CHAPTER 12

Impeachable dispositions

SYNOPSIS

12.1 MEANING OF 'DISPOSITION' 166

12.2 DISPOSITIONS WHICH MAY BE SET ASIDE 168

12.2.1 Disposition made not for value 169

12.2.2 Disposition which prefers one creditor above another: voidable preference 171

12.2.3 Disposition intended to prefer one creditor: undue preference 175

12.2.4 Collusive disposition which prejudices creditors or prefers one creditor 177

12.2.5 Disposition in fraud of creditors (actio Pauliana) 177

12.3 PROCEEDINGS TO SET ASIDE VOIDABLE DISPOSITION 178

12.3.1 Who may sue 178

12.3.2 Jurisdiction of court 180

12.3.3 Time for bringing proceedings 180

12.3.4 Interim relief 180

12.3.5 Evidence 180

12.3.6 Prescription of claim 181

12.4 ORDER SETTING ASIDE DISPOSITION 181

12.4.1 Recovery of any property alienated 181

12.4.2 Execution on court's judgment 181

12.4.3 Indemnity to bona fide recipient of disposition 182

12.4.4 Effect of order on underlying debt 183

12.5 EXEMPTION OF CERTAIN DISPOSITIONS FROM ACT 183

12.6 TRANSFER OF BUSINESS WITHOUT PRESCRIBED NOTICE 184

12.7 TRANSFER OF BUSINESS AFTER PROCEEDINGS INSTITUTED 188

12.8 SUGGESTIONS FOR VISUAL LEARNERS USING DIAGRAMS AND TIMELINES 189

Besides being vested with the property belonging to the insolvent at the time of sequestration,
the trustee has the means of recovering certain property alienated (ie, whose ownership was
transferred to some other person) by the insolvent before his sequestration. The trustee may
ask the court to set aside certain dispositions made by the insolvent before sequestration and
may, in certain circumstances, treat as void the transfer by the insolvent of his business before
sequestration. These topics are discussed in this chapter.

12.1 MEANING OF 'DISPOSITION'

According to s 2, the term 'disposition' means 'any transfer or abandonment of rights to

property, and includes a sale, lease, mortgage, pledge, delivery, payment, release,

166
Impeachable dispositions para 12.1

compromise, donation, or any other contract therefor, but does not include a disposition in
compliance with an order of the court The following should be noted in this regard:

'Property', according to s 2, means movable or immovable property, wherever situated within

the Republic, and includes a contingent interest in property other than the contingent interest
of a fideicommissary heir or legatee. The definition includes foreign assets: the purpose of the
expression 'wherever situated within the Republic' is not to limit the operation of a
sequestration order to property within the Republic, but to extend the operation of the
sequestration order to property beyond the territorial limits of the court which granted the order
(Sackstein NO v Proudfoot SA (Pty) Ltd 2003 (4) SA 348 (SCA) 358-9). So the word 'property'"
includes property situated outside the Republic. For the discussion of property in cross-border
insolvency law, see chapter 29.
There was formerly some uncertainty over whether the repudiation of an inheritance (ie, a
bequest or legacy) or insurance benefit amounts to a disposition for the purposes of the Act
(see, eg, Boland Bank Bpk v Du Plessis 1995 (4) SA 113 (T) in which it was held that it does; but
ef Kellerman NO v Van Vuren & others 1994 (4) SA 336 (T); Klerck and Schärges NNO v Lee &
others 1995 (3) SA 340 (SE); Simon NO & others v Mitsui and Co Ltd & others 1997 (2) SA 475
(W) 520, Durandt NO v Pienaar NO & others 2000 (4) SA 869 (C) in which the contrary view was
adopted). The Supreme Court of Appeal has now decided authoritatively that the beneficiary in
this type of case merely has a competence or power to accept the inheritance or benefit in
question and that until the beneficiary does so, it does not form part of his estate (Wessels NO
v De Jager en 'n ander NNO 2000 (4) SA 924 (SCA) 928; see 5.2). So, in repudiating (ie, refusing
to accept) the inheritance or benefit, the beneficiary does not abandon any property right. For
the same reason, a change of beneficiary under a life insurance policy from the insured to a
third party does not amount to a disposition by the insured. Nomination of the third-party
beneficiary merely gives him a power or competence. So it is not a transfer or abandonment of
any right under the policy (cf Love & another v Santam Life Insurance Ltd & another 2004 (3) SA
445 (SE) 448-9; see 5.3.8(ii)).
A 'disposition' includes a contract providing for the alienation or abandonment of rights to
property (Estate Jager v Whittaker & another 1944 AD 246 250, cited with approval in Nel v
Bank of Baroda 2016 JDR 0871 (KZD) para 7; Sackstein NO v Van der Westhuizen en 'n ander
1996 (2) SA 431 (O) 436; Jackson v Louw NO 2019 JDR 0015 (ECG) para 33). This is
sometimes referred to as an 'uncompleted" disposition (see, eg, s 26(2)). A contract of
suretyship, although not specifically mentioned in the definition, is a disposition since it is a
contract which provides for a payment by the debtor (Langeberg Koöperasie Bpk v Inverdoorn
Farming and Trading Co Ltd 1965 (2) SA 597 (A) 602). Further examples of transactions which
have been held to be dispositions are the issuing of a cheque by the insolvent, both where his
bank account is in credit (De Villiers NO v Kaplan 1960 (4) SA 476 (C)) and where he has been
granted overdraft facilities (Rousseau NO v Standard Bank of SA Ltd 1976 (4) SA 104 (C)); a
contract between the insolvent and a party indebted to him in terms of which the latter must
pay the amount of the debt to a creditor of the insolvent (ef Standard Finance Corporation of
South Africa Ltd (in Liquidation) v Greenstein 1964 (3) SA 573 (A)); and an arrangement by
which a party who has

167
paras 12.1-12.2

The Law of Insolvency

agreed to lend money to the insolvent is required to pay the amount of the loan into the bank
account of a third person for the purpose of channelling the amount to a creditor of the
insolvent (Van Zyl & others NNO v Turner & another NNO 1998 (2) SA 236 (C)).

The term 'disposition' does not include a disposition made in compliance with an order
of court, eg, the payment of a contractual debt or the delivery of property as ordered by the
court (cf Swadif (Pty) Ltd v Dyke NO 1978 (1) SA 928 (A) 944-5), even if the insolvent chose not
to oppose those proceedings (Simon NO & others v Mitsui and Co Ltd & others (supra) 520), or
the order was obtained by agreement, ie, in terms of a consent paper (Dabelstein & others v
Lane & Fey NNO 2001 (1) SA 1222 (SCA) 1228). But this exclusion does not apply (and so the
disposition qualifies as a disposition for the purposes of the Act) if the creditor obtained the
court order by fraud or by collusion with the insolvent and with the intention of prejudicing
other creditors (Sackstein en Venter NNO v Greyling 1990 (2) SA 323 (O)). The onus of proving
fraud or collusion lies on the party seeking to set aside the disposition (Dabelstein & others v
Lane & Fey NNO (supra)).
The disposition must be made before the sequestration. The earlier the date of
sequestration, the greater the number of dispositions hit by the relevant statutory provisions
(Afrisam (South Africa) Proprietary Limited v Maleth Investment Fund Proprietary Limited 2019
JDR 2519 (SCA) para 20).
As for the maker of the disposition, Zwarts v Janse Van Rensburg 2011 JDR 0514 (SCA)
concerned the identification of the debtor with whom the appellant contracted and who paid
him the dividends of his investment in a pyramid scheme. He contracted with the corporate
entities running the scheme's business from time to time. The debtor that made the disposition
was treated as the consolidated estate into which each of these corporate entities had been
subsumed.

12.2 DISPOSITIONS WHICH MAY BE SET ASIDE

The dispositions which may be set aside are those

made not for value;

having the effect of preferring one creditor above another (ie, voidable preferences);
intended to prefer one creditor above another (ie, undue preferences);
made in collusion with another person and having the effect of prejudicing creditors or
preferring one above another; and
made in fraudem creditorum (in fraud of creditors).

The first four types are voidable in terms of the Insolvency Act (ss 26, 29, 30 and 31); the last
(made in fraud of creditors) may be set aside in terms of the common law. In practice,
dispositions often fall into more than one category (cf M & another v Murray NO & others 2020
(6) SA 55 (SCA) 65), and the particulars of claim may be expressed in the alternative (ef cases
on pyramid schemes (Fourie NO & others v Edeling NO & others [2005] 4 All SA 393 (SCA);
Gainsford NO v Rees 2014 JDR 1492 (GJ)). Until a disposition is set aside by the court, it
remains valid and binding (cf Harcourt v Eastman NO 1953 (2) SA 424 (N) 428; Galaxie Melodies
(Pty) Ltd v Dally NO 1975 (4) SA 736 (A) 743).

Only dispositions made by the insolvent are impeachable under the Act. So a disposition made
by the insolvent's bank without his authority does not qualify

168

Powered by CamScanner
Impeachable dispositions

paras 12.2-12.2.1

(Zamzar Trading (Pty) Ltd (in Liquidation) v Standard Bank of SA Ltd 2001 (2) SA 508 (W) 515).

12.2.1 Disposition made not for value

(i) What must be proved

Section 26(1) empowers the court to set aside a disposition made for no value. The trustee
must prove that the insolvent made the disposition, when he made it, and that he received no
value for it (Rousseau & others NNO v Visser & another 1989 (2) SA 289 (C) 307; Louw NO v
DMA Fishing Enterprises (Pty) Ltd & another 2002 (2) SA 163 (SE)). If the disposition was
made more than two years before sequestration, the court can only set it aside if the trustee
also proves that, immediately after the disposition was made, the liabilities of the insolvent
exceeded his assets (s 26(1)(a)). If the disposition was made within two years of
sequestration, the court must set the disposition aside unless the person claiming under or
benefited by the disposition proves that, immediately after it was made, the assets of the
insolvent exceeded his liabilities (s 26(1)(b); Glenrand MIB Financial Services (Pty) Ltd v Van
den Heever NO 2012 JDR 2303 (SCA) paras 39-40, the recipient proving that the insolvent's
assets exceeded its liabilities).

The trustee must also prove that the recipient of the disposition benefited from the disposition
(Van Wyk Van Heerden Attorneys v Gore NO & another [2022] ZASCA 128 (30 September 2022)
para 26). An attorney who receives money deposited into his trust account for on-payment to
another person under his client's mandate instructions is a mere conduit for the payment, and
the attorney does not himself benefit from the client's disposition of the money for the
purposes of s 26 (idem paras 37-9). But if the attorney uses money deposited into his trust
account by appropriating it to settle his fees and pay disbursements incurred on the client's
behalf, the attorney does benefit from this disposition (idem 40-1). Then the attorney bears the
full onus of proving that, immediately after the client made the disposition (the deposit of the
money) into the attorney's trust account, the client's assets exceeded his liabilities. This is a full
onus of proof, not a mere duty to adduce evidence (idem para 42).

It is unnecessary to establish whether the insolvent intended to prejudice creditors by making

the disposition: the object of s 26 is simply to prevent a person in insolvent circumstances
from impoverishing his estate by giving away assets without receiving any appreciable
advantage in return (cf Estate Wege v Strauss 1932 AD 76 84).

'Value' in s 26 means a benefit received or promised as a quid pro quo (ie, something given or
exchanged in return for another thing) (Estate Jager v Whittaker & another 1944 AD 246 250),
either by the recipient of the disposition or by someone else (Hurley and Seymour NO v WH
Muller & Co 1924 NPD 121). Examples of dispositions not for value are a donation (Estate
Jager v Whittaker & another (supra)) and a payment for a promise that the promissor cannot be
compelled to carry out (Harcourt v Eastman NO 1953 (2) SA 424 (N)). A disposition not for
value means a disposition for no value at all (Strydom NO & others v Snowball Wealth (Pty) Ltd
& others [2022] ZASCA 91 (15 June 2022) paras 25 and 36). In Strydom's case, shares had
been sold for less than their reasonable market value, but this did not mean that they had been
disposed of for no value at all. The court explained (idem para 32) that

169
para 12.2.1
The Law of Insolvency

'there is nothing inherently, commercially or morally objectionable to a sale at a discounted

price. The same cannot be said of a factually insolvent person squandering or giving away
assets for no return. [Section] 26(1) was intended to apply only to gratuitous dispositions.

