Let me tell you a story:
When I was an eager young lawyer anxious to prove myself, my senior partner handed me the files of a local client by the name of Compass Products, to collect their debts (actually that's not entirely what happened but I'll get back to that - call that "footnote (1)"
Compass was owned and run by a wonderful old Jewish man, Mr Hesselberg. Their business was in Albert Rd Woodstock I think. They were wholesalers in the hospitality business.
I had to collect their debts from defaulting retailers who bought from them. It all went swimmingly until I hit my first insolvency claim. I knew absolutely nothing about insolvency practice other than the bare bones of the law which we learned at UCT - enough knowledge to be dangerous - in fact, fatal. The liquidators - also a bunch of nice Jewish guys, very good at their jobs - assumed that they were dealing with creditors and lawyers who knew what they were doing. Another fatal mistake, in my case.
The liquidators proceeded by the book (in principle there are two court orders - a preliminary order which appoints the liquidators and authorises them to advertise for debtors and creditors to file their claims, and in due course a final order confirming the insolvency and authorising payment to creditors (if there is any money to pay them). After their first court order, we got the notice to file our claim.
I didn't give it a second thought. I formulated the claim, prepared and signed the necessary supporting affidavit, and took it personally to the liquidator's offices. I was delighted to hear that we were the very first creditors to file our claim. What an achievement! I was such a hot shot! But back at my firm I decided to keep quiet about it so that when the moment came and I had the cash in my hot little hands, I could announce it triumphantly.
But that's not how it panned out - because there's a subtle difference, to which I never gave any thought, between a debtor who is ILLIQUID, ie, he has assets which exceed his debts in value, he just doesn't have the cash to pay the debts, and a debtor who is BANKRUPT, ie, his liabilities exceed the value of his assets, in which case everyone will just get a dividend. And then of course you have the poor schlepper who is so bankrupt that never mind the creditors, there isn't even enough value in the estate to cover the cost of the insolvency proceedings.
In the latter case the liquidators are entitled to look to the creditors who proved their claims to cover whatever fees they cannot recover from the estate of the insolvent! - So old hands in the debt collection business know when to abandon their claims and when to file them. They do NOT file their claims immediately. You do so with circumspection after you've got an understanding of the debtor's real situation.
In this case we were the only creditor to file a claim and the debtor had no assets so we got hit with 100% of the liquidator's bill. Obviously I couldn't do this to poor old Mr Hesselberg and if I had tried to do that he would have been advised to sue us for damages due to professional negligence.
So I went, cap in hand, to the liquidator, who as I said was a nice old Jewish gentleman, and explained my position. He could have ignored my plea and persisted - but he smiled at me benevolently (he knew that he was dealing with an inexperienced young schlemiel who would probably learn in due course), pulled out his file and in front of me he tore up my claim and affidavit and tossed them in the bin.
Lesson learned.
I hope you don't mind but I'm copying this story to your walking-mates, just for fun!
FOOTNOTE #1
I didn't actually get given Compass Products as a client, just like that: we had a senior professional assistant (let's call him John) who did all the debt collections. He was an incredibly handsome, tall, flamboyant Christian guy who wore impeccable suits and he had a stream of pretty young ladies in and out of his office. He also assisted Klem Druker, who some of you may remember - Klem acted for many people in the local entertainment business including the film business, and Klem was equally flamboyant. So John also had an unfair share of the young South African film actresses. But neither he nor Klem - ahem! - knew that much law, so they depended heavily on the rest of us to be their brains trust.
At some point John got it into his head that as a result of his years of hard work, and because he thought that his position at the firm was so assured, he was now entitled to "sabbatical leave" - in his case, a really long stay in America. Imagine that. In a conservative little law firm run by conservative little Jewish men who never took more than a few days' leave at a time in their entire lives and who slaved away for +/- 11 hours a day, 6 days a week, this hero here wants a few months in America!
They gave it to him, but me, as an ambitious young Jewish boykie to whom the old-fashioned Jewish work ethic was first nature and who sometimes worked from 4 a.m. to 7 p.m. just to prove himself, this "sabbatical leave" sounded dangerous. I was still an articled clerk, but I sensed a gap opening up here, and I leapt at it. I volunteered to look after John's debt collections while he was away and with some hesitancy the partners agreed. (The other big companies that I got were Victory Trading - owner Hymie Shapiro from Camps Bay - and a few furniture stores with branches all over).
By the time John got back from America, there was no more place for him at the firm. He resigned after a month. He went on to marry the heir to the Huletts sugar empire and emigrated to Sydney and was never seen again. I liked John, but I could never be John!
