6) Impeachable Transactions

Question 1

to whom do impeachable transactions apply?

Answer 1

both NPs and JPs

Question 2

how does the Act protect creditors from impeachable transactions?

Answer 2

allows the trustee to set the transactions aside that occurred before seq/liq – will undo the transaction and bring the asset/monetary value thereof back into the estate for creditor benefit

Question 3

what is section 26?

Answer 3

dispositions with no value

Question 4

what are the requirements dispositions with no value?

Answer 4

a) disposition of property by debtor
b) disposition is made without value (or nominal value)
c) liabilities exceed assets

Question 5

what is the nominal value?

Answer 5

a very low value, little to nothing

Question 6

what is an example of a disposition with no value?

Answer 6

donations, sales, transfers

Question 7

when is the onus on the trustee for a disposition with no value?

Answer 7

if the disposition was made more than 2yrs before date of seq/liq, trustee must prove that immediately after disposition, A<L

Question 8

when is the onus on the person who benefitted for a disposition with no value?

Answer 8

if less than 2 years before; must prove A>L immediately after disposition

Question 9

what is section 27?

Answer 9

dispositions under an antenuptial contract

Question 10

what happens for dispositions under an antenuptial contract?

Answer 10

immediate benefit given ito. antenuptial contract in good faith from spouse to another shall not be set aside as a disposal without value unless spouse is seq <2 years of registering the ANC

Question 11

what are the req for the solvent spouse to appeal s27?

Answer 11

a) immediate benefit (<3 months after marriage it was completed)
b) disp must have been in good faith
c) ANC registered at least 2yrs before seq

Question 12

what is section 29?

Answer 12

voidable preferences

Question 13

what happens for voidable preferences?

Answer 13

the court may set aside a disposition made by insolvent if the trustee can prove all the requirements

Question 14

what are the requirements for voidable preferences?

Answer 14

a) disposition of property by debtor to creditor
b) took place less than 6 months before seq
c) effect of disp was to prefer one creditor over another
d) immediately after disp, L>A

Question 15

what does the s29 proviso say?

Answer 15

the court cannot set aside the disp if the person in whose favor it was made can prove:
- done in ordinary course of business
- not intended to prefer creditor

Question 16

what is s30?

Answer 16

undue preferences

Question 17

what happens with undue preferences?

Answer 17

if debtor makes a disp of his property to a creditor at a time where L>A, with the intention of preferring a creditor to another, and the estate is later seq, the court may set aside the disp

Question 18

what are the requirements of undue preferences?

Answer 18

all elements must be met

Question 19

what are some of the diffs between s29 and s30?

Answer 19

• s30 has no time limit
• s29 = immediately after disp, L>A; s30 = at the time when L>A
• s29 = trustee to prove effect; s30 = intention
• s30 = no proviso

Question 20

what is the effect on the creditor’s claim for s29 and 30?

Answer 20

where the disposition is set aside, the claim is restored and will rank according to concursus creditorum

Question 21

what is s31?

Answer 21

collusive dealings

Question 22

what are the requirements for collusive dealings?

Answer 22

a) disp made of property before seq
b) disp was in collusion with another person (not necessarily creditor)
c) disp has effect of preferring a creditor

Question 23

what is collusion?

Answer 23

the debtor and another person conspire to prejudice the creditors

Question 24

which section between 29, 30 and 31 would the trustee choose?

Answer 24

• 31, as the person who benefitted has to pay damages to the estate and a penalty
• if other party is creditor, they will have to forfeit their claim

Question 25

what is actio pauliana?

Answer 25

a common law remedy which is used to set aside a disposition made in a collusive manner with another person and which has the effect of preferring a creditor; no penalties imposed

Question 26

what is section 34?

Answer 26

voidable sale of a business

Question 27

what is a voidable sale of a business?

Answer 27

if a trader transfers:
- a business belonging to him, OR
- any goods / property forming part of the business (except in ordinary course)
- goodwill of the business
without advertising the transfer in a newpaper / Gazette

Question 28

against whom shall sales of a business be voidable?

Answer 28

creditors or the trustee

Question 29

how shall sales of a business be voidable against creditors?

Answer 29

• for a period of 6months after transfer – never happened in eyes of creditors so they can claim their debts during those 6 months and execute against the business if not paid
• person to whom business is sold can only claim damages for their loss

Question 30

how shall sales of a business be voidable against the trustee?

Answer 30

if the company is liquidated 6 months after transfer – the trustee can reclaim the business into the estate and sale would be void; buyer will have concurrent claim for amount paid

Question 31

what is the relationship between s21, s26 and s27?

Answer 31

if spouse buys house for spouse under ANC, will technically be a donation for s26 purposes. s27 will protect this house and allow spouse to keep house