So s 26 did not apply to these dispositions, and the sales of shares were allowed to stand.
To qualify as 'value', the reciprocal benefit need not be a monetary or tangible one
(Goode, Durrant & Murray Ltd v Hewitt and Cornell NNO 1961 (4) SA 286 (N) 291).
In Estate Wege v Strauss (supra), for example, being allowed to remain a member of
Tattersall's was held to be value. It is possible that the benefit may not have a reasonable
market value, and that a fair return or equivalent may not be capable of evaluation or
expression in monetary terms (Strydom NO & others v Snowball Wealth (Pty) Ltd &
others (supra) para 34). But the benefit must be adequate (Terblanche NO v Baxtrans
CC & another 1998 (3) SA 912 (C) 916-17; Cronje NO v De Paiva [1997] 2 All SA 80
(B) 86). So, for example, the sale of property for a nominal or trifling amount would be
a disposition without value (Bloom's Trustee v Fourie 1921 TPD 599 601).
In Commissioner for Inland Revenue v Bowman NO 1990 (3) SA 311 (A), the liquidator
of a company sued to set aside payments by the company in respect of income tax as
dispositions without value. The tax had been assessed on the basis of fictitious income,
and, in fact, no tax had been payable. The court rejected a suggestion that the services
provided by the State with income tax revenue could be seen as value for the purposes of
s 26. Goldstone AJA said (idem 317):

'The benefit which the taxpayer may enjoy from the manner in which the State spends
revenue collected by the Commissioner appears too speculative and tenuous to be
regarded as "value" within the meaning of s 26(1)."

Payment of a lawful debt is not a payment without value because the payer receives
counter-value in the form of a discharge of his liability (Estate Jager v Whittaker &
another (supra) 250-1; cf Alley Cat Clothing (Pty) Ltd v De Lisle Weare Racing [2002]
1 All SA 123 (D) 135, in which this principle was applied to the payment of a gambling
debt). Performance in terms of an illegal agreement can, it seems, qualify as 'value',
provided the performance has actually been rendered (Visser en 'n ander v Rousseau en
andere NNO 1990 (1) SA 139 (A) 154-5 (obiter)). But a loan by a lender not registered
as a credit provider under the National Credit Act 34 of 2005 is void. So the interest paid
by the insolvent on that illegal loan is a donation voidable under s 26 (Engelbrecht NO & others
v Du Toit [2020] ZAWCHC 119 (19 October 2020) paras 9-11). In each case,
the question of whether the insolvent has received 'value' for his disposition must be
decided by considering all the circumstances in which the transaction was made (Goode,
Durrant and Murray Ltd v Hewitt and Cornell NNO (supra) 291).

For the purposes of s 26 (and also ss 29 and 30), the liabilities of the insolvent
include any obligation undertaken as a surety. The insolvent's assets must be taken
to include any sum recoverable by way of a right of recourse after payment to the
creditor (Millman & another NNO v Masterbond Participation Bond Trust Managers
(Pty) Ltd (under Curatorship) & others 1997 (1) SA 113 (C); Absa Bank Ltd v
Scharrighuisen 2000 (2) SA 998 (C) 1004-5).

If it is proved that the liabilities of the insolvent, at any time after making a
gratuitous disposition, exceeded his assets by less than the value of the property
disposed of, the disposition may be set aside only to the extent of the excess
(s 26(1)). So, for example, if the insolvent made a gift of R5 000 which caused his
liabilities to exceed his assets by R10 000, and he acquired assets that reduced

170
Impeachable dispositions

paras 12.2.1-12.2.2

his insolvency margin to R3 000, the disposition may be set aside only to the extent
of R3 000.

(ii) Exception to s 26—disposition in terms of ANC

A settlement of property in an antenuptial contract by the husband on his wife or any

child to be born of the marriage is not liable to be set aside as a disposition without value on
the husband's insolvency if specific requirements are met (s 27(1) and (2)):

The disposition must be an 'immediate benefit', ie, a benefit given by a transfer, delivery,
payment, cession, pledge or special mortgage of property completed within three months of
the date of the marriage.
The disposition must have been given in good faith. 'Good faith' in this context refers to the
absence of any intention to prejudice creditors in obtaining payment of their claims or to prefer
one creditor above another (s 2).
The antenuptial contract must have been duly registered at least two years before the
sequestration (Enyati Resources Ltd v Glaum NO & another 1989 (2) SA 314 (C)).

(iii) Beneficiary's right to share in estate limited

A gratuitous disposition is made without payment or return, ie, made for free. The
beneficiary of a gratuitous disposition which has been set aside by the court has no right
to claim in competition with the creditors of the insolvent estate (s 26(2)). The same
applies to the beneficiary of a gratuitous disposition which has not been set aside but
which was uncompleted by the insolvent (ibid). But there is one exception to the latter
rule: namely, where the uncompleted disposition was made by way of suretyship,
guarantee or indemnity. In this event, the promisee may compete with the estate's
creditors for an amount not exceeding the amount by which the value of the insolvent's
assets exceeded his liabilities immediately before the disposition was made (s 26(2)
proviso). So, for example, if the insolvent stood surety (gratuitously) for R5 000 and,
immediately before he entered into the contract, his assets exceeded his liabilities by
R2 000, then the creditor under the suretyship contract may prove a claim of R2 000 in
competition with the insolvent's other creditors. If, immediately before the insolvent
contracted, his assets were less than his liabilities, then the suretyship creditor cannot
prove in competition with other creditors. If, before the insolvent contracted, his assets
exceeded his liabilities by R6 000, the suretyship creditor in the example may compete
to the full extent of his claim of R5 000.

12.2.2 Disposition which prefers one creditor above another: voidable

preference

(i) What must be proved

Under s 29(1), the court may set aside a disposition made by the insolvent not more than
six months before the sequestration of his estate or his death (where he is deceased and
his estate is insolvent) if the disposition had the effect of preferring one of the
insolvent's creditors above another and immediately after the disposition was made,
the liabilities of the insolvent exceeded the value of his assets. The trustee has the onus
of proving all these requirements (Simon NO & others v Coetzee [2007] 2 All SA 110
(T) 112). The policy behind s 29 is evidently that a person on the brink of insolvency
171
para 12.2.2

The Law of Insolvency

should not be permitted to choose one or a few of his creditors for full payment and
disregard the rest.

The disposition does not have to have been made directly to the creditor
concerned it must have merely had the effect of preferring him (Standard Finance
Corporation of South Africa Ltd (in Liquidation) v Greenstein 1964 (3) SA 573 (A)
577). So if the insolvent, rather than paying C, his creditor, paid X, a creditor of C, then
the trustee can set aside the disposition to X because it had the effect of preferring C
above the insolvent's other creditors (ibid; see also Paterson NO v Trust Bank of Africa
Ltd 1979 (4) SA 992 (A)). The test of whether a creditor has been preferred is whether
the proper distribution of the assets as envisaged by the Act has been defeated or, in
other words, whether the creditor has benefited more or been paid earlier than would
have been the case if he had been paid a dividend under the Act (Isaacson and Son v Van
Druten's Trustee 1930 GWL 33 36; Klerck NO v Kaye 1989 (3) SA 669 (C) 675; Simon
NO & others v Coetzee (supra) 114).

The claims proved against the estate are accepted as prima facie proof of the
insolvent's liabilities as at the date of sequestration and so may be relevant for
establishing the extent of the insolvent's liabilities immediately after the disposition
(Ensor NO v New Mayfair Hotel 1968 (4) SA 462 (N)). The value of the assets to be
assessed is the market value. This has been described as, among other things, the full
and fair price which the assets would be likely to realize if sold voluntarily under the
usual terms, and the price which a willing seller might reasonably expect to obtain for
the assets from a willing buyer (Venter v Volkskas Ltd 1973 (3) SA 175 (T) 180).

(ii) Exception to s 29—disposition in the course of business and not intended

to prefer

Section 29 enables the trustee to set aside transactions made and assets alienated by the
insolvent while close to insolvency. The spectre of the trustee exercising his powers
under s 29 could be an insuperable obstacle for a businessperson who wishes to
overcome his financial difficulties by carrying on business in the usual way. So the
legislature has included a proviso in s 29 that the court cannot set aside a disposition if
the person in whose favour it was made proves that it was made in the ordinary course of
business and that it was not intended to prefer one creditor above another (s 29(1); Janse
van Rensburg & others NNO v Steenkamp & another; Janse van Rensburg & others
NNO v Myburgh & others 2010 (1) SA 649 (SCA)). The beneficiary must prove both
elements if the trustee's claim is to be defeated.

Ordinary course of business

In deciding whether a disposition was made in the ordinary course of business, an

objective test is applied whether the disposition was one which would normally be
entered into between solvent businesspersons (Hendriks NO v Swanepoel 1962 (4) SA
338 (A) 345; Amalgamated Banks of South Africa Bpk v De Goede en 'n ander 1997 (4)
SA 66 (SCA) 77-8; Gazit Properties v Botha & others NNO 2012 (2) SA 306 (SCA)
309), or, put differently, whether the disposition is in conformity with ordinary business
methods adopted by solvent businesspersons (Van Zyl & others NNO v Turner &
another NNO (supra) 245) or whether it would be anomalous, unbusinesslike or
surprising to the ordinary businessperson of business (Malherbe's Trustee v Dinner &
others 1922 OPD 18 22). In Griffiths v Janse Van Rensburg & another NΝΟ 2016 (3)
172
Powered by CS CamScanner
Impeachable dispositions

para 12.2.2

SA 389 (SCA), the court had to deal with the question of whether payments made in terms of
an illegal pyramid scheme qualified as payments made in the ordinary course of business. The
court reiterated that the test for evaluating whether the dispositions 'were made during the
ordinary course of business' is objective (idem 394). When the dispositions are assessed, all
the relevant facts should be considered, and each case must be evaluated on its own facts.
The court held (ibid):

"The question is whether ordinary, solvent businesspeople would, in similar circumstances,

themselves act as did the parties to the transaction.... In other words the disposition in
question should not cause wrinkled noses or raised eyebrows among solvent businesspeople
who know the circumstances in which it was made.'

The court held that the payments made to the investor in Griffiths could not represent
dispositions made in the ordinary course of the business because the business operations
were clearly illegal and the excessive returns on the investment contributed to such a
conclusion (see also Gainsford & others NNO v Tanzer Transport (Pty) Ltd 2014 (3) SA 468
(SCA)). In Al-Kharafi & Sons v Pema & others NNO 2010 (2) SA 360 (W), Malan J remarked
(idem 378):

'As was said in Downs Distributing Co Pty Ltd v Associated Blue Star Stores Pty Ltd [(1948) 76
CLR 463 (High Court of Australia) 477 per Latham CJ], the expression ["in the ordinary course
of business"] "does suppose that according to the ordinary and common flow of transactions in
affairs of business there is a course, an ordinary course. It means that the transaction must fall
into place as part of the undistinguished common flow of business done, so that it should form
part of the ordinary course of business as carried on, calling for no remark and arising out of
no special situation"."

The court must have regard to the terms of the disposition and the circumstances in which it
was made (including the actions of both parties) but leave out of consideration the fact that
the party making the disposition was insolvent then (Van Zyl & others NNO v Turner & another
NNO (supra) 245; Gore & others NNO v Shell South Africa (Pty) Ltd 2004 (2) SA 521 (C) 526;
Van der Walt NO & another v Le Roux NO & another [2004] 4 All SA 476 (0) 485; cf Al-Kharafi &
Sons v Pema & others NNO (supra) 376-7). The court is concerned only with the disposition,
not with the insolvent's business generally. A disposition may be made 'in the ordinary course
of business' if duly made in terms of a valid contract, even though the insolvent's overall
business model is illegal and the payment is made with stolen money (Gazit Properties v Botha
& others NNO (supra) 309-11). In Moodliar NO & others v Lawson Tool Distributors (Pty) Ltd
2022 (2) SA 220 (WCC), payments had been made regularly at arm's length on account over
four months, the last of them about two months before liquidation. These payments were held
to have been made in the ordinary course of business. Another example of a disposition made
in the ordinary course of business is afforded by Pretorius's Trustee v Van Blommenstein 1949
(1) SA 267 (O). The insolvent bought a lorry and, some time later, pledged it to secure payment
of the price. He concluded the pledge because the seller had sued for the price and was only
prepared to give an extension of time for payment if he received real security. The court held
that, although it would not generally be in the ordinary course of business for a debtor to give a
pledge for a debt which he had incurred earlier, here the insolvent had had little choice and had
acted as any ordinary businessperson would have done. Contrast Paterson NO v Trust Bank of
Africa Ltd (supra). In this case, the insolvent, an attorney who had stolen from his trust account
and badly needed to raise money, sold his legal practice to his professional assistant, C,

173
para 12.2.2

The Law of Insolvency

for a cash sum of R15 000 and additional amounts to be paid later. Under the contract,
the R15 000 had to be paid into the insolvent's overdrawn business account with
T Bank. This provision was inserted at the insistence of T Bank, which was prepared to
grant C overdraft facilities for the R15 000 only if the money was applied to reduce the
insolvent's overdraft. The court held that, although, at face value, the arrangement about
how the R15 000 was to be paid was a normal banking transaction, when seen in the
light of the circumstances of this case, the arrangement fell outside the ordinary course
of business. The contract between the insolvent and C had been in the nature of a forced
sale, concluded because the insolvent had misappropriated money from his trust account
(which was not an event in the ordinary course of business). And the insolvent had been
unable to reject the condition imposed by the bank, which he would have been able to do
if the transaction had been concluded in the ordinary course of business.

