Lessons for insolvency law from the emoluments attachment order experience

Abstract

Section 23(5) of the Insolvency Act poses an interesting challenge, namely vesting a portion of an insolvent’s post-sequestration income in the trustee of the insolvent estate without infringing on the insolvent’s constitutional rights. The income earned by the insolvent during sequestration is in general excluded from his estate and does not vest in the trustee, unless the Master determines that a portion of the insolvent’s income will not be required to maintain the insolvent and his dependents. In such a case, only the portion deemed to be surplus to requirements will be included in the insolvent estate and will vest in the trustee. The question of what role the insolvent’s income should play during the sequestration process, and therefore how section 23(5) should be interpreted and applied, has vexed the courts and numerous practical and constitutional issues arise. This study examines the application and shortcomings of section 23(5) during the administration phase of the sequestration process. It then explores the lessons learned during the recent constitutional scrutiny and subsequent amendment of the emoluments attachment process. Lastly, recommendations are made for possible law reform of section 23(5).