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[2020] ZASCA 86
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M and Another v Murray and Others (251/2019) [2020] ZASCA 86; 2020 (6) SA 55 (SCA) (9 July 2020)
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THE SUPREME COURT OF
APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case No: 251/2019
In the matter between:
V[…] I[…]
M[…]
FIRST
APPELLANT
IPROLOG
(PTY) LTD SECOND
APPELLANT
and
CLOETE MURRAY
N.O. FIRST
RESPONDENT
MABATHO SHIRLEY
MOTIMELE N.O.
SECOND RESPONDENT
JERRY SEKETE KOKA
N.O. THIRD
RESPONDENT
Neutral
citation:
M[…]
and Another v Murray and Others
(251/2019)
[2020] ZASCA 86
(9 July 2020)
Coram:
PONNAN, DAMBUZA, VAN DER MERWE, MAKGOKA
AND MBATHA JJA
Heard:
18 May 2020
Delivered:
This judgment was handed down
electronically by circulation to the parties’ representatives
by email, and by publication on
the Supreme Court of Appeal website
and release to SAFLII. The time and date for hand down is deemed to
be 10h00 on the 9
th
day of July 2020.
Summary:
Pensions – protection of
s
37B
of the
Pensions Fund Act 24 of 1956
– whether it operates
if pension benefit paid before sequestration.
Insolvency
–
s 31
of the
Insolvency Act 24 of 1936
– whether
collusion established.
ORDER
On
appeal from:
Gauteng Division of the
High Court, Pretoria (Holland-Müter AJ sitting as court of first
instance).
1 Save
to the extent reflected in the paragraph below, the appeal is
dismissed with costs, such costs to be paid
by the appellants jointly
and severally, the one paying the other to be absolved.
2
Paragraph 1 of the order of the court a quo is substituted with the
following:
‘
1
The payments made by the insolvent, Mr P[…] A[…] L[…]
M[…], to or for the benefit respectively
of the first
respondent, V[…] I[…] M[…], in the sum
R1 023
867 and the second
respondent, Iprolog (Pty) Ltd, in the sum of R3 500 000,
are set aside and the respondents are ordered
to repay those monies
forthwith to the applicants.
JUDGMENT
Makgoka
JA (
Ponnan, Dambuza, Van der Merwe
and Mbatha JJA
concurring)
:
[1]
The primary issue in this appeal is
whether a pension benefit paid out to the insolvent, Mr P[…]
A[…] L[…]
M[…] (Mr M[…]) before his
estate was sequestrated, enjoyed the protection provided in s 37B
of the Pensions
Fund Act 24 of 1956 (the Act), which protects pension
benefits against attachment by a trustee of an insolvent estate,
subject
to certain exceptions. If this is answered in the negative, a
secondary issue arises, namely whether that pension money, which he
disposed of to his then wife, the first appellant, Ms V[…]
I[…] M[…] (Mrs M[…]) and the second appellant,
Iprolog (Pty) Ltd (Iprolog) should be set aside in terms of the
relevant provisions of the Insolvency Act 24 of 1936 (the
Insolvency
Act).
[2
]
Mr M[…]’s estate was
finally sequestrated on 1 August 2011. Some two years before the
sequestration, he received a
pension payout, which, as already
stated, he disposed of to the appellants. Iprolog purchased
immovable properties with that
money. After the sequestration,
the respondents, the joint trustees of his insolvent estate, obtained
an order in the court
a quo, the Gauteng Division of the High Court,
Pretoria, setting aside the dispositions. That court also granted an
order interdicting
the appellants from alienating an immovable
property indirectly purchased with the pension money. Mrs M[…]
and Iprolog
appeal against those orders with the leave of this court.
[3]
Mr M[…] and Mrs M[…]
had been married to each other out of community of property since
1980. Mr M[…] was a
judgment debtor of Lowveld Cooperative
Investments (Lowveld). Its action against Mr M[…] to recoup
the debt failed in February
2006 before the trial court. However,
this court granted Lowveld leave to appeal to the full court. While
the appeal was pending,
Iprolog was registered on 6 April 2009, and
on 30 April 2009 Mr M[…] became its sole director. On 5 May
2009, Mr M[…]
and Mrs M[…] became trustees of the Les
Baux Family Trust (the Trust), which in due course became the sole
shareholder of
Iprolog.
[4]
On 18 May 2009 the full court
delivered its judgment, and overturned the order of the trial court
dismissing Lowveld’s claim.
It ordered Mr M[...] to pay Lowveld
the sum of R726 638.35, interest and costs. Mr M[…]
immediately applied to this
court for special leave to appeal. On 31
May 2009 Mr M[…] requested payment of his provident fund
benefit from Mindkey Corporate
Selection Retirement Fund. On 15 June
2009 Mr M[…] received R4 639 000 from the provident
fund, which was paid
into his banking account. On 23 June 2009,
he transferred R3 500 000 of that amount into an attorney’s
trust account for the credit of Iprolog. This money was used for the
purchase of two farms in Kwazulu-Natal by Iprolog. The balance
of
R1 023 867 was paid directly to Mrs M[…].