If the disposition was concluded in a specialized field of business, such as

between brokers on the stock exchange, or between a bookmaker and his client in
connection with the laying of bets, the court will consider the customs which are
shown to apply in that field of business (Hendriks NO v Swanepoel (supra) 345-
where it was held that ordinary transactions between farmers are not a special field
of business). In Estate Wege v Strauss 1932 AD 76 84, the insolvent paid a betting
debt which had been outstanding for a long time. The court took cognizance of the
custom that betting debts must be paid immediately and held that this payment was
not in the ordinary course of business.

To fall within the ordinary course of business, both the making and the receiving
of the disposition must be lawful. Where, for example, a creditor receives usurious
interest in terms of a contract of loan, the disposition is not in the ordinary course of
business (Klerck NO v Kaye 1989 (3) SA 669 (C)).

No intention to prefer

The question of what is meant by intention to prefer is discussed below (see 12.2.3).
Here it is enough to say that the insolvent will not be held to have intended to prefer if it is
established that, when he made the disposition, he did not contemplate or expect
sequestration (cf Pretorius NO v Stock Owners' Co-operative Co Ltd 1959 (4) SA 462
(A) 472; Van Eeden's Trustee v Pelunski & Mervis & others 1922 OPD 144 148), or that
his main purpose or dominant motive in making the disposition was something other
than the conferring of an advantage on the creditor concerned, eg, to shield himself from
criminal prosecution or to cover up a misappropriation of assets and save himself
from exposure (Pretorius's Trustee v Van Blommenstein (supra) 279-80) or to comply
with a contractual obligation to give possession of his movable property to the creditor
concerned for the perfecting of the latter's security under a general notarial covering
bond (Cooper & another NNO v Merchant Trade Finance Ltd 2000 (3) SA 1009
(SCA)). It has been held that proof that the insolvent hoped to tide over his financial
difficulties is not in itself sufficient to disprove the intention to prefer (Swanepoel NO v
National Bank of South Africa 1923 OPD 35 38).

It is not useful to distinguish between the intent to prefer and the underlying reasons
or motive (Moodliar NO & others v Lawson Tool Distributors (Pty) Ltd 2022 (2) SA
220 (WCC)).

174
Impeachable dispositions

para 12.2.3

12.2.3 Disposition intended to prefer one creditor: undue

preference

(i) What must be proved

Under s 30, the court may set aside a disposition that the insolvent made at any time before
sequestration if he made the disposition with the intention of preferring one of his creditors
above another and, when he made it, his liabilities exceeded his assets. The trustee has the
onus of proving these elements (Venter v Volkskas Ltd 1973 (3) SA 175 (T) 177). Once he has
done so, judgment must be given in his favour: no defences are available to the person who is
benefited by the disposition.

The test for determining whether the insolvent intended to prefer is whether his dominant,
operative or effectual intention in making the disposition was to disturb the proper distribution
of the assets on insolvency. The test is subjective (Eliasov NO v Arenel (Pvt) Ltd 1979 (3) SA 415
(R) 418): the question is not simply whether the insolvent should have known that the
disposition would have the effect of conferring a preference but whether, as a fact, he intended
the disposition to have this effect, and whether this was his primary objective or main purpose
in making the disposition (Pretorius's Trustee v Van Blommenstein 1949 (1) SA 267 (O) 279;
Cooper & another NNO v Merchant Trade Finance Ltd 2000 (3) SA 1009 (SCA) 1030-1; Gore &
others NNO v Shell South Africa (Pty) Ltd 2004 (2) SA 521 (C) 530). It stands to reason that the
insolvent must have applied his mind to the matter. If he did not actually consider whether he
was conferring a preference, he cannot be said to have intended to do so (Cooper & another
NNO v Merchant Trade Finance Ltd (supra) 1029).

These factors are relevant in determining whether the insolvent's dominant intention was to
confer a preference:

Whether the insolvent contemplated insolvency when making the disposition (Giddy, Giddy
and White's Estate v Du Plessis 1938 EDL 73 79). Contemplation of insolvency is generally
necessary before an intention to prefer can be inferred. Still, it does not follow axiomatically
from the fact that the insolvent contemplated sequestration that he had the intention to prefer.
Other factors may negate this inference (Cooper & another NNO v Merchant Trade Finance Ltd
(supra) 1029-30). The court will infer that the insolvent intended to prefer if it is established that
he realized, when making the disposition, that sequestration was substantially inevitable (the
insolvent in such a case is assumed to have intended the natural consequences of his act: Du
Plessis NO v Oosthuizen en 'n ander 1999 (2) SA 191 (O) 212-13), unless the evidence negates
this inference and shows that his dominant intention was to achieve some purpose other than
conferring an advantage on the creditor in question, eg, to protect himself from criminal
prosecution or to avoid exposure (Pretorius NO v Stock Owners' Co-operative Co Ltd 1959 (4) SA
462 (A) 472-3; Venter NO v Barsouth Investments (Pty) Ltd 1992 (2) SA 78 (C) 84; Van Zyl & others
NNO v Turner & another NNO (supra) 244; Cooper & another NNO v Merchant Trade Finance Lid
(supra) 1030-1; Gore & others NNO v Shell South Africa (Pty) Ltd (supra) 530).
Whether the debtor could exercise a free choice at the time of the disposition. If the debtor
paid the creditor under great pressure, for example, to avoid prosecution, an intention to prefer
will not be proved. But it is not any pressure or coercion that will displace the intention to
prefer, only
175
para 12.2.3

The Law of Insolvency

'pressure which is akin to duress or undue influence, or what has been described in the
cases as an "overwhelming sense of imminent peril"; "great pressure"; or even
"severe or terrifying pressure""

(per Griesel J in Gore & others NNO v Shell South Africa (Pty) Ltd 2004 (2) SA 521
(C) 530). In Cooper & another NNO v Merchant Trade Finance Ltd (supra) 1029,
the court accepted that it does not follow, just because the debtor received no
consideration for the disposition or was not put under any pressure to make it, that
the dominant intention was to prefer the other party. The presence of these factors
may conclusively indicate that there was not a dominant intention to prefer, but the
converse does not necessarily follow. One must consider all the circumstances and
consider what the correct inference to draw is.

Whether there is any relationship between the insolvent and the creditor (ie, in addition to
that of debtor and creditor) (Cooper & another NNO v Merchant Trade Finance Ltd (supra)
1030). A close friendship or family relationship may motivate the insolvent to give a
preference. So the presence of either is a factor to be considered in deciding whether there
was an intention to prefer, but it is not conclusive of the issue (Pretorius's Trustee v Van
Blommenstein (supra) 279-80; Pretorius NO v Stock Owners' Co-operative Co Ltd (supra) 474-
5).

In deciding whether the insolvent intended to prefer, the court must weigh up all the
relevant facts that prevailed at the time of the disposition and decide the issue on a
balance of probabilities. If the facts allow more than one inference, the court must
choose the most plausible or probable inference. If this inference favours the trustee, he
is entitled to judgment. If, on the other hand, an inference in favour of both parties is
equally possible, the trustee will not have discharged the onus resting on him (Cooper &
another NNO v Merchant Trade Finance Ltd (supra) 1027-8). The fact that the
insolvent does not give evidence does not ipso facto (by that very fact) mean that one
must infer that there was an intention to prefer (ibid 1028).

(ii) Differences between trustee's powers under s 30 and s 29

It will be observed that the trustee's powers under s 30 (undue preference) differ
significantly from his powers in terms of s 29 (voidable preference):

An undue preference may be set aside irrespective of when before sequestration it was
made. By contrast, a voidable preference can only be set aside if it was made not more than six
months before sequestration or the insolvent's death (as the case may be).
For a disposition to be an undue preference, the debtor must actually be insolvent when he
makes it. A disposition may qualify as a voidable preference even if the debtor is solvent when
he makes it, provided he is insolvent immediately afterwards.
To have a disposition set aside as an undue preference, the trustee must prove that the
debtor actually intended to prefer one creditor above the others. On the other hand, the trustee
may establish a voidable preference by showing merely that the disposition had the effect of
preferring one creditor above another.
Section 30 does not grant a defence to the beneficiary of an undue preference, while s 29
does grant a defence to the beneficiary of a voidable preference.
176
Impeachable dispositions

paras 12.2.4-12.2.5

12.2.4 Collusive disposition which prejudices creditors or

prefers one creditor

Under s 31(1), the court may set aside a transaction entered into by the debtor before
sequestration in terms of which he, in collusion with another person, disposed of his
property in a manner which had the effect of prejudicing his creditors or of preferring
one of his creditors above another. The element of collusion distinguishes this type of
disposition from voidable and undue preferences. Collusion in this context is an
agreement with a fraudulent purpose, not merely an agreement with the result that one
creditor is preferred over another (Meyer NO v Transvaalse Lewendehawe Koöperasie
Bpk en andere 1982 (4) SA 746 (A) 771). In M & another v Murray NO & others
2020 (6) SA 55 (SCA), the debtor sought to keep his pension money away from his
creditors. The court found that his divorce from his wife was a sham, and their
settlement agreement under which she received nearly all his assets and money
(including the pension money) constituted collusion.

To succeed with an action under s 31(1), the trustee must prove these requirements:

The insolvent made a disposition of his property (Louw NO v DMA Fishing Enterprises (Pty)
Ltd & another 2002 (2) SA 163 (SE) 165—the reference in this case to 's 36' is clearly a mistake);
The disposition was made 'in collusion with another person': that is to say, the insolvent and
the other person both knew that the former was insolvent and expected the disposition to have
the effect of prejudicing creditors or preferring one above another (Gert de Jager (Edms) Bpk v
Jones NO en McHardy NO 1964 (3) SA 325 (A) 331; Meyer NO v Transvaalse Lewendehawe
Koöperasie Bpk en andere (supra) 771).
The disposition had the effect of prejudicing creditors or preferring one creditor above
another (Lane NO & another v Harksen & others [1998] 4 All SA 7 (C) 15).

Besides setting aside the collusive disposition, the trustee may recover from any person
who was a party to the disposition

any loss which the disposition caused to the insolvent estate; and
a penalty in an amount determined by the court, but not exceeding the amount by which the
party concerned would have been benefited by the disposition if it had not been set aside (s
31(2)).

The compensation and penalty may be recovered in the action to set aside the
disposition (s 31(3)). If the other party to a collusive disposition is a creditor, he forfeits
any claim that he may have had against the estate (s 31(2); Gert de Jager (Edms) Bpk v
Jones NO en McHardy NO (supra) 337).

12.2.5 Disposition in fraud of creditors (actio Pauliana)

Although the Act sets out specific circumstances in which a disposition of the
insolvent's property may be set aside, it does not deprive creditors of their right under
the common law to have a disposition set aside as being in fraudem creditorum (in fraud
of creditors) (Swadif (Pty) Ltd v Dyke NO 1978 (1) SA 928 (A) 938; Peterson & another
NNO v Claassen & others 2006 (5) SA 191 (C) 202). The relevant action at common
law derives from Roman law and is known as the actio Pauliana (Fenhalls v Ebrahim &
others 1956 (4) SA 723 (D); Nedcor Bank Ltd v Absa Bank & another 1995 (4) SA 727
(W) 729–30). The actio Pauliana grants a creditor in an insolvent estate a common-law

177
paras 12.2.5-12.3.1

The Law of Insolvency

remedy to recover assets that ought to have been in an insolvent estate and it is still available
to creditors even after the debtor is liquidated (Ameropa Commodities (Pty) Limited v Benchimol
NO 2020 JDR 1223 (KZD) para 24).

To succeed in bringing the actio Pauliana, the plaintiff must prove that:

the transaction diminished the debtor's assets;

the person who received from the debtor did not receive his own property;
there was an intention to defraud; and
the fraud took effect

(see Hockey NO v Rixom NO & Smith 1939 SR 107 118; Fenhalls v Ebrahim & others (supra) 727).

