Insolvency Possible Questions Exam
QUESTION 1
Carmen married Cornelius out of community of property on 28 February 2017 and
they concluded an antenuptial contract on 26 February 2017. In terms of the
antenuptial contract, Carmen is to transfer ownership of a property worth R2 million
to Cornelius. Cornelius, in return, is to transfer R10 000 in cash to Carmen. These
transfers occurred on 20 May 2017. Carmen falls into financial difficulties and her
estate is sequestrated on 30 June 2017. You are appointed as trustee of Carmen’s
estate on 1 September 2017. After a long investigation of Carmen’s financial
information, you discover the transfer of the property to Cornelius that occurred on
20 May 2017 and you institute an action to set aside this disposition on 11 July 2020.
Discuss, with reference to authority, whether an application to recover the property
would be successful. In your discussion, consider the requirements for such an
application and whether Carmen and Cornelius can somehow stop this application.
(15 marks)
S 26 Requirements: disposition made of no value
1. Insolvent made disposition = Yes, Carmen made disposition
2. Was disposition made 2 years before sequestration or more than 2 years before
sequestration: Affects BOP.
- More than 2 yesr: BOP on trustee S26(1)(a)
= 2 months before sequestration (>2 years). S26(1)(b) Court must set aside.
- Thus to keep possession of assets, he needs to prove that the insolvent’s
assets > liabilities, after the disposition was made.
Snowball case: disposition of no value vs disposition of insufficient value.
Van Wyk case: Who benefitted?
Estate Wege case: ordinary sense of the word no value = no benefit
Is proving this possible based on facts:
Quite unlikely that her assets > liabilities.
, - Due to the short period of time between the disposition and the
sequestration, it is unlikely that the beneficiary will be able to prove that
her assets exceeded her liabilities.
Insolvent received no value for disposition
- S26(1): empowers court to set aside a disposition made of no value.
- Value = a benefit received or promised for disposition
- Does the R10 000 payment by beneficiary amount to a benefit received as
quid pro quo?
1. Value must be adequate: insufficient vs normal value
Insufficient: less than actual value of the property value that
would have been agreed upon by two independent parties
concluding this transaction, the market value or what an
independent valuator would have valued the property as more.
Normal value: Not adequate. Amounts to a pittance of the actual
value of the property.
WHEN WAS DISPOSITION MADE?
o S26(1)(a): if disposition was made more than 2 years
before sequestration and liabilities>assets directly after
burden of proof is on TRUSTEE. (difficult burden)
o S26(1)(b): disposition made within 2 years of
sequestration, court must set aside.
- Most likely: Nominal because receiving R10 000 for a R2 000 000
property means that the insolvent received less than a 1% of the actual
value of the property. Argument weighs more heavily in favour of trustee.
- Strydom case: consider what a disposition of no value.
S 27 Exceptions: Requirements : ANC
S 27(1)-(2): A settlement of property in an antenuptial contract by a spouse on
his spouse or any child to be born of the marriage is not liable to be set aside
as a disposition without value on the spouse’s insolvency if certain
requirements are met
1. Immediate benefit – completed within 3 months of date of marriage
, - Married = 28/02/2017
- Disposition = 20/05/2017
- Requirement met. ✅
- Enyati: S27 defence case
2. Bona Fide
- An absence of any intention to prejudice creditors in obtaining payment of
their claims or prefer one creditor above the another
- Difficult to prove. (needs to show there was intention to prejudice)
- Possible argument:
o Assumptions: as to why a person would transfer ownership to their
spouse based on the timing
o Marriage, signing and transfer all very close to each other may
indicate that the disposition was not made in good faith
3. ANC registered at least 2 years before the sequestration of the estate
1. ANC registered = 26/02/2017
2. Sequestration = 30/06/2017
3. Requirement not met ✅
b. Beneficiary doesn’t have defence
BUT Prescription
c. Prescription Act applies to the claim made by Trustee
d. When does it start to run:
o The date on which the trustee is appointed falls within 3 years of
when they go to court to set aside the disposition.
o But the date on which the estate sequestrated is more than 3 years
from the date on which the trustee goes to court to set aside the
disposition
o Enyati case: S27 defence could not applied because benefit was only
received later. Yeas.
e. Duet & Magnum v Koster
Question: whether a claim by the trustee to set aside an
impeachable disposition can prescribe?