[5]
The appellants explained the two
payments as follows. It was alleged that Mr and Mrs M[…] had
been experiencing marital problems
for a number of years, and that in
April 2009, Mrs M[…] finally decided that she wanted a
divorce. Therefore, the pension
pay-out was requested specifically to
cater for the proprietary consequences of the marriage at divorce. In
particular, it was
stated that Mr M[…] owed Mrs M[…]
the sum of R4 746 080.14 made up as follows: in terms of
the parties’
antenuptial contract registered on 6 May 1980, Mr
M[…] was obliged to purchase a property for Mrs M[…]
for R100 000.
According to Mr M[…] the equivalent value
of that sum in 2009 was R3 722 213.14. The payment of
R3 500 000
referred to above, was meant to cater for this.
Mr M[…] explained that he did not wish to pay this amount to
Mrs M[…]
until the divorce was finalised. The balance of
R1 023 867 was said to represent a loan amount comprising
unpaid wages
when Mrs M[…] worked for Mr M[…] as a
bookkeeper in his business as a financial advisor. The explanation
was that
during her employment, he did not pay her an actual salary
but a loan account was created and the amounts owing were credited to
such loan account.
[6]
It was further alleged that the
parties ‘separated’ on 19 July 2009. On 21 July
2009 Mr M[…]’s
application for leave to appeal against
the full court’s order was dismissed by this court. Two days
thereafter, on 23 July
2009, Mrs M[…] issued summons
against Mr M[…], in which she claimed only a decree of
divorce, and no patrimonial
relief or maintenance. On 19 August 2009
they signed a settlement agreement in terms of which Mr M[…]
undertook
to pay maintenance of R100 000 per month to Mrs M[…].
In addition, Mr M[…] undertook to pay for various expenses
on
behalf of Mrs M[…]. It was also recorded that in terms of the
parties’ antenuptial contract, Mr M[…] was
obliged to
transfer certain assets, including an immovable property, to Mrs
M[…]. In clause 4.3 of the Settlement Agreement
it was
recorded that:
‘
In
settlement of [Mrs M[…]’s] claims . . . and in
settlement of the sum of R1 023 867 due and payable in
terms of a loan account held with Moreau and Associates as at
28 February 2008, [Mr M[…]] has liquidated his
pension fund and after all statutory deductions and payment of all
taxes are met, he has agreed to pay over the balance of the proceeds
to [Mrs M[…]].
Lastly, the settlement
agreement provided that Mrs M[…] would retain ownership of two
farms in Mpumalanga.
[7]
The divorce action was finalised on
21 August 2009, when an order was granted for a decree of divorce
incorporating the settlement
agreement referred to above. On 2
November 2009 Mr M[…] resigned as a director of Iprolog, and
Mrs Moreau replaced
him. In May 2010 Lowveld commenced proceedings
for the sequestration of Mr M[…]’s estate. As of August
2010, on Mr
M[…]’s own version, the unsatisfied judgment
debt, interest and costs due to Lowveld amounted to R2 027 587.74.
[8]
During October and November 2010 the
farms purchased by Iprolog, as fully set out in para 3 above, were
sold and a portion of the
net proceeds thereof, R2 160 000,
was used by Iprolog to purchase an immovable property in Edenvale,
Gauteng Province
(the Edenvale property) for cash, in December 2010.
In March 2011 Mr M[…] moved into this property. A month
later,
April 2011, Mrs M[…] joined him on the property.
As at the time when the application was finalised in the court a quo,
the parties lived together on this property. Mr M[…]
explained that this was a purely convenient arrangement because
of
Mrs M[…]’s alleged ill-health. According to him, he
felt morally obliged to care for her, though they lived
in separate
houses on the property. It is common cause that they continued to
occupy this property together, at least until the
judgment was handed
down in the court a quo.
[9]
On 6 June 2011 Mr M[…]’s
estate was provisionally sequestrated, and the final order of
sequestration was granted on
1 August 2011. The respondents were
appointed joint trustees of Mr M[…]’s estate, and in
terms of
s 20(1)(
a
)
of the
Insolvency Act his
estate vested in the respondents as
trustees. During June 2012 Mr M[…] and Mrs M[…]
were interrogated before
a magistrate in terms of
ss 64
and
65
of the
Insolvency Act. Based
on the evidence during the interrogation, the
respondents on 1 March 2013 launched the application to which this
appeal relates,
to have the payments made by Mr M[…] to Mrs
M[…] and to Iprolog, set aside.
