Background

The applicants, the joint liquidators of Vele Investments (Pty) Ltd (Company) sought to recover monies totalling R17,292,254 that were alleged to have been stolen and laundered from VBS Bank through the Company and paid to the respondents. The applicants sought to have these payments set aside as dispositions without value.

Section 26 of the Act

Section 26(1) of the Act provides:

“26. Dispositions without value

 (1) Every disposition of property not made for value may be set aside by the court if such disposition was made by an insolvent:

 (a) more than two years before the sequestration of his estate, and it is proved that, immediately after the disposition was made, the liabilities of the insolvent exceeded his assets;

(b) within two years of the sequestration of his estate, and the person claiming under or benefited by the disposition is unable to prove that, immediately after the disposition was made, the assets of the insolvent exceeded his liabilities:

Provided that if it is proved that the liabilities of the insolvent at any time after the making of the disposition exceeded his assets by less than the value of the property disposed of, it may be set aside only to the extent of such excess.”

Contentions by the parties

The applicants relied on admissions made by the respondents during their testimony at a section 417 enquiry whereat the first respondent (Mr Mphephu) admitted to receiving gratuitous payments from the Company in the absence of him working for it and for no reciprocal value. Moreover, payments totalling R11,985,682.15 were made by the Company to Mphephu’s attorney which were distributed to settle, among other things, attorney’s fees, a mortgage bond for an immovable property and other expenses related to refurbishment of that immovable property. During the section 417 enquiry, Mphephu’s attorneys admitted that the payments made to the firm by the Company were “without any reciprocity or quid pro quo” having been given to the Company.

On the other hand, the respondents’ defence was premised entirely on a constitutional basis, more specifically that African customary law is an equal source of law to the common law and legislation. The nub of the defence put up by Mphephu in his answering affidavit was that he was “gifted several movable properties and one immovable property” by the Company “as part of the customary law practice uluvha”. Uluvha is the practice of giving gifts to a traditional leader as a mark of respect and homage.

The court’s findings

The court rejected the respondents’ defence as the applicant’s claim was not for movable or immovable property. It was for dispositions (payments) made by the Company to the respondents without value, which they admitted receiving. It was the court’s further finding, as contended by the applicants, that the respondents’ defence was only in relation to movable and immovable property and that it did not refer to the payments admittedly received by them. In addition, the court found that nowhere did the respondents aver that African customary law applies to corporate entities as contemplated in the Companies Act 71 of 2008. In any event, had the respondents made this contention, it would have been misguided in that (i) no evidence of the applicability of the custom of uluvha was provided and (ii) a company as a juristic person cannot practice a custom, only a human can, as a company is a legal persona distinct from its members, as held in Dadoo Ltd v Krugersdorp Municipal Council [1920] A.D 530.