STUDY UNIT 10

Question 1

What is the different types of creditors/ what is the ranking of creditors?

Answer 1

1) preferent creditors
2) secured creditors
3) concurrent creditors

Question 2

Describe a preferent creditor

Answer 2

• Section 2 preference means right to payment of claim out of assets in preference to other claims
• can only be paid from unsecured assets= unsecured creditor
  -ranks above concurrent creditor
• if the statutory maximum is met, the preferred creditors form part of concurrent creditors and gets paid from the residue

Question 3

Describe a secured creditor

Answer 3

-holds security for claims
- gets paid out of proceeds of secured asset
- if proceeds does not cover entire claim, the balance then forms part of concurrent creditors

Question 4

Describe a concurrent creditor

Answer 4

• does not have advantage above other creditors
• “ordinary creditors”
• gets paid from residue after all other creditors have been paid
• calculation = free residue/total amount of concurrent creditor’s claim = portion of cent per rand
  concurrent creditor’s claim x portion of cent per rand = dividend/ claim that gets paid out

Question 5

Name the different types of security

Answer 5

1) special mortage
2) landlord’s legal hypothec
3) pledge
4) right of retention - enrichment liens + debtor and creditor liens
5) instalment agreement hypothec

Question 6

Explain the ranking of claims

Answer 6

The ranking of claims is in what order the claims will be paid out.
1) encumbered assets (bank is restricted from taking or using these assets)
encumbered assets can be divided into initial costs and secured claims.
Initial costs are the costs that needs to be handled first for example the trustee’s remuneration or maintenance of the asset.
Secured claims is the type of security which can be divided into immovable property and moveable property.
2) unencumbered assets ( free residue, creditors can’t claim these assets from trustee)
These are: 2.1) funeral expenses
2.2) deathbed expenses
2.3) cost of sequestration
2.4) cost of execution
2.5) salaries/remuneration of employees
2.6) statutory obligations
2.7) income tax
2.8) claims secured by general and special bonds
2.9) claims secured by concurrent creditors

Question 7

Discuss the realisation of assets

Answer 7

• trustee must realise assets to benefit of creditor
• trustee must dispose of estate assets for value
• creditors must authorise trustee to dispose of assets without receiving value in return
• Janse van Rensburg v Muller

Question 8

Name assets that may not be realised by the trustee

Answer 8

• wearing apparel and bedding
• household furniture and tools
• essential means of subsistence
  HOWEVER
• insolvent may waive this right and the Master may determine portion that may be retained by insolvent

Question 9

Manner of realisation

Answer 9

• trustee must realise assets as directed by creditor
• no direction given by end of 2nd meeting = sale by public auction/tender

Question 10

Requirements for sale to public auction/tender

Answer 10

1) notice in gazette
2) notice must describe asset
3) Section 82 = directions in which a public tender must be conducted

Question 11

Sale in contravention of Act

Answer 11

• buyer in good faith = valid sale
• trustee is liable for x2 amount of any loss due to wrongful action

Question 12

Purchase of assets by trustee

Answer 12

• trustee may not acquire unless confirmed by court
• Estate Jamodien v Registrat of Deeds

Question 13

Sale of assets before second meeting

Answer 13

• trustee must wait for directions from creditor
• EXCEPTION = trustee is satisfied and makes recommendations in writing to Master, with reasons
• Master may authorise
• if property is subject to right of preference, Master requires consent from preferred creditor.