Chapter 1: Introduction

1.5 The master

 A Master is appointed in terms of the Administration of Estates Act 66 of 1965 to each of

the areas of the Provincial Divisions of the High Court. The Master has a pivotal role to play
in insolvency matters, as will be seen from his many powers and duties flowing from the
Act.
 One of the most important functions which the Master exercises is the custody of all
documents relating to insolvent estates (s 154(1)).
 In Ex parte The Master of the High Court South Africa (North Gauteng) 2011 (5) SA 311
(GNP), Bertelsmann J remarked (322):
‘Every stage of the administration of insolvent estates and companies and close
corporations under winding-up, from the launching of the original sequestration or
liquidation application to the rehabilitation of the insolvent or the deregistration of the
corporate entity, is controlled by the Master’s office. Its duties include many specialised
functions and administrative tasks that can only be carried out efficiently by a dedicated
organisation that exists specifically for that purpose.’
 For the performance of various functions the Master is entitled to charge prescribed fees.
These are payable to the Department of Justice and Constitutional Development, either at a
magistrate’s court or directly into an appropriate bank account of the Department (s 153(1);
 The Master is a ‘creature of statute’ and, as such, has only the powers granted to him by
the legislature. He cannot act unless empowered to do so by statute, either expressly or by
necessary implication. He is not a judicial officer, and so cannot issue court orders or
judgments.
 In terms of s 151 of the Insolvency Act, any person aggrieved by a decision, ruling, order, or
taxation of the Master may bring it under review by the court and, to that end, may apply to
the court, after notice to the Master. To be reviewable in terms of the section, the decision,
ruling etc, must be final in effect (not susceptible to alteration) and definitive of rights;
moreover, it must have the effect of disposing of at least a substantial portion of the relief
claimed. A person is ‘aggrieved’ for these purposes if his legal rights have been infringed or
if he has a legal grievance.
 The right of review conferred by the section is not limited to the party against whom the
Master’s decision or ruling was pronounced nor is it limited to proved creditors. Even the
trustee of the estate may bring review proceedings as a ‘person aggrieved.
 The type of review envisaged by the section is one in which the court has powers of both
appeal and review with the additional power, if required, of receiving new evidence and
entering into and deciding the whole matter afresh.
  The court is not restricted in exercising its powers to cases where some irregularity or
illegality has occurred. This does not mean, however, that the court’s powers under the
section are unlimited and that it is free to disregard the factual material before the Master or
the Master’s reasoning. It is only if the Master has erred or misdirected himself in a material
respect, based on what was placed before him at the time, that the court can intervene and
exercise its powers under s 151.
Chapter 2 Voluntary surrender
2.4.2 Curator bonis may be appointed
 Despite the publication of a notice of surrender, the debtor is still at liberty to deal with his
property as he chooses. He may, for instance, sell it or pass a mortgage bond over it. As a
safeguard against the debtor’s dissipating his assets after publishing a notice of surrender,
the Master may appoint a curator bonis to the debtor’s estate (s 5(2)).
 A curator bonis is a legal representative appointed to manage another person’s finances,
property, or estate. DEFINITION
 The appointment must be made in accordance with policy determined by the
Minister. The curator bonis is obliged immediately to take the estate into his
custody and assume control of any business or undertaking of the debtor, as
the Master may direct . The estate remains vested in the debtor because the
curator bonis is only a caretaker.
 The curator bonis must open a bank account and is subject to the same
provisions in this regard as a trustee.
 The curator bonis is entitled to reasonable remuneration for his services, taxed
by the Master (s 63(1)). The remuneration forms part of the costs of
sequestration (s 97(2)(c)).
4.4 Holding office
An unrehabilitated insolvent is disqualified from holding a large number of positions
—so many, in fact, that only a few can be mentioned here:
 He cannot be appointed as a trustee in an insolvent estate (s 55(a) of the
Insolvency Act), and if he is already a trustee when his estate is sequestrated,
he must vacate his office (s 58(a)). Nor may he be a liquidator of a company or
a close corporation (s 372(a) of the Companies Act 61 of 1973 and ss 372 and
373 of the 1973 Companies Act, read with s 66(1) of the Close Corporations
Act 69 of 1984, read with Schedule 5, item 9 of the Companies Act 71 of
2008). The insolvent is also disqualified from being a business rescue
practitioner (s 138(1)(d) of the 2008 Companies Act).
 He is not capable of being a member of the National Assembly, the National
Council of Provinces, a provincial legislature or a municipal council (ss 47(1)
(c), 62, 106(1)(c) and 158(1)(c) of the Constitution of the Republic of South
Africa, 1996), or of the National House of Traditional Leaders (s 5(c) of the
National House of Traditional Leaders Act 22 of 2009).
 Unless granted an exemption by the court, he is disqualified from being a
company director (s 69(8)(b) (i) and (11) of the Companies Act 71 of 2008).
Under the previous 1973 Companies Act, the courts allowed an
unrehabilitated insolvent to become a company director only if there was no
danger to the private interests of the members or to the public who might be
 injured by dishonest trading One presumes that the same rule will apply under
the 2008 Companies Act.
 Save with the authority of the court, he cannot take part in the management of
a close corporation (s 47(1)(b)(i) of the Close Corporations Act 69 of 1984).
 He may not be a director of a co-operative (s 33(2)(b) of the Co-operatives Act
14 of 2005) or a mutual bank (s 38(b)(i) of the Mutual Banks Act 124 of 1993).
 He may not be registered as a credit provider, debt counsellor or payment
distribution agent (s 46(2) of the National Credit Act 34 of 2005).
 He may not sit on the board of the Land and Agricultural Development Bank of
South Africa (ss 1 and 10(e) of the Land and Agricultural Development Bank
Act 15 of 2002).
 He may not be a member of the Legal Practice Council (ss 8(2)(a) and 11), the
Legal Practitioners’ Fidelit y Fund Board (s 64(2)) or the National Forum on the
Legal Profession (s 99(2)(a) of the Legal Practice Act 28 of 2014). In his
application for enrolment as a legal practitioner (s 95(1)(k) and (t) read with ss
24(2)(d) , 30(1)(a) and (b)(iii) of that Act), his supporting affidavit must, among
other things, include confirmation that he is a fit and proper person to be
admitted, including a statement about whether his estate has been
sequestrated, provisionally or finally , or whether there is any application for
the sequestration of his estate which is pending; and where his estate has
been sequestrated, he must state whether he has been rehabilitated (Rule
17.2.14.3 of the South African Legal Practice Council, Government Gazette
No. 4178177 of 20 July 2018). If he is a legal practitioner who handles trust
moneys (s 84 of the Legal Practice Act), further rules apply if he becomes
insolvent (ss 90(1)(b) and 84(1)). Then the Legal Practice Council, the Legal
Practitioners’ Fidelity Fund Board or any person having an interest in the trust
account of that legal practitioner or trust account practice may apply to the
High Court for the appointment of a curator bonis (s 90(1)). The High Court
appoints the curator bonis to control and manage the legal practitioner’s
account, with any rights, powers and functions as the court may consider fit.
 If he is a property practitioner and commits an act of insolvency or is insolvent,
he is immediately disqualified from holding a Fidelity Fund certificate (s 59(1)
(a)–(b) of the Property Practitioners Act 22 of 2019, with effect from 1
February 2022). (The Property Practitioners Act repealed the Estate Agency
Affairs Act 112 of 1976 (s 76 Page 84 of the 2019 Act), and estate agents
have undergone a name change.) He must then take the required steps within
30 days (s 59(1)(i)–(vii)). These steps include informing the necessary
persons, stopping work as a property practitioner, handing over the
administration of his trust account to the Property Practitioners Regulatory
Authority, and seeing to it that his outstanding matters in consultation with any
affected person are taken over by another property practitioner.
 He cannot be a registered manufacturer or distributor of liquor (s 11(2)(b) of
the Liquor Act 59 of 2003). The trustee of his insolvent estate may continue
the registered activities in the name of the estate or propose to the Minister
that the registration be transferred to another qualified person (s 17(1) and (2);
s 1 sv ‘Minister’).
  He cannot act as a sheriff because, as an insolvent, he cannot be issued a
Fidelity Fund certificate (ss 30(1) (a) and 33(1)(c) of the Sheriffs Act 90 of
1986). Nor may he register as a debt collector (s 10(1)(a)(v) of the Debt
Collectors Act 114 of 1998).
 He cannot be a dealer in second-hand goods, a pawnbroker or a scrap-metal
dealer (ss 1 ‘dealer’ and 14(1)(c) of the Second-Hand Goods Act 6 of 2009).
 The sequestration of his estate does not automatically terminate his office as
the executor of a deceased estate, provided he can otherwise perform his
duties (s 23 of the Administration of Estates Act 66 of 1965; Trustees of Wright
v Executors of Wright (1872) 2 Roscoe 84). The same applies to his tutorship
or curatorship (De Villiers, Tutor v Stuckeris (1829) 1 Menz 377). But he faces
the termination of his office if he does not lodge sufficient security with the
Master on written notice (s 77(3) of the Administration of Estates Act).
 If he is the trustee of a trust, the Master may remove him from office (s 20(2)
(c) of the Trust Propert y Control Act 57 of 1988; cf Sinclair v Meintjes (1874) 4
Buch 40). Sequestration of his estate will, in an y event, terminate his
trusteeship if the trust deed contains a provision to this effect.
 In total, he may not be a member of 133 statutory councils, boards or bodies .
 These disqualifications and restrictions may need to be reconsidered in the
light of the constitutional right to freedom of trade, occupation and profession,
under which ‘[e]very citizen has the right to choose their trade, occupation or
profession freely’ (s 22 of the Constitution of the Republic of South Africa,
1996). This broad provision is limited, though, by the words: ‘The practice of a
trade, occupation or profession may be regulated by law’ (ibid). If a relevant
disqualification or restriction is challenged, conceivably the justification under s
36 of the Constitution will be that the provision is intended to protect the public
from dealing with insolvents. The underlying attitude is that insolvents are
considered untrustworthy. This prejudice may, perhaps, be softened by
consulting the corresponding position in some other legal
Chapter 4: The legal position of the insolvent
INTRODUCTION

 Sequestration of a debtor’s estate imposes on him a form of reduction in

status (capitis diminutio) (Spencer v Standard Building Society 1931 TPD 481
484), which limits his capacity to contract, earn a living, litigate and hold office.
