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[2020] ZAWCHC 103
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Strydom and Another v Snowball Wealth (Pty) Limited and Others (10287/2019) [2020] ZAWCHC 103 (11 September 2020)

IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
CASE
NO: 10287/2019
In
the matter between:
PIETER
HENDRIK STRYDOM
N.O.
First Plaintiff (First Respondent in the exception)
AMELIA
STRECKER
N.O.
Second Plaintiff (Second Respondent in the exception)
And
SNOWBALL
WEALTH (PTY)
LIMITED
First Defendant (First excipient)
LEO
CHIH HAO
CHOU
Second Defendant (Second excipient)
WZHANG
Third Defendant (Third excipient)
JULIAN
DAVID
RABINOWITZ
Fourth Defendant (Fourth Excipient)
Coram:
N C Erasmus, J
Dates
of Hearing:
21 May 2020
Date
of Judgment:
11 September 2020
JUDGMENT
(HANDED
DOWN ELECTRONICALLY)
ERASMUS,
J
Introduction
[1]
The excipients who are the defendants in an action instituted by the
plaintiffs, as joint liquidators of DexGroup (Pty) Ltd
(in
liquidation), excepts to the particulars of claim, as amended, on the
basis that the particulars of claim lacks averments necessary
to
sustain an action, or that they are legally unsustainable. The
outcome of these proceedings revolve around the meaning of the
word
"value" as and its usage in section 26(1) of the Insolvency
Act, 24 of 1936 ("the
Insolvency Act&quot
;). For convenience, I
shall refer to the parties as cited in the action.
Background
[2]
The plaintiffs are the joint liquidators of DexGroup (Pty) Ltd (in
liquidation) ("the Company "). The Company was
finally
liquidated on 26 October 2016, and the plaintiffs were appointed on 9
November 2016. However, in terms of section 348 of
the Companies Act,
61 of 1973 it is pleaded that the effective date of the liquidation
is 25 February 2014. The initial particulars
of claim dated 21 June
2017, was amended during 2019.
[3]
Plaintiff's claim against the first defendant is founded upon two
transactions that took place on 23 September 2010 and 22 November

2010, respectively. It is alleged that on these dates, being more
than two years before the date of its final liquidation, DexGroup

sold shares that it held in Trustee Group Holdings Ltd ("Trustee")
to the first defendant at a price that was below the
reasonable
market price. The plaintiffs aver that during the time of the
disposition, the reasonable market value per share was
67c per share,
whilst at the same time shares were sold at 27c and 48c per share,
respectively. Twentyone million (21,000,000)
shares at 27c per share
and six million (6,000,000) at 48c per share were sold to the first
defendant. As against the second, third
and fourth defendants,
plaintiffs claim on the same basis as against the first defendant
save that the second, third and fourth
defendants bought 4,136,755,
300,000 and 1,000,000 shares at 48c per share, respectively.
[4]
On the basis of the reasonable market value and the price per share
paid by the defendant, the plaintiffs aver that the dispositions
fall
to be set aside as it was not sold at reasonable market value, was
illusory, or merely nominal. It, therefore, should be set
aside in
terms of
section 26
of the
Insolvency Act.
[5
]
Plaintiffs thus claim the return of the Trustee shares to the
trustees, or in default thereof, that the dispositions be set aside

and they be compensated at the current value calculated at R4.20 per
share. In summary the plaintiffs claim against the first defendant