[10]
The respondents alleged that there
was collusion between Mr and Mrs M[…] to strip the former of
all his assets and income
to avoid paying his debt to Lowveld. In
particular, the respondents asserted that: Iprolog was ‘the
alter ego and corporate
veil’ of Mrs
M[…]
and Mr M[…] (paras 3.3 and 10.4); (paras 2.4 and 6.11.3);
by making the Trust the sole shareholder of Iprolog
they sought to
distance themselves from the company (para 6.2 ) and ‘create a
further trench which had to be crossed by any
creditor seeking to
gain access’ to Mr M[…]’s pension monies (paras
6.2 and 6.11.4); their ‘separation’
occurred only after
the Full Court upheld Lowveld’s appeal (para 6.4); their
divorce was ‘merely a sham’
and a ‘window-dressing’
as it was instituted a mere two days after the application for
leave to appeal had been
dismissed by this court on 21 July 2009
(para 6.5).
[11]
In the appellants’ answering
affidavit, deposed to by Mr M[…], it was averred that the
payments which the respondents
sought to set aside were pension
monies and that such monies, including the assets purchased
with such monies, were exempt
from attachment by the respondents in
terms of s 37B of the Act. The appellants denied that there was any
disposition of money
from Mr M[…] to Iprolog. Instead, they
said, Mrs M[…] loaned an amount of R5 372 760 to the
Trust (on an
unnamed date in 2009). According to the appellants, on
26 August 2009, the Trust loaned the same amount to Iprolog.
This,
according to the appellants, was proof that no disposition was
made by Mr M[…] to Iprolog, and that Mrs M[…] made
no
loans in 2009 to Iprolog. The loan, they stressed, was made by Mrs
M[…] to the Trust, which in turn, loaned the same
amount to
Iprolog. The evidence before the court a quo included the oral
evidence of Mr M[…] in terms of
s 32(2)
of the
Insolvency
Act
, adduced at the instance of the appellants pursuant to
rule
6(5)(
g
) of
the Uniform Rules of Court.
[12]
The matter came before Holland-Müter
AJ, who considered the provisions of s 37B and reasoned that because
Mr M[…] had
received his pension payout before his estate was
sequestrated, the money no longer enjoyed the protection provided by
s 37B. The
learned judge held that ‘[w]hen receiving the
payment, the monies became
commixtio
with the estate of the now insolvent (although he was not yet
insolvent then)’. The learned judge further found that there
was collusion between Mr and Mrs M[…] to the detriment of Mr
M[…]’s creditors. The learned judge considered,
among
others, the fact that Mrs M[…] and Mr M[…] still
resided together on the same property as a ‘further
indication
of the collusion’ between them to prejudice the former’s
creditors. Accordingly, the court a quo had no
difficulty in setting
aside the dispositions made to Mrs M[…]. The court a quo
concluded that the dispositions fell within
the ambit of
s 31
of the
Insolvency Act. Consequently
, it issued an order:
‘
1.
The payment made by P[…] A[…] L[…] M[…]
(the insolvent) in the amount of R4 639 000 towards
the
first respondent [Mrs M[…]] on or about 15 June 2009,
alternatively the payment of the amount of R3 500 000
towards the second respondent [Iprolog] by or on behalf of the
insolvent is set aside the payment of the difference between the
amount of R3 500 000 and the amount of R4 639 000
made by the insolvent to Mrs M[…] and ordering that
said
amounts shall be repaid forthwith to the applicants
[the respondents].
2. The sale of the
immovable property situated at 89 Main Road, Edenvale, Gauteng and
currently occupied by the first respondent
and the insolvent is
prohibited save in the event of same being sold at a market related
price with the prior knowledge of the
sale thereof to the applicants
in which event the nett proceeds of the such sale shall be paid into
trust at the applicants, pending
the finalization of the repayment of
the amounts referred to in par 1 above.’
[13]
In this court, as in the court a
quo, it was submitted on behalf of the appellants that the pension
pay-out to Mr M[…] was
exempt from attachment in terms
s 37B
,
and that, in any event, the payments to Mrs M[…] could not be
set aside as they were made in compliance with a court order.
With
regard to the
Insolvency Act, it
was submitted that neither of the
provisions of the relevant sections had been established to justify
setting aside the payments.
I deal with these in turn.
[14]
Section 37B
reads as follows:
‘
Disposition
of pension benefits upon insolvency
If the estate of any
person entitled to a benefit payable in terms of the rules of a
registered fund (including an annuity purchased
by the said fund from
an insurer for that person) is sequestrated or surrendered, such
benefit or any part thereof which became
payable after the
commencement of the Financial Institutions Amendment Act, 1976 (Act
No. 101 of 1976), shall. . . .not be deemed
to form part of the
assets in the insolvent estate of that person and may not in any way
be attached or appropriated by the trustee
in his insolvent estate or
by his creditors, notwithstanding anything to the contrary in any law
relating to insolvency.’
[15]
‘
Benefit’
is defined in s 1 of the Act as
‘
any
amount payable to a member or beneficiary in terms of the rules of
that fund’.
[1]
The
reference to ‘payable’, instead of ‘paid’