4.1 Contracting
 The Insolvency Act does not deprive the debtor of his contractual capacity
generally (MacKay v Fey NO 2006 (3) SA 182 (SCA)). So he retains a general
competency to make binding agreements (cf s 23(2)). At the same time, to
protect creditors, the Act imposes certain restrictions on the debtor’s capacity
to contract.
4.1.1 Prohibited contracts
 The debtor may not make a contract which purports to dispose of any property
of his insolvent estate (s 23(2)). And without the trustee’s written consent, the
 debtor may not conclude a contract that adversely affects (or probably will
adversely affect) his estate or any contribution that he is obliged to make
towards his estate.
 The contribution referred to here is the one claimable by the trustee under s
23(5) from moneys earned by the insolvent in the course of his profession,
occupation or employment. The contribution becomes due to the trustee only
once the Master has expressed the opinion that these moneys are not
necessary for the support of the insolvent and his dependants.
 Before the Master assesses a contribution, the insolvent therefore need not
obtain the trustee’s consent to contract.
 In Mervis Brothers (Pty) Ltd v Hanekom 1963 (2) SA 125 (T), M sued H, an
insolvent, for a debt incurred before sequestration. The action rested on an
undertaking given by H after sequestration that he would pay the full amount
of the debt to M. The trustee had not consented to H’s giving this undertaking.
The magistrate’s court held that the undertaking probably would adversely
affect any contribution that H would have to make if called upon to do so and,
without the trustee’s consent, it was not binding. On appeal, the court held that
as the Master had not assessed a contribution, H was not obliged to contribute
at the time of contracting. So the trustee’s consent had not been required, and
H’s undertaking was binding.
 If a person alleges that a particular contract with an insolvent is invalid for any
reason, he must set out the facts on which he bases his allegation (Cowan v
Toffee 1947 (2) SA 1148 (T)).
4.1.2 Effect of contract which is not prohibited
 The contract is valid and binding on the parties where the trustee’s consent is
unnecessary or where it is given (s 23(2)). However, according to De Polo &
another v Dreyer & others 1991 (2) SA 164 (W), although the contract is
binding, the insolvent may not enforce performance in his favour unless the
Insolvency Act (or some other statute) specifically gives him the right to do so.
In the absence of an empowering statutory provision, the trustee is the proper
person to enforce the claim. So, for example, the insolvent cannot compel
payment of money due under a post-sequestration partnership concluded with
the trustee’s consent because no statutory provision entitles him to recover for
his own benefit money due under a partnership. Only the trustee may demand
this payment (De Polo & another v Dreyer & others (supra)). On the other
hand, the insolvent may enforce payment for work done after sequestration
because s 23(9) expressly gives him the right to recover this remuneration for
his own benefit (cf Ex parte Van Rensburg 1946 OPD 64). In De Polo’s case,
Morris AJ explained the principle as follows (idem 176): ‘[T]he mere fact that
an insolvent can enter into a contract does not have the consequence that he
is entitled to sue on that contract for his own benefit. That follows from the
proposition that all assets, whether preexisting or after acquired, fall within the
estate and vest in the trustee. Where s 23(6) refers to a claim due to him
under this section, in my opinion it refers to the succeeding subsections
which . . . refer to the insolvent being entitled to sue “for his own benefit”. That
expression occurs in all three subsections and those, it seems to me, are the
 circumstances where a claim is due to him under the section. There is no
nexus between the right to enter into a contract and the entitlement to receive
the benefit of that contract adversely to the estate. There may be
circumstances in which an insolvent can enforce a contract which he has
entered into, but if it comes to claiming benefits, whether in the form of assets
or money accruing under that contract, I find nothing in the Act which entitles
the insolvent to sue in his own name and for his own benefit. Had the
Legislature intended that the insolvent could recover the benefits of the
contract without reference to the trustee and for his own benefit, then that
could have been stated in s 23(2) in words similar to those appearing in ss (7),
(8) and (9).’
 The contractual rights which the insolvent is specifically empowered to enforce
for his own benefit under s 23(7) to (9) are set out below (4.3.1).
4.1.3 Effect of prohibited contract
 If the insolvent enters into a contract which purports to dispose of estate
property, the contract is voidable at the option of the trustee; it is not void (W L
Carroll & Co v Ray Hall Motors (Pty) Ltd 1972 (4) SA 728 (T); MacKay v Fey
NO & another 2006 (3) SA 182 (SCA) 188). The position is the same if the
insolvent contracts without obtaining his trustee’s consent where it is required
(Ex parte Olivier 1948 (2) SA 545 (C)). Assets that the insolvent acquires, and
liabilities that he incurs, under the contract are his own, and he may thus
acquire an estate adversely to the trustee (Ex parte Moolman NO 1943 TPD
258). Should the trustee choose not to set aside the contract or simply stand
by without voiding it, the contract remains binding upon the parties (Ex parte
Olivier (supra) 549). However, as in the case of a contract which does not
require consent or to which consent has been given, the insolvent cannot sue
for performance unless a statutory provision gives him the right to enforce for
his own benefit the performance under that type of contract (cf De Polo &
another v Dreyer & others 1991 (2) SA 164 (W)). If the trustee chooses to set
aside a contract, he may recover any performance made by the insolvent. Yet
the trustee must also restore to the third party any benefits that the insolvent
has received under the transaction (Estate Louw v Credit Corporation of SA
Ltd 1956 (3) SA 303 (C)): here ‘the appropriate remedy is restitutio in
integrum’ (return to the earlier legal position) (MacKay v Fey NO & another
(supra) 188). Section 24(1) provides some protection to third parties who
contract with the debtor, unaware that he is insolvent. The section states that if
an insolvent purports to alienate for valuable consideration and without the
consent of the trustee property, or any right to property, which the insolvent
acquired after the sequestration of his estate (and which thus became part of
the estate), to a person who proves that he was not aware and had no reason
to suspect that the estate of the insolvent was under sequestration, the
alienation is still valid. The following should be noted in this regard: The
section applies only to new assets which came into the insolvent’s possession
after sequestration and not to assets acquired by the insolvent in exchange
for, or in replacement of, property in the estate at the time of sequestration. In
Wessels v De Klerk & another 1960 (4) SA 310 (T), the insolvent sold
 immovable property that formed part of his insolvent estate at the time of
sequestration and he received two promissory notes in part payment of the
purchase price. He later endorsed the notes to a bona fide purchaser. The
court held that the sale of the notes was not validated by s 24(1) and was thus
voidable at the option of the trustee.
 The section places the onus upon the third party to prove that when he
received the property in question, he was neither aware, nor had any reason
to suspect, that the debtor was an insolvent. It is not enough for the third party
to show that he had no reasonable ground to suspect insolvency; he must go
further and establish that he had no reason at all to suspect it (Fey NO &
another v Mackay [2004] 4 All SA 50 (C)
4.2 Earning a livelihood
 It is in nobody’s interest that the insolvent or his dependants should be
rendered destitute. So he is allowed to follow any profession or occupation or
enter into any employment (s 23(3)), and he may make whatever contracts are
reasonably necessary for this purpose (cf George v Lewe 1935 AD 249).
 But he may not, without his trustee’s written consent, carry on, be employed in
any capacity in, or have any direct or indirect interest in, the business of a
trader who is a general dealer or a manufacturer (s 23(3)). The trustee must
decide for himself whether to consent and in this regard must not follow the
creditors’ instructions, as the determination does not concern the
administration of the insolvent estate.
 The term ‘trader’ is widely defined in the Act (s 2; S v Moll 1988 (3) SA 236 (T)
243). The term includes, among others, any person who carries on any trade,
business or undertaking in which property (movable or immovable) is sold, or
is bought, exchanged or manufactured for the purpose of sale or exchange, or
in which building operations of whatever nature are performed Neither ‘general
dealer’ nor ‘manufacturer’ is defined in the Act. The definition of ‘trader’ in s 2
expressly excludes farming operations.
 The definition has also been restrictively interpreted. A milk depot selling only
milk has been held not to be a general dealer for these purposes (Ex parte Du
Plessis 1957 (2) SA 253 (W)). The same conclusion was reached about a
restaurant business (R v Papangelis 1960 (2) SA 309 (O)). In S v Van der
Merwe 1980 (3) SA 406 (NC), the court, after considering the earlier cases,
held that a ‘general dealer’ is someone who trades at a fixed and recognized
place in all sorts of wares and not just in one kind or a few particular kinds. A
trader who is neither a general dealer nor a manufacturer does not need his
trustee’s consent, and there are several anomalies (A J Ferreira Beleggings
(Edms) Bpk v Swart (supra) 175). A ‘manufacturer’ is the owner or
entrepreneur of a factory, responsible for manufacturing a manufactured
object (idem 174), such as the person running a tailoring establishment in
Swart’s case.
 A consent to trade in a particular business does not entitle the insolvent to do
anything besides trade in the manner specified in that type of business, so as,
for example, to receive the benefit of donations received outside his trade
(Cilliers & others v Liebenberg & others (1909) 26 SC 611). But the insolvent
 may make contracts reasonably incidental to the type of business
(Johannesburg Municipality v Davies 1925 AD 395), including, apparently, a
contract of partnership (Priest v Charles 1935 AD 147). It also seems that the
insolvent who trades with his trustee’s written consent must record his receipts
and expenditure, that the trustee may claim any surplus unnecessary for
supporting the insolvent and his dependants, and that the Master may issue a
certificate about the amount the trustee may claim.
 If the insolvent pursues a vocation without obtaining consent where it is
required, he commits a criminal offence (s 137(c)). He cannot escape liability
by saying he did not know that consent was necessary (R v Cassim 1932 CPD
209). And any contracts he makes in the course of the unlawful vocation are
voidable if the trustee so chooses.
 Should the trustee give or refuse his consent to carry on a trade, any of the
creditors or the insolvent, as the case may be, may appeal to the Master,
whose decision is final (s 23(3)). A copy of any consent given must
immediately be forwarded by the trustee to the Master (s 23(3)
4.3 Instituting and defending legal proceedings
 The fact that a person is insolvent does not necessarily prevent him from
being a party to legal proceedings (Grevler v Landsdown en ’n ander NNO
1991 (3) SA 175 (T) 177).
