2022 JUNE Exam (Answers) - Insolvency Law (MRL3701)

Question 1 1.1 Identify the problem / issue that was faced by the court in Magnum Financial Holdings (Pty) Ltd (in liquidation) v Summerly and another NNO 1984 (1) SA 160 (W) and give reasons why the court in this case was satisfied that the applicants had made out a case for the relief sought. (5) 1.2 Dumisani approaches you for advice. He informs you that his brother, Benson, owes him R24 000 for gardening services rendered by his company. Dumisani explains to you that despite various attempts to get Benson to pay his debts, he has yet to make any payment. Dumisani is especially upset because he has heard a rumour that Benson and his wife have apparently relocated their home from Johannesburg to Cape Town because his wife is ill and needs medical treatment at a care facility in Stellenbosch. Dumisani wants to know from you whether you can assist him to apply for the complusory sequestration of Benson’s estate, because his brother has fled from his home and therefore his responsibilities. Refer to the relevant act of insolvency, including a reference to the relevant legislation. (10) 1.3 On 16 August 2018, Absa Bank made an application to the High Court for the sequestration of Mr Sting’s estate. Absa Bank alleged that Mr Sting owed it over R240 million, plus interest. A candidate attorney, employed by the attorneys representing Absa Bank, furnished a copy of the notice of motion and the founding affidavit to Mr Sting. The candidate attorney enquired from Mr Sting whether they had a domestic employee. She was informed that there was a domestic worker, Ms Lucy, but it was not disclosed that there were two other domestic workers. The candidate attorney then left a copy of the petition on the dining table for the identified domestic worker, Ms Lucy, without directing that Mr Sting bring it to the attention of the domestic worker. Concerning the above facts explain whether domestic employees are entitled to be informed of the sequestration of the estate of their employer. In your answer refer to relevant case law and the relevant provision in the Insolvency Act 24 of 1936. (10) CONFIDENTIAL 8 of 9 MRL3701 May/June 2022 1.4 Critically discuss the case of Sarrahwitz v Maritz NO and Another 2015 (4) SA 491 (CC) with particular reference to the provisions of the Alienation of Land Act 68 of 1981, and also then include the amendments made to the Alienation of Land Act thereafter. (10) 1.5 The deceased, Mr Legend, who died insolvent, had a policy on his life that had been in existence for a period longer than three years. A few days before committing suicide he nominated his wife and son as beneficiaries of the policy. With reference to legislation and case law, critically analyse the amendments to section 63 of the Long-Term Insurance Act 52 of 1998 in respect of the use of life insurance policies to defraud the creditors of a deceased insolvent estate. (15) TOTAL QUESTION 1: [50] Question 2 2.1 Regarding meetings of creditors, a “Special Meeting” may be called for one of two purposes. Discuss each of these purposes. (10) 2.2 With reference to impeachable dispositions, discuss the difference between the trustee’s powers under section 30 and section 29 of the Insolvency Act. (10) 2.3 Indicate whether the following bonds are “special notarial bonds” or “general notarial bonds”: 2.3.1 A bond over six lorries owned by the debtor. The details in the relevant bond include the registration numbers, types of vehicles, colours, chassis numbers, and engine numbers. (3) 2.3.2 A bond over all the movables owned by the debtor. (2) TOTAL QUESTION 2: [25] Question 3 3.1 Go-Pro Trucking Co (Pty) Ltd owes Lerato R10 000 for some services she rendered to the company. When Go-Pro Trucking failed to pay her at the end of March 2021 as agreed, Lerato left a letter of demand for payment at Go-Pro Trucking’s registered office CONFIDENTIAL 9 of 9 MRL3701 May/June 2022 in Midrand. After three weeks, the company has not paid Lerato or contacted her regarding the demand for payment. Advice Lerato on whether the court can wind up Go-Pro Trucking and if the court can refuse to grant the order since it seems Go-Pro Trucking’s assets exceed its liabilities. (10) 3.2 Critically discuss the important issues the court considered regarding the abuse of the sequestration process in Ex Parte Snooke 2014 (5) SA 426 (FB). (10) 3.3 Explain briefly when a company is deemed to be unable to pay its debts. (5) TOTAL QUESTION 3: [25] TOTAL: [100]