IURI 322 - Law of Insolvency PDF

IURI 322 - Law of Insolvency Study Unit 9 Meeting of creditors CHAPTER 9 & 13  By means of a system of meetings, the insolvent’s creditors establish their claims, elect the trustee and give directions to the trustee on the sequestration of the estate. ‘Creditors’ in this context, means cr...

IURI 322 - Law of Insolvency Study Unit 9 Meeting of creditors CHAPTER 9 & 13  By means of a system of meetings, the insolvent’s creditors establish their claims, elect the trustee and give directions to the trustee on the sequestration of the estate. ‘Creditors’ in this context, means creditors i.r.o debts incurred before sequestration. FIRST MEETING When Immediately on receipt of final sequestration order Convened by The Master Notice In Gazette not less than 10 days prior to meeting Purpose To enable creditors to prove claims and elect a trustee SECOND MEETING When After first meeting and appointment of the trustee on a date fixed by Master Convened by The Trustee Notice In Gazette and 1 or more newspapers circulating in the district in which the insolvent resides or has principal place of business. Purpose To enable creditors to prove claims, receive trustee’s report on affairs and condition of estate and to give trustee directions on administration of estate SPECIAL MEETING A special meeting may be called for any of the following purposes: 1. Proof of claims 2. Interrogation of the insolvent. PROOF OF CLAIM MEETING When After second meeting when trustee is called upon by any interested party tendering payment of expenses to be incurred in connection with meeting Convened by The Trustee Notice In Gazette Purpose To enable creditors to prove claims INTERROGATION OF THE INSOLVENT MEETING When At any time, provided Master gives consent, trustee may call a meeting and must do so if required by a creditor who has proved a claim against estate Convened by The Trustee Notice In Gazette Purpose Interrogating the insolvent General meeting GENERAL MEETING When At any time or when required to do so by Master or creditors representing ¼ of the value of all claims proved Convened by The Trustee Notice In Gazette and 1 or more newspapers circulating in the district in which the insolvent resides or has principal place of business and must state matters to be dealt with Purpose Giving trustee instructions concerning administration of estate, also for considering an offer of composition  Date & Venue of meetings: The Master determines the date & time of the 1st meeting. The fixing of the dates & times of other meeting is left to the trustee. The PO has the power to adjourn a meeting from time to time General (s39(5)). *The Act does not provide for the venue of the various Provisions meetings, except to require that every meeting be held at a place accessible to the public (s39(6)). Meetings are relating to usually held at the office of the Master or Magistrate* Presiding Officer at meetings: if a meeting is held in a meetings district with the Master’s Office, the M or an officer in the public service designated by him must preside over the meetings (s39(2)). If held in any other district, the meeting must be held according to the Master’s directions in any other district. Record of proceedings The presiding officer (PO) must keep a record of the proceedings at every meeting, certify it at conclusion and transmit it to the M (s39(3)). The minutes constitute prima facie proof. Statement privileged The publication of any statement at a meeting is privileged to same extent as the publication of a statement made in a court of law. Proof of claims Creditor (C) cannot share in any distribution of assets, challenge trustees' actions etc. UNLESS he has proved his claim against the estate However, he may be informed of the estate affairs PROOF OF CLAIM = locus standi & prima facie proof of the existing debt. Time: In general- anytime before final distribution of estate (s44(1)). But once 3 months has elapsed from closure of 2nd meeting, the creditor can only prove his claim if he obtains permission of the Master or court & pays costs of late proof.  Documents which must be Time & place of lodging Procedure for lodged claim document proof of A claim must be proved by way of an affidavit (Forms C/D) in the First The affidavit & supporting vouchers must be delivered claims Schedule to the Act (S44(4)) The affidavit may be made by the to the office of the PO at least 24hrs before advertised s44 lays down creditor or any person fully cognizant of the claim. Must set forth: time of the meeting. If the procedure Facts on which the deponent’s knowledge of the claim is based; documents not delivered on time, claims cannot be for proving Nature & particulars of the claims; admitted to proof at the meeting, unless PO Whether the claim was acquired by claims cession after sequestration; considers late submission not to be a fault on the Nature & details of any security held creditor’s part. by the creditor for the claim See further detail on page 140 Procedure for Examination of Attendance by claim documents Creditor proof of claims by creditors The Act