Walker and Another v Schabort Potgieter Attorneys Inc and Others (320/2024; 368/2024) [2025] ZASCA 154 (17 October 2025)

Case Note

Walker and Another v Schabort Potgieter Attorneys Inc and Others (320/2024; 368/2024) [2025] ZASCA 154 (17 October 2025) – Supreme Court of Appeal

Reportability

This judgment has been marked reportable because it clarifies, for the first time at appellate level, the intersection between section 32(1)(b) of the Insolvency Act 24 of 1936 and an attorney’s common-law, contractual and statutory duties to account to a company in liquidation. The court’s treatment of the word “fails” in section 32(1)(b) extends the meaning of failure from mere unwillingness to an objective inability to fund litigation, a question that had previously generated conflicting first-instance decisions. In addition, the judgment offers guidance on the proper form of an attorney’s account where substantial trust monies have been received on behalf of an insolvent estate, thereby providing practitioners with much-needed certainty on the content of fiduciary obligations owed under the Legal Practice Act 28 of 2014.

Cases Cited

Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; 2012 (4) SA 593 (SCA)
Capitec Bank Holdings Ltd and Another v Coral Lagoon Investments 194 (Pty) Ltd and Others [2021] ZASCA 99; 2022 (1) SA 100 (SCA)
Bothma-Batho Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk [2013] ZASCA 176; 2014 (2) SA 494 (SCA)
Reynolds and Others NNO v Standard Bank of South Africa Ltd 2011 (3) SA 660 (GSJ)
Myburgh v Walters NO 2001 (2) SA 127 (C)
Doyle v Fleet Motors PE (Pty) Ltd 1971 (3) SA 760 (A)
Victor Products (SA) (Pty) Ltd v Lateulere Manufacturing (Pty) Ltd 1975 (1) SA 961 (W)
Doyle v Board of Executors 1999 (2) SA 805 (C)
Grancy Property Ltd and Another v Seena Marena Investment (Pty) Ltd and Others [2014] ZASCA 50; 2014 (3) All SA 123 (SCA)
Scholtz and Another v De Kock NO and Others (312/2023) [2024] ZASCA 132 (2 October 2024)

Legislation Cited

Insolvency Act 24 of 1936 – sections 26–32 and 104
Companies Act 61 of 1973 – sections 417 and 418
Legal Practice Act 28 of 2014 – particularly section 119 and the Code of Conduct
(Former) Attorneys Act 53 of 1979 – cited for historical context

Rules of Court Cited

The judgment does not turn on any specific Uniform Rule of Court and none are expressly cited.

HEADNOTE

Summary

The Supreme Court of Appeal dismissed an appeal brought by attorney John Walker, his current and former practices, and the liquidators of Pamodzi Gold East Rand (Pty) Ltd against a High Court order compelling Walker to render and debate full accounts with the liquidators of Aurora Empowerment Systems (Pty) Ltd. Although Pamodzi funded the section 32 litigation against various debtors, the court held that Walker’s client remained Aurora and that the proceeds of the recoveries belonged to the insolvent estate, not to the funding creditor. The court further confirmed that Walker’s fiduciary, contractual and statutory duties to account were unaffected by the successive permutations of his legal practice.

Key Issues

Whether an attorney instructed under a tripartite “section 32” mandate must account to the company in liquidation or to the funding creditor.
The proper interpretation of “fails” in section 32(1)(b) of the Insolvency Act and whether it includes factual inability to proceed.
Whether section 32 read with section 104 entitles the funding creditor to receive the recovered proceeds.
The adequacy of the accounting already furnished and the circumstances in which a court will order a further comprehensive account and a formal debatement.

Held

The court held that Aurora, not Pamodzi, was the true beneficiary of the recoveries and that Walker therefore had a duty to deliver a full, voucher-supported account to Aurora. Section 32(1)(b) indeed permits a creditor to finance litigation when the trustee is unable to do so, but it does not divert the fruits of the litigation away from the insolvent estate. Walker’s existing statements were incomplete, lacked source documentation, and failed to separate payments attributable to distinct matters; consequently, the High Court was correct to compel a proper account and a debatement. The appeal was dismissed with costs, including those of two counsel.

THE FACTS

Aurora Empowerment Systems was finally wound-up in 2011. The joint liquidators discovered, through a Companies Act enquiry in terms of sections 417 and 418, a range of impeachable transactions favouring insiders and related parties. Aurora lacked the resources to sue on those dispositions. Pamodzi, itself in liquidation but a major creditor of Aurora, agreed to indemnify Aurora for the costs of the prospective litigation.

