6) Impeachable Transactions Flashcards
to whom do impeachable transactions apply?
both NPs and JPs
how does the Act protect creditors from impeachable transactions?
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
what is section 26?
dispositions with no value
what are the requirements dispositions with no value?
a) disposition of property by debtor
b) disposition is made without value (or nominal value)
c) liabilities exceed assets
what is the nominal value?
a very low value, little to nothing
what is an example of a disposition with no value?
donations, sales, transfers
when is the onus on the trustee for a disposition with no value?
if the disposition was made more than 2yrs before date of seq/liq, trustee must prove that immediately after disposition, A<L
when is the onus on the person who benefitted for a disposition with no value?
if less than 2 years before; must prove A>L immediately after disposition
what is section 27?
dispositions under an antenuptial contract
what happens for dispositions under an antenuptial contract?
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
what are the req for the solvent spouse to appeal s27?
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
what is section 29?
voidable preferences
what happens for voidable preferences?
the court may set aside a disposition made by insolvent if the trustee can prove all the requirements
what are the requirements for voidable preferences?
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
what does the s29 proviso say?
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
what is s30?
undue preferences
what happens with undue preferences?
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
what are the requirements of undue preferences?
all elements must be met
what are some of the diffs between s29 and s30?
- 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
what is the effect on the creditor’s claim for s29 and 30?
where the disposition is set aside, the claim is restored and will rank according to concursus creditorum
what is s31?
collusive dealings
what are the requirements for collusive dealings?
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
what is collusion?
the debtor and another person conspire to prejudice the creditors
which section between 29, 30 and 31 would the trustee choose?
- 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
what is actio pauliana?
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
what is section 34?
voidable sale of a business
what is a voidable sale of a business?
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
against whom shall sales of a business be voidable?
creditors or the trustee
how shall sales of a business be voidable against creditors?
- 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
how shall sales of a business be voidable against the trustee?
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
what is the relationship between s21, s26 and s27?
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