does not Creditor, the trustee, require the creditor Continued… the insolvent or their to attend the meeting representatives may to prove his claim, inspect the claim but it may be documents during advisable for the office hours free of creditor or his charge (44(5)) representative to be present to deal with any queries or objections to the admission of claim. INTERROGATION BY TRUSTEE (OR CREDITOR OR PRESIDING OFFICER) When & where: May be conducted at any meeting of creditors (s65(1)). For instance, at a special meeting called for the purpose of proof of claims (Lubbe v Estate Lubbe) or at a general meeting convened for the purpose of giving the trustee directions about matters concerning the estate (Essop v The Master & another). The meeting must be properly called, otherwise interrogation will not proceed. Who may interrogate? Trustee Any C with a proved claim Presiding Officer (PO) Or agent of the above parties.  Who may be interrogated? PO may summon: Any person who is known/on reasonable grounds believed to possess or have been in possession of any property belonging to the insolvent/his spouse Insolvent/ any other person summoned to Any person known/on reasonable grounds is appear s64 (2) believed to be indebted to the estate Any person who in the opinion of the PO can give material info regarding the insolvent/his affairs/his business affairs / the estate/ property of the insolvent’s spouse.  What subjects can be covered in interrogation? All matters relating to insolvent/ his business affairs The sequestration of his estate Any property belonging to the estate Business, affairs or property of the solvent spouse Read Harksen v Lane 1998: This case looked at the unconstitutionality of s 65(1) in relation to the solvent spouse. The violation of the solvent spouse’s rights to equality and property, privacy and freedom and security of the person was in issue. The constitutional court held that on the basis that it is constitutional for the spouse’s property to temporarily vest in the trustee/master, it follows that the solvent spouse’s estate is relevant to the insolvent spouse and thus interrogation is permitted. No constitutional rights were violated. What is the procedure at an interrogation PO- call witness & administer oath Statement of person interrogated must be recorded in the same way as evidence given in a civil court s65(3) Where insolvent in interrogated he must make a declaration that he has made a full and true disclosure of his affairs. PO must ensure that proceedings are conducted in accordance with the fundamental principles of justice & he must perform his functions fairly and impartially.(Advance Mining v Hydraulics Pty Ltd & others v Botes NO & Others) He must intervene to stop interrogation that amounts to abuse of s65, it is vexatious or oppressive. (Lane & Another NNO v Magistrate Wynberg 1997) PO must disallow any irrelevant questions and questions that would prolong the interrogation unnecessarily. A person called upon to give evidence may be assisted at his interrogation by an attorney, advocate or other agent Rules regarding privilege Person being interrogated may not refuse to answer because it will incriminate him or is to be tried on a criminal charge & may be prejudiced at such trial by his answer (s65(2)) If a banker is summoned, he must produce all cheques (or record of payment) in his possession which were drawn by the insolvent/ spouse within 1 year of sequestration. Any evidence given during interrogation is admissible in any proceedings instituted against the person who gave the evidence. S65(5) Section 65 (2A) limits the ambit of the above provisions in two respects: (1) PO must hold any incriminating or prejudicial part of any proceedings in camera & prohibit it from the public (2). No incriminating evidence given at an inquiry may be admitted in any criminal proceedings, except in matters of perjury or related matters. Consequences of refusing to submit to an interrogation? If the insolvent person duly summoned to appear at a meeting of creditors fails to attend or remain in attendance at the meeting: Section 66 (1) - PO may issue a warrant authorizing police to apprehend him and bring him before the PO. UNLESS, they have a reasonable excuse for remaining absent (e.g., forgetting to attend is not a reasonable excuse). Section 66 (2) Where person appears but refuses to produce documents or answer question fully, the PO may have them detained in prison until they are willing to “do so” (cooperate) Niewoudt v Faught No en andere: it was held that when the party gives an answer which is incomplete or unsatisfactorily, the PO must decide whether this is due to unwillingness to testify or whether the party has answered the question to the best of their ability. If the answer is clearly untrue or evasive, it may be considered a form of intentional refusal to answer the question. But if the answer is not nonsensical or evasive, even if it is improbable, it cannot be said that the party has failed to answer the questions to the best of his ability. *REMAINDER OF CHAPTER: SELF-STUDY* GOOD LUCK WITH TEST 2 The end!