(a) A debtor’s estate is sequestrated, not the debtor himself. (2)
(b) The debtor need not have ordinarily resided or carried on business for the entire 12
months preceding the sequestration application: ordinary residence or conduct of
business at any time during that period suffices. (2)
(c...
EXAM PACK MRL 3701
INSOLVENCY LAW (MERCANTILE LAW 1 MODULE 3701)
Duration : 2 Hours 100 Marks
QUESTION 1
Fill in the missing words or word:
(a) A debtor’s estate is sequestrated, not the debtor himself. (2)
(b) The debtor need not have ordinarily resided or carried on business for the entire 12
months preceding the sequestration application: ordinary residence or conduct of
business at any time during that period suffices. (2)
(c) Free residue’ is defined in s 2 as ‘that portion of the estate which is not subject to
any right of preference by reason of any special mortgage, legal hypothec, pledge or
right of retention. (2)
(d) The insolvency Act does not deprive the debtor of his contractual capacity
generally, and, accordingly, he retains a general competency to make binding
agreements. However, to protect creditor, the Act imposes certain restrictions on the
debtor’s capacity to contract. (2)
(e) If an insolvent pursues a vocation without obtaining consent where it is required, he
commits a criminal offence.
(f) Because of the principle of “huur gaat voor koop”, the trustee cannot, as a rule,
repudiate a lease of immovable property concluded by the insolvent as lessor and must
realize the property subject to the lease. (2)
(g) Where the joint estate of spouses married in community of property is sequestrated,
both spouses become insolvents and section 21 of the Act accordingly has no
application.(2)
(h) In accordance with section 21(2)(a) of the insolvency Act the trustee must release
property that was the solvent spouse’s property immediately before her marriage to the
insolvent, or before 1 October 1926.(2)
(i) If the trustee elects to carry on and complete the contracts, he ‘steps into the shoes’
of the insolvent. He may insist on receiving any performance owed bye the other party,
and he is bound to carry out any performance that the contract required of the
insolvent.(2)
(j) When an employment contract between an employer and employee is suspended
in terms of section 38(1) of the insolvency Act, amongst other things, no employment
benefit accrues to the employee in terms of the contract. (2)
1
,(k) Enrichment liens are so called because they are based on unjustified enrichment.
There are two kinds: salvage liens and improvement liens. (2)
(l) A special meeting may be called for proving claims or interrogating an insolvent. (2)
(m) The court may remove a trustee from office on the grounds of his misconduct as a
trustee. The power which the court has at common law to order removal on this grounds
has not been displaced by s 60 of the insolvency Act (Fey No and Whiteford No v
Serfontien & another 1993 (2) SA 605 (A)). (2)
(n) In Estate Wege v Strauss 1932 AD 76 the court rejected the argument that no
value was received, because a payment which is made in terms of an invalid agreement
cannot be regarded as value. In reaching its decision the court held that the word value
carries its ordinary meaning. (2)
(o) In deciding whether the insolvent had the intention to prefer, the court must weigh up
all the relevant facts that prevailed at the time of the disposition and decide the issue on
the balance of probabilities. If the facts permit more than one inference, the court
must select the most plausible or probable inference. (2)
(p) To fall within the ordinary course of business, both the making and receiving of the
disposition must be lawful. (2)
(q) A secured creditor is entitled to be paid out of the proceeds of the property subject
to security, after payment of certain expenses and any secured claim which ranks
before his. If the proceeds of the encumbered property are insufficient to cover the
secured creditor’s claim, he has a concurrent claim for the balance (Singer NO v The
Master & another 1996 (2) SA 133 (A)). (2)
(r) One of the questions considered in Ensor No v Rensco Motors(Pty) Ltd 1981 (1)
SA 815 (A) was whether or not the alienation of certain goods by an insolvent company
just before its liquidation occurred as intended in section 34 of the Insolvency Act 24 of
1936. (2)
(s) Because the basis of the court’s power to grant a declaratory order is that the trustee
and creditors do not lay claim to the property in question, it follows that if any creditor
objects to the declaratory order, the insolvent is not entitled to the property and court
cannot vest it in him (Vorster v Steyn 1981 (2) SA 831 (O)). (2)
(t) If creditors adopt a composition which provides for less than 50 cents in the rand,
the insolvent may apply for rehabilitation only on the basis of the prescribed period. (2)
TOTAL QUESTION 1: 40
2
,QUESTION 2
Indicate whether the following statements are true or false. DO NOT give a written
explanation: use only the letters T or F.
