ADMINISTRATION OF INSOLVENT

ESTATE PART 3

Mr. S Ngubane, Lecturer

UKZN, School of Law

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INTERROGATION OF THE INSOLVENT & WITNESSES

Interrogation may take place to help the trustee & creditors to investigate the insolvent's
affairs & ascertain his true financial position.
When & where can interrogation may take place:
• (a) at any meeting of creditors, see s 65(1); e.g at a special meeting (Lubbe v Estate Lubbe
1935 CPD 299 or at a general meeting (Essop v The Master & another 1983 (1) SA 926 (C));
apart from the insolvent, witnesses may be called for interrogation (Marques & Another v
De Villiers & another NNO 1990 (4) SA 415 (W)).
• The persons who may be interrogated are: (a) the insolvent; (b) any other person present at
the meeting, who has been, or who might have been, summoned to appear for interrogation
in terms of s 64(2).
• In terms of s 64(2), a presiding officer at any meeting of creditors may summon any of the
following persons for interrogation:
• (a) any person who is known, or on reasonable grounds believed, to possess or to have
been in possession of property of the insolvent prior to the sequestration of his estate, or
which belongs, or belonged to the insolvent estate or to the insolvent’s spouse.
• (b) any person who is known, or on reasonable grounds believed, to be indebted to the
insolvent’s estate.
• (c) any person who, in the opinion of the presiding officer, may be able to give material
information concerning the insolvent or his affairs (before or after sequestration), any
property belonging to the estate, or the business, affairs, or property of the insolvent’s
spouse.

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INTEROGATION OF THE INSOLVENT &
WITNESSES

• Interrogation may be conducted by: (a) the trustee; (b) any creditor who has proved a claim
against the insolvent estate; (c) the presiding officer; (d) an agent of the of any of the
parties involved, see 65(1).
• Interrogation by the Master:
• A master may, whenever, he is of the opinion that the insolvent, trustee, or any other
persons is able to give relevant information concerning the insolvent, make an inquiry in
terms of s 152(2).
• A master may summon the party concerned to appear before him or a magistrate to provide
the required information, s 152(2).
• A master may interrogate any party concerned any time after sequestration (Appleson v
The Master & others 1951 (3) SA 141 (T) & before rehabilitation of the insolvent.
• It needs not be shown that an interrogation under s 64 or s 65 is impossible (Cools v The
Master & others 1998 (2) SA 212 (C) 224-225. The Master may administer an oath to the
party summoned & then the Master and/or the trustee may interrogate him, s 152(4) & (3).
• Nature & scope of the Master's inquiry under s 152: (a) the inquiry must be purely
investigative in nature (Podlas v Cohen & Bryden NNO & others 1994 (4) SA 662 (T) 675); (b)
inquiry must not adversely affect anyone's rights & the presiding officer need not apply the
audi alteram partem rule; (c) presiding officer must observe the dictates of procedural
fairness but may not allow the examinee access to the information on which the inquiry
was based upon(Strauss & others v The Master & others NNO 2001 (1) SA 649 (T) 662-663).

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INTEROGATION OF THE INSOLVENT &
WITNESSES

Nature & scope of the Master's inquiry under s 152:

• Interrogation by the Master: (d) inquiry need not follow any specific procedure & the
presiding officer is not compelled to write any notes or keep a record of the inquiry or to
disclose any informal notes he might have for the proceedings (Stadler en andere v
Wessels NO en andere 2000 (4) SA 544 (O) 554.
• (e) a person other than a trustee is not entitled to representation at the inquiry. However, a
presiding officer who is being interrogated must be allowed to have legal representation
(Hoskins & another v Van der Merwe & another NNO 1992 (1) SA 920 (W).
• The court's power of review in terms of s 151 is very limited but the court may interfere with
the Master's decision to hold an inquiry if he acted mala fide, see Strauss & others v The
Master & others NNO 2001 (1) SA 649 (T) 656-657.
• Consequences of failure to attend or submit to interrogation:
• (a) if a person who is duly summoned fails to appear or attend or remain in attendance at a
creditor's meeting, the presiding officer may issue a warrant of arrest against him (s 66(1);
(b) unless he provides a reasonable justification, the presiding officer may commit him to
prison (s 66(2)).
• (c) if a person who is duly summoned appears but fails to produce the required documents
or answer questions or refuses to be sworn by the presiding officer, the presiding officer
may commit him to prison (s 66(3)).
• (d) if a party fails to fulfil an agreed undertaking, the presiding officer may commit him to
prison (s 66(4); (e) presiding officer is also immune just like judicial officer, see s 66(6).