The term 'fraud' in this context does not have its criminal-law connotation: the test is simply
whether the object of the transaction was to give one creditor an unfair advantage over the
other creditors in insolvency (Trustees Estate Chin v National Bank of South Africa Ltd 1915 AD
353 363; Beddy NO v Van der Westhuizen 1999 (3) SA 913 (SCA) 916; Al-Kharafi & Sons v Pema &
others NNO 2010 (2) SA 360 (W) 371). In the case of a disposition for value (ie, one made ex
titulo oneroso), it must be shown both that the insolvent intended to commit a fraud on his
creditors and that the recipient of the disposition knew of his intention and was privy to it
(Hockey NO v Rixom and Smith (supra) 119; Pharmaceutical Enterprises (Pty) Ltd & others v Main
Road Centurion 30201 CC t/a Albermarle Pharmacy & another 2021 (5) SA 246 (GJ) 251). On the
other hand, in the case of a gratuitous disposition (ie, one made ex titulo lucrativo), it is enough
to prove fraud on the part of the insolvent alone: the good faith or otherwise of the recipient is
irrelevant (Hockey NO v Rixom and Smith (supra) 119; Scharff's Trustee v Scharff 1915 TPD 463;
cf Kommissaris van Binnelandse Inkomste en 'n ander v Willers en andere 1999 (3) SA 19 (SCA)
28-9).

'Voet [42.8.15] gives a large number of illustrations of such fraudulent transactions, such [as]
granting a long lease of property at a very low rental, allowing a claim against a debtor to
become prescribed, failing to defend a groundless action, selling, giving or pledging one's
property for another's debt or constituting oneself a debtor to a person to whom in fact nothing
is owing' (Bertelsmann et al Mars: The Law of Insolvency in South Africa para 13.8).

Creditors may invoke the actio Pauliana to recover the assets disposed of and any benefits
accruing from the insolvent's fraud. The latter benefits include the proceeds of trading with the
alienated assets as well as any property acquired with it (or its value or the proceeds of it)
(Kerbyn 178 (Pty) Ltd v Van den Heever & others NNO 2000 (4) SA 804 (W) 818-20).

12.3 PROCEEDINGS TO SET ASIDE VOIDABLE DISPOSITION

12.3.1 Who may sue

Proceedings to set aside a disposition rendered impeachable by the Act, or to recover

compensation or a penalty payable under the Act, may be instituted by the trustee (s 32(1)(a)).
If the trustee fails to bring the proceedings, a creditor may sue in the trustee's name, provided
the creditor indemnifies the trustee against all costs (s 32(1)(b); cf Myburgh v Walters NO 2001
(2) SA 127 (C) 130). The indemnity is necessary to

178
Impeachable dispositions

para 12.3.1

protect the estate against any adverse costs order that the creditor may incur, the trustee
being liable, as nominal plaintiff, for such costs. So the indemnity must be given before
the action is instituted and must be adequate for the purpose of the proceedings. In
addition, the creditor must be able to meet his obligations under the indemnity within a
reasonable time after being called upon to do so by the trustee (Lane & another NNO v
Dabelstein & others (Lane & another NNO intervening) 1999 (3) SA 150 (C) 163-6; Western Flyer
Manufacturing (Pty) Ltd v Dewrance & others NNO: In re Dewrance &
others NNO v North West Transport Investments (Pty) Ltd (under Judicial
Management) & others 2007 (6) SA 459 (B) 465 470). In Lane's case, the court
accepted that a creditor may sue to avoid a disposition where only a provisional trustee
has been appointed and that trustee has failed to obtain leave from the court to sue under
s 18(3). The court held (differing from an earlier decision in Lane NO & another v
Harksen & others [1998] 4 All SA 7 (C)) that the creditor need not obtain leave of the
court, since he must provide an indemnity under s 32(1) and this protects creditors of
the estate (cf Dabelstein & others v Lane and Fey NNO 2001 (1) SA 1222 (SCA) 1229).
In the Western Flyer case, the court explained (idem 470) that although the institution of
proceedings without first providing an indemnity constitutes an irregularity, it does not
necessarily invalidate the proceedings.

“The purpose of the Legislature as expressed in s 32 of the Act... is to provide that in the
event of a creditor instituting action in the name of the trustee, the trustee should be
safeguarded by the indemnity against all costs of the litigation. The purpose of the section is
not to regulate principles relating to locus standi or the validity of the manner by which the
action is to be instituted. For that reason the indemnity must be provided before the action is
instituted (ie before any costs have been incurred.) However, if it is provided after the action
has been instituted in such a manner that the trustee is not at risk as far as costs (both before
and after the indemnity) are concerned, the purpose of s 32 has been achieved.'
In Cowan v Hathorn NO 2013 JDR 2671 (SCA), the indemnity for costs was only
furnished after proceedings were instituted. The court held that the indemnity must
be furnished to ensure that the liquidators are not liable for an adverse costs order that the
creditors may incur while litigating in the liquidators' name when the liquidators no longer
control the proceedings or the expenditure involved. The section aims at preventing the
dissipation of the company assets. In the circumstances, the indemnity had been offered
before the proceedings were instituted, and the liquidators were adequately protected and
never at risk.

When a creditor institutes an action in the trustee's name, he must cite the trustee
as the plaintiff (ie, nominal plaintiff) in the proceedings. It is not competent for the
creditor to sue in his own name and merely allege that he sues in the name of
the trustee (Volkskas Bpk NO v Barclays Bank (DC & O) 1955 (3) SA 104 (T)). No
other creditor may derive any benefit from moneys or property recovered in the
action until the claim and costs of the litigating creditor have been paid in full
(s 104(3)). And any creditor who knew that the proceedings had been instituted and
who delayed in proving his claim until the court had given judgment cannot share in
any money or in the proceeds of any property recovered as a result of the
proceedings (s 104(2)).

The trustee is also the proper person to institute the actio Pauliana at common
law (Wolpe v Gale 1980 (3) SA 259 (W)). The court may, on application, allow a
creditor to sue in his own name, provided he joins the trustee as a party to the suit,
179
paras 12.3.1-12.3.5

The Law of Insolvency

either as a co-plaintiff (if the trustee is willing) or as a co-defendant (if he is unwilling).

12.3.2 Jurisdiction of court

Proceedings to set aside an impeachable disposition may be brought in the magistrate's court,
provided the matter falls within the normal jurisdictional limits of that court (s 2 sv 'court').

12.3.3 Time for bringing proceedings

The trustee's power to bring proceedings to set aside improper transactions under s 32(1) is
not subject to any time constraints. The trustee (or, failing him, a creditor) may institute
proceedings even after confirmation of the liquidation and distribution account. Confirmation
of an account under s 112, in other words, has no bearing on a claim under s 32 (Cook NO v SJ
Coetzee Inc 2012 (2) SA 616 (GNP) 622).

12.3.4 Interim relief

If the subject matter of an impeachable disposition is in the creditor's possession, the trustee
may apply to court for an attachment of the property concerned, pending the determination of
proceedings to set aside the disposition (Hawkins' Trustee v Corio Saw and Planing Mills Ltd &
others 1923 WLD 125). The trustee need only make out a prima facie case that he may reclaim
the property for the estate: he need not show that the estate will suffer irreparable loss if the
attachment is not granted (ibid; see also 11.1). The requirement of suing in the trustee's name
does not necessarily apply to interim proceedings. A creditor may institute these in his own
name if the situation requires swift action to protect a right, especially one that is vindicatory or
quasi-vindicatory (Ultrapolymers (Pty) Ltd v Maredi NO & another 2012 (4) SA 232 (GSJ) 234-
5).

12.3.5 Evidence

Under s 32(2), any party to proceedings to set aside an improper disposition may subpoena the
insolvent to give evidence, and the court may also call upon him to do so. The section then
states that, when giving evidence, the insolvent may not decline to answer a question on the
ground that the answer may tend to incriminate him or may prejudice him in criminal
proceedings which are to be brought against him. In the light of Parbhoo & others v Getz NO &
another 1997 (4) SA 1095 (CC), it seems clear that this latter provision infringes the
constitutional right against self-incrimination (s 35 of the Constitution of the Republic of South
Africa, 1996) and is invalid in so far as it permits the use of incriminating evidence in criminal
proceedings (except proceedings dealing with perjury or related offences). In Parbhoo, the
Constitutional Court declared invalid s 415(5) of the Companies Act 61 of 1973 (dealing with
the admissibility of evidence obtained at an inquiry under s 415(1) of the Act) to the extent that
the section provided for the admission of incriminating evidence in criminal proceedings, other
than for perjury or related offences (see also 23.9.1).

When a creditor has instituted proceedings in the trustee's name, the creditor may not make
discovery under the Uniform Rules of Court: only the trustee can do so (Reynolds & others NNO
v Standard Bank of South Africa Ltd 2011 (3) SA 660 (W) 662-3).

180
Impeachable dispositions
paras 12.3.6-12.4.2
12.3.6 Prescription of claim
In Barnard and Lynn NNO v Schoeman & another 2000 (3) SA 168 (N) 171-2, the court held that a
claim to set aside an impeachable disposition (in Barnard's case, a voidable preference) does
not become a debt for the purposes of prescription. So prescription in respect of the claim
does not begin to run until the court has determined the value of the claim and pronounced
upon it, after considering any possible defences available to the debtor. This view was rejected
in Duet and Magnum Financial Services CC (in Liquidation) v Koster 2010 (4) SA 499 (SCA) 505-8.
The court accepted that ss 26 to 31 and s 32(3) of the Insolvency Act give the trustee (or
liquidator) a right, in prescribed circumstances, to have a person declared a debtor of the
estate, and the complement of this right qualifies as a 'debt' for the purposes of prescription.
The court also held that prescription of the debt ordinarily begins to run no later than the date
on which the trustee (or liquidator) is appointed.
12.4 ORDER SETTING ASIDE DISPOSITION
12.4.1 Recovery of any property alienated
When setting aside a disposition, the court must declare the trustee entitled to recover any
property alienated under the disposition (s 32(3)). It may be impossible for the third party to
return the property—for instance, because it has been destroyed or transferred to another
person. In that event, the court must declare the trustee entitled to recover the value of the
property, ie, the value at the date of the disposition, or at the date on which the disposition is
set aside, whichever is the higher value (ibid).
12.4.2 Execution on court's judgment
Once judgment is granted in favour of the trustee, he is in the same position as any other
judgment creditor and may have recourse to the ordinary methods and processes of execution,
should the defendant not obey the order of his own accord (De Hart NO v Kleynhans & others
1970 (4) SA 383 (O) 389). Mora interest is payable by the defendant from the date of the
judgment setting aside the disposition (Janse van Rensburg & others NNO v Steyn 2012 (3) SA
72 (SCA) 80-1). (Mora interest is interest payable because of wrongful delay in performing an
obligation.) If the defendant's estate is under sequestration, the trustee is not entitled to obtain
payment of the full amount of the judgment debt but is merely entitled to prove as a concurrent
creditor in the estate (ibid). In Pride Milling Co (Pty) Ltd v Bekker NO & another 2022 (2) SA 410
(SCA), the appeal concerned the application of s 341(2) of the Companies Act 61 of 1973. That
provision reads: 'Every disposition of its property (including rights of action) by any company
being wound-up and unable to pay its debts made after the commencement of the winding-up,
shall be void unless the Court otherwise orders.' The general rule was that such a disposition
was void and of no effect, but the court might still, as an exception, order otherwise in
appropriate circumstances. In this regard, the court exercised an unfettered discretion and
must decide what would be just and fair in the light of all the relevant circumstances. The
factors that the court would consider included the underlying purpose of s 341(2) of the
Companies Act in the context of a company being wound up for its inability to pay its debts (in
other words, to prevent this company from dissipating its assets and thus frustrating its
creditors' claims), the interests of creditors, and the
181
paras 12.4.2-12.4.3

The Law of Insolvency

interests of the beneficiary of the disposition. But the court's discretion was limited to
payments made between the date of the lodging of the application for winding-up and
the date of the granting of the provisional order, the latter being the point at which the
concursus creditorum (concourse of creditors) was reached (idem 422).

