Assignment 1 Semester 1 2026
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Due Date: 2 March 2026
QUESTION 1
Voidable Preference
A voidable preference happens when a person, just before becoming insolvent, pays one
creditor in a way that gives that creditor an unfair advantage over the others. This is not
allowed because it breaks the rule that all creditors should be treated equally during
insolvency.
To set aside a voidable preference under section 29(1) of the Insolvency Act, the trustee
must prove the following:
The insolvent made the payment or gave away something (a disposition).
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QUESTION 1
Voidable Preference
A voidable preference happens when a person, just before becoming insolvent,
pays one creditor in a way that gives that creditor an unfair advantage over the
others. This is not allowed because it breaks the rule that all creditors should be
treated equally during insolvency.
To set aside a voidable preference under section 29(1) of the Insolvency Act, the
trustee must prove the following:
The insolvent made the payment or gave away something (a disposition).
The act happened within six months before the sequestration or death.
The payment or transfer had the effect of preferring one creditor over the
others.
Right after the act, the person’s debts were more than their assets (they were
factually insolvent).1
The trustee must prove all these facts to convince the court to undo the payment.2
(b) Undue Preference
An undue preference is more serious because it is based on intention. It happens
when the insolvent meant to favour one creditor over the rest before sequestration.
Under section 30 of the Insolvency Act, the court can set the disposition aside if the
trustee proves that:
The insolvent made the payment or transfer (the disposition),
It was done at any time before sequestration,
1
Insolvency Act 24 of 1936 s 29(1)
2
Hockly's Law of Insolvency, Winding-Up and Business Rescue (Juta 2022) 172