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INTEROGATION OF THE INSOLVENT &
WITNESSES

Consequences for failure to attend or submit to interrogation:

• De Lange v Smuts NO & others 1998 (3) SA 785 (CC) – held that s 66(3) is unconstitutional
to the extent it empowers a presiding officer who is not a judicial officer in terms of the
constitution because it violates s 12(1)(b) of the constitution which provides for the right
not to be detained without a fair trial.
• Students must study the procedure during an interrogation in terms of s 65(1) [e.g
proceedings must be done in accordance with fundamental principles of justice; presiding
officer must call & administer oath to the insolvent or witnesses; statement of persons
interrogated must be recorded, s 65(3); persons called to give evidence may be assisted by
an attorney etc].
• Privilege:
• (a) applies when giving evidence, or required documents, s 65(2); (b) evidence given at an
interrogation is admissible in any proceedings against the person who gave such evidence
(s 65(5); (c) person interrogated may not refuse to answer a question on basis that the
answer will incriminate him, or may be prejudiced (s 65(2)), see Wessels NO v Van Tonder
en ’n ander 1997 (1) SA 616 (O) 621; (d) a banker of the insolvent or his spouse must, if
summoned to do so, produce all cheques in his possession which were with drawn by the
insolvent or his spouse or any other relevant information (s 65(2)).
• However, the presiding officer must hold the incriminating evidence or part of any
proceedings in camera and prohibit the publication of any incriminating evidence (s 65(2A)
(a) & no such evidence may be admitted in criminal proceedings except for perjury related
offences.

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REALISATION OF THE ESTATE ASSETS

Having taken charge of the estate assets, the trustee must realise them for the benefit of
creditors.
Types of creditors:
(a)concurrent creditors – does not enjoy any advantage over other creditors of the
insolvent. They are paid out of the free residue (portion of the estate which is not
subject to any of the preference by reason of any special mortgage, legal hypothec,
pledge or right of retention (s 2), after the any preferent creditors have been paid.
Concurrent creditors all rank equally and they are paid equally from the residue.

•(b) a secured creditor holds security for his claim in the form of a special mortgage,
pledge or right of retention (s 2). He is paid out of the proceeds of the property subject
to the security. (Singer NO v The Master & another 1996 (2) SA 133 (A). In terms of s
89(2), a secured creditor may choose to rely exclusively on his security.

•(c) preferent creditors – may be used to refer to any creditor who is entitled to receive
payment before other creditors, see s 2. Usually reserved for a creditor whose claim is
not secured but nevertheless ranks above the claims of concurrent creditors. Preferent
creditors may be given with regard to (a) funeral & death bed expenses (s 96); costs of
execution (s 98); salary or remuneration of employees (s 98A); statutory obligations (s
99); income tax (s 101; claims regarding general bonds or certain special bonds (s 102).

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REALISATION OF THE ESTATE ASSETS

• Types of security conferring preference:

• (a) special mortgage, see s 2 (mortgage bond hypothecating immovable property;
notarial bond hypothecating specially described movable property in terms of s 1 of
the Security by Means of Movable Property Act 57 of 1993);
• (b) landlord's legal hypothec (eg a landlord who is owed rent has a legal hypothec
over the leasee's movable property on his leased premises (s 85(2)).
• (c) pledge – usually a valid pledge occurs when there is delivery of movable property
to a creditor on the understanding that it will be used retained by him until his claim
has been satisfied (see Bank of Lisborn & SA Ltd v The Master 1987 (1) SA 276 (A).
• (d) right of retention – a party has a right of retention or lien over specific property
belonging to another if performed or incurred expenses in respect of the property.
There are two types of liens (1) enrichment liens; (2) debtor & creditor liens.
• Ranking of claims (order in which various claims may be brought against the
insolvent's estate) (a) Encumbered assets (initial costs, s 89(1); secured claims, s
95(1); immovable & movable property) (b) Unencumbered assets or free residue
(funeral expenses, s 96(1); death-bed expenses (s 96(2); costs of sequestration (s
97(1) & (2); costs of execution (s 98(1); salary of employees s 98A(1)(a)(i); statutory
obligations, s 99(1); concurrent creditor's claims, s 103(1)(a) & claims secured by
general and special bond).

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Thank You!!!

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