the return of 27 million Trustco shares, alternatively, payment of
R113,400,000 (R113,4m). The claims against the second, third
and
fourth defendants is for the return of the number of shares as
indicated above, alternatively, the payment of R17,374,371,00
(second
defendant), R1,260,000,00 (third defendant) and R4,200,000,00 (fourth
defendant), respectively.
[6]
The defendants excepted to the particulars of claim on the basis that
they lack the averments necessary to sustain the plaintiffs'
action
against the defendants. Further, that the allegations contained in
the particulars of claim are not capable of sustaining
a claim based
on a disposition "not made for value" as contemplated by
section 26
of the Act. They argue that the plaintiffs brought its
claim in terms of
section 26
of the
Insolvency Act and
, on the facts
alone, it is clear that value was given and it was not merely nominal
nor illusory.
The
legal position insofar as it relates to exceptions.
[7]
Rule 23(1) of the Uniform Rules of Court reads:
1) Where any pleading is
vague and embarrassing or lacks averments which are necessary to
sustain an action or defence, as the case
may be, the opposing party
may, within the period allowed for filing any subsequent pleading,
deliver an exception thereto and
may set it down for hearing in terms
of paragraph (f) of subrule (5) of rule (6): Provided that where a
party intends to take an
exception that a pleading is vague and
embarrassing he shall within the period allowed as aforesaid by
notice afford his opponent
an opportunity of removing the cause of
complaint within 15 days: Provided further that the party excepting
shall within ten days
from the date on which a reply to such notice
is received or from the date on which such reply is due, deliver his
exception."
[8]
The first to fourth defendants seek the same relief in the notices of
exception, seeking to strike the plaintiffs' particulars
of claim by
upholding the exceptions. The relief they seek is identical in that
the plaintiffs' claim is to be struck out with
costs. In argument,
though, the first defendant argued that insofar as it may be
relevant, that plaintiffs be granted an opportunity
to rectify the
situation.
[9]
The main purpose of an exception taken, on the basis that the
particulars lack averments to sustain a cause of action, is to
avoid
the leading of unnecessary evidence.
[10]
In
Barclays National Bank Ltd v Thompson
1989 (1) SA 547
(A)
the following is stated:
"... the main
purpose of an exception that a declaration does not disclose a cause
of action is to avoid the leading of unnecessary
evidence at the
trial:
Dharumpal Transport (Pty) Ltd v Dharumpal
1956 (1) SA
700
(A). Save for exceptional cases, such as those where a defendant
admits the plaintiff's allegation but pleads that as a matter of
law
the plaintiff is not entitled to the relief claimed by him (cf
Welgemoed en Andere v Sauer
1974 (4) SA 1
(A), an exception to
a plea should consequently also not be allowed unless, if upheld, it
would obviate the leading of "unnecessary
"evidence.",
and also ".......It seems clear, however, that the evidence
which must be rendered unnecessary by the
upholding of an exception
to a defence is evidence pertaining to that defence, and not some
other defence against which the exception
is not directed."
This, in my view, also applies to a claim instead of a defence "
[11]
Earlier on in the same judgment the court pronounced:
"It seems clear that
the function of a well-founded exception that a plea, or part
thereof, does not disclose a defence to
the plaintiff's cause of
action is to dispose of the case in whole or in part. It is for this
reason that exception cannot be taken
to part of a plea unless it is
self-contained, amounts to a separate defence, and can therefore be
struck out without affecting
the remainder of the plea.. ."
[12]
In
Telematrix (Pty) Ltd t/a Matrix Vehicle Tracking v Advertising
Standards Authority SA
2006 (1) SA 461
(SCA) at 465 [3] Harms JA
stated:
"Exceptions should
be dealt with sensibly. They provide a useful mechanism to weed out
cases without legal merit. An over -
technical approach destroys
their utility. To borrow the imagery employed by Miller J, the
response to an exception should be like
a sword that 'cuts through
the tissue of which the exception is compounded and exposes its
vulnerability'
Dealing
with an interpretation issue, he added:
'Nor do I think that the