On 7 July 2012 the parties concluded a written fee and mandate agreement with attorney John Walker. Walker, then practising as a sole proprietor, undertook to prosecute the claims, to keep separate, detailed records, and to provide a final account supported by vouchers. During the life of the mandate he migrated to employment at Schabort Potgieter Attorneys, later re-establishing his own incorporated practice, but retained control of the files throughout.

Over seven years Walker recovered close to R20 million for the Aurora estate. Only about R5,8 million found its way to Aurora. The attorney resisted requests for detailed accounting, contending that he was accountable solely to Pamodzi, which had financed the litigation. Aurora, supported by forensic accounting evidence, alleged misapplication of funds, inadequate narratives, missing vouchers and the conflation of Aurora matters with Pamodzi’s unrelated litigation. The High Court ordered Walker to render a proper account and engage in a formal debatement process.

THE ISSUES

The Supreme Court of Appeal had to determine, first, whether Aurora possessed a contractual, fiduciary or statutory right to compel an account from Walker. Second, it examined whether section 32(1)(b) displaced that right by vesting the proceeds—or any control over them—in the funding creditor. Third, the court considered whether the accounts already supplied were sufficient to discharge Walker’s obligations. Finally, it addressed whether the High Court order was too wide, or had become moot because Walker had, in his view, already accounted.

ANALYSIS

The court began by restating the Endumeni principles on interpretation, emphasising the unified inquiry into text, context and purpose. Applying those principles to the fee and mandate agreement, Mbatha ADP found its language unequivocal: Walker undertook to collect debts on behalf of Aurora and to render a final, voucher-backed account. No reading of the document, purposive or otherwise, could displace Aurora as the principal.

Turning to the Insolvency Act, the court construed the term “fails” in section 32(1)(b) broadly. A trustee who lacks funds to sue can be said to “fail” to pursue the claim, enabling a creditor to step in. Yet section 32 does not confer direct entitlement to the fruits of litigation on the funding creditor; section 104(3) explicitly provides that participating creditors are paid after the estate’s claim and costs have been satisfied. Reynolds and Myburgh were relied upon to confirm that the liquidators remain the only plaintiffs in law, even where a creditor finances the action.

Against that statutory backdrop, Walker’s fiduciary and contractual duties were analysed. The court relied on Board of Executors, Doyle, Victor Products and Scholtz to underscore that a fiduciary must keep the beneficiary fully informed and must separate client funds from personal or third-party claims. Walker’s concessions that he owed both fiduciary and contractual duties rendered it unnecessary to elaborate extensively, but the court nonetheless stressed that the Legal Practice Act independently obliges practitioners to account truthfully and promptly.

Finally, the court evaluated the adequacy of the accounting. The Warricker forensic reports revealed critical gaps: lump-sum entries with no payor or payee identified, immediate same-day debits of large trust receipts, and no supporting vouchers. Such defects demonstrated that Walker had not furnished the “proper account” contemplated in Doyle and subsequent authorities. An account is more than a bill of costs; it must enable the principal to verify every trust-fund movement. The High Court was therefore correct to compel a fresh, fully-particularised account and to provide for a debatement mechanism if consensus could not be reached.

REMEDY

The Supreme Court of Appeal dismissed the appeal and affirmed the High Court’s order. It therefore directed Walker and all co-appellants to furnish Aurora’s liquidators with a comprehensive, voucher-supported account within the prescribed period, to engage in a formal debatement, and to pay over any amounts found to be due. Costs of the appeal were awarded against the appellants jointly and severally, including the costs of two counsel.

LEGAL PRINCIPLES

First, a creditor who funds litigation under section 32(1)(b) does not acquire ownership of the proceeds; those remain assets of the insolvent estate, subject only to the protective mechanism in section 104(3).

Second, an attorney’s duty to account is sourced concurrently in contract, fiduciary doctrine and the Legal Practice Act. None of these sources can be ousted by the identity of the fee-payer or by changes in the practitioner’s business form.

Third, the meaning of “fails” in section 32(1)(b) extends beyond a wilful omission to act; it includes objective inability, thereby enabling practical use of the provision where liquidators lack funds.

Fourth, a “proper account” must be sufficiently detailed to allow the principal to trace every amount received and disbursed, identify counterparties, and test the reasonableness of professional fees; a mere bill of costs, or unsourced bank statements, is insufficient.

Lastly, where an attorney has provided a deficient account, courts are entitled to order a supplemental account, to direct a structured debatement, and to permit a further approach to court on the same papers should disputes persist, thereby ensuring the fiduciary obligation is fully vindicated.