Court Bonds
What is the purpose of a court bond?
Before a liquidator, trustee, curator, or practitioner can be appointed, they must provide security to the Master of the High Court. This is usually done through a surety bond issued by an insurance company.
If the practitioner fails to perform their duties properly, the Master of the High Court can call on the insurer to cover any losses. The insurer can then seek reimbursement from the practitioner.
How does the law of surety work?
Who does the bond protect?
The bond protects the Master of the High Court and others if the practitioner causes loss or damage due to poor performance or mismanagement. It does not protect the practitioner. To cover their own negligence, the practitioner must get professional indemnity (PI) insurance.
The practitioner must sign an agreement to be responsible for properly administering the estate. They also agree to pay any claims for losses caused by their failure to do so.
The practitioner files a surety bond, which guarantees their performance. The insurer backs this bond and holds the practitioner accountable for any failures. If there are multiple practitioners, they will each sign separate agreements but remain jointly responsible for the estate’s management.