Strydom N.O and Others v Le Roux (A07/25) [2025] ZAWCHC 509 (3 November 2025)

Case Note

Pieter Hendrik Strydom No and Haroon Abdool Satar Moosa No and Deon Marius Botha No v Cecilia Jacoba Le Roux [2025] ZAWCHC 107 (A07/25) dated 03 November 2025

Reportability

This case is reportable due to its implications on the interpretation and application of the Insolvency Act, 1936 (Act No. 24 of 1936). The judgment clarifies the standards for establishing dispositions made without value in the context of insolvency, stressing the importance of understanding the legal parameters governing liquidations and dispositions by insolvent entities. Additionally, the case sheds light on the courts' obligations when a party does not present a defense in insolvency matters, reaffirming principles around creditor rights and protection against preferential payments.

Furthermore, the case sets a precedent concerning the treatment of funds transferred by an insolvent entity, specifically those characterized as payments to investors in schemes that have been declared illegal. The implications are significant for liquidators seeking to recover funds for the benefit of the creditor body, particularly in situations where funds were transferred shortly before liquidation.

Cases Cited

1. Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and Others 2004 (4) SA 490 (CC)
2. Rossouw NO v Visser 1989 (2) SA 289 (C)
3. Strydom & Another v Snowball Wealth (Pty) Ltd and others 2022 (5) SA 438 (SCA)
4. Umbogintwini Land and Investment Co Ltd (in Liquidation) v Barclays National Bank Ltd & Another 1987 (4) SA 894 (A)
5. Visser v Rossouw NO 1990 (1) SA 139 (A)
6. Fourie NO & Others v Edeling NO and Others [2005] 4 All SA 393 (SCA)
7. Estate Wege v Strauss 1932 AD 76
8. ABSA Bank Ltd v IW Blumberg & Wilkinson 1997 (3) SA 669 (SCA)

Legislation Cited

• Insolvency Act, 1936 (Act No. 24 of 1936)

Rules of Court Cited

• Rule 22(3)

HEADNOTE

Summary

This appeal arose from the attempt by joint liquidators to reclaim amounts from Cecilia Jacoba Le Roux, who had received payments from Free Agape Enterprises (Pty) Ltd shortly before its liquidation. The High Court allowed the appeal, determining that the respondent's receipt of funds constituted dispositions made without value, as she had not made any payments to Free Agape. The court set aside the previous order and mandated the repayment of funds along with interest and costs.

Key Issues

The primary legal issues addressed include: - Whether the respondent's receipt of funds constituted dispositions made without value within the meaning of the Insolvency Act. - The burden of proof in establishing that the respondent was unable to demonstrate value in returns received from Free Agape. - Determining the significance of no defense being filed by the respondent in the context of legal proceedings brought by liquidators.

Held

The court held that the payments made to the respondent by Free Agape were dispositions not made for value and were consequently set aside as per section 26(1) of the Insolvency Act. The court ordered the respondent to repay the total amount received plus interest, reflecting the principle that payments lacking sufficient consideration could be rescinded to protect the interests of creditors in insolvency proceedings.

THE FACTS

Free Agape Enterprises was placed under liquidation on 12 June 2018, with the effective date of liquidation constituted as 22 March 2018. The joint appellants had been appointed as liquidators and identified payments made to Cecilia Jacoba Le Roux amounting to R1,044,500 between 21 April 2017 and 14 November 2017, which were made just under two years before liquidation. The appellants argued that these payments were dispositions made without value, as the respondent had made no corresponding payments to Free Agape during this period.

The respondent did not file any defense or present a substantive answer to the allegations and instead appeared in person during the initial default judgment proceedings, where she was ultimately granted another chance to file a defense, which she failed to do.

THE ISSUES

The court was faced with several pivotal legal questions. Firstly, whether the funds transferred to the respondent could be classified as dispositions made without value as defined in the Insolvency Act. Additionally, the court needed to examine the implications of the respondent's failure to file a defense, or sufficiently engage in the proceedings, and how this failure impacted the burden of proof regarding her entitlement to the funds received.

ANALYSIS

The primary analysis involved scrutinizing whether the payments made constituted "dispositions not made for value." The court emphasized that it was the responsibility of the respondent to demonstrate that the assets of Free Agape exceeded its liabilities immediately after the payments were made. Since she failed to fulfill this onus, the appellants' claims stood unrebutted.

Moreover, the court considered the illegal nature of Free Agape's operations, which involved taking deposits from investors and redistributing the funds in a manner characteristic of a Ponzi scheme. This illegality effectively nullified any claims the respondent could have made regarding the value of what she received. The court's reliance on established case law reinforced the conclusions drawn about the non-viability of the respondent's position.

The absence of a defense from the respondent meant that the appellants' allegations were accepted as fact. The court asserted that it could not speculate as to whether the respondent might have made any payments back to Free Agape. Therefore, the liquidators were justified in recovering the total amounts paid to the respondent.

REMEDY

The court ultimately set aside the order of the court of first instance and substituted it with an order that required the respondent to repay R1,044,500 to the liquidators. The court also mandated that interest on this amount be paid at a specified rate from a particular date until full payment was complete, in addition to ordering that the respondent would be liable for the costs of the appeal.

LEGAL PRINCIPLES

Key legal principles established or reaffirmed by this decision include: - Dispositions made by an insolvent entity without value may be set aside under section 26(1) of the Insolvency Act, particularly when the recipient cannot prove that the transfer was justifiable based on the insolvency definition. - The burden of proof lies with the defendant in establishing that, at the time of the receipt, the entity’s liabilities did not exceed its assets. - In insolvency proceedings, the presence of illegal schemes significantly undermines claims to received funds and protects the rights of creditors against preferential transfers.