4.3.1 Proceedings which may be brought/defended personally by insolvent
 Under s 23(6) to (10), an insolvent may sue or be sued in his own name and
without reference to the trustee of his estate, in these cases:
 if the matter relates to status, eg, divorce;
 if the matter relates to a right which does not affect the insolvent estate, such
as a right to receive maintenance from the insolvent (Weinberg v Weinberg
1958 (2) SA 618 (C)) or not to be unlawfully dispossessed of property
 if the claim is to recover remuneration or reward for work done or professional
services rendered by the insolvent or on his behalf after the sequestration of
his estate;
 if the claim is for a pension to which he is entitled for services rendered;
 if the claim is for compensation for loss or damage that he has suffered
through defamation or personal injury (the precise ambit of this claim is
considered in chapter 5);
 if the matter concerns a delict committed by him after the sequestration of his
estate.
 Although the insolvent is, in general, divested of his estate, he retains a
reversionary interest in it ‘because of the possibility that a residue or surplus
of realised assets over liabilities may, in terms of s 116 of the Act, accrue to
him’ (Mookrey v Smith NO 1987 (1) SA 332 (C) 335). So he may litigate to
ensure that it is properly administered.
 For instance, he may sue to recover or protect property which vests in the
trustee if the latter refuses to take the necessary action.
 He may also apply for an interdict to prohibit the trustee from realizing assets
in the estate if those already sold have yielded enough funds to meet all the
claims proved by creditors.
 And the insolvent may sue the trustee for damages for any loss incurred
because of his maladministration of the estate.
 The fact that the insolvent has a right to litigate in matters concerning the
administration of the estate does not mean that he has a general right to
prescribe how the estate should be administered. He may bring proceedings
to interfere with the administration of the estate only if he suffers an injustice
because of an irregularity or a lack of good faith on the part of the trustee or
creditors.
 This point is illustrated by Kruger v Symington NO en andere 1958 (2) SA 128
(O). The creditors had resolved to sell an asset in the estate at a price which,
unbeknown to them at the time, was lower than the asset’s real value. The
court held that this fact was not, in itself, sufficient reason for attacking the
resolution or prohibiting the sale. There was no sign that the resolution had
been passed irregularly or that the creditors had acted in bad faith.
4.3.2 Security for costs
 An insolvent who brings an action in the magistrate’s court is obliged to give
security for the costs of the action if the defendant requests it (Rule 62(1)(b)
of the Magistrates’ Courts Rules). If the insolvent does not give security when
called upon by the defendant to do so, the latter may apply for the action to be
dismissed (ibid). For proceedings in the High Court, the position is different. If
the matter is one for which the Insolvency Act specifically gives the insolvent
the right to sue—such as a claim for remuneration for services rendered—he
cannot be required to give security for costs, unless, perhaps, the failure of
the action is a foregone conclusion and thus vexatious (Argus Printing &
Publishing Co Ltd v Anastassiades 1954 (1) SA 72 (W) 79; Hobson NO v Abib
1981 (1) SA 556 (N)). If the insolvent’s right to sue does not flow from the Act
—eg, where the matter concerns the general administration of the estate—the
court may order him to furnish security if it considers that the action is
reckless and vexatious (Ecker v Dean 1940 AD 206; Director, Law Society of
Cape of Good Hope v Budricks [2000] 2 All SA 541 (SE) 544–5; MTN Service
Provider (Pty) Ltd v Afro Call (Pty) Ltd 2007 (6) SA 620 (SCA) 625). In
deciding the latter question, the court will have regard to the prospects of the
action succeeding, whether the action is one which the trustee or the creditors
could have brought, and whether there has been previous litigation on the
same subject matter (Israel v Burger 1961 (1) SA 827 (O)).
4.3.3 Entitlement to costs
 If the insolvent sues or is sued personally in a matter in which he is entitled to
litigate, and he obtains an award of costs in his favour, the judgment for costs
belongs to him personally, and he may dispose of it as he likes (Schoeman v
Thompson 1927 WLD 298). Damages for the trustee’s maladministration
accrue to the insolvent estate, but an award of costs against the trustee
enures for the benefit of the insolvent (Ecker v Dean 1940 AD 206). In Ecker’s
 case, it was held that if there was any shortfall in the amount recovered from
the trustee in respect of costs, the deficiency should be taken from the
damages paid to the estate.
Chapter 8: Preservation of the estate pending the Trustees appointment
8.3 Curator bonis
 A curator bonis may have been appointed after a notice of intention to
surrender was published.
 He must continue to act in that capacity even after the estate has been
sequestrated, until a provisional trustee or a trustee has been appointed.
 The estate assets do not vest in the curator bonis at any time: he merely has
custody and control of them. They may be attached by the sheriff as
described above.
 A curator bonis is entitled to reasonable remuneration from the estate for his
services (s 63(1)), and his fee has to be paid as part of the costs of
sequestration (s 97(2)(c)). It is an established practice to hire someone to do
certain administrative work. But the trustee may not pay this employee at
estate expense to perform the trustee’s ordinary duties (Pellow v Master of
the High Court 2012 (2) SA 491 (GSJ); cf Miller & others v Nafcoc Investment
Holding Co Ltd & others 2010 (6) SA 390 (SCA)).
8.4 Provisional trustee
8.4.1 Appointment
 A trustee can only be appointed some weeks after a sequestration order is
granted. It is often necessary or desirable to have some person in charge of
the estate in the meantime, with powers he may exercise in the interests of
creditors.
 For this reason, after provisional or final sequestration has occurred, the
Master may follow the Minister’s policy and appoint a provisional trustee to
the estate to hold office until a trustee is appointed (s 18(1)).
 Only the Master can make this appointment: the High Court has no inherent
power or authority to appoint a provisional trustee or to make
recommendations to the Master in this regard.
 Creditors or other interested persons desiring the appointment of a provisional
trustee must apply to the Master, setting out the reasons why it is expedient to
have a provisional trustee appointed, eg, to carry on the insolvent’s business
in the intervening period or sell perishables immediately.
 A policy developed by the Minister of Justice and Constitutional Development
may be applied when appointing trustees ‘to promote consistency, fairness,
transparency and the achievement of equality for persons previously
disadvantaged by unfair discrimination’ (s 158(2)). The Minister published
such a policy in February 2014 and amendments to it in October 2014
(Government Gazette No 37287 dated 7 February 2014 with paras 6 and 7
substituted by GN 798 in Government Gazette 38088 dated 17 October
2014).
  The High Court declared the published policy invalid for, among other things,
unlawfully fettering the Master’s discretion and providing no reasonable
likelihood of resolving challenges of corruption or fronting, nor of advancing
the transformative agenda required by the Constitution (SA Restructuring and
Insolvency Practitioners Association v Minister of Justice and Constitutional
Development & others, and another application 2015 (2) SA 430 (WCC)). The
decision was confirmed by the Supreme Court of Appeal (Minister of Justice v
The SA Restructuring & Insolvency Practitioners Association 2017 (3) SA 95
(SCA)), whose decision, in turn, the Constitutional Court upheld (Minister of
Justice & another v SA Restructuring and Insolvency Practitioners Association
& others 2018 (5) SA 349 (CC)). These decisions were mentioned in Venter
NO & others v The Master of The High Court, Pretoria & others [2022]
ZAGPPHC 578 (8 August 2022). The Master may make discretionary
appointments of provisional liquidators (s 368) and co-liquidators (s 374 of the
Companies Act 61 of 1973). The applicants (the final liquidators) in Venter
challenged the legality and rationality of the Master’s appointing the second
and third respondents as their co-liquidators. The court confirmed that the
only relevant policy determined by (Not yet done with this chapter)
8.4.2 Rights and duties
As soon as possible after his appointment, the provisional trustee must establish
whether the sequestration order correctly reflects:
 the insolvent’s full names, date of birth, identity number (if any) and marital
status; and
 If the insolvent is married, the full names, date of birth, and identity number (if
any) of his spouse (s 18A).
 If any details are lacking or incorrect, the provisional trustee must at once take
reasonable steps to obtain the correct particulars. He must then send a
certificate containing the particulars along with a copy of the sequestration
order and of his appointment to the Master and every Registrar of Deeds.
Under s 18(3), the provisional trustee has a trustee’s powers and duties, as
provided in the Act, except that:
 he may not bring or defend legal proceedings without the court’s authority
(although, obviously, he has the power to approach the court to obtain
authority); and
 he may not sell any estate property without the authority of the Master or the
court, and then only after such notice and subject to such conditions as the
Master may direct. A sale without prior authority is void and cannot be ratified.
 The Master may, at any time, subject to s 18(3), give such directions to the
provisional trustee as creditors could give a trustee at a duly convened
meeting of creditors (s 18(2)).
 Although s 18(3) effectively gives the provisional trustee wide powers, it is
accepted that it is not his function to take steps in the winding up of the
insolvent estate. His task is simply to take physical control of the estate and
preserve it for creditors until a trustee is appointed.
  So the court will not authorize the provisional trustee to institute legal
proceedings or sell property, except in special circumstances.
 In Warricker & another NNO v Liberty Life Association of Africa Ltd 2003 (6)
SA 272 (W), Van Oosten J observed (idem 276):
 An applicant seeking the authority of the Court in terms of [s 18(3)] . . .
must satisfy the Court, on good cause shown, that a departure from the
normal course of events provided for in the Act is warranted. Where the
institution of proceedings to enforce a claim is contemplated, to be
entitled to an order the applicant must satisfy the Court, first, that some
degree of urgency exists; secondly, that the cause of action which is to
become the subject-matter of the proceedings is prima facie enforceable;
and, thirdly, that the interests of creditors in the insolvent estate will not
be prejudiced by the earlier institution of proceedings.’
8.4.3 Remuneration
 The provisional trustee is entitled to reasonable remuneration from the
estate for his services, to be taxed by the Master (ss 1 definition ‘trustee’,
63(1)) and paid as part of the costs of sequestration (s 97(2)(c)).
 It must be noted that although the Act provides for appointing a curator
bonis and a provisional trustee, neither appointment may be necessary.
In such cases, the sheriff may simply attach the property in the manner
described above and keep it until the trustee is appointed.
CHAPTER10
The election of the trustee
 At the first meeting of creditors, creditors who have proved their claims may
elect one or two trustees (s 54(1)).
 If more than one person is nominated, the individual who obtains a majority of
votes in both number and value must be elected as the sole trustee (s 54(2)).
If one person obtains a majority in value, and another person a majority in
number, both must be elected trustees (s 54(3)(b)).
