Allowances, Realization of Assets & Reports

Section 83

Realization of securities for claims


(1)  A creditor of an insolvent estate who holds as security for his claim any movable property shall, before the second meeting of the creditors of that estate, give notice in writing of that fact to the Master, and to the trustee if one has been appointed.

(2)  If such property consists of a marketable security, a bill of exchange or a financial instrument as defined in section 1 of the Financial Markets Control Act, 1989 (Act No. 55 of 1989), the creditor may, after giving the notice mentioned in subsection (1) and before the second meeting of creditors, realize the property in the manner and on the conditions mentioned in subsection (8).

[Sub-s. (2) substituted by s. 30 (a) of Act No. 54 of 1991.]

(3)  If such property does not consist of a marketable security or a bill of exchange, the trustee may, within seven days as from the receipt of the notice mentioned in subsection (1) or within seven days as from the date which the certificate of appointment issued by the Master in terms of subsection (1) of section eighteen or subsection (2) of section fifty-six reached him, whichever be the later, take over the property from the creditor at a value agreed upon between the trustee and the creditor or at the full amount of the creditor’s claim, and if the trustee does not so take over the property the creditor may, after the expiration of the said period but before the said meeting, realize the property in the manner and on the conditions mentioned in subsection (8).

(4)  If no trustee has been appointed before the said meeting, the creditor may, with the permission in writing of the Master and before the said meeting, realize in manner and on the conditions mentioned in subsection (8) any such property which he is not entitled to realize in terms of subsection (2).

(5)  The creditor shall, as soon as possible after he has realized such property, prove in terms of section forty-four the claim thereby secured and he shall attach to the affidavit submitted in proof of his claim a statement of the proceeds of the realization and of the facts on which he relies for his preference.

(6)  If he has not so realized such property before the second meeting of creditors, he shall as soon as possible after the commencement of that meeting deliver the property to the trustee, for the benefit of the insolvent estate and if the creditor has not delivered the said property to the trustee within a period of three days as from the commencement of the said meeting the trustee may demand from him delivery of such property. If the creditor fails to comply with such demand of the trustee, the Master, at the request of the trustee and after notice to the creditor shall direct the deputy-sheriff within whose area of jurisdiction the property is situate to attach the property and to deliver it to the trustee, and in that case the creditor shall be liable for the deputy-sheriff’s costs, as taxed and allowed by the Master. If those cannot be recovered from the creditor, they shall be paid out of the estate as part of the costs of the sequestration.

(7)  When the trustee has received the property mentioned in subsection (6), the said creditor may prove his claim and place a value upon the said property in terms of subsection (4) of section forty-four.

(8)  The creditor may realize such property in the manner and on the conditions following, that is to say—

(a)

if it is—

(i)

any property of a class ordinarily sold through a stock-broker as defined in section 1 of the Stock Exchanges Control Act, 1985 (Act No. 1 of 1985), the creditor may, subject to the provisions of the said Act and (where applicable) the rules referred to in section 12 thereof, forthwith sell it through a stock-broker, or if the creditor is a stock-broker, also to another stock-broker; or

(ii)

a financial instrument referred to in subsection (2), the creditor may, subject to the provisions of the Financial Markets Control Act, 1989, and rules referred to in section 17 thereof, forthwith sell it through a financial instrument trader as defined in section 1 of the said Act, or, if the creditor is a financial instrument trader or financial instrument principal as defined in section 1 of the said Act, also to another financial instrument trader or financial instrument principal;

[Para. (a) substituted by s. 30 (b) of Act No. 54 of 1991.]

(b)

if it is a bill of exchange, the creditor may realize it in any manner approved of by the trustee or by the Master;

(c)

if it consists of a right of action, the creditor shall not realize it except with the approval of the trustee or of the Master;

(d)

if it is any other property, the creditor may sell it by public auction after affording the trustee a reasonable opportunity to inspect it and after giving such notice of the time and place of the sale as the trustee directed.


(9)  As soon as the trustee has directed a creditor in terms of paragraph (d) of subsection (8) to give notice of a sale by public auction, the trustee shall give notice in writing to all the other creditors of the estate in question of the time and place of the proposed sale.

(10)  Whenever a creditor has realized his security as hereinbefore provided he shall forthwith pay the net proceeds of the realization to the trustee, or if there is no trustee, to the Master and thereafter the creditor shall be entitled to payment, out of such proceeds, of his preferent claim if such claim was proved and admitted as provided by section forty-four and the trustee or the Master is satisfied that the claim was in fact secured by the property so realized. If the trustee disputes the preference, the creditor may either lay before the Master an objection under section one hundred and eleven to the trustee’s account, or apply to court, after notice of motion to the trustee, for an order compelling the trustee to pay him forthwith. Upon such application the court may make such order as to it seems just.

(11)  If a creditor has valued his security when proving his claim, the trustee, if authorized by the creditors, may, unless the creditor has realized his security in terms of subsection (2) or (3), within three months as from the date of his appointment or as from the date of the proof of the claim (whichever is the later) take over the property (whether movable or immovable) which constitutes the security at the value placed thereon by the creditor when his claim was proved: Provided that if two or more creditors have a pledge or special mortgage of the same property, a creditor who has valued his security shall be deemed to have valued, and the trustee shall be entitled to take over, only the preferent rights of the creditor in respect of the property, and not the property itself. If the trustee does not, within that period, take over the said property or security he shall realize it for the benefit of all creditors whose claims are secured thereby, according to their respective rights.

[Sub-s. (11) amended by s. 24 (a) of Act No. 16 of 1943 and substituted by s. 27 of Act No. 99 of 1965.]

(12)  If the claim of a secured creditor exceeds the sum payable to him in respect of his security he shall be entitled to rank against the estate in respect of the excess, as an unsecured creditor, and if the net proceeds of any such property exceed all claims secured thereby the balance, after payment of those claims, shall be added to the other free residue (if any) in the estate in question.

(13)  The preceding provisions of this section shall apply mutatis mutandis in respect of any creditor for value of a solvent spouse mentioned in section twenty-one, who holds as security for his claim against that spouse any movable property belonging to that spouse.

[Sub-s. (13) substituted by s. 24 (b) of Act No. 16 of 1943.]