12.4.3 Indemnity to bona fide recipient of disposition

Under s 33(1), the recipient of a voidable disposition who in good faith parted with
property or security or lost a right against another person need not comply with an order
to restore the subject matter of the disposition, unless the trustee has indemnified him for
parting with the property or security or for losing the right. The recipient must prove, in
particular, the following requirements (the onus being on him to do so: Ruskin NO v
Barclays Bank DCO 1959 (1) SA 577 (W)):

That, in return for the disposition, he parted with property or security which he held, or lost a
right against another person. The words 'in return for' indicate that there must be reciprocity
between the disposition and the passing of the property or the loss of the right. In other words,
the latter must be the quid pro quo for the former (Barclays National Bank Ltd v Umbogintwini
Land and Investment Co (Pty) Ltd (in Liquidation) & another 1985 (4) SA 407 (D)). Section
33(1) does not apply if the recipient has neither parted with property nor given up any right in
return for the disposition (Geyser NO & another v Telkom SA Ltd 2004 (3) SA 535 (T) 548) or if
there is merely an incidental connection between them (Consolidated News Agencies (Pty) Ltd
(in Liquidation) v Mobile Telephone Networks (Pty) Ltd & another 2010 (3) SA 382 (SCA) 398).
In the Barclays Bank case, the insolvent (a company) had given a suretyship undertaking to B
Bank and passed a bond in favour of the bank to secure payment in terms of the suretyship
undertaking. The bank argued that, in return for these dispositions, it had parted with sums of
money (namely, amounts lent to the principal debtor on overdraft after the signature of the
deed of suretyship) and that it was not obliged to restore the benefit which it had obtained
under the dispositions unless the liquidator indemnified it for the loans in question, which the
liquidator had not done. The court held that the loans were not the consideration or the quid
pro quo for the suretyship undertaking and bond. The loans had been given under an
agreement between the bank and the principal debtor. If they had been made in return for
anything, it was the undertaking by the principal debtor to pay interest on the overdraft. It
followed that the bank's contention could not be sustained. In the Consolidated News Agencies
case (idem 398-9), the court observed that where the respective acts of the parties are said to
have arisen from an agreement between them, an examination of the terms of the agreement
is the first step in determining whether the necessary reciprocity is established.
That he acted in good faith. The requirement of good faith applies to all the circumstances
surrounding the transaction; it is not confined to the conduct that gave rise to the property or
security being parted with or the right being lost (Ruskin NO v Barclays Bank DCO (supra) 584-
5; Geyser NO & another v Telkom SA Ltd (supra) 549; Consolidated News Agencies (Pty) Ltd (in
Liquidation) v Mobile Telephone Networks (Pty) Ltd & another (supra) 400-1). The creditor
must show, among other things, that at the time of the transaction (when he parted with the
property or gave up the right), he did not know or contemplate that the debtor was insolvent or
on the brink of insolvency (cf Ruskin NO v Barclays Bank DCO (supra) 584; Consolidated

182
Impeachable dispositions

paras 12.4.3-12.5

News Agencies (Pty) Ltd (in Liquidation) v Mobile Telephone Networks (Pty) Ltd & another
(supra) 400-1).

The underlying purpose of s 33(1) is to ensure that, when a disposition is set aside in terms of
the Act, there is restitutio in integrum, ie, the restoration of both parties to their positions before
the disposition was made (Barclays National Bank Ltd v Umbogintwini Land and Investment Co
(Pty) Ltd (in Liquidation) & another (supra) 411). Proof of the requirements stated above does
not affect the right of the trustee to have the disposition set aside. Still, the trustee cannot
insist on compliance with the court's order for the return of the property or benefit disposed of
until he has given an indemnity to the recipient (Ruskin NO v Barclays Bank DCO (supra) 583).

12.4.4 Effect of order on underlying debt

It is not entirely clear whether an order setting aside a disposition always extinguishes the debt
between the parties. The issue is important, not only for the beneficiary of the disposition, who
may wish to claim against the insolvent estate, but also for a surety for the debtor, since a
surety is discharged if the principal obligation is extinguished for any reason.

The courts appear to have accepted that an order setting aside a gratuitous disposition under s
26 invalidates the debt between the parties and so precludes any claim by the beneficiary and
discharges any surety (see, eg, Linden Duplex (Pty) Ltd v Harrowsmith 1978 (1) SA 371 (W); cf
also s 26(2) and 12.2.1(ii)). But there are conflicting decisions on whether an order setting
aside a voidable preference under s 29 has the same effect. In Freedman and Rossi (Pty) Ltd v
Geustyn & others 1986 (4) SA 762 (W), it was held that the order vitiates the debt, but in
Millman NO and Stein NO v Kamfer; Millman NO and Stein NO v Engelbrecht 1993 (1) SA 305
(C), the court held that the order merely prohibits the unusual, prejudicial performance of the
debt and does not extinguish the debt. According to this view, the beneficiary may claim
against the estate, and a surety for the insolvent remains liable.

The courts have not yet spelt out the consequences of an order setting aside a disposition
under s 30 (undue preference) or a disposition under s31 (collusive disposition). For the
beneficiary of the collusive disposition, though, the issue is of academic interest, since s 31(2)
provides that if the other party to a collusive disposition is a creditor, he forfeits any claim that
he may have had against the estate (see also Gert de Jager (Edms) Bpk v Jones NO en
McHardy NO 1964 (3) SA 325 (A) 337).

It remains to be seen which approach will find favour with the Supreme Court of Appeal.
Clearly, the same principle should apply whether or not the disposition before the court is set
aside in terms of s 26 or s 29 or, for that matter, any other section.

12.5 EXEMPTION OF CERTAIN DISPOSITIONS FROM ACT

In some instances, the provisions of the Act governing dispositions do not apply:

Sections 26, 29 and 30 (dispositions without value, voidable preferences and undue
preferences) do not apply to property disposed of under the exchange rules, depository rules or
clearing house rules (s 35A(5)), or property disposed of in terms of a master agreement (s
35B(4)). See also 7.2.9-10.
Under s 35(2)(a) of the Prevention of Organised Crime Act 121 of 1998, if the estate of a
defendant who has made an affected gift to another person is sequestrated, a
183
paras 12.5-12.6

The Law of Insolvency

court must not set aside the disposition of that gift under ss 29, 30 or 31 of the Insolvency Act
if a prosecution for an offence has been instituted against the defendant and the proceedings
against him or her have not been concluded, or if that other person's property is subject to a
restraint order. If a court does set aside a disposition contemplated under s 35(2)(a) after
proceedings against the defendant have been concluded, the court must take into account any
realization of the property of the other person under Chapter 5 of the Act (s 35(2)(b)). (Chapter
5 of the Prevention of Organised Crime Act deals with the proceeds of unlawful activities.)

12.6 TRANSFER OF BUSINESS WITHOUT PRESCRIBED

NOTICE

Under s 34(1) of the Insolvency Act, if a trader, without giving notice as prescribed by the Act,
transfers in terms of a contract a business belonging to him, or its goodwill, or any goods or
property forming part of it (except in the ordinary course of that business or for securing the
payment of a debt), the transfer is void as against his creditors for six months from then
onwards, and it is void against his trustee if his estate is sequestrated at any time within that
period. "Transfer' for these purposes includes the transfer of possession, actual or
constructive: the trader does not actually have to transfer ownership to the other party (s
34(4)). Section 34(1) applies irrespective of how the transfer takes place or the nature of the
preceding agreement (Roos NO en 'n ander v Kevin and Lasia Property Investments BK en andere
2002 (6) SA 409 (T) 415). The notice referred to is the publication of a notice of intended
transfer in the Government Gazette and two issues of an Afrikaans newspaper and two issues
of an English newspaper circulating in the district in which that business is carried on (s 34(1)).
The publication must appear not less than 30 days and not more than 60 days before the date
of the transfer (ibid). It must provide accurate information about the transfer-if, for example, it
states the wrong date, it is invalid (Simon v DCU Holdings (Pty) Ltd & others 2000 (3) SA 202 (T)
226). Publication of the notice is required even if the trader's creditors know about the intended
transfer (Gainsford & others NNO v Tiffski Property Investments (Pty) Ltd & others 2012 (3) SA 35
(SCA) 42).

As soon as a notice is published under s 34(1), every liquidated liability of the trader in
connection with his business which would become due at some future date falls due
immediately if the creditor concerned demands payment (s 34(2)).

The following should be noted about the scope and effect of s 34(1):

The section is designed to protect the creditors of a business. It is aimed at the (all too
common) practice by which a trader seeks to evade his business debts by disposing of the
business to a third party who is not liable for its debts and, from then onwards, dissipating the
price or using it to pay some creditors, regardless of the claims of others (Harrismith Board of
Executors v Odendaal 1923 AD 530 538; Gainsford & others NNO v Tiffski Property Investments
(Pty) Ltd & others (supra) 43-4). The section applies whether or not the trader's estate is
sequestrated (Vermaak v Joubert and May 1990 (3) SA 866 (A) 873) and even if the disposal
was an advantageous one-for example, at a price exceeding the value of the assets in
question-because creditors may be prejudiced even when the business or its assets are
disposed of advantageously (Joosab v Ensor NO 1966 (1) SA 319 (A) 326-7).
 The section applies only to traders. A 'trader', under s 2, is a person who carries on a trade,
business, industry or undertaking of a kind specified in the section (see 4.2).

184
Impeachable dispositions

para 12.6

The specified activities cover a wide field and include any business in which property is sold or
is bought, exchanged or manufactured for sale or exchange. Certain activities are not covered-
for example, letting and hiring of immovable property (Kevin and Lasia Property Investment CC
& another v Roos NO & others 2004 (4) SA 103 (SCA) 108) and transport haulage (McCarthy
Ltd v Gore NO 2007 (6) SA 366 (SCA) 370). The test in each case is whether the person
concerned carries on the relevant activity as part of his core business (McCarthy Ltd v Gore NO
(supra) 370-1; K2013046547/07 (South Africa) (Pty) Ltd v Hyde Construction CC 2021 JDR
1210 (SCA) para 13), bearing in mind also that the core business can change
(K2013046547/07 (South Africa) (Pty) Ltd v Hyde Construction CC (supra) para 23). The
definition does not apply if the activity is merely incidental to the primary business activities of
the enterprise (McCarthy Ltd v Gore NO (supra) 370-1). The definition says that a person is
deemed to be a trader until proved otherwise. So a person alleged to be a trader bears the onus
of proving that his primary business activity falls outside the ambit of the definition (Gainsford
& others NNO v Tiffski Property Investments (Pty) Ltd & others (supra) 44; K2013046547/07
(South Africa) (Pty) Ltd v Hyde Construction CC (supra) para 11). The date on which it must be
determined whether the debtor was a trader is the date of transfer of the property
(K2013046547/07 (South Africa) (Pty) Ltd ibid; Axal Properties 2 CC v Kotze 2013 JDR 2086
(SCA) paras 2.1 and 3). A person does not stop being a trader for these purposes simply
because he stops operating his business ('closes his doors') (Kelvin Park Properties CC v
Paterson NO 2001 (3) SA 31 (SCA) 35). He remains a trader and remains subject to s 34(1) for
as long as he owns the business or its assets and owes debts in respect thereof. So, for
example, the section applies when a trader alienates the assets of his business four weeks
after he has stopped trading (Bank of Lisbon International Ltd v Western Province Cellars Ltd &
another 1998 (3) SA 899 (W) 901). Further, it is irrelevant what caused the trading to stop. The
trader's voluntarily stopping trading because of financial difficulties must not be distinguished
from his being compelled to stop by the financial collapse of the business. In both cases the
trader's creditors need to be protected by s 34 (Axal Properties 2 CC v Kotze (supra) para 9).

The section applies to the transfer of part of a business, in particular, the transfer of the
goodwill of the business, or goods or property forming part of the business. In Joosab v Ensor
NO (supra), it was held that, having regard to the purpose of s 34(1), it would be undesirable to
lay down any definite criterion for determining when goods form part of a business (see also
Kelvin Park Properties CC v Paterson NO (supra) 36). But any goods bought and received by a
trader ostensibly for his business must be considered to form part of the business, irrespective
of whether the goods have been physically appropriated to its stock in trade. In the court's view,
if the position were otherwise, the purpose of the section could easily be defeated.

The section does not apply to the transfer of goods or property of a business if the transfer is
'in the ordinary course of that business'. The word 'that' is important: the inquiry is not whether
the transaction would have normally been entered into by solvent businesspersons (cf
12.2.2(ii)), but whether it would have normally been concluded by a solvent businessperson
conducting a business of the kind carried on by the debtor (Joosab v Ensor NO (supra) 326;
Gainsford & others NNO v Tiffski Property Investments (Pty) Ltd & others (supra) 42-3). Regard
must be had to what

185
para 12.6

The Law of Insolvency

is, or would be, done by similar businesses in similar circumstances (Ensor NO v Rensco
Motors (Pty) Ltd 1981 (1) SA 815 (A) 825). In this case, M, which carried on business as, among
other things, a dealer in Mazda vehicles and spare parts under a franchise from I, sold its entire
stock of Mazda parts to I. The sale came about because I had terminated the franchise
agreement between the parties and had exercised an option in the agreement which allowed it,
on the termination of the franchise, to buy all unsold Mazda parts held by M. The court held
that, although the sale by a motor dealer of his stock of spare parts at one and the same time
would not normally be in the ordinary course of that business, in this particular case the
position was different because M had been obliged to sell in terms of the franchise agreement.
This agreement had been entered into in the ordinary course of M's business, and its terms had
been an integral part of the business. In submitting to I's exercise of its rights under the
agreement, M had acted as any solvent businessperson carrying on that type of business
would have done. Trollip JA observed (idem 826):

'[I]t must necessarily be a paramount principle of carrying on business that a solvent trader
should duly honour his obligations under a contract entered into in the ordinary course of his
business.'