 But if either party declines a joint trusteeship, the other must be elected sole
trustee (ibid). Should one person obtain a majority of votes in number and no
other person obtain a majority in value, or vice versa, the party who obtains
the majority must be elected as the sole trustee (s 54(3)(a)).
 When a trustee is elected at a meeting not presided over by the Master, his
election is not valid until confirmed by the Master (s 56(1)).
10.1.2 Appointment
 The Master is the only official with the power to appoint the trustee of a
sequestrated estate (or the liquidator of a company).
 A judge is not empowered to make such an appointment or to make
recommendations to the Master in this regard.
 Any such appointment is a nullity and need not be set aside.
The Master may refuse to accept as trustee the person whom the creditors
have elected
  If he does not do so, he must, once the person has given satisfactory security
for the proper performance of his duties as trustee, confirm his election and
appoint him as trustee by delivering to him a certificate of appointment (s
56(2)).
 This certificate is valid throughout the Republic (ibid). The trustee must then
give notice of his appointment and his address in the Gazette (s 56(3)).
 If the Master considers it desirable to do so, he may, in accordance with policy
determined by the Minister, appoint as a co-trustee, with the trustee or
trustees of an insolvent estate, a person qualified to act as trustee who has
given the security required by s 56(2) (s 57(5)). That appointee is governed by
all the provisions of the Insolvency Act concerning a trustee (s 57(6)).
10.1.3 Refusal to appoint
The Master may refuse to confirm the election of a person elected as trustee, or to
appoint him as such, if
 he was not properly elected;
 he is disqualified from being a trustee (see 10.2);
 he has failed to give the required security; or
 in the opinion of the Master, he should not be appointed as trustee to the
estate in question (s 57(1)).
If the creditors have elected a trustee unlawfully, the Master must not confirm the
election and must convene a creditors’ meeting to elect another trustee.
In deciding whether a person is a suitable candidate
 the Master should consider his personality,
 experience,
 age and diligence,
 as well as the complexity or otherwise of the problems presented by the estate
 The person must be capable of filling a trustee’s position of trust towards
creditors and the insolvent, and must be able to act independently, treat
creditors equally, and perform his duties without fear, favour or prejudice.
 It has been held that the Master may issue a directive to his staff that a
particular person must not be appointed as trustee.
 In Ex parte The Master of the High Court South Africa (North Gauteng) 2011
(5) SA 311 (GNP), the court explained (idem 322):
An organisation [of the nature of the Master’s office] has the institutional
knowledge and expertise to apply policy, and to assess the ability and integrity
of trustees and liquidators, and is therefore able to judge whether or not
individuals are duly qualified to be appointed, either at all or to a specific
estate. In . . . Lipschitz v Wattrus NO 1980 (1) SA 662 (T) . . . the court
emphasised the intricacy and volume of work that the master’s office has to
perform, and recognised that the master keeps lists of the names of potential
trustees, liquidators and judicial managers composed of persons who are
prima facie qualified to be appointed. If the master comes to the bona fide
conclusion that a particular person is no longer fit to fulfil the role of provisional
 trustee, liquidator or judicial manager, he has the power, but also the duty, to
prevent such person’s appointment.’
 If the Master declines to confirm a party’s election or to appoint him as trustee,
he must notify the party in writing and state the reasons for so declining (s
57(1)).
 If he declines on the ground that, in his opinion, the person concerned should
not be appointed as trustee to the estate in question, he need only state this
as his reason.
 Having declined an election or appointment, the Master must convene a
meeting of creditors in the manner set out in the Act for the purpose of electing
another trustee (s 57(2)).
10.1.5 Joint trustees
 If two or more trustees have been appointed, or if the Master has appointed a
co-trustee under s 57(5), they must act jointly in performing their functions as
trustees, and they are jointly and severally liable for every act that they
perform jointly.
 If one co-trustee acts unlawfully without the knowledge or consent of the other,
the latter is not liable.
 If co-trustees disagree on any estate matter, it must be referred to the Master,
who must determine the issue or give directions on the procedure to be
followed for doing so (s 56(5)).
 Joint trustees may delegate administrative acts to a third party for the latter to
perform for them as their subordinate agent, but not matters of discretion that
the trustees’ office requires them to exercise both jointly and severally.
10.2 Persons disqualified from being trustee
 Certain persons are not competent to be appointed trustee in any estate.
Others are merely disqualified from being trustee in a particular estate.
10.2.1 Absolute disqualification
These persons may not be trustees in any estate:
 an insolvent;
 a minor or other person under legal disability;
 a person who resides outside the Republic;
 a company, close corporation or other corporate body;
 a former trustee disqualified under s 72;
 a person declared by the court under s 59 to be incapacitated for election as
trustee , while such incapacity lasts, or any person removed by the court from
an office of trust on account of misconduct;
 a person who has been convicted of theft, fraud, forgery, uttering or perjury,
and who has been sentenced to a term of imprisonment without the option of a
fine, or to a fine exceeding R2 000;
 a person who was at any time party to an agreement with a debtor or a
creditor under which he undertook that he would, while performing the
 functions of a trustee, grant or obtain for a debtor or a creditor a benefit not
provided for by law; or
 a person who has, by means of misrepresentation, reward, or the offer of any
reward, whether direct or indirect, induced or attempted to induce, a person to
vote for him as trustee or to assist in having him elected as trustee of any
insolvent estate (s 55).
10.2.2 Relative disqualification
These persons are disqualified in respect of a particular estate:
 a person related to the insolvent in blood or by marriage within the third
degree;
 a person having an interest opposed to the general interest of the creditors;
 a person who acted as the bookkeeper, accountant or auditor of the insolvent
at any time during a period of 12 months immediately preceding the date of
sequestration; or
 an agent authorized to vote on behalf of a creditor at a meeting and who acts
or purports to act in terms of that authority (s 55).
Chapter 11: The power and duties of the trustee
Introduction
 The trustee has the task of collecting and, where necessary, preserving the
assets in the estate so that he can realize them for the benefit of creditors.
 The Act also obliges the insolvent to help the trustee collect the estate assets.
 In general, the trustee must be wholly independent and impartial and regard
equally the interests of all the creditors.
 He occupies a position of trust towards the insolvent.
 As sequestration is intended to be to the advantage of creditors, though, the
trustee does not act in breach of his position if he takes all lawful steps in his
power to ensure that it is the creditors rather than the insolvent who benefit
from the sequestration.
 If the trustee fails to perform a duty imposed on him by the Act, the Master or a
person having an interest in the liquidation or distribution of the estate may,
after giving the trustee at least 14 days’ notice, apply to the court for an order
directing the trustee to perform the duty (s 116bis(1)).
 Costs awarded to the Master or interested persons are, unless the court
orders otherwise, payable by the trustee from his personal funds (de bonis
propriis) (s 116bis(2)), but the court will not order the trustee to pay from his
own pocket unless he has been guilty of improper conduct.
The ff are duties of the trustee
11.1 Taking charge of assets and documents
 As soon as possible after the sheriff has made an inventory under s 19 (see
8.2), the trustee must take possession or control of all movable property,
books and documents belonging to the estate, and furnish the Master with a
 valuation of the movable property by an appraiser appointed under the Act or
approved by the Master (s 69(1)).
 A creditor holding movable property as security for his claim may, in certain
circumstances, retain that property and administer it himself under s 83.
 Section 69(3) provides that a magistrate may, on application by the trustee
under s 69(2), if it appears from a statement made upon oath that there are
reasonable grounds for suspecting that any property, book or document
belonging to the insolvent estate is being concealed or otherwise unlawfully
withheld from the trustee, issue a warrant to search for and take possession of
that property, book or document. The warrant influences affected persons’
constitutional rights such as dignity, privacy, freedom, security, trade and
property. It must be drafted with care and specificity, then properly executed
only by the sheriff and police officers it authorizes.
 Section 69(2) does not oust the High Court’s jurisdiction to issue the warrant.
 Liquidators may rely on s 69 in order to ensure that goods belonging to the
insolvent estate are found, secured and realized under the Insolvency Act
and/or the Companies Act 61 of 1973 for the creditors’ benefit
 The search warrant must be executed in the same way as a warrant to search
for stolen property. The executing officer must deliver any article seized to the
trustee (s 69(4)). As s 69(4) only requires a warrant to be executed and not
issued ‘in a like manner as a warrant to search for stolen property’, the
provisions relating to the issue of warrants in criminal proceedings do not
apply to a s 69 warrant (Naidoo & others v Kalianjee NO & others 2016 (2) SA
451 (SCA)). The statement on which the magistrate relies need not be made
by the trustee, and neither the statement nor the trustee’s application for the
warrant need be made in writing.
 The magistrate should call for facts to support the deponent’s conclusions—
not simply accept them—and he should exercise his discretion on the given
facts.
 The expression ‘reasonable grounds for suspecting’ does not mean prima
facie proof: the yardstick is whether the facts justify a reasonable suspicion
that property is being concealed or withheld, even though that suspicion may
turn out to be wrong.
 It follows that the warrant is not defective only because the property attached
does not, in fact, belong to the insolvent estate.
 But the section should not be resorted to where there is a clear, open and
reasonable dispute between the possessor and the trustee about whether the
property belongs to the insolvent estate and where there is little or no danger
of the property’s being damaged or no possibility of its being removed.
 Once the property has been delivered to the trustee, the authority conferred by
the warrant is exhausted.
 Section 69(3) does not authorize the trustee to remain in possession of the
property. Whether or not he may keep possession falls to be decided
according to ordinary principles of law, the issue being whether the estate has
a right to the property that is sufficient to resist any competing claim to
possession.
  If assets delivered to the buyer under a credit sale are later seized under a s
69 warrant, the buyer may bring the rei vindicatio (vindicatory action) against
the property possessor but must prove ownership.
11.2 Recovery of debts due to estate
 In the notice in which the trustee gives notification of his appointment, he must
call upon all persons indebted to the estate to pay their debts within a time and
at a place mentioned in the notice (s 77). Should payment not be forthcoming,
the trustee must immediately recover the debt, by legal proceedings if
necessary (ibid). It would seem that the trustee need not send a letter of
demand to each debtor individually. Nor is there provision for accelerating the
payment of debts that fall due after the date of sequestration: these debts
need only be paid on the due dates. If a debtor cannot pay in full, the trustee
may accept a reasonable part of the debt in discharge of the whole debt (s
78(1)). If the debt exceeds R2 000, the trustee may compound it only if
authorized to do so by the creditors or, where no creditor has proved a claim,
the Master (ibid). (In this context, the word ‘compound’ means to settle a debt
by agreement for part payment.) It is not competent for the creditors or the
Master to give general instructions to the trustee about the compounding of
debts. Each debt exceeding R2 000 must be considered separately, and the
trustee must be given specific instructions on how the debt is to be
discharged.