mere notional possibility that evidence of surrounding circumstances
may influence the issue should necessarily
operate to debar the Court
from deciding such issue on exception. There must, I think, be
something more than a notional or remote
possibility. Usually that
something more can be gathered from the pleadings and the facts
alleged or admitted therein. There may
be a specific allegation in
the pleadings showing the relevance of extraneous facts, or there may
be allegations from which it
may be inferred that further facts
affecting interpretation may reasonably possibly exist. A measure of
conjecture is undoubtedly
both permissible and proper, but the shield
should not be allowed to protect the respondent where it is composed
entirely of conjectural
and speculative hypotheses, lacking any real
foundation in the pleadings or in the obvious facts."'
On
my reading of the pleadings, there is no indication that there are
either surrounding circumstances, nor any relevant extraneous
facts
that can be relevant to the interpretation of the stated facts that
would debar me from deciding the pleaded issue on exception.
[13]
Wallis JA, in
Children's Resource Centre Trust and Others v
Pioneer Food (Pty) Ltd and Others
2013 (2) SA 213
(SCA) at 232
par [36], stated the following:
"... Causes of
action are not in the first instance dependent on questions of law.
They require the application of legal principle
to a particular
factual matrix. The test on exception is whether on all possible
readings of the facts no cause of action is made
out. It is for the
defendant to satisfy the court that the conclusion of law for which
the plaintiff contends cannot be supported
upon every interpretation
that can be put upon the facts."
[14]
The
pleadings excepted to is taken as it stands, the truthfulness of the
averments it contains is accepted except where the allegations
are
manifestly false, or divorced from reality, this principle is limited
to facts and "does not extend to inferences and
conclusions not
warranted by allegations of fact".
[1]
[15]
The plaintiffs are relying on the decisions in
Minerals and
Quarries (Pty) Ltd v Henckert En Ander
1967 (4) SA 77
(SWA) at
84A and
Versluis v Greenblatt
1973 (2) SA 271
(NC) at 278A-C,
to advance the argument that the court has the power to defer
consideration of the exception to the trial court
where the question
raised by the exception seems to be interwoven with the evidence
which will be led at the trial. This argument
pre-supposes that the
facts pleaded can be supplemented with potential evidence which to me
does not seem to be the case as there
is no real foundation in the
pleadings, or the obvious facts. I now turn to the question of law
raised, by the interpretation of
section 26(1) of the
Insolvency Act.
Disposition
"not made for value"
[16]
As a starting point, I am guided by the Supreme Court of Appeal in
Natal Joint Municipal Pension Fund v Endumeni Municipality
(920/2010)
[2012] ZASCA 13
;
[2012] 2 All SA 262
(SCA);
2012 (4)
SA 593
(SCA) (16 March 2012), where at par [18] it reads:
"The present state
of the law can be expressed as follows. Interpretation is the process
of attributing meaning to the words
used in a document, be it
legislation, some other statutory instrument, or contract, having
regard to the context provided by reading
the particular provision or
provisions in the light of the document as a whole and the
circumstances attendant upon its coming
into existence. Whatever the
nature of the document, consideration must be given to the language
used in the light of the ordinary
rules of grammar and syntax; the
context in which the provision appears; the apparent purpose to which
it is directed and the material
known to those responsible for its
production. Where more than one meaning is possible each possibility
must be weighed in the
light of all these factors. The process is
objective not subjective. A sensible meaning is to be preferred to
one that leads to
insensible or unbusinesslike results or undermines
the apparent purpose of the document. Judges must be alert to, and
guard against,
the temptation to substitute what they regard as
reasonable, sensible or businesslike for the words actually used. To
do so in
regard to a statute or statutory instrument is to cross the
divide between interpretation and legislation. In a contractual
context
it is to make a contract for the parties other than the one
they in fact made. The'inevitablepoint of departure is the language

