Strydom NO and others v Le Roux
| Jurisdiction | http://justis.com/jurisdiction/166,South Africa |
| Judge | Kusevitsky J |
| Judgment Date | 15 September 2023 |
| Citation | 2023 JDR 3558 (WCC) |
| Hearing Date | 15 September 2023 |
| Docket Number | 2613/2022 |
Kusevitsky J:
Introduction
2023 JDR 3558 p2
Kusevitsky J
On 9 June 2023 on the unopposed motion roll, an application for default judgment served before me in which the Plaintiffs, in their representative capacities as joint liquidators of Free Agape Enterprises (Pty) Ltd (In liquidation) (“Free Agape”), sought the repayment of monies from the Defendant in the amount of R 1 044 500.00 in terms of section 26(1) of the Insolvency Act, 24 of 1936, alternatively the amount of R 240 000.00 in terms of section 29 of the Insolvency Act.
It is common cause that summons was issued and the matter postponed during October 2022 for the Defendant to obtain legal representation. On the day of the hearing in June 2023, the Defendant had not filed a notice to defend nor a plea. The Defendant did however appear in person and advised the following:
she had paid monies to Free Agape as an investment (“belegging”) and had no knowledge that it was illegal for her to have done so;
she had already repaid some money.
I granted judgment in favour of the Plaintiffs on the alternative claim in the amount of R 240 000.00 in terms of section 29(1), having been of the view that the Plaintiffs did not make out a case for relief sought in terms of section 26(1). The Plaintiffs have requested reasons as to why their claim under section 26(1) did not succeed. Here follows the reasons.
The summons
The particulars of claim aver that on 12 June 2018, Free Agape was placed in final liquidation. In terms of s 348 of the Companies Act, 61 of 1973, the deemed
2023 JDR 3558 p3
Kusevitsky J
date of commencement of the liquidation of Free Agape is 22 March 2018, which is the date when it is alleged that the application for winding up was presented to court.
On 13 August 2019 under case number 11938/2019, an order was granted declaring that the investment scheme conducted under the name and style of Free Agape and various under trading names to be illegal, unlawful and void; and that all investment and related agreements entered into between Free Agape and third parties as investors, to be null and void. [1]
The averments furthermore state that Free Agape did no business other than taking deposits from clients/investors, which was utilised to repay deposits received from other clients and/or to pay out money, described as dividends to other clients; the liabilities of Free Agape exceeded its assets; and Free Agape was unable to pay its debts as contemplated in s 339, read with s 340 of the 1973 Companies Act. [2]
Plaintiffs’ claim in terms of s 26(1) of the Insolvency Act
The Plaintiffs aver that during or about the period 21 April 2017 to 14 November 2017, Free Agape effected payments to the Defendant in a total amount of R 1 044 500.00. [3] They state that the aforesaid payments were made by Free Agape to the Defendant less than two years before the effective date of liquidation and as a result, the payments constitute dispositions as contemplated in s 26(1), read with s 2 of the Insolvency Act.
2023 JDR 3558 p4
Kusevitsky J
Plaintiffs aver that they are entitled to reclaim for the benefit of the body of creditors all actual payments made to the Defendant by Free Agape in so far as they exceed the payments made by the Defendant to Free Agape. During this period, they aver that the Defendant made no payment to Free Agape thus the Plaintiffs are entitled to reclaim the amount of R 1 044 500.00 being the amount of all payments made to the Defendant by Free Agape that exceed the payments made by the Defendant to Free Agape.
They conclude that the payments in the aforesaid amounts were dispositions not made for value and in the premises, the dispositions are liable to be set aside in terms of s 26 of the Insolvency Act.
Is the transaction impeachable as envisaged in the Insolvency Act?
Section 26 reads as follows:
Section 26 – Disposition without value
Every disposition of property not made for value may be set aside by the court if such disposition was made by an insolvent-
more than two years before the sequestration of his estate, and it is proved that, immediately after the disposition was made, the liabilities of the insolvent exceeded his assets;
within two years of the sequestration of his estate, and the person claiming under or benefited by the disposition is unable to prove that, immediately after the disposition was made, the assets of the insolvent exceeded his liabilities:
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Kusevitsky J
Provided that if it is proved that the liabilities of the insolvent at any time after the making of the disposition exceeded his assets by less than the value of the property disposed of, it may be set aside only to the extent of such excess.”
Section 26(1) is aimed at protecting the interests of creditors through powers provided to trustees to approach courts to set aside pre-sequestration...
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