 The trustee may grant a debtor an extension of time for payment, provided the
extension does not go beyond the final date for submission of the account
under s 91 of the Act (s 78(1)). The account under s 91 is the liquidation
account.
 If a debtor pays the insolvent, the payment is of no effect unless the debtor
proves that it was made in good faith and without knowledge of the
sequestration (s 22).
11.3 Continuation of insolvent’s business
 The trustee must realize the estate assets as speedily as possible and so has
no automatic right to carry on the insolvent’s business
 He may do so only if authorized by the creditors or, in the absence of
instructions from them, by the Master (s 80(1)). The costs of then continuing
the business are costs of administration (s 97(2)(c)). If the trustee continues
the business without authority, the estate cannot be saddled.
 with any loss or additional expenditure resulting from his actions (Consolidated
Caterers Ltd v Patterson NO 1960 (4) SA 194 (E)). The Master may give
authority to continue the insolvent’s business at any time, whether before or
after the second meeting of creditors (s 80(1)). It would appear that authority
may be given by creditors ex post facto, ie, by way of a resolution ratifying
actions already taken by the trustee. In Klatzkin v Noble NO (supra), where the
trustee had continued running the insolvent’s business in compliance with the
principal creditors’ wishes, it was held that the later ratification of the trustee’s
actions by creditors at a meeting removed ‘any doubt that there might have
been as to the power of the trustee to carry on the business without a formal
 resolution of creditors’ (idem 717). The authority given may only be to continue
the business temporarily for the purpose of its being wound up: eg, to preserve
its goodwill so that it can be sold as a going concern (cf Klatzkin v Noble NO
(ibid)). Authority cannot be granted to continue the business indefinitely in
order to make a profit out of it (Thorne v The Master 1964 (3) SA 38 (N) 50–1).
In Marshall Bros Trustee v Transvaalsche Bank 1907 TS 1060, the insolvent
estate consisted of certain base-metal claims, and buildings and machinery for
working clay situated on the claims. The majority of creditors resolved that the
claims and machinery should not be sold until they had been brought into
good working order as a going concern (a task requiring considerable work
and expenditure) and, even then, not without first obtaining the sanction of
creditors at a special meeting to be convened at a later date. It was held that it
was not permissible for creditors to postpone the sale of the assets to a date
to be fixed by them and thus that the resolution to this effect could not stand.
 When the trustee is given authority to carry on the business, he must, unless
otherwise directed by creditors, purchase any goods required for the business
for cash and from the takings of the business only (s 80(2)). He is entitled to
employ whatever assistance is reasonably necessary to enable him to carry
on the business (Klatzkin v Noble NO (supra) 717). The trading account that
the trustee must draw up after carrying on a business on behalf of the estate is
discussed in a later chapter.
11.4 Investigation of insolvent’s affairs
 The trustee must investigate the affairs and transactions of the insolvent
before the sequestration of his estate (s 81(1)). The purpose of the
investigation is to enable the trustee to report to creditors on the insolvent’s
affairs and transactions and on any matter of importance relating to the
insolvent or the estate (see 11.7 about the report which the trustee must
prepare). To assist him in his investigation, the trustee may call upon the
insolvent in writing to give a true, clear and detailed explanation of his
insolvency and to account correctly and in detail for the excess of his liabilities
over his assets (s 138(b)). The trustee also has the right to inspect and obtain
certified copies of all the insolvent’s income tax returns (s 81(2)). A return
certified as correct is admissible on its mere production in any civil or criminal
proceedings.
11.5 Receipt book
 Immediately after his appointment, the trustee must open a book in which he
must enter, as soon as possible, a statement of all moneys, goods, books,
accounts and other documents received by him on behalf of the estate (s
71(1)). The Master, every creditor who has proved a claim, and, if the Master
so orders, any person claiming to be a creditor or a surety for the trustee may
inspect the book at all reasonable times (s 71(2)
11.6 Estate bank account
 The trustee must open a cheque (now a current) account in the name of the
estate with a bank in the Republic and must deposit in the account, from time
 to time, all sums which he receives on behalf of the estate (s 70(1)(a)). If he
retains an amount of estate money exceeding R40 after the earliest day on
which he could have deposited it, he is liable to pay into the estate double the
amount retained (s 72(1); cf Matsepe NO & others v Master of the High Court,
Bloemfontein & another [2019] JOL 44812 (FB); Standard Bank of South
Africa Ltd v Master of the High Court, Eastern Cape, Port Elizabeth & others
[2018] 4 All SA 871 (ECP)). The same applies if the trustee knowingly allows a
cotrustee to retain estate money (s 72(1)). The trustee may take moneys from
the cheque account which are not immediately required for the payment of any
claim against the estate and place them in a savings account or in an interest-
bearing deposit with a bank (or mutual bank) in the Republic (s 70(1)(b)–(c)). If
required by the Master to do so, the trustee must notify him in writing of the
branch of the bank (or mutual bank) where he has opened an account and he
must furnish the Master with a bank statement or other evidence of the state of
the account (s 70(2)). The trustee may not transfer any account from that
branch except after written notice to the Master (s 70(3)). Considering that the
provision in s 70(4) that all cheques or orders drawn upon an account must
contain the name of the payee and the cause of payment and must be drawn
to order and be signed by every trustee or duly authorized agent, it could be
argued that electronic fund transfers are not permitted. It is submitted that s
70(4) deals with payment by cheque and does not as such prohibit electronic
fund transfers.
 The Chief Master has issued a directive (Chief Master’s Directive 5 of 2012,
para 3.2, effective from 17 July 2012) which reads:
 ‘Payment by an Estate Representative [defined to include a trustee and a
liquidator], other than by cheque (for instance EFT), is accepted subject to the
following:
 (1) The Estate Representative is responsible to ensure that all payments made
are lawful;
 (2) Every payment must contain the name of the payee, the cause of payment
and other requirements specific to that payment e.g. the reference number
and the name of [the] Master’s Office in respect of Master’s Fees; Payments
may only be made to a bank account designated by the payee.
 (3) An affidavit contemplated by section 35(12) of the Administration of Estates
Act 1965 by the Estate Representative, in which he or she declares that a
creditor was paid or that an heir received his or her share may be accepted by
the Master in lieu of a receipt by the beneficiary.
 The Master, and any surety for the trustee, has the same right as the trustee
to information about the account and may examine all vouchers in relation to
the account, whether in the hands of the bank (or mutual bank) or the trustee
(s 70(5)). After notice to the trustee, the Master may direct the manager of a
branch where an account has been opened to pay into the Guardian’s Fund all
moneys standing to the credit of the account, or which may later be paid into it
(s 70(6)).
11.7 Report to creditors
After investigating the insolvent’s affairs and transactions, the trustee must submit a
full written report to creditors (s 81(1)). He must do this:
 at the second meeting of creditors; or
 at an adjournment of the second meeting, provided he has obtained the
Master’s written permission before the second meeting;
 or if an offer of composition has been accepted by creditors, within one month
after the acceptance of the offer .
The report must deal with the affairs and transactions of the insolvent and any
matter of importance relating to the insolvent or the estate (ibid). In particular, the
report must deal with the following (s 81(1)(a)–(i)):
 the assets and liabilities of the insolvent;
 the cause of the debtor’s insolvency;
 the books relating to the insolvent’s affairs and whether he has kept a proper
record of his transactions (and if not, the respects in which the record is
deficient)
 whether the insolvent appears to have contravened the Act or any other law—
the trustee must include in the report all the facts relating to the alleged
offence and must furnish any further information later called for by the Master
or the Director of Public Prosecutions (s 81(4));
 any allowance paid by the trustee to the insolvent and his reasons for paying
it;
 any business which the trustee has been continuing on behalf of the estate,
any goods which he has purchased for the business, and the result of carrying
on the business;
 any legal proceedings pending or threatened against the estate;
 any uncompleted acquisition of immovable property by the insolvent or current
lease entered into by the insolvent as lessee; and
 any matter relating to the administration or realization of the estate requiring
the direction of creditors.

 At least 14 days before the meeting at which the report is to be submitted, the
trustee must send by registered post to each creditor whose name and
address he knows a copy of the report, of the sheriff’s inventory, and of the
valuation of the movable property which he (the trustee) has furnished to the
Master (s 81(1)bis(a)). With the report, the trustee must submit
recommendations regarding any resolution or direction which he considers
ought to be passed or given at the meeting (ibid). At least 24 hours before the
meeting, the trustee must submit to the presiding officer an affidavit setting out
the names and addresses of the creditors to whom he has sent copies of the
report and other documents and containing full details of his recommendations
(s 81(1)bis(b)).

 The creditors at the second meeting may direct what action must be taken by
the trustee in respect of any matter reported to them (s 81(3)(a)). If they give
 no directions, the trustee’s recommendations that the creditors could have
lawfully accepted are deemed to have been adopted by them if the Master
approves (s 81(3)(b)). And the Master may give whatever directions he thinks
fit relating to any matter in the trustee’s report or the administration or
realization of the estate (s 81(3)(c)).

Chapter 14 The duties of the insolvent

 To ease the trustee’s task of gathering and taking charge of all the assets in
the estate, the Act imposes several duties on the insolvent.
14.1 Delivery of records and statement of affairs
 On being served with the final order of sequestration, the insolvent must
immediately deliver to the sheriff all records relating to his affairs which have
not already been taken into custody (s 16(2)(a)). Within seven days of service,
he must lodge in duplicate with the Master a statement of affairs, framed
substantially in the prescribed form—Form B in the First Schedule to the Act—
and verified by affidavit (s 16(2)(b)). A detailed discussion of the contents of
the statement of affairs appears in chapter 2. If the Master is satisfied that the
insolvent cannot prepare the statement of affairs without help, the Master may
allow a reasonable fee to be paid as part of the costs of sequestration to the
person who helps the insolvent (s 16(5)).
14.2 Delivery of assets
 Within 14 days as from the appointment of the trustee, the insolvent must
deliver to the trustee any property belonging to the estate which is in his
possession (s 136(b)(i)). Failure to do so constitutes a criminal offence (ibid).
