Keeping it simple: Dispositions not made for value- means no value at all. Strydom N.O and Another v Snowball Wealth (Pty) Ltd and Others [2022] ZASCA 91

Insolvency proceedings will always be to the benefit of the creditors. When companies are liquidated or private persons are sequestrated, the property of the insolvent vests in the trustee or liquidator to fairly distribute the assets among creditors.[i] However, the Insolvency Act 24 of 1936 (“the Act”) provides for the trustee to recover certain property alienated by the insolvent before his/her sequestration.[ii] These are known as impeachable dispositions. The reason for a court to set aside certain transactions is to benefit the overall body of creditors.

Impeachable dispositions as per sections 26, 29, 30 & 31 of the Act, also apply to companies in liquidation due to section 339 of the Companies Act 61 of 1973.[iii] Therefore in this article, reference to trustee should include a liquidator and sequestration should be read to include liquidation and vice versa.

When interpreting the law, the philosophical principle “Occam’s Razor” often walks out the back door. This principle states that the simplest explanation is most often the correct one. The recent Supreme Court of Appeal judgment Strydom N.O and Another v Snowball Wealth (Pty) Ltd and Others [2022] ZASCA 91 handed down on 15 June 2022 relied on the basic principles of interpretation to define the phrase “not made for value”. This was an appeal from the Western Cape High Court.

The appellants were the joint liquidators of DexGroup (Pty) Ltd (in liquidation).[iv] The respondents were Snowball Wealth (Pty) Ltd, Mr LCH Chou, Ms W Zhang, and Mr JD Rabinowitz.[v] Before its liquidation, DexGroup sold its shares in Trustco Group Holdings Limited (“the shares”) to each of the respondents at a  discounted price. The appellants argue that the sale of shares to the respondents at a price below the reasonable market value was illusory or merely nominal and should be set aside by the court in terms of section 26(1)(a) of the Act.[vi]

Section 26(1)(a) of the Act enables trustees to impeach or ‘reverse’ a transaction that was not made for value. In simple terms, a trustee must prove that a disposition was made, and he received no value for it. If the disposition was made more than two years before the liquidation, the trustee must prove that after the disposition the liabilities of the insolvent exceeded the assets.

The respondents (with slight variation in the reasoning for their arguments) contended that “not made for value” should mean that there was no benefit received.[vii] The Court relied on previous case law to determine the difference between a claim based on a disposition for inadequate or insufficient value as opposed to no value at all.[viii] The court referred to Estate Wege v Strauss 1932 AD 76 which interpreted the word “value” in the ordinary sense of the word and was taken further in Estate Jager v Whittaker & Another 1944 AD 250 where a disposition not made for value means “a disposition for which no benefit or value has been received or promised as a quid pro quo.” [ix]

Reverting to the basic principles of interpretation, the court found that a disposition not made for value means for no value at all.[x] It supports the notion that it would lead to absurdity to determine when paying a discounted price, it can be said it carried no value.[xi] The appeal was therefore dismissed.

The case illustrates that interpreting legislation reverting to the simplest explanation is most often the correct one. This Supreme Court of Appeal case endorses the current legal position that in order to set aside a transaction preceding liquidation proceedings, it should be proved that no benefit or value has been received in return.


Author:            Chiranda Pretorius
Position:          Candidate Attorney