Proving Claims against Insolvent Estates

When to Prove a Claim Against a Liquidated Estate. 

To prove a claim against an insolvent estate, the claim must be a liquidated claim that arose before the date of sequestration and existed at that date, and did not prescribe at that date. A liquidated claim is a claim for a certain amount that has been determined through an agreement, a court judgment, or other means. Non-liquidated claims may be tendered at a meeting of creditors and deemed proved against the estate if the trustee has compromised or admitted them, or if they have been settled by a court judgment.

Types of claims against insolvent estates:

1. Secured Claim: A creditor with a preferent right over the property of an insolvent estate, such as a landlord's legal hypothec, right of retention, or special mortgage, holds a secured claim.
2. Preferent Claim: A creditor's claim is preferent if they have a right to payment "out of" the property of the estate before other creditors' rights. This includes funeral and death-bed expenses and payment of salary and wages of former employees. Other particular claims may enjoy a preference in terms of the Insolvency Act or other statutes with the force of law.
3. Concurrent Claim: A concurrent claim is neither secured nor preferent in terms of the Insolvency Act.
4. Conditional Claim: A conditional claim is dependent on a condition that must be fulfilled before the claim is enforceable. A conditional claim may be proved provided it is a liquidated claim.
5. Prescribed Claim: A claim that has prescribed at the date of sequestration cannot be proved against the estate.

Proving a claim against a insolvent estate

A claim can be proved at any time before the final distribution of the estate. A creditor may delay proof of their claim while there is a risk of a contribution being levied against creditors who have already proved their claims. To prove a claim, the creditor must submit an affidavit with supporting documents to the officer presiding at the meeting of creditors. A prescribed form is available from the trustee or liquidator of the estate. 

At the meeting of creditors, submitted claims will be admitted or rejected by the presiding officer. The decision to reject a proved claim may be reviewed by the unsuccessful claimant. 

CONFIRMATION OF LIQUIDATION AND DISTRIBUTION ACCOUNTS

Once all claims against an insolvent estate have been proved, the trustee or liquidator must prepare a liquidation and distribution account. The account must show all assets realized, all claims proved and admitted, and all expenses incurred in the administration of the estate. The liquidation and distribution account must be advertised in the Government Gazette and a local newspaper. 

Creditors and interested parties then have 21 days from the date of advertisement to inspect the account and file any objections they may have. After the expiration of the 21-day period, the trustee or liquidator must apply to the Master of the High Court for confirmation of the account. If there are no objections or if any objections have been resolved, the Master will confirm the account. Once the account has been confirmed, the trustee or liquidator must distribute the assets of the estate to the proved creditors in accordance with the priorities set out in the Insolvency Act.

If there are any funds remaining after all proved claims have been paid, the trustee or liquidator must pay those funds to the insolvent, unless there is a court order to the contrary. 

In conclusion, if you are a creditor with a claim against an insolvent estate, it is important to understand the types of claims that can be proved, the procedure for proving a claim, and the priorities for distribution of assets in the event of a confirmed liquidation and distribution account.

Author: Louwrens Koen