14.3 Providing assistance
 At any time before the second meeting of creditors the insolvent must, if
required by the trustee, assist him in collecting and taking charge of any
property belonging to the estate (s 23(12)). In return for his assistance, the
insolvent is entitled to be paid out of the estate such allowance in money or
goods as the Master considers necessary to support the insolvent and his
dependants.
14.4 Providing information
The insolvent is obliged, on pain of criminal prosecution, to provide certain
information and details to the trustee or the Master:
 Within 14 days of the trustee being appointed, the insolvent must inform
him of the whereabouts of any estate property not under his (the
insolvent’s) control which is not fully disclosed in the statement of his
affairs, or which is not already in the trustee’s possession (s 136(b)(ii)). The
insolvent is under a similar duty in relation to books or documents not under
 his control and which are not already in the trustee’s possession (s 136(b)
(iv)).
 The insolvent must, at the trustee’s request, furnish complete and truthful
information about any property which was in his possession, or about the
time when, or manner or circumstances in which, he disposed of the
property or ceased to possess it (s 136(c)). And he commits an offence if,
at a meeting of creditors, when required by the trustee or the presiding
officer or any creditor, he fails to disclose what has become of property
which was in his possession so recently that he ought to be able to account
for it (s 138(c)).
 If the insolvent learns or suspects that a person has proved or intends
proving a false claim against the estate, he must inform the Master and the
trustee in writing within seven days of acquiring the knowledge or becoming
suspicious (s 136(a)).
 The insolvent is obliged, if so required by the trustee, to give a true, clear
and detailed explanation of his insolvency or to account for the excess of
his liabilities over his assets (s 138(b)
14.5 Informing trustee of addresses
 The insolvent must keep the trustee informed of his residential and postal
addresses (s 23(13)). If any notice is required to be given to the insolvent
under the Act, it may be sent by registered letter to either of these addresses
(s 23(14)).
14.6 Record of assets and disbursements
 The insolvent is obliged to keep a detailed record of all assets which he
receives from whatever source, and of all disbursements which he makes in
the course of his profession, occupation or employment (s 23(4)). The trustee
may inspect the record at all reasonable times (ibid). If required by the trustee,
the insolvent must send him, in the first week of every month, a statement
verified by affidavit of all assets received and disbursements made during the
preceding month (ibid). The trustee may call for reasonable vouchers in
support of any item in the statement (ibid). By examining the information so
obtained, the trustee can decide whether to approach the Master in order to
have a portion of the insolvent’s income declared unnecessary for the support
of the insolvent and his dependants in terms of s 23(5) (see 5.3.2). Section
23(4) is deficient in so far as it does not compel the insolvent to keep his
trustee informed of his income and financial position after the distribution of his
capital assets. It is impractical to expect the trustee voluntarily to follow up this
information without being guaranteed that his disbursements will be covered.
The subsection, therefore, should be amended.
14.7 Attending meetings and giving evidence
  The duty of the insolvent to attend creditors’ meetings and submit to
interrogation has already been dealt with (see 13.1.2). The insolvent must, if
summoned to do so, attend proceedings instituted by or against the trustee
and answer any question lawfully put to him in the course of the proceedings
(s 140). The failure to comply with this duty without a reasonable excuse is a
criminal offence.
Chapter 16
Creditors’ claims and their ranking
 the main objective of insolvency law is to ensure that an insolvent debtor’s
assets are distributed among his creditors according to a predetermined and
fair order of preference.
16.1 Types of creditors
Three types of creditors are identified for ranking purposes: concurrent, secured and
preferent.
16.1.1 Concurrent creditors
 Concurrent creditors do not enjoy any advantage over the other creditors of
the insolvent. Concurrent creditors are paid out of the free residue after any
preferent creditors have been paid. The ‘free residue’ is defined as that portion
of the estate which is not subject to any right of preference by reason of any
special mortgage, legal hypothec, pledge or right of retention (s 2). It is, in
other words, the unencumbered part of the estate. Concurrent creditors all
rank equally: should the free residue be insufficient to meet their claims (as it
usually is), each receives an equal proportion of his claim by way of a
dividend. So, if the free residue amounts to R5 000 and A has a concurrent
claim for R6 000 and B for R4 000, then A and B will each receive a dividend
of 50 cents in the rand (or one-half of their respective claims, ie, A—R3 000
and B —R2 000).
16.1.2 Secured creditors
 A secured creditor is one who holds security for his claim in the form of a
special mortgage, landlord’s legal hypothec, pledge or right of retention (s 2 sv
‘security’). A brief description of these forms of security is given below. The
definition in s 2 contemplates real security only: a creditor whose claim is
secured by suretyship is not secured for the purposes of the Act. A secured
creditor is entitled to be paid out of the proceeds of the property subject to the
security, after the payment of certain expenses (see 16.3.1(i)) and any
secured claim that ranks before his (see 16.3.1(ii)). If the proceeds of the
encumbered property are insufficient to cover the secured creditor’s claim, he
has a concurrent claim for the balance (Singer NO v The Master & another
1996 (2) SA 133 (A)). Under s 89(2), a secured creditor may, when proving his
claim, choose to rely exclusively on his security. In doing this, this creditor
 waives, by implication, any right to participate in the free residue, and it is not
open to him to argue later that he proved an incorrect claim as envisaged in s
44(4). Having made his election, he cannot later undo it (Eastern Free State
Cape Co-operative Ltd v The Master & others 1997 (3) SA 899 (E) 906–7;
Absa Bank Ltd v The Master & others NNO 1998 (4) SA 15 (N) 25–31). But he
may still proceed against a surety for the balance of his claim if the realization
of the security does not yield enough to discharge the claim (BOE Bank Ltd v
Bassage 2006 (5) SA 33 (SCA) 37–9). Section 89(2) requires the creditor to
make an unequivocal election when submitting his claim form. The section
does not apply, for example, if the creditor states that he will elect in the future
whether to rely solely on the proceeds of his security, or that he elects to do
this if there is a danger of a contribution being payable, but not otherwise
(Snyman v The Master & others 2003 (1) SA 239 (T) 242–3). In Eastern Free
State Co-operative Ltd v The Master & others (supra), the creditor stated
simply that ‘the creditor relies on its security for payment of its claim’. It was
held that these words, read in context, fell short of a statement that the creditor
would look solely to the proceeds of its security to satisfy its claim. So the
creditor was not precluded from sharing in the free residue for the satisfaction
of the balance of its claim. The option of relying solely on the security is not as
unfavourable as it might at first seem since, as will appear in chapter 17, a
secured creditor who relies solely on his security is less likely to be called
upon to contribute towards the costs of sequestration than one who elects to
preserve.
16.1.3 Preferent creditors
 The term ‘preferent creditor’ may be used in a wide sense to refer to any
creditor who is entitled to receive payment before other creditors (cf the
definition of ‘preference’ in s 2). A secured creditor qualifies as a preferent
creditor in this broad sense.
 But the term ‘preferent creditor’ is usually reserved for a creditor whose claim
is not secured but still ranks above the claims of concurrent creditors.
The Insolvency Act creates preferences for the following claims:
 funeral and death-bed expenses (s 96);
 costs of sequestration (s 97);
 costs of execution (s 98);
 salary or remuneration of employees (s 98A);
 statutory obligations (s 99);
 income tax (s 101);
 and claims of holders of general bonds and certain special bonds (s 102).
The Companies Act 71 of 2008 inserts a new preference for the business rescue
practitioner’s fees and expenses (s 135). This preference ranks below the costs of
execution and above the salary and remuneration of employees in the list above.
  A preferent creditor is entitled to payment out of the free residue of the estate,
ie, that portion which is not subject to any security interest. Between
themselves, the various categories of preferent creditors rank in a
predetermined order of preference laid down by the Act. Some of the
preferences conferred by the Act are limited to maximum amounts (see
below). If a claim exceeds the statutory maximum, the creditor concerned has
a concurrent claim for the balance.
16.2 Types of security conferring preference
16.2.1 Special mortgage
The definition of ‘special mortgage’ in s 2 embraces the following:
 a mortgage bond hypothecating immovable property;
 a notarial bond hypothecating specially described movable property in terms of
s 1 of the Security by Means of Movable Property Act 57 of 1993—this Act
came into operation on 7 May 1993;
 a notarial bond hypothecating specially described movable property
registered before 7 May 1993 in terms of s 1 of the Notarial Bonds (Natal) Act
18 of 1932. The 1932 Act was superseded by the Security by Means of
Movable Property Act.
The definition excludes any other bond hypothecating movable property: so a
general notarial bond does not qualify as a special mortgage. But it does confer a
preference in respect of the free residue of the estate (see 16.3.2(viii)). A bond
registered under s 31 of the Ship Registration Act 58 of 1998 is deemed to be a
special bond as defined in s 2 (s 31(5) of the Ship Registration Act 58 of 1998).
 Section 88 of the Insolvency Act lays down that a bond (other than a
kustingbrief (which is explained below)) gives no security or preference if
the estate of the debtor was sequestrated within six months after the
lodging of the bond with the Registrar of Deeds for registration;
 the debt was incurred more than two months before the lodging of the
bond;
 and the debt was not previously secured.
A conditional debt is incurred for these purposes when the condition is met (Joint
Liquidators of Glen Anil Development Corporation Ltd (in Liquidation) v Hill Samuel
(SA) Ltd 1982 (1) SA 103 (A)). Section 88 is obviously aimed at the creditor who
only takes steps to obtain the protection of a secured claim once the debtor’s
insolvency is imminent; the section is not intended to restrict the passing of bonds
generally. So the section does not apply if the debt had already been secured and
the bond was intended merely to replace that security. But the section does apply if
only some of the debt, and not the whole debt, was previously secured. In Volkskas
Bpk v Meester van die Hooggeregshof en ’n ander NO 1987 (4) SA 192 (NC), a
bond had been registered to secure an overdraft facility and, when the facility was
increased, a second bond was registered. As only part of the debt secured by the
second bond had previously been secured, that bond enjoyed no preference.