Contrast Gore & another NNO v Saficon Industrial (Pty) Ltd 1994 (4) SA 536 (W), Gainsford &
others NNO v Tiffski Property Investments (Pty) Ltd & others (supra), and Roos NO en 'n ander v
Kevin and Lasia Property Investments BK en andere 2002 (6) SA 409 (T). In Gore's case, S, a
company in the business of selling and servicing forklifts, sold 90 per cent of its assets in the
hope of staving off liquidation of the group of companies of which it formed part. It was held
that just because the sale fell within the ordinary course of business of the group of companies
as a whole (as was alleged), it did not mean that the sale was within the ordinary course of S's
business. S was in the business of providing forklifts, and the sale did not fit into the ordinary
course of that business. Similarly, in Gainsford's case, a company used its immovable and
movable property to run a ski resort business. The court held that the company's disposal of all
this property could 'by no stretch of the imagination' fall within the ordinary scope of its
business (idem 42 44).

In Roos, a company earning income from letting shops and flats on its immovable property had
two creditors. One of them was a bank holding three mortgage bonds over the immovable
property. To discharge its indebtedness to the bank, the company sold its entire business,
including the immovable property, subject to the condition that the buyer must register a bond
in favour of the bank in the same amount as the company's debt to the bank. Transferring the
property left the company an empty shell, unable to pay its other creditor. The court held that,
as the transfer had effectively rendered the company incapable of carrying on its business of
generating income through property letting, it had not been concluded in the ordinary course of
the company's business.

The section is also inapplicable when the transfer is to secure the payment of a debt.
So, for example, the section does not apply to the pledge of a movable.
When the trustee alleges that a transfer of goods falls within the section, he bears the onus
of proving that

186
Impeachable dispositions

para 12.6

the goods formed part of the insolvent's business at the time of the transfer (Silverstream
Investments (Kranskop) CC v Ronbo Automotive CC 1997 (1) SA 107 (D) 111) it is not enough for
him to show, for example, that they form part of the insolvent's assets generally (Bruyns NO v
Aerogrande (Pty) Ltd 1964 (3) SA 554 (W)); and
the transfer was not in the ordinary course of the insolvent's business (Ensor NO v Rensco
Motors (Pty) Ltd (supra) 822; Gainsford & others NNO v Tiffski Property Investments (Pty) Ltd &
others (supra) 44).
A transfer which has not been advertised is void as against the trustee. It follows that the
trustee need not bring an action to have the transfer set aside: he may simply disregard it and
demand the return of whatever assets have been delivered to the transferee (Harrismith Board
of Executors v Odendaal (supra) 538-9). But if the transferee resists, the trustee will, in effect, be
compelled to ask the court for an order declaring the transfer void and requiring the transferee
to hand over all the assets in his possession which originally belonged to the business (Scott-
Hayward NO v Lief NO 1958 (3) SA 65 (T); Galaxie Melodies (Pty) Ltd v Dally NO 1975 (4) SA 736
(A) 743). If the transferee has already resold the assets and can no longer restore them to the
trustee, the latter may sue for their value by bringing a delictual action for wrongful disposal
(actio ad exhibendum) (Gore & another NNO v Saficon Industrial (Pty) Ltd (supra)). Once the
transferee has returned the assets (or their value) to the trustee, he has a concurrent claim
against the estate for the amount that he paid or for the other performance that he rendered to
the insolvent.
An unadvertised transfer is not void in any absolute sense but only against the trustee. This
means that it is within the trustee's discretion to treat the transfer as void. The trustee may
always waive or choose not to exercise his powers under the section, and if he does this, the
transfer remains standing (Galaxie Melodies (Pty) Ltd v Dally NO (supra) 743; Gainsford & others
NNO v Tiffski Property Investments (Pty) Ltd & others (supra) 45). Usually, the trustee will
choose to abide by the transfer if the assets have depreciated since the conclusion of the sale
and he will find it difficult to match the price agreed upon, or if the price fixed still exceeds the
market value of the assets. A decision by the trustee to treat the transfer as void invalidates
any mortgage bond that the transferee has registered over the immovable property of the
business (Gainsford & others NNO v Tiffski Property Investments (Pty) Ltd & others (supra) 45-9).
The reason is that a transfer in contravention of s 34 is void ab initio (from the beginning), so
the transferee does not acquire the ownership of the immovable property and cannot
encumber this property with a mortgage bond. The mortgagee is not arbitrarily deprived of
property as envisaged by s 25(1) of the Constitution, among other things, because there is a
rational connection between the voidness of a transfer hit by s 34(1) and the ends sought to be
achieved (to protect the creditors of a trader who transfers his business at a time when he is in
financial difficulties) (ibid).
The transfer is also void against the creditors, in the relative sense, enabling them to treat
the transfer as void for the purpose of recovering payment of their debts (Pharmaceutical
Enterprises (Pty) Ltd & others v Main Road Centurion 30201 CC t/a Albermarle Pharmacy &
another 2021 (5) SA 246 (GJ) 250).

187
12.7 TRANSFER OF BUSINESS AFTER
PROCEEDINGS INSTITUTED

Section 34(3) deals with the situation in which a trader transfers his business after another
person has instituted proceedings against him for the purposes of enforcing a claim against
him in connection with the business. The section renders the transfer void as against the
person concerned for the purpose of such enforcement if either

the transferee is aware, at the time of transfer, that the proceedings have been instituted; or
the proceedings have been instituted in a High Court or magistrate's court that has
jurisdiction in the district in which the business is carried on.

The following should be noted about s 34(3):

Section 34(3) applies irrespective of whether the trader gives notice of the transfer of the
business as prescribed by s 34(1) (Simon v DCU Holdings (Pty) Ltd & others 2000 (3) SA 202
(T) 222).
The creditor is protected if he has instituted proceedings before the transfer-he need not
have taken judgment (Weltmans Custom Office Furniture (Pty) Ltd (in Liquidation) v Whistlers
CC 1999 (3) SA 1116 (SCA) 1121).
The protection provided by s 34(3) is not limited as to time (Soomar v Avon Leigh CC t/a
Elsea Products 2000 (1) SA 524 (E) 528-9).
For s 34(3) to apply, the claim sought to be enforced must be one 'in connection with the
business' a claim to enforce a liability of the trader unrelated to the business does not enjoy the
protection of the section. In Simon v DCU Holdings (Pty) Ltd & others (supra), it was held that
the phrase 'in connection with the business' must not be interpreted in a narrow or technical
way and that it is wide enough to include a claim for the balance of the price of all the assets of
the business.
To determine whether a creditor's claim arises in connection with the business, the nature
of that business and of the creditor's claim must be determined (Axal Properties 2 CC v Kotze
2013 JDR 2086 (SCA) para 18). A claim not arising in connection with the trader's primary or
core business is rejected (idem para 21).
The creditor is not denied the protection of s 34(3) where the agreement on which his claim
is based has been amended or superseded by another agreement, provided there is a
sufficiently close connection between the proceedings and the second agreement. In Weltmans
Custom Office Furniture (Pty) Ltd (in Liquidation) v Whistlers CC (supra), the agreement of sale
originally sued upon had been replaced by a settlement agreement. This agreement was held
to be sufficiently closely connected to the proceedings for s 34(3) to apply. Melunsky AJA
explained (idem 1122):

'[T]he compromise did not change the essential nature of the [creditor's] claim.... Both the
original and the settlement agreements related to the sale of the same business and the
[creditor's] claim, under each agreement, was for payment of the purchase price. The
compromise differed from the original agreement in relation to the amount payable and the
method of payment but it did not alter the essence of the [creditor's] claim or the debtor's
obligation.... The result is that the proceedings instituted by the [creditor] before the transfer
are sufficiently closely connected to its claim under the settlement agreement to entitle this
Court to hold the transfer to be void for the purposes of s 34(3).'

188
Impeachable dispositions paras 12.7–12.8

Section 34(3) does not render the transfer of the business completely void, but only void as
against the creditor who has instituted proceedings and to the extent of his claim (Weltmans
Custom Office Furniture (Pty) Ltd (in Liquidation) v Whistlers CC (supra) 1123).

12.8 SUGGESTIONS FOR VISUAL LEARNERS USING DIAGRAMS AND TIMELINES

In every field of law, it is essential to understand which parties are involved in the set of facts,
which roles these parties play, and which time requirements they must meet.

As promised in 1.7.3(ii), we now illustrate the use of diagrams with Kevin and Lasia Property
Investment CC & another v Roos NO & others 2004 (4) SA 103 (SCA) <[Link]
bin/[Link]?file=za/cases/ZASCA/2003/[Link]&query=%22480/2002%22> (accessed on 2
September 2022). The case is briefly mentioned in para 12.6, second bullet in the discussion of
s 34(1), about the transfer of the trader’s business without the prescribed notice. The facts and
eventual decision of the case by the court of first instance feature in para 12.6, fourth bullet.

We recommend that the debtor should be marked in red as troubled, insolvent, financially
distressed or at least the subject of winding-up. Here is our sketch of Kevin and Lasia (supra):

K and L ← Sale contract ← LFH (Pty) Ltd (purchaser) Thing sold (OK Sentrum) (seller)

(transferee) ← Transfer of property ← (transferor) (done by Registrar of Deeds, Pretoria)

K & L (mortgagor of thing sold)

ABSA Bank (mortgagee of thing sold) Then within 6 months:

LFH (Pty) Ltd (Winding-up)

Yielding: Roos & Van Rooyen (liquidators)

They activated s 34(1) IA: no notices of proposed transfer published before transfer, so transfer
to be set aside and immovable property retrieved (as our lassoing arrow shows) into insolvent
estate

The publication period in s 34(1) can be shown in a timeline not to scale:

60 days 30 days Transfer date

XXXXXXXXXXXXXX

The XXXs portion shows the requirement to publish, not too early (more than 60

189

Powered by CamScanner
para 12.8

The Law of Insolvency

days; and so to the left of the first notch) and not too late (less than 30 days; and so to the right
of the second notch).

If the time requirement is not met, the transfer is void as against the trader's creditors for a
period of six months after transfer, and the transfer is also void against the trustee of the
trader's estate, if the trader's estate is sequestrated at any time within this period (s 34(1); see
12.6).

So another notch must be added to the general timeline to show the voidness period:

60 days

XXXXXXXXXX

30 days

Transfer date

6 months

YYYYYYYYYYYYY

During the YYY period, the creditors and trustee may treat the transfer as void but can no
longer do so after that (in other words, in the period to the right of the six-month notch). The
composite timeline shows both time requirements in s 34(1) for publication and voidness,
reminding the trader when to publish and the trustee and creditors when to act.

The timeline in Kevin and Lasia (supra) ran as follows:

60 30

days days

XXX

Sale

(25/2)

Trsfr

(29/6)

Prov

W (21/11)

Final

W (23/11)

6 mths

(29/12)
YYYYYYYYYYYYYYYYYYYYYYYY

The crossed-out XXXs show that LFH (Pty) Ltd never published the notice. The six months
after the transfer date are six calendar months (s 2 'month' of the Interpretation Act 33 of 1957,
which applies to the Insolvency Act 1936). The 1936 Act was an Act of Parliament (s 2 'law' of
the Interpretation Act) that was in force at the time when the 1957 Act commenced (s 1 of the
Interpretation Act). Six months after the transfer date in this case was 29/6 plus 6 equals
29/12. So the liquidators met their YYY time requirement for seeking to have the transfer set
aside.

190

Powered by CamScanner
CHAPTER 13

Interrogation of the insolvent

and other witnesses

SYNOPSIS

13.1 INTERROGATION BY TRUSTEE (OR CREDITOR OR PRESIDING

OFFICER) ......................................................................... 191

13.1.1 When and where interrogation may take place ........................... 191

13.1.2 Who may be interrogated .......................................................... 192

13.1.3 Who may interrogate ............................................................... 193

13.1.4 Subject matter of interrogation ............................................... 193

13.1.5 Procedure at interrogation ..................................................... 194

13.1.6 Privilege ............................................................................ 195

13.1.7 Failure to attend or submit to interrogation ........................... 196

13.1.8 Interrogation revealing possible offence ................................ 197

13.2 INTERROGATION BY MASTER................................................... 197

To enable the trustee and creditors to investigate the insolvent's affairs and determine
his true financial position, the Act provides for interrogating the insolvent and other
witnesses. The Act also empowers the Master to conduct a private interrogation. These
matters are considered in this chapter.

