compliance with Act provisions is discussed.
Regarding the necessity that an advantage to creditors be demonstrated during these
processes.
Daffue J. criticized the exorbitant legal expenses levied and declared that the voluntary
surrender process had been abused. In addition, anomalies were discovered, and
sequestrations rarely benefited creditors when considering applications for rehabilitation
while taking into account the tracked original applications.

3.3. In terms of section 345 of the insolvency act, a company is deemed to be unable to
pay its debts in the following cases: A creditor, to whom the company is indebted for at
least R100 (then due), has left a demand for payment at the company’s registered office
and the company has
neglected for three weeks thereafter to pay, secure, or compromise the claim to the
satisfaction of the creditor.