Section 88 mentions a kustingbrief as an exception to the general rule in that
section. A kustingbrief is a type of special mortgage bond. At the same time as he
receives transfer of the immovable property, the purchaser passes the kustingbrief
in favour of the seller for the purchase price.
 or a third person who has lent the money to pay the purchase price (In re
Insolvent Estate of Buissinne Van der Byl and Meyer v Sequestrator and
Attorney-General (1828– 1849) 1 Menz 318). The kustingbrief, which is
registered with the deed of sale, takes preference over mortgages registered
after the kustingbrief. The period of prescription applicable to a debt secured
by a special notarial bond is 30 years (Factaprops 1052 CC & another v Land
and Agricultural Development Bank of South Africa 2017 (4) SA 495 (SCA)). In
Botha v Standard Bank of South Africa Ltd 2019 (6) SA 388 (SCA), the
question was raised whether the cancellation of a mortgage bond, after the
debt has become due and prescription has begun to run, has the effect of
altering the prescription period of the debt from 30 years to three years. The
Supreme Court of Appeal agreed with the court a quo that even if a mortgage
bond has become valueless as security, it retains its classification and
character despite the cancellation, as the law of prescription is not concerned
with security. 16.2.2 Landlord’s legal hypothec A landlord who is owed rent
has a hypothec over movable property brought on to the leased premises for
use by the tenant and over all crops raised by the tenant on the premises. On
insolvency, the landlord has a secured claim regarding all movable assets
owned by the insolvent which are covered by the hypothec (s 85(2)). The
claim is secured up to an amount of three months’ rent, if the rent is payable
monthly or at shorter intervals; six months’ rent, if the rent is payable at
intervals exceeding one month but not more than three months; nine months’
rent, if the rent is payable at intervals exceeding three months but not more
than six months; 15 months’ rent, if the rent is payable at intervals exceeding
six months (s 85(2)(a)–(d)). Page 219 The landlord has a concurrent claim for
any excess. He obtains no preference in relation to goods belonging to third
parties that are subject to the hypothec (Kleinsakeontwikkelingskorporasie Bpk
v Santambank Bpk 1988 (3) SA 266 (C)).
16.2.3 Pledge
 A valid pledge is constituted where movable property is delivered to a creditor
on the understanding that he will keep it until his claim has been satisfied.
Movable incorporeal property is pledged by means of a cession in securitatem
debiti (Bank of Lisbon and South Africa Ltd v The Master & others 1987 (1) SA
276 (A)). The holder of a general notarial bond over movables who obtains
possession of the movables under a court order authorizing him to exercise
his rights under a perfection clause is in the position of a pledgee
 (Development Bank of Southern Africa Ltd v Van Rensburg & others NNO
2002 (5) SA 425 (SCA) 436–7; Contract Forwarding (Pty) Ltd v Chesterfin
(Pty) Ltd & others 2003 (2) SA 253 (SCA) 258–60; Grobler v Oosthuizen 2009
(5) SA 500 (SCA) 506–8).
16.2.4 Right of retention
 Broadly speaking, a party has a right of retention (or lien) over specific
property belonging to another if he (the first party) has expended labour or
incurred expenses in respect of the property of the second party. Liens arise
automatically by operation of law. There are two types of liens: enrichment
liens, and debtor and creditor liens.
 Enrichment liens are so called because they are based on unjustified
enrichment. There are two kinds: salvage liens and improvement liens. The
holder of an enrichment lien may retain the property until compensated for his
expenses and labour. But he cannot insist on being paid more than the
amount by which the owner has actually been enriched. The lessee of urban
property enjoys this lien for necessary and useful improvements to the
immovable property (Business Aviation Corporation (Pty) Ltd & another v
Rand Airport Holdings (Pty) Ltd 2006 (6) SA 605 (SCA)). By contrast with
enrichment liens, debtor and creditor liens secure an amount due under a
contract in which the first party undertook to repair or improve the second
party’s property at an agreed price. A creditor who holds a debtor and creditor
lien is entitled to retain the property as against the debtor until the latter has
paid him the agreed consideration. As a rule, for a party to have a lien, he
must possess the property. But this does not apply to a lien arising under the
Admiralty Jurisdiction Regulation Act 105 of 1983 (Euromarine International of
Mauren v The Ship Berg & others 1984 (4) SA 647 (N) 652).
16.2.5 Instalment agreement hypothec
 If movable property has been delivered to a debtor under an instalment
agreement, the seller acquires, on sequestration, a hypothec over the property
which secures his claim for the balance outstanding under the contract (s
84(1); and see 7.2.8).
16.3 Ranking of claims
 The Act ‘ranks’ the various claims against the insolvent estate: that is to say,
the Act lays down the order in which the claims must be paid and to what
extent each claim must be paid. For the purposes of distribution, the estate
consists of the proceeds of both the encumbered and the unencumbered
assets. The proceeds of each encumbered asset are applied to pay the claim
(or claims) secured by that asset. Any balance remaining after the payment of
secured creditors is combined with the proceeds of the unencumbered assets
to pay the remaining creditors. These moneys (known as the ‘free residue’)
are applied first to satisfy preferent claims (in their order of preference) and
 then to pay the claims of concurrent creditors. When two or more preferent
claims rank equally and the amount available is not enough to satisfy them in
full, they abate (and are thus reduced) in equal proportions. When the balance
of the free residue remaining after settling all preferent claims cannot pay all
concurrent creditors in full, the claims of those creditors are paid
proportionately. In the rare case of a balance remaining after all concurrent
claims have been paid in full, post-sequestration interest is payable on those
claims at a prescribed rate. Distribution of the proceeds of the encumbered
and unencumbered assets (free residue) takes place as explained below.
16.3.1 Encumbered assets
(i) Initial costs
 Under s 89(1), the proceeds of each encumbered asset must be applied to the
payment of certain costs before payment of the claim(s) secured by the asset.
The creditors to whom these costs are owed cannot recover them by proving
claims against the estate (Standard Bank of South Africa Ltd v Townsend &
others 1997 (3) SA 41 (W) 58). The costs are these:
 the costs of maintaining, conserving and realizing the asset in question, eg,
the costs of a night-watchman, auctioneer’s commission, a sectional title levy
(s 15B(3)(a)(i)(aa) of the Sectional Titles Act 95 of 1986; Nel NO v Body
Corporate of the Seaways Building & another 1996 (1) SA 131 (A); Barnard
NO v Regspersoon van Aminie en ’n ander 2001 (3) SA 973 (SCA)) and
water, sewerage and other charges paid to a local authority to obtain a
clearance certificate for registration of transfer (Eastern Metropolitan
Substructure of the Greater Johannesburg Transitional Council v Venter NO
2001 (1) SA 360 (SCA) 370–1); the trustee’s remuneration in respect of the
asset (for the rate of remuneration, see Tariff B in the Second Schedule to the
Act); a proportionate share of the costs incurred by the trustee in giving
security; a proportionate share of the Master’s fees (for these fees, see the
Third Schedule to the Act); if the asset is immovable property, any tax which
is, or will become, due on it for a period not exceeding two years immediately
preceding the date of sequestration; and for the period from the date of
sequestration to the date of transfer of the property; together with any interest
or penalty which may be due on the tax. In Steve Tshwete Local Municipality v
Fedbond Participation Mortgage Bond Managers (Pty) Ltd & another 2013 (3)
SA 611 (SCA), the Supreme Court of Appeal clarified that if the period of a
prohibition in any law is effectively shorter than the two-year period provided
for in s 89(1) of the Insolvency Act, the shorter period will apply after
sequestration, as the latter is intended to limit and not to extend embargo
provisions (see Kunst, Boraine and Burdette Meskin’s Insolvency Law para
12.4.4.1). The court also confirmed that ‘[t]he words of s 89(4) (namely that a
law which prohibits transfer of immovable property, unless any tax due thereon
has been paid, shall not debar a trustee from transferring the property if the
trustee has paid the tax for the period mentioned in s 89(1)) lend themselves
to the interpretation that the object of s 89 was to provide a remedy to a
 trustee by limiting the impediment created by embargo provisions’ (idem 617);
and that ‘s 89 limits the embargo provision only where the debt is a tax as
defined therein and that it imposes no limitation at all on the periods over
which other debts mentioned in such embargo provisions have become due’
(idem 617–18). In City of Johannesburg v Kaplan NO & another 2006 (5) SA
10 (SCA) 19–20, it was held that in so far as debts due to a municipality for
rates and services are not taxes for the purposes of s 89, they are a charge on
the property and enjoy preference over a mortgage bond on the property
under s 118(3) of the Local Government: Municipal Systems Act 32 of 2000.
And the period of this preference is limited only by prescription (see City of
Tshwane Metropolitan Municipality v Mathabathe & another 2013 (4) SA 319
(SCA); Steve Tshwete Local Municipality v Fedbond Participation Mortgage
Bond Managers (Pty) Ltd & another (supra)). In City of Tshwane Metropolitan
Municipality v Mathabathe & another (supra), the Supreme Court of Appeal
clarified that s 118 provides two different remedies. Section 118(3) provides
the municipality with security for the payment of the amount owed to it, which
ranks in preference over a registered mortgage bond on the proceeds of the
property and is not related to a time limit, while s 118(1) represents an
embargo provision connected to a time limit. In addition, in Jordaan & others v
City of Tshwane Metropolitan Municipality & others 2017 (6) SA 287 (CC), the
Constitutional Court interpreted s 118(3) so as not to infringe s 25(1) of the
Constitution of the Republic of South Africa, 1996, which provides for the right
not to be deprived of property arbitrarily. When property is transferred, the new
owner is not liable for the debts arising from the charge upon the property
under s 118(3) (the ‘historical debt’). This charge does not survive the transfer
and is not transmissible. Making the new owner pay for historical debt would
be a double debit amounting to an arbitrary deprivation of property that would
be unconstitutional. On this interpretation, s 118(3) was held to be
constitutional. Where there are funeral and death-bed expenses and the free
residue cannot defray them, the deficiency must be paid out of the secured
assets in proportion to their value (s 96(4)). So, if the deficiency is R600 and
there are two encumbered assets, one realizing R90 000 and the other R30
000, then R450 is chargeable to the proceeds of the former asset, and R150
to the proceeds of the latter. (The arithmetic works as follows: add the values
of the two assets’ proceeds (R90 000 and R30 000) together for a total of
R120 000. Start with the lower proceeds (R30 000) and calculate those as a
fraction of the R120 000 total proceeds: R30 000 divided by R120 000 equals
ss . Then multiply the R600 deficiency by to obtain R150. As a shortcut,
deduct that R150 from the R600 deficiency to find the R450 chargeable to the
higher (R90 000) proceeds.)
