Abstract

If the executor of a deceased estate finds that the estate is insolvent and the creditors of the deceased estate have not instructed him to sequestrate the estate in terms of the Insolvency Act 24 of 1936, he may choose to administer the estate as an insolvent deceased estate in terms of section 34 of the Administration of Estates Act 66 of 1965. Section 34(7) of this Act requires an executor to submit liquidation and distribution accounts of the estate to the Master within certain specified periods of time and section 34(7)(b) prescribes that these accounts must provide for the distribution of the proceeds according to the preferred order prescribed by the Insolvency Act. Section 95(1) of the Insolvency Act provides that “the proceeds of any property which was subject to a special mortgage, landlord’s legal hypothec, pledge or right of retention, after deduction therefrom of the costs mentioned in subsection (1) of section 89, shall be applied in satisfying the claims secured by the said property”. The question that this contribution seeks to answer is whether “the proceeds of any property” in section 95(1) includes the amount(s) paid by a tenant as rent after the date of sequestration, but before the property was sold by the trustee or liquidator? According to Singer NO v The Master 1996 2 SA 133(A), this phrase includes interest derived from the deposit of the purchase price of the property. However, the Appellate Division also accepted that “the proceeds of any property” were not limited to the purchase price of the property, but included fruits derived after the date of sequestration such as rent paid by a tenant before the property was sold or interest paid by the purchaser. It is recommended in this contribution that rental income that accrues prior to the realisation of the secured property should not be treated in the same way as, for example, rental income and occupational interest that accrues after realisation of the property. This recommendation is based on the interpretation of section 95(1) of the Insolvency Act, in conjunction with section 83 and section 95(2).