If the trustee merely holds informal discussions to investigate matters that clearly
call for a formal interrogation, he is guilty of a dereliction of duty and may have his
remuneration reduced or disallowed by the Master under s 63(1) (Thorne v The
Master 1964 (3) SA 38 (N) 52-3).

13.1 INTERROGATION BY TRUSTEE (OR CREDITOR OR PRESIDING

OFFICER)

13.1.1 When and where interrogation may take place

An interrogation may be conducted at any meeting of creditors (s 65(1)). It may take

place, for instance, at a special meeting called for the purpose of proof of claims (Lubbe
v Estate Lubbe 1935 CPD 299) or at a general meeting convened for the purpose of
giving the trustee directions about matters concerning the administration of the estate
(Essop v The Master & another 1983 (1) SA 926 (C)). The meeting must be properly
called: the interrogation cannot proceed if it is not. In Essop v The Master & another
(supra), the trustee called a general meeting for the purpose of 'interrogation of
witnesses'. It was held that, under s 41, a general meeting had to be convened by

191
paras 13.1.1-13.1.2

The Law of Insolvency

the trustee 'for the purpose of giving him directions concerning any matter relating
to the administration of the estate' and that it was not competent to call the meeting
solely for the purpose of interrogating witnesses. So a subpoena requiring a witness to
attend the meeting for interrogation had to be set aside. Again, in Marques & another v
De Villiers & another NNO 1990 (4) SA 415 (W), the trustee called a special meeting
for the 'further proof of claims', but his sole purpose in convening the meeting was to
interrogate the insolvent and other witnesses. The court held that the meeting had not
been properly convened, and so the interrogation could not proceed.

13.1.2 Who may be interrogated

The persons who may be interrogated are the insolvent and any other person present at
the meeting who has been, or who might have been, summoned to appear for
interrogation under s 64(2). Under s 64(2), the presiding officer at any meeting of
creditors may summon any of these persons to appear at the meeting to be interrogated:

Any person who is known, or on reasonable grounds believed, to possess or to have

possessed property which belonged to the insolvent before the sequestration of his estate, or
which belongs or belonged to the insolvent estate or to the insolvent's spouse.
Any person who is known, or on reasonable grounds believed, to be indebted to the estate.
Any person who, in the opinion of the presiding officer, may be able to give material
information about the insolvent or his affairs (whether before or after sequestration), any
property belonging to the estate, or the business, affairs, or property of the insolvent's spouse.

The presiding officer may also summon any person who is known, or on reasonable
grounds believed, to possess any book or document containing information referred to in
s 64(2), to produce the book or document (or an extract from it) at a meeting of creditors
(s 64(3)). A person subpoenaed to produce documentation of a certain class in terms of
this section must actually produce it-it is no answer for him to say simply that the
trustee may have access to everything that he (the witness) has (Pitsiladi v Van
Rensburg & others NNO 2002 (2) SA 160 (SE) 162).

The range of witnesses who may be summoned to appear and the documentary
evidence that may be called for are extensive. The reason is evidently to allow the
trustee and creditors to investigate the affairs of the insolvent on the widest possible
basis (Yiannoulis v Grobler & others 1963 (1) SA 599 (T) 601). Although a
subpoena under s 64(2) may be expressed in wide terms, it must be limited to what
is a permissible investigation under the section (ef Pitsiladi v Van Rensburg &
others NNO (supra) 162).

The insolvent must attend the first and second meetings of creditors (including
any adjournments) unless he has obtained the written permission of the presiding
officer to absent himself (s 64(1)). This permission may only be granted after
consultation with the trustee (ibid). The insolvent must also attend a general or
special meeting if required to do so by written notice of the trustee (ibid).

If the insolvent or his spouse is called upon to attend a general or special meeting
of creditors, he or she is entitled to an allowance out of the estate to defray
necessary expenses incurred in connection with the attendance (s 65(8)). Any other

192
Interrogation of the insolvent and other
witnesses

paras 13.1.2–13.1.4

person summoned to attend a meeting for the purpose of interrogation is entitled to

be paid out of the estate the fees to which he would be entitled if he were a witness
in civil proceedings in a court of law (s 65(7)).

13.1.3 Who may interrogate

The interrogation may be conducted by the trustee, any creditor who has proved a claim
against the estate, the presiding officer or the agent of any of these parties (s 65(1)).

13.1.4 Subject matter of interrogation

Section 65(1) provides that the insolvent or a witness may be interrogated about:

all matters relating to the insolvent or his business or affairs, whether before or after the
sequestration of his estate;
any property belonging to the estate; and
the solvent spouse's business, affairs or property (s 65(1)).

The scope of the interrogation (like the presiding officer's power to summon witnesses)
is defined in the widest terms. This is necessary if the interrogation is to achieve its
object: namely, obtaining a complete and detailed picture of the insolvent's estate and
financial affairs. It follows that it is permissible (and not an abuse of the process) to hold an
interrogation for the purpose of gathering information for possible civil litigation
against parties with whom the insolvent was connected or had dealings (Pitsiladi v Van
Rensburg & others 2002 (2) SA 160 (SE) 161–2).

In Harksen v Lane NO & others 1998 (1) SA 300 (CC), it was argued that s 65(1)
amounted to an unconstitutional violation of the solvent spouse's fundamental rights
enshrined in the Interim Constitution (the Constitution of the Republic of South
Africa Act 200 of 1993), in particular her rights under the equality and property
clauses, and her rights to privacy and freedom and security of the person. The court
disagreed. Its reasoning appears from the following passage (idem 330–2):

‘On the basis that it is constitutional to vest the property of a solvent spouse temporarily in
the Master or trustee, it follows that the solvent spouse similarly can have no legitimate
complaint to being interrogated concerning her or his own property and affairs to the extent
that they are relevant to the insolvent estate. As far as reliance is placed upon ss 11(1) and
13 of the interim Constitution [ie, the clauses dealing with privacy and freedom and security
of the person], it is necessary to have regard to the scope of questions which ... a person
summoned [is required] to answer.... [T]he first limitation ... relates to their relevance to
the purpose of the meeting. That purpose is clearly the affairs of the insolvent estate. It
follows that to the extent that persons may be required to answer questions concerning the
business, affairs or property of the solvent spouse, the information sought must be relevant
to the estate of the insolvent spouse.... A second and even wider limitation is to be found
in the provisions of s 139 read with s 66(3) of the Act.... A presiding officer may not
commit to prison ... a person who refuses to answer a question not “lawfully put to him”.
A question which would constitute an invasion of a constitutional right of an examinee
cannot be said to be one “lawfully put”. To paraphrase the words of Ackermann J in Nel v
Le Roux NO & others [1996 (3) SA 562 (CC) at para [9]] if a presiding officer at a meeting
of creditors held under the Act finds that, in answering any question, the examinee's rights
under chap 3 of the interim Constitution would be infringed he or she should hold that this
did not constitute a question “lawfully put” to the examinee and that a refusal to answer
such a question did not therefore constitute conduct punishable by imprisonment under
s 66(3) and therefore would not constitute an offence under s 139(1).’

193
para 13.1.5
13.1.5 Procedure at interrogation

The presiding officer may call and administer the oath to the insolvent or other witness who
may then be interrogated (s 65(1)). There are no issues formulated beforehand—the inquiry is
conducted for the purpose of discovery, to obtain facts which the trustee and creditors do not
possess and which may be of financial benefit to the estate (Agyrakis & another v Gunn &
another 1963 (1) SA 602 (T) 604; Grapentin & another v Sue McGuinness Communications CC &
others 2021 JDR 2613 (GJ) para 39). The statement of any person being interrogated must be
recorded in the same way as the evidence in a civil court (s 65(3)), the extent and practical
effect of deficiencies determining whether and how far the record might be referred to, the test
being whether the object of the statutory provision has been achieved by what was done in
purported compliance with it (Pickford & another v Engelbrecht NO & others [2020] ZAWCHC
163 (18 November 2020) para 14). When the insolvent is interrogated, he must be required to
declare that he has made a full and true disclosure of all his affairs (s 65(4)).

The presiding officer must ensure that the proceedings are conducted according to the
fundamental principles of justice and that he performs his functions fairly and impartially
(Advance Mining Hydraulics (Pty) Ltd & others v Botes NO & others 2000 (1) SA 815 (T) 824–5).
The court may intervene to stop an interrogation if it amounts to an abuse of s 65, or if it is
vexatious or oppressive (Lane & another NNO v Magistrate, Wynberg 1997 (2) SA 869 (C) 874).
The presiding officer must disallow any irrelevant question and may disallow a question that
would prolong the interrogation unnecessarily (s 65(1)). He should exclude questions on the
latter basis if they are not calculated to produce material information about the insolvent's
affairs or if the information can be obtained more readily from another source (Agyrakis &
another v Gunn & another (supra) 605). Questions to establish the general credibility of a
witness are permissible, provided they are relevant to the affairs of the insolvent (Pretorius &
others v Marais & others 1981 (1) SA 1051 (A) 1063–4). Questions that infringe a witness's
constitutional rights are not lawfully put, and he need not answer them (Harksen v Lane NO &
others 1998 (1) SA 300 (CC) 332). The fact that the presiding officer is obliged, in certain
circumstances, to hold the inquiry in camera (in private) (see 13.1.6) does not mean that in all
other circumstances it must take place in public (Roux v Die Meester en ‘n ander 1997 (1) SA
815 (T) 825).

A person called upon to give evidence may be assisted at his interrogation by an advocate,
attorney or other agent (s 65(6)), and he is entitled to be informed of his right to this assistance
(Advance Mining Hydraulics (Pty) Ltd & others v Botes NO & others (supra)). But he has no
constitutional or other right of access to information before the inquiry—he is called to the
inquiry to help provide information, not to receive it (Pitsiladi v Van Rensburg & others NNO 2002
(2) SA 160 (SE) 162).

A witness may be interrogated even though he is a witness in a pending civil trial about the
subject of the proposed interrogation (Pretorius & others v Marais & others (supra) 1064).

The s 65 inquiry does not in itself lead to a decision affecting anyone who testifies there but is
only to gather information. The presiding officer's role is procedural, to make sure that the
proceedings are run properly and effectively (Pickford & another v Engelbrecht NO & others
(supra) para 26).

194
Interrogation of the insolvent and other
witnesses

para 13.1.6

13.1.6 Privilege

In general, the law relating to privilege applies to giving evidence or producing a book or
document at an interrogation (s 65(2)). But the principles of privilege are relaxed to some
extent, to allow an interrogation to achieve its intended purpose.

The Act lays down these provisions in this regard:

A person being interrogated may not refuse to answer a question on the ground that the
answer would tend to incriminate him, or on the ground that he is to be tried on a criminal
charge and may be prejudiced at such trial by his answer (s 65(2) proviso).
A banker of the insolvent or his spouse must, if summoned to do so, produce all cheques in
his possession which were drawn by the insolvent or his spouse within one year of
sequestration (ibid). If a cheque is unavailable, the banker must produce any record which he
has of the payment (ibid). If called upon to do so, the banker must give any other information
which he has about the missing cheque, or the bank account of the insolvent, or his spouse
(ibid).
Any evidence given at an interrogation is admissible in any proceedings instituted against
the person who gave the evidence (s 65(5)).

Section 65(2A) limits the ambit of the above provisions in two respects: a presiding officer
must hold the incriminating or prejudicial part of any proceedings in camera and prohibit the
publication of any incriminating evidence (s 65(2A)(a)), and no incriminating evidence given at
an inquiry may be admitted in any criminal proceedings, except in proceedings for perjury or
related offences (s 65(2A)(b)). The expression 'part of the proceedings' in this context is not
confined to specified or determinable questions and answers (Harksen v The Magistrate,
Wynberg & others; Lane NO & another v The Magistrate, Wynberg & others [1997] 2 All SA 205 (C)
211-12).

