Boitumelo Tsweleng
62684035
MRL3701
Assignment 2
791956
Due date 17 April 2023
You are a candidate attorney at a law firm in the process of consulting a client, Mr.
Masuku. He informs you that he bought a vehicle from one Mr. Havenga, who makes
a living by buying and selling secondhand cars. He further informs you that the
trustee of Mr. Havenga however approached him (Mr. Masuku), took back the
vehicle that he bought from Mr. Havenga and informed him that he is claiming the
vehicle under section 29 of the Insolvency Act 24 of 1936. Mr. Masuku now seeks
your advice on how to get the vehicle back.
During your research, you find that dispositions which may be set aside include
those not made for value, voidable preferences, undue preferences, collusive
dealings, and those made in fraud of creditors.
1. Which of the dispositions above may be set aside in terms of the common law,
and what is the relevant action that may be used to set the disposition aside?
made in fraudemcreditorum (‘in fraud of creditors’).1
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 fraudemcreditorum
(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 is
known as the action Pauliana (Fenhalls v Ebrahim & others 1956 (4) SA 723 (D);
Nedcor Bank Ltd v Absa Bank & another 1995 (4) SA 727 (W) 729-30).
To succeed in bringing the action 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 effect2
2. What must the trustee prove to set aside a disposition made for no value? (2)
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 proves also that, immediately after it 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 it aside
1
Hockly’s Insolvency Law Page 141.
2
Hockly’s Insolvency Law Page 149.
unless the person claiming under or benefited by it proves that, immediately after it
was made, the assets of the insolvent exceeded his liabilities (s 26(1)(b)).3
3. Regarding the factual scenario above, advise your client what a section 29
disposition is, state whether there is an exception to section 29 that may protect him,
and what that exception is. Lastly state which test is applied to determine whether
the exception applies.
Section 29(1)4 provides that a disposition that had the effect of preferring one
creditor over another may be set aside by a court, where such disposition was made
when the debtor was insolvent or if it caused the debtor’s insolvency. Yes it will
protect him, 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 certain 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 sequestration (Enyati Resources Ltd v Glaum
NO & another 1989 (2) SA 314 (C)).5
An objective test is applied—whether the disposition was one which would normally
be entered into between solvent business persons (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, stated differently, whether the disposition is in conformity
with ordinary business methods adopted by solvent persons of business (Van Zyl &
others NNO v Turner & another NNO 1998 (2) SA 236 (C) 245) or whether it would
be anomalous, unbusinesslike or surprising to the ordinary person of business
(Malherbe’s Trustee v Dinner & others 1922 OPD 18 22). In Al-Kharafi & Sons v
Pema & others NNO 2010 (2) SA 360 (W), Malan J remarked (378).6
4. State whether the following statement is true or false and provide a motivation for
your answer: Referring to Collusive Dealings, section 31(1) of the Insolvency Act
refers to any agreement with the results that one creditor is preferred over another.
False, section 31(1) provides that 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
3
Hockly’s Insolvency Law Page 141.
4
Insolvency Act 24 of 1936.
5
Hockly’s Insolvency Law Page 142.
6
Hockly’s Insolvency Law Page 142.
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).7
References
Insolvency Act 24 of 1936.
Sharrock R, Vand der Linde K & Smith A. (2012) Hockly’s Insolvency Law 9th
edition. Juta, Lansdowne.
University of South Africa Study Guide. (2019) Insolvency Law. University of
South Africa, Mucklneuck, Pretoria.
ACADEMIC HONESTY DECLARATION
Declaration: .............................................
•I understand what academic dishonesty entails and am aware of Unisa’s policies in
this regard. •I declare that this assignment is my own, original work. Where I have
used someone else’s work, I have indicated this by using the prescribed style of
referencing. Every contribution to, and quotation in, this assignment from the work or
works of other people has been referenced according to this style.
•I have not allowed, and will not allow, anyone to copy my work with the intention of
passing it off as his or her own work.
•I did not make use of another student’s work and submit it as my own.
NAME: BOITUMELO DOLLY TSWELENG
SIGNATURE: BD TSWELENG
STUDENT NUMBER: 62684035
MODULE CODE: MRL3701
DATE: 15 April 2023
7
Hockly’s Insolvency Law Page 148.
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