1. Sequestration will usually be applied for only when the debtor’s liabilities already
exceed his assets. True
2. An estate is usually conceived of as a collection of assets and liabilities, but a debtor
who has only liabilities may not be regarded as having as estate for sequestration
purposes. False
3. In an application for voluntary sequestration, it is possible to infer that the debtor who
has only liabilities may not be regarded as having as estate for sequestration purposes.
False
4. Section 9(2) provides that a liquidated claim which has accrued but which is not yet
due by the time the application is heard must not be regarded as liquidated for these
purposes. False
5. A debtor who has no assets and only liabilities cannot surrender his estate. True
6. If the court is satisfied that the requirements have been established on a balance of
probabilities, it is bound to grant a final order of sequestration. False
7. The debtor may not make a contract which purports to dispose of any property of his
insolvent estate( sec 23(2)). Furthermore, he may not, without the written consent of the
trustee, enter into a contract which adversely affects(or is likely to adversely affect) his
estate or any contribution which he is obliged to make towards his estate.True
8. Payment of a lawful debt is not a payment without value. True
9. Where spouses are married in community of property their creditors may recover
debts from both of them, and not only from each spouse‘s undivided interest in the joint
estate, but also from his or her separate estate outside the joint estate. False
10. Another category of property which the trustee must release is that acquired by the
solvent spouse under a marriage settlement. The solvent spouse needs to prove that
the settlement was bonafide. False
11. Once he has decided to uphold or to repudiate the contract the trustee may not
change his mind. True
12. The purpose of the first meeting is to enable creditors of the estate to prove their
claims against the estate and elect a trustee. False
3
, 13. In terms of the Insolvency Act, the Master has the power to confirm, or to refuse to
confirm, the appointment as trustee of any elected or nominated person. False
14. Under sec 30 the court may set aside a disposition which the insolvent made at any
time after sequestration if he made the disposition with the intention of preferring one of
his creditors above another and when he made it, his liabilities exceeded his assets.
False
15. Rehabilitation has the effect of putting an end to the sequestration. It relieves the
insolvent of every disability resulting from sequestration and discharges all his
debts(other than debts arising out of fraud on his part) which were due or the cause of
which arose before sequestration. True
TOTAL QUESTION 2: 30
QUESTION 3
(a) Discuss the judgment of the court in Ensor No v Rensco Moors (Pty) Ltd 1981
(1) SA 815 (A)(10) marks
A company(M) did business as a garage and dealer in motor vehicles(a franchise
agreement with another party existed). It also ran a workshop for repair of vehicles for
which tools and spare parts were kept in stock. After several unfortunate developments
M was liquidated. This was after it had sold the spare parts mentioned above.(1 mark
for the facts)
The question on appeal was whether or not the alienation of goods by an insolvent
company(M) just before its liquidation was in “the ordinary course of business” of the
company(1) within the meaning of that phrase in section 34(1) of the Insolvency Act(1)
Section 34 reads as follows(5 marks for some sort of description of Section 34)
“ 34 Voidable sale of business
(1) If a trader transfers in terms of a contract any business belonging to him, or the
goodwill of such business or any goods or property forming part thereof(except in the
ordinary course of that business of for securing the payment of a debt), and such
trader has not published a notice of such intended transfer in the Gazette and in two
issues of an Afrikaans and two issues of an English newspaper circulating in the district
in which that business is carried on, within a period not less than 30 days and not more
that 60 days before the date of such transfer, the said transfer shall be void as against
the trustee of his estate, if his estate is sequestrated at any time within the said
period…”
4
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