The overall effect of the provisions is that an examinee cannot refuse to answer incriminating
questions, and that the answers he gives may be used against him in civil proceedings and in
criminal proceedings relating to perjury and related offences, but not in criminal proceedings
generally (Du Plessis NO v Oosthuizen; Du Plessis NO v Van Zyl 1995 (3) SA 604 (O) 613;
Wessels NO v Van Tonder en 'n ander 1997 (1) SA 616 (O) 621). The rationale here is easy to
discern. The purpose of an interrogation is to obtain information about the insolvent estate
which would not otherwise be disclosed to the trustee or to creditors, and which may be used
to recover money or property for the benefit of the estate (cf Pitsiladi v Van Rensburg & others
NNO 2002 (2) SA 160 (SE) 162). To achieve this purpose, it is essential that the trustee and
creditors must be permitted to ascertain whether the insolvent or any other person has acted
improperly or in fraud of creditors of the estate. This task would be impossible if the examinee
could decline to answer questions on the basis that they might incriminate him and if the
evidence elicited at the interrogation could not be used in subsequent civil proceedings against
the examinee.

The Companies Act 61 of 1973 contains a provision similar to s 65, though not identical-s 415.
Section 415(5) states that any evidence given at an interrogation under s 415(1) of the Act is
admissible in any proceedings instituted against the person who gave the evidence. This
section thus allows for incriminating evidence given at such an interrogation to be admitted in
any criminal proceedings against the person concerned (Du Plessis NO v Oosthuizen; Du Plessis
NO v Van Zyl (supra)

195
paras 13.1.6-13.1.7

The Law of Insolvency

609). In Parbhoo & others v Getz NO & another 1997 (4) SA 1095 (CC), it was held that s 415(5)
is constitutionally invalid to the extent that it permits the use of incriminating evidence in
criminal proceedings other than those for perjury or related offences. In the light of this
decision, it may be concluded that s 65(5) is constitutionally sound, since s 65(2A)(b) limits the
scope of s 65(5) and prohibits the admission of incriminating evidence under the latter section
in criminal proceedings, apart from proceedings on the grounds of perjury and related
offences.

In Equisec (Pty) Ltd v Rodriques & another 1999 (3) SA 113 (W), a debtor applied to stay the
granting of a final sequestration order against his estate, arguing that exposure to compulsory
interrogation would prejudice him in criminal proceedings pending against him. The court
rejected his application, holding that he was adequately protected by s 65(2A) because it would
render incriminating evidence elicited at such an interrogation inadmissible in criminal
proceedings.

Although evidence given at an interrogation is admissible in civil proceedings instituted against

the person who gave the evidence, it does not simultaneously serve as proof of the facts that it
reveals. In this regard, the court must consider the evidence as a whole and decide how much
weight should be given to it. The court may, if it sees fit, accord different degrees of credence
or credibility to different parts of the evidence (Du Plessis NO v Oosthuizen en 'n ander 1999 (2)
SA 191 (O) 206).

13.1.7 Failure to attend or submit to interrogation

If the insolvent or a person duly summoned to appear at a meeting of creditors fails to attend
or remain in attendance at the meeting, the presiding officer may issue a warrant authorizing a
member of the police to apprehend the insolvent or person summoned and bring him before
the presiding officer (s 66(1)). Unless the insolvent or person summoned satisfies the presiding
officer that he had a reasonable excuse for failing to appear or remain in attendance, the
presiding officer may commit him to prison for a period which that officer may determine (s
66(2)). The officer in charge of the prison must then detain the person committed and produce
him when and where required by the presiding officer (ibid).

If a party summoned to an interrogation appears, but fails to produce a book or document

which he was required to produce, or if a person who may be interrogated refuses to be sworn
by the presiding officer, or refuses to answer fully and satisfactorily any question lawfully put to
him or does not answer the question fully and satisfactorily, the presiding officer may issue a
warrant committing the party concerned to prison, where he must be detained until he has
undertaken to do what is required of him (s 66(3)). In Nieuwoudt v Faught NO en andere 1987
(4) SA 101 (C) 109, it was held that when the party gives an answer which is incomplete or
unsatisfactory, the presiding officer must decide whether this is due to an unwillingness to
testify, or whether the party has answered the question to the best of his ability. If the answer is
clearly untrue or evasive, it may be considered a form of intentional refusal to answer the
question. But if the answer is not nonsensical or evasive, even if it is improbable, it cannot be
said that the party has failed to answer the question to the best of his ability (ibid). If, after
being released on an undertaking to do what is required of him, the party fails to fulfil his
undertaking, the presiding officer may commit him to prison as often as may be necessary to
compel him to do what is required of him (s 66(4)).
196
Interrogation of the insolvent and other
witnesses

paras 13.1.7-13.2

A person committed to prison under s 66 may apply to the High Court for his discharge from
custody, and the court may order his discharge if it finds that he was wrongfully committed or
is being wrongfully detained (s 66(5)). The presiding officer enjoys the same immunity in
connection with the apprehension or committal of a person as is enjoyed by a judicial officer
regarding any act performed by him in the exercise of his functions (s 66(6)).

In De Lange v Smuts NO & others 1998 (3) SA 785 (CC), it was argued that s 66(3) (dealing with
committal for failing to produce a document, take the oath, or answer a question satisfactorily)
is constitutionally invalid because it violates s 12(1)(b) of the Constitution (regarding the right
not to be detained without a fair trial). The court accepted that the section is invalid, but only to
the extent that it empowers a presiding officer who is not a judicial officer in the court structure
established by the Constitution (in other words, a judge or a magistrate) to issue a warrant
committing an examinee to prison. It seems clear that the same reasoning applies to s 66(2)
(about committal for failing to appear or remain in attendance). Subsections (2) and (3) of s 66
should both, therefore, be read subject to the qualification that a presiding officer may order
committal on the grounds stipulated in the subsections only if he is recognized as a judicial
officer in the court structure. In De Lange's case, Ackermann J remarked as follows (idem 824):

'It was suggested in argument that if the public service officers did not have summary
committal powers this would give rise to delays which would undermine the efficacy of the
sequestration process. It is not self-evident to me why this must be so if creditors' meetings
and courts are efficiently run.... There is nothing before us to show why these public service
officers cannot legitimately be accommodated in the magisterial judiciary and used exclusively
to preside over creditors' meetings or why, for that matter, specialist insolvency or bankruptcy
courts cannot effectively be established under the Constitution in which their expertise can
also be fully employed. As judicial officers with true structural and constitutional independence,
there could be no objection to them committing examinees to prison....'

13.1.8 Interrogation revealing possible offence

If it appears from a statement made at an interrogation that there are reasonable grounds for
suspecting that a person has committed an offence, the Master must send the statement with
any necessary documents to the Director of Public Prosecutions, to enable him to decide
whether any criminal proceedings should be instituted in the matter (s 67(1)).

13.2 INTERROGATION BY MASTER

The Act also provides for an inquiry to be instituted by the Master whenever he considers that
the insolvent, the trustee, or any other person can give information which he (the Master)
considers desirable to obtain about the insolvent, his estate, the administration of his estate, or
any claim or demand made against the estate (s 152(2); Burger NO v Bester NO 2022 JDR 0820
(CC) para 11n3). In such a case, the Master may summon the party concerned to appear
before him (or before a magistrate or an officer in the public service) at a stated time and place
and give the information (s 152(2)). The Master may exercise this power at any time after
sequestration (including provisional sequestration: Appleson v The Master & others 1951 (3) SA
141

197
para 13.2

The Law of Insolvency

(T)) and before the rehabilitation of the insolvent (s 152(2)). It need not be shown that
an interrogation under s 64 or s 65 is impossible or impractical (Cools v The Master &
others 1998 (4) SA 212 (C) 224-5). The Master may administer the oath to the
party summoned, and then the Master and also the trustee (if the latter is not the person
summoned) or his agent may interrogate that party (s 152(4)). After the interrogation,
the Master may require the person to appear again and submit further information or any
book or document (s 152(3)). The relevance of these documents to the insolvent's
affairs outweighs the right of privacy under s 14 of the Constitution of the Republic of
South Africa, 1996 (Gumede & others v Subel NO & others 2006 (3) SA 498 (SCA)
504-6). Specific provisions of the Act relating to interrogations by the trustee apply with
the necessary changes: those concerning privilege and the giving of incriminating
evidence (Wessels NO v Van Tonder en 'n ander 1997 (1) SA 616 (0) 620), those
dealing with the failure to attend or submit to interrogation and the immunity of the
presiding officer, and those governing witness fees (s 152(5)-(7)). So, for example, a
witness need not attend the interrogation until offered the prescribed witness fees and
allowances (Swart en 'n ander v Cronje en 'n ander NNO 1991 (4) SA 296 (T); Laskarides &
another v German Tyre Centre (Pty) Ltd (in Liquidation) & others NNO
2010 (1) SA 390 (W) 399). The differences between the s 152 inquiry and the s 65
interrogation are set out in Stadler en andere v Wessels NO en andere 2000 (4) SA 544
(0) 550-4.

The courts have accepted these propositions about the nature and scope of an inquiry
under s 152:

The inquiry is purely investigative in nature. The presiding officer investigates facts, but he
makes no finding that can detrimentally affect anyone's rights, nor does he determine any
rights (Van der Westhuizen v Roodt & others 1986 (1) SA 693 (N) 698; Podlas v Cohen and
Bryden NNO & others 1994 (4) SA 662 (T) 675; Roux v Die Meester en 'n ander 1997 (1) SA 815
(T) 824; Nedbank Ltd v Master of the High Court, Witwatersrand Local Division, & others 2009 (3)
SA 403 (W) 414).
As the inquiry does not adversely affect anyone's rights, the Master need not apply the audi
alteram partem (hear the other side) rule before deciding to hold the inquiry, and the presiding
officer need not observe the audi alteram partem rule while the inquiry is in progress. It follows
that the Master need not grant a hearing to a person summoned before issuing him with a
notice to appear and that he does not have to provide reasons for his decision to hold an
inquiry (Podlas v Cohen and Bryden NNO & others (supra) 675). Nor can the insolvent demand to
be present at the examination or to be given the opportunity to cross-examine witnesses (Roux
v Die Meester en 'n ander (supra)).
In regulating and controlling the inquiry, the presiding officer must observe the dictates of
procedural fairness. Yet this requirement does not mean that he must allow an examinee
access to the information on which the decision to hold the inquiry was based (Strauss &
others v The Master & others NNO 2001 (1) SA 649 (T) 662-3). An examinee has no
constitutional right of access to such information (under s 32 of the Constitution read with Sch
6, item 23), because the inquiry does not amount to administrative action and does not
adversely affect the examinee's rights (Strauss & others v The Master & others NNO (supra) 665-
6).
The courts are empowered and obliged to restrain the use of an enquiry that would
constitute an abuse (Urquhart v The Master of the High Court 2019 JDR 2000 (FB)

198
Interrogation of the insolvent and other witnesses para 13.2

para 11). An improper forensic advantage depends on the circumstances of the case.
Examples would include summoning a witness to benefit a third party in pursuing proceedings
against that witness; issuing a summons so as to obtain pre-trial discovery when a discovery
order had already been refused; allowing an enquiry where the only purpose of the enquiry was
to extract damaging admissions and unconvincing justifications for a possible negligence
claim; or engineering an enquiry just before a trial where the liquidator as plaintiff seeks
ammunition to attack the defendant.

The inquiry need not follow any particular procedure. The presiding officer is not compelled to
keep a record or notes of the inquiry and cannot be made to disclose to any person, including
the examinee himself, any informal notes that he kept of the proceedings (Stadler en andere v
Wessels NO en andere (supra) 554).

A person other than the trustee is not entitled as of right to representation at the inquiry
(Appleson v The Master & others (supra)). Yet the presiding officer does often allow
representation. The court has said that it is desirable that a person who is being interrogated
should be allowed to have a legal adviser present to advise him of his rights (Van der
Westhuizen v Roodt & others (supra) 699), especially where the interrogation may constitute a
step in litigation hostile to the witness (Hosking & another v Van der Merwe & another NNO 1992
(1) SA 920 (W)). It has been held that as insolvency inquiries are confidential, their purpose
would, to some extent, be defeated if all the witnesses were to be represented by the same
legal practitioner, since questions and answers obtained during the enquiry would then
immediately become common knowledge to all the witnesses (Myburgh v The Master of the
High Court Bloemfontein Free State Division, Bloemfontein NO 2019 JDR 1698 (FB) para 16).
Because of the nature of the inquiry, the court's power of review under s 151 is restricted. The
court may interfere with the Master's decision to hold an inquiry only if he acted in bad faith
(mala fide), from ulterior motives, or failed to apply his mind to the matter (Strauss & others v
The Master & others NNO (supra) 656-7). The court may intervene in the inquiry itself only if it is
conducted in an oppressive or vexatious manner or might result in hardship to the examinee, or
if unusual, special or exceptional circumstances are present (idem 662).