of the provision itself', read in context and having regard to the
purpose of the provision and the background to the preparation
and
production of the document."
[17]
The relevant provisions of the
Insolvency Act apply
to companies by
virtue of section 340 of the Companies Act, 61 of 1973. Section 340
(1) provides:
"Every disposition
by a company of its property which, if made by an individual could,
for any reason , be set aside in the
event of his insolvency, may, if
made by a company, be set aside in the event of the company being
wound up and unable to pay all
its debts, and the provisions of law
relating to insolvency shall
mutatis mutandis
be applied to
any such disposition."
[18]
The aim of the provisions of the
Insolvency Act dealing
with voidable
dispositions and undue preferences is to ensure that assets that left
the estate of the debtor, in the circumstances
contemplated, are
recovered so that they can be equitably distributed amongst the
debtors and creditors.
Sections 26
("disposition without
value"), 29 ("voidable preferences"), 30 ("undue
preference to creditors")
and 31 ("collusive dealings")
contemplate various circumstances, with varying threshold
requirements, in which a court
may set aside a debtor's dispositions.
Trustees in an insolvent estate are authorised to bring proceedings
to have transactions
set aside and where the court sets the
transactions aside, it shall entitle the trustees to recover the
property so alienated,
or its value. Whilst it is apparent that the
trustees have a range of possibilities, in the instant matter they
elected to rely
exclusively on the provisions of
section 26(1)
of the
Insolvency Act. The
defendants (the excipients) argue that, on a
proper construction of the allegations by the plaintiffs, their
reliance on
section 26
cannot be sustained as it is contradictory in
itself, and as a legal consequence does not meet the requirements of
section 26.
[19]
Section 26(1)
of the
Insolvency Act provides
:
"Every disposition
for 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." (my underlining)
[20]
The Supreme Court Appeal (Appellate Division, as it then was)
considered the wording of
section 26(1)
in
Estate Wege v Strauss
1932 AD 76
at 82 where it is stated:
"It certainly does
not bear the same meaning as valuable consideration in English law.
There is nothing in the
Insolvency Act which
would lead us to infer
that the Legislature meant to give some technical meaning to the word
"value". It can therefore
only mean value in the ordinary
sense of the word."
[21]
In
Estate Jager v Whittaker and another
1944 AD 246
at 250,
the court stated with regard to section 26 of the Act, the phrase
under discussion means
"The words
'disposition not made for value' mean, in the ordinary signification,
a disposition for which no benefit or value
is or has been received
or promised as a
quid pro quo.
The most obvious example of
such a disposition is a donation..."
[22]
The Supreme Court of Appeal in
Langeberg Kooperasie Bpk v
lnverdoorn Farming and Trading Company Ltd
1965 (2) SA 597
(A) at
604 referred with approval to the
dictum
in
Goode, Durrant
and Murray Ltd v Hewitt and Cornell NNO
1961 (4) SA 286
(N) where
it is stated:
"The word 'value' is
not confined to a monetary or tangible material consideration, nor
must it necessarily proceed from the
person to whom the disposition
is made. Where an insolvent has received 'value' for a disposition
must be decided by reference
to all the circumstances under which the
transaction was made
(Hurley and Seymour N.O. v W H Muller and
Co.,
1924 NPD 122
at p.133)."
[23]
Where a
company, in a group of companies, guarantees the obligations of
another company in the group, the continued financial stability
of
the whole group may be sufficient to constitute value for the
purposes of section 26(1). Similarly, the grant by a company of
a
suretyship in respect of another company debts in order to keep alive
the
spes
of
taking transfer of a valuable property was considered to be in this
position for the value for the purposes of section 26(1)
[2]
.
[24]
The
plaintiffs, relying on
Bloom's
Trustee v Fourie
1921
TPD 599
and Mars
[3]
, argue that
'Value' in relation to a similar context in section 24 of the 1916
Act means 'adequate value'. The court in Bloom's
Trustee related
'value' to the price that the item will 'command in the market' and
added:
'Otherwise it would seem
to me that a disposition to a creditor could not be set aside under
section 24(1)(b) if assets of large
valuable are so 'sold' for
entirely inadequate consideration of for mere trifling
consideration".
They
further argue that in the instant matter the difference between the
realistic market value and the e price that was paid would
be "no
value" for purposes of section 26(1).
[25]
Their reliance on both these authorities, in my view, is misplaced.
It seems the passage in Mars was copied from previous editions

