Disposition

Question 1

Pre- sequestration dispositions

Answer 1

Voidable contracts:
-A trustee in certain circumstances can request for a contract that is deemed valid to be void due to it’s effect on creditors as a whole

Question 2

Disposition without value:

Answer 2

Any dispositions made without value more than 2 years before sequestration will be valid UNLESS the TRUSTEE can prove that your liabilities exceeded your assets immediately after the disposition was made.

Exception:
Requirements:

1. Made in terms of ante-nuptial contract
2. Within 3 months after marriage
3. Disposition was bona fide (there was no intention to disadvantage creditors with this disposition).
4. Ante-nuptial contract registered 2+ years before sequestration

Question 3

Voidable preference: Debtor pays/compensates one creditor just before sequestration, which PREFERS one creditor above the rest.

Answer 3

Requirements:

1. Disposition must occur within 6 months before sequestration.
2. Consequently, one creditor is preferred above the rest.
3. Liabilities exceed assets directly thereafter.

Exception:
- The beneficiary may retain the disposition if he can prove that the disposition was in the ordinary/normal course of business(Objective test) and that the insolvent did not intend to prefer him above the other creditors(Subjective test).

Question 4

Undue preference

Answer 4

1. Undue preference
   - During factual insolvency
   - Burden of proof: trustee.
   - Requirements:
2. Factually insolvent when the disposition was made.
3. Preferred 1 creditor above the rest.
4. Intention to prefer 1 creditor above the rest and the debtor’s expected sequestration.

Question 5

Collusion: Fraud

Answer 5

• Section 31: A court may set aside a disposition if the insolvent colluded with another person to dispose of the insolvent’s assets that caused prejudice to the creditors, or one creditor was preferred.
• Burden of proof: trustee
• Requirements: Trustee must prove:
  1. Both parties were aware of the debtor’s insolvency
  2. The disposition caused prejudice to the creditors or that one was preferred above the others.
  3. Third party with whom the debtor has a familiar relationship worked together to dispose of assets.

The third party that is colluding with the insolvent party faces certain consequences.

1. He must compensate for any damage that the insolvent estate suffered, for example, in the example we did where 50% of the house was transferred to the spouse’s name – the cost of the transfer will have to be compensated to the insolvent estate.
2. A fine could also have been imposed on the third party.
3. If the third party is a creditor, he will lose the claim he has against the insolvent estate.

Question 6

Voidable disposal of business:

Answer 6

• Disposal of business/assets/goodwill OTHER THAN in the normal course of that business.
• Trader must publish a notice in the Government Gazette and in 2 Afrikaans and 2 English newspapers.

Consequences if no notice was given:
- If he does not do it then the disposal of the business, assets, or goodwill will be void for 6 months following thereon.
- If the dealer’s estate is sequestrated within 6 months thereafter, the disposition will also be void against the trustee.
- If it took place within 6 months of sequestration, then the trustee can have the disposition put aside.