What is the effect of a sequestration order?
The Act provides that the effect of a sequestration order (including a provisional order) is to divest the insolvent of his ESTATE and vest it in the MASTER and later in the TRUSTEE once he has been appointed.
What is the function of the trustee in the vesting of the assets of the insolvent?
The function of the trustee is to collect assets in the estate, realize them and distribute the proceeds among creditors in order of preference set by the Insolvency Act.
How long does the estate remain vested in the trustee?
The estate remains vested in the trustee until:
1. The Discharge (fulfilling) of the sequestration order by the court
- When creditors accept the the offer of composition made by the insolvent which provides that the insolvent’s property will be restored to him
- An order of the insolvent’s rehabilitation is granted in terms of section 124 (3).
Which property falls into the estate?
- All property of the insolvent at the DATE OF SEQUESTRATION including property (or its proceeds) in the hands of the SHERIFF under a WRIT OF ATTACHMENT;
- all property which the insolvent ACQUIRES or which ACCRUES to him DURING THE SEQUESTRATION.
This includes any property that the insolvent RECOVERS for the BENEFIT of the estate where the trustee fails to take necessary action. (giving friend a car example)
What is “property” under section 2 of the insolvency act?
Property means both movable and immovable property wherever situated in the Republic, and this includes contigent interests in the property, except for contigent interests of the fideicommissary heir or legatee.
Is property OUTSIDE of the Republic included in the estate?
As a general rule, property that is outside of the republic is NOT included in the estate. However, the exception is that:
Movable property situated in a foreign jurisdiction, that the insolvent owns WHEN HIS ESTATE IS SEQUESTRATED, or that he ACQUIRES AFTERWARD DURING SEQUESTRATION, provided that at either of the relevant times HE IS DOMICILED IN THE JURISDICTIONAL AREA OF THE COURT THAT SEQUESTRATES THE ESTATE.
Is inherited property part of the estate?
Property inherited by a spouse to a marriage in community of property forms part of the insolvent estate even if the will states differently.
-Property inherited by an insolvent, DURING HIS INSOLVENCY, falls part of the insolvent estate notwithstanding a contrary to the testator’s will.
Which property does not form part of the estate?
-Wearing appreal, bedding, household furniture, tools
-Remuneration for work done
-Pension
- Compensation for damages due to defamation or personal injury
-compensation for occupational injuries or diseases
-Unemployment insurance benefits
-insurance policies
-share in accrual
-trust property/funds
What is the combined effect of the two provisions of section 23(9) and 23(5)?
23(9)= insolvent may recover money in his own name if the money is reward/remuneration for services rendered or work done by him (his own benefit)
23(5)= contribution claimable by the trustee from the insolvent’s employment/occupation/profession
The combined effect of these two provisions is that the earnings which an insolvent receives for work done remain vested in him, UNTIL THE MASTER (on application by the trustee) has expressed an opinion that a portion of the earnings is unnecessary for the support of the insolvent and his dependents. So only if the Master expresses this opinion, then the insolvent becomes divested of the relevant portion of these earnings in favour of the trustee.
Discuss policies covering liability to third party under section 156
Under section 156, third parties are entitled to recover directly from the insurer the amount of the insolvent’s liability, but not more than the maximum amount for which the insurer has bound himself to indemnify.
This section only applies if the insolvent insured himself against liability to third persons and also if another person took out a policy extending this cover to the insolvent.
This section is restricted to insurance against liability to third party under a policy of indemnity insurance. (does not apply if the policy obliges the insurer to compensate the insolvent only for damage to property).
it does not give third party greater rights against the insurer than the insolvent had under the policy. Insurer may refuse to compensate third party beyond the maximum amount that is set in the policy or they may resist to pay bcs of a clause that makes the contract unenforceable.
This sectioon does not transfer rights of the insolvent to the third party. instead, it creates a new legal cause of action for the third party and the insurer.
Can an insolvent dispose of his estate?
Insolvent cannot dispose of property that forms part of the insolvent estate.
What is the remedy if the insolvent disposes his estate? what can the trustee do/
Section 25(4) states that if an insolvent unlawfully disposes of immovable property or a right to immovable property which forms part of the insolvent estate, the trustee may, notwithstanding the provisions of section 25(3) recover compensation in respect of the property or rights thereof.
Section 25(4) states that the trustee is entitled to recover from:
1, the insolvent personally
2. a person who acquired the property or right knowingly that it was part of an insolvent estate
3. a person who did not know that the property/right formed part of the insolvent estate, but who acquired it without giving sufficient value in return.
What possible remedies can the trustee take to recover property which was unlawfully disposed by the insolvent?
The trustee can:
1. Claim return of the property or the right to the property
2. Claim compensation
What is the general rule of the expiry of the caveat ito section 25(3)? does this mean property is revested to the insolvent?
After the expiry of every caveat entered in respect of the property of an insolvent, any act of registration in respect of such property brought about by him shall be valid in spite of the fact that the property formed part of his insolvent estate.
The expiry of a caveat does not revest the insolvent of his estate. Section 25(4) empowers the trustee to recover the property or rights to the immovables.
What is a caveat?
A caveat is entered by the Registrar of Deeds to prevent insolvent from transferring the property or registering the property rights over. It is a warning enforced to ensure that property is not disposed from the insolvent estate.