(ii) Secured claims
After payment of the above costs, the balance of the proceeds of the
encumbered asset, including any interest earned on the price obtained for the
asset (Singer NO v The Master & another 1996 (2) SA 133 (A)), must be applied
to the payment of all claims secured by the asset, in the proper order of
preference (s 95(1)). Interest due on a claim for a period not exceeding two years
immediately preceding the date of sequestration is secured as if it were part of
the capital sum (s 89(3)). Interest from the date of sequestration to the date of
payment is also secured (s 95(1)). The applicable rate is 8 per cent per annum
unless the claim bears a higher rate in terms of a stipulation in writing, in which
event interest must be calculated at the rate stipulated (s 95(1) read with s
103(2)). The 8 per cent provided for by the Act is simple, not compound, interest
(Boland Bank Ltd v The Master & another 1991 (3) SA 387 (A)). Secured claims
rank among themselves: Immovable property enrichment lien; special mortgage
bond(s) (and contract recorded to terms of the Alienation of Land Act (see
7.3.2(ii)) in the order in which they were registered or recorded; debtor and
creditor lien (D Glaser & Sons (Pty) Ltd v The Master & another NO 1979 (4) SA
780 (C); Landen Landboubank van Suid-Afrika v Cogmanskloof
Besproeiingsraad 1992 (1) SA 217 (A) 244). Movable property enrichment lien;
pledge (including a statutory pledge, such as that created by s 30 of the Land and
Agricultural Development Bank Act 15 of 2002); special notarial bonds in the
order in which they were registered; debtor and creditor lien; instalment
agreement hypothec; landlord’s hypothec. Not all of these security interests can
exist simultaneously over the same movable asset: A lien and a pledge cannot
exist together because they both require possession of the property by the
creditor in order to exist. A landlord’s hypothec cannot exist over the property if
the property is hypothecated by a notarial bond governed by the Security by
Means of Movable Property Act 57 of 1993, unless the hypothec was perfected
by attachment before the bond was registered; or the property is subject to an
instalment agreement as defined in s 1 of the National Credit Act 34 of 2005 (s 2
of the Security by Means of Movable Property Act 57 of 1993). As mentioned
above (see 16.1.2), should the proceeds of the security be insufficient to cover
the sum payable to the secured creditor, he is entitled to rank as a concurrent
creditor for the balance unless he has chosen to rely solely on the proceeds of
his security.
16.3.2 Unencumbered assets (free residue)
 The trustee must distribute the free residue to the creditors in the order of
preference laid down in ss 95 to 104 of the Insolvency Act. The trustee and
the insolvent cannot validly agree to depart from this scheme of distribution.
In Commissioner, South African Revenue Service v Stand Two Nine
Nought Wynberg (Pty) Ltd & others 2005 (5) SA 583 (SCA), it was argued
that an insolvent might arrange with his trustee or liquidator to pay in full the
claim of a particular estate creditor. The court pointed out (idem 586– 7)
that giving effect to such an agreement would enable the parties to subvert
the scheme of distribution laid down by the Act. Whatever agreement the
trustee might have concluded had to yield to his statutory duty to recover
and reduce into possession all the insolvent’s assets and distribute the
proceeds according to law. (i) Funeral expenses The free residue must be
applied, in the first place, to defraying the expenses of the funeral of the
insolvent, if he died before the trustee’s first account was submitted to the
Master; and the funeral of the insolvent’s wife or minor child, if these
expenses were incurred within three months immediately before
sequestration (s 96(1)). Funeral expenses enjoy preference to a maximum
amount of R300 (ibid). (ii) Death-bed expenses After the payment of funeral
expenses (not exceeding R300), any balance of the free residue must be
applied to paying the death-bed expenses of the insolvent, if these
expenses were incurred before the trustee’s first account was submitted to
the Master; and the insolvent’s wife or minor child, if these expenses were
incurred within three months immediately before sequestration. Again, the
preference does not exceed the sum of R300 in all (s 96(2)). ‘Death-bed
expenses’ means expenses incurred for medical attendance, nursing and
medical necessaries (s 96(3)). The claims regarding death-bed expenses
rank pari passu (simultaneously and in equal measure; without preference)
and abate in equal proportions, if necessary (ibid). Given the current funeral
and medical costs, these monetary limits in the respective subsections
which were last amended in 1983 render these preferences virtually
meaningless today. (iii) Costs of sequestration Next, any balance of the free
residue must be applied in defraying the costs of sequestration (s 97(1)).
The costs of sequestration, in the order in which they must be paid, are the
sheriff’s charges incurred since sequestration (eg, for attaching and making
an inventory of the estate assets); the Master’s fees; and miscellaneous
charges (s 97(2)) consisting of the taxed costs of sequestration (including
the costs of opposition to the application, if the court so orders: see 3.4);
Page 224 the fee allowed by the Master to a person who helped the
insolvent or his spouse draw up a statement of affairs after sequestration
(see 6.1.2 and 14.1); the remuneration of a curator bonis (if any); the
remuneration of the trustee (and presumably also the provisional trustee);
all other costs of administration and liquidation, including costs incurred by
the trustee in giving security for the proper performance of his duties;
completing executory contracts; maintaining, conserving and realizing
unencumbered assets; and litigating in connection with the estate;
expenses incurred by the Master or presiding officer at a meeting of
creditors in protecting the estate assets or observing the provisions of the
Act; rent owed for any period after sequestration; the salary, wage or fees
of any person engaged by the curator bonis or trustee in connection with
the administration of the estate. The above miscellaneous charges rank
pari passu among themselves and must abate in equal proportions, if
necessary (ibid). (iv) Special preferences under the Companies Act 2008
when liquidation superseded business rescue Since the ranking of claims
under the Insolvency Act applies also to companies and close corporations
 being wound up and unable to pay their debts (see s 339 of the Companies
Act 61 of 1973 and the introduction to chapter 23), brief mention should be
made of claims that will rank immediately after the costs of liquidation if the
business rescue proceedings are superseded by a liquidation order.
Section 135(3) of the Companies Act creates preferences for the following:
fees and expenses owing to the business rescue practitioner; unpaid
remuneration and other employment-related amounts owed to employees
in respect of the period of the company’s business rescue proceedings; and
amounts due to other creditors who provided postcommencement
financing, in the order in which they were incurred.
 If a liquidation order supersedes business rescue proceedings, the s 135
preference continues in force, save to the extent of claims arising from the
costs of liquidation (s 135(4)). The ranking of post-commencement claims
in business rescue proceedings is discussed in 27.3.2. (v) Costs of
execution If any free residue remains after the costs of sequestration and,
where applicable, special preferences under the Companies Act 2008 have
been paid, it must be applied in defraying the taxed fees of the sheriff in
connection with any execution upon the insolvent’s property and the
proceedings leading to that execution; and any other taxed costs in those
proceedings, not exceeding R50 (s 98(1)). The amount paid must not
exceed the proceeds of the property in question if the property was under
attachment or if the proceeds of the sale were in the hands of the execution
officer at the date of sequestration (ibid). The attachment of property in
Page 225 execution confers no preference on the judgment creditor other
than that provided for here (s 98(2)). (vi) Salary or remuneration of
employees Any balance of the free residue is then applied to paying the
following: any salary or wages due to an employee, for a period not
exceeding three months (s 98A(1)(a)(i) of the Insolvency Act), to a
maximum of R12 000; any payment in respect of any period of leave or
holiday due to an employee which has accrued as a result of his being
employed by the insolvent in the year of insolvency or the preceding year,
whether or not payment is due at the date of sequestration (s 98A(1)(a)(ii)),
to a maximum of R4 000; any payment due in respect of any other form of
paid absence for a period not exceeding three months before the date of
sequestration (s 98A(1)(a)(iii)), to a maximum of R4 000; any severance or
retrenchment pay due to the employee in terms of any law, agreement,
contract, wage-regulating measure, or as a result of termination under s 38
(s 98A(1)(a)(iv)), to a maximum of R12 000; any contributions which were,
immediately before sequestration, owing by the insolvent in his capacity as
employer (including contributions payable in respect of any of the
employer’s employees) to any pension, provident, medical aid, sick pay,
holiday, unemployment or training scheme or fund, or to any similar
scheme or fund (s 98A(1)(b)), to a maximum of R12 000 in respect of each
scheme or fund (not each employee). ‘Unemployment fund’ for these
 purposes does not include the Unemployment Insurance Fund referred to in
s 6 of the Unemployment Insurance Act 30 of 1966. (This 1966 statute was
repealed (s 70 of the Unemployment Insurance Act 63 of 2001), and the
assets, liabilities, rights and obligations of the Unemployment Insurance
Fund were transferred to the fund of the same name (para 3 of Schedule 1,
read with s 4).) The maximum amounts referred to above are determined
by the Minister under s 98A(2)(a) (GN R865 in Government Gazette 21519
dated 1 September 2000). This section empowers the Minister (after giving
the prescribed notice to interested parties: s 98A(2)(d)) to determine
maximum amounts payable under s 98A(1) to ensure that the balance of
the free residue is applied equitably. The Minister may also, from time to
time, change these maximum amounts to take into account subsequent
fluctuations in the value of money (s 98A(2)(b)). It is noteworthy that these
maximum amounts have not been changed in 22 years. An employee is
entitled to be paid his wages, leave pay and other payments mentioned in s
98A(1)(a) without proving a claim under s 44 (s 98A(3)). But the trustee
may require the employee to submit an affidavit in support of his claim
(ibid). The claim for salary or wages ranks before all the other claims
mentioned in s 98A(1) (s 98A(4)(a)). And the claims for leave pay, other
paid absence, and severance or retrenchment pay are preferred to the
claims for contributions to the various funds or schemes (s 98A(4) (b)). The
claims for leave pay, other paid absence, and severance or retrenchment
pay rank equally and abate in equal proportions, if necessary (s 98A(4)(b)).
The same applies to the various claims for contributions (s 98A(4)(c)). Page
226 The Minister may, after consultation with the National Economic
Development and Labour Council (Nedlac), by notice in the Gazette,
exclude categories of employees schemes or funds from the operation of s
98A on certain specified grounds (s 98A(6)). The Minister has exercised his
powers under this provision and excluded directors of companies and
members of close corporations (GN R865 in Government Gazette 21519
dated 1 September 2000). This exclusion means that company directors
and close corporation members have none of the preferent claims.
Chapter 23
The winding up of companies
23.6 The liquidator 23.6.1 Appointment of provisional liquidator