without being updated in line with the latest decisions.
Blooms
Trustee
is no longer good law as was clearly stated in Swanee 's
Boerdery (supra).
[26]
This court, per Selikowitz J, had the occasion to consider the
meaning of the phrase under discussion as used in section 26
of the
Act in
Terblanche NO v Baxtrans
CC
and another
1998 (3)
SA 912
(CPD). Certain assets belonging to the company in liquidation
had been disposed of to the second defendant for a consideration of

383,539 instead of as alleged by the plaintiff at a value of
1,276,000. Counsel for the liquidator (plaintiff) submitted that
whenever a disposition is made for less than the true value of the
asset, it is
prima facie
without value. Dealing with these
submissions the court remarked as follows:
"The arguments
presented by counsel failed to distinguish between the concepts of
'no value ' and 'inadequate value' and failed
to recognise the
relationship between these concepts to one another in the context of
s 26
of the
Insolvency Act."
The
court indicated that in interpreting
section 26
, it must be
remembered that it is but one of a number of provisions relating to
impeachable transactions which "like the proverbial
cat can be
screened in many different ways "
It
went further to state the following:
"In my view, the
rejection in
Swanee's Boerdery
of the dictum in
Bloom's
Trustee
relates to the refining of 'value' in relation to
adequacy as also in relation to the concept of 'just and valuable
consideration'."
The
question of adequacy should, however, not be equated with the concept
of illusionary or a nominal value. illusionary or nominal
value is
what those words suggest, no one value at all. "Illusory value"
is an illusion and "nominal value"
is value in name only.
Adequacy, on the other hand, in relation to value controllers are far
more extensive idea. "Illusory
value" and "nominal
value"
"Will always be
inadequate. However, a price for the benefit maybe inadequate in
relation to the value of the item but they
nevertheless not amount to
illusory or nominal value."
[27]
The court
went on to express the view that cases of inadequate value (as
opposed to cases where the supposed value is "illusionary"

or "nominal" and therefore, in truth no value at all) and
more appropriately dealt with via other unimpeachable disposition

provisions of the
Insolvency Act.
[4
]
It is not insignificant to note that the approach adopted in
Terblanche had not been departed from in the past 22 years, and as

quoted authoritatively by Meskin in Insolvency Law and followed in
the unreported decisions of
Haywood
NO v Fortune
2006
JDR 0972 (T) at para [7] and
Pro-Med
Construction
CC
(in
liquidation) v Botha
[2012]
ZAGPJHC 145 (24 August 2012) at para [2].
[28]
I now turn to the facts of this matter tested against the legal
position set out above. It is clear that the disposition was
clearly
not for "no value" and was also not "illusionary"
nor "nominal". The plaintiffs' own factual
allegations are
destructive of any claims in terms of
section 26
of the
Insolvency
Act. The
proper interpretation, in the context of the act, as set out
above does simply not apply to the facts as pleaded. The pleadings

excepted must be taken as it stands, the truthfulness thereof is
accepted for these purposes. Even if accepted that the value paid
was
less than the reasonable market value, no basis is laid nor suggested
that there was anything remiss therewith. It would be
an absurdity to
equate the position that, when paying a discounted price, it can be
said you gave no value.
[29]
Accordingly, I am of the view that the particulars of claim does not
sustain a claim in terms of
section 26(1)
of the
Insolvency Act.
Therefore
, the following order is made:
1.
The
exceptions of the first to the fourth defendants are upheld.
2.
The
plaintiffs' claim is set aside.
3.
The
plaintiffs are granted leave, if so advised, to amend the particulars
of claim within twentyone (21) days of this Order.
4.
The
defendants are entitled to the cost of the exceptions including the
cost of two counsel where so employed.
__________________________
NC
Erasmus
Judge
of the High Court
Counsel
for Plaintiffs/Respondents in exception: Adv F H Terblanche SC
Attorneys
for Plaintiffs/Respondents in exception: Roestoff Attorneys, Pretoria
Counsel
for 1st Defendant/Excipient: Adv Chris Eloff SC
Attorneys
for 1st Defendant/Excipient: Bowman Gilfillan Inc, Sandton
Counsel
for 2nd, 3rd & 4th Defendants/Excipients: Adv Jeremy Muller SC
Adv
Kate Reynolds
Attorneys
for 2nd, 3rd and 4th Defendants/ Excipients: Edward Nathan
Sonnenbergs Inc, Cape Town
[1]
Natal Fresh Produce Growers Assoc v Agroserve (Pty) Ltd
1990 (4) SA
749
(NPD), at 7SSA-B (This passage was accepted and applied by this
Court in Van Zyl NO v Bolton
1994 (4) SA 648
(C) at 651E-F and Vogel
v Kleynhans
2003 (2) SA 148
(C) at para [9]).
[2]
Swanee's Boerdery (Edms) Bpk (in liq) v Trust Bank 1986 (2) 850 (AD)
at 860H to 861D
[3]
The Law of Insolvency in South Africa.
[4]
See Endumeni supra