QUESTION 1
Carmen married Cornelius out of community of property on 28 February 2017 and
they concluded an antenuptial contract on 26 February 2017. In terms of the
antenuptial contract, Carmen is to transfer ownership of a property worth R2 million
to Cornelius. Cornelius, in return, is to transfer R10 000 in cash to Carmen. These
transfers occurred on 20 May 2017. Carmen falls into financial difficulties and her
estate is sequestrated on 30 June 2017. You are appointed as trustee of Carmen’s
estate on 1 September 2017. After a long investigation of Carmen’s financial
information, you discover the transfer of the property to Cornelius that occurred on
20 May 2017 and you institute an action to set aside this disposition on 11 July 2020.
Discuss, with reference to authority, whether an application to recover the property
would be successful. In your discussion, consider the requirements for such an
application and whether Carmen and Cornelius can somehow stop this application.
(15 marks)
S 26 Requirements: disposition made of no value
1. Insolvent made disposition = Yes, Carmen made disposition
2. Was disposition made 2 years before sequestration or more than 2 years before
sequestration: Affects BOP.
- More than 2 yesr: BOP on trustee S26(1)(a)
= 2 months before sequestration (>2 years). S26(1)(b) Court must set aside.
- Thus to keep possession of assets, he needs to prove that the insolvent’s
assets > liabilities, after the disposition was made.
Snowball case: disposition of no value vs disposition of insufficient value.
Van Wyk case: Who benefitted?
Estate Wege case: ordinary sense of the word no value = no benefit
Is proving this possible based on facts:
Quite unlikely that her assets > liabilities.
, - Due to the short period of time between the disposition and the
sequestration, it is unlikely that the beneficiary will be able to prove that
her assets exceeded her liabilities.
Insolvent received no value for disposition
- S26(1): empowers court to set aside a disposition made of no value.
- Value = a benefit received or promised for disposition
- Does the R10 000 payment by beneficiary amount to a benefit received as
quid pro quo?
1. Value must be adequate: insufficient vs normal value
Insufficient: less than actual value of the property value that
would have been agreed upon by two independent parties
concluding this transaction, the market value or what an
independent valuator would have valued the property as more.
Normal value: Not adequate. Amounts to a pittance of the actual
value of the property.
WHEN WAS DISPOSITION MADE?
o S26(1)(a): if disposition was made more than 2 years
before sequestration and liabilities>assets directly after
burden of proof is on TRUSTEE. (difficult burden)
o S26(1)(b): disposition made within 2 years of
sequestration, court must set aside.
- Most likely: Nominal because receiving R10 000 for a R2 000 000
property means that the insolvent received less than a 1% of the actual
value of the property. Argument weighs more heavily in favour of trustee.
- Strydom case: consider what a disposition of no value.
S 27 Exceptions: Requirements : ANC
S 27(1)-(2): A settlement of property in an antenuptial contract by a spouse on
his spouse or any child to be born of the marriage is not liable to be set aside
as a disposition without value on the spouse’s insolvency if certain
requirements are met
1. Immediate benefit – completed within 3 months of date of marriage
, - Married = 28/02/2017
- Disposition = 20/05/2017
- Requirement met. ✅
- Enyati: S27 defence case
2. Bona Fide
- An absence of any intention to prejudice creditors in obtaining payment of
their claims or prefer one creditor above the another
- Difficult to prove. (needs to show there was intention to prejudice)
- Possible argument:
o Assumptions: as to why a person would transfer ownership to their
spouse based on the timing
o Marriage, signing and transfer all very close to each other may
indicate that the disposition was not made in good faith
3. ANC registered at least 2 years before the sequestration of the estate
1. ANC registered = 26/02/2017
2. Sequestration = 30/06/2017
3. Requirement not met ✅
b. Beneficiary doesn’t have defence
BUT Prescription
c. Prescription Act applies to the claim made by Trustee
d. When does it start to run:
o The date on which the trustee is appointed falls within 3 years of
when they go to court to set aside the disposition.
o But the date on which the estate sequestrated is more than 3 years
from the date on which the trustee goes to court to set aside the
disposition
o Enyati case: S27 defence could not applied because benefit was only
received later. Yeas.
e. Duet & Magnum v Koster
Question: whether a claim by the trustee to set aside an
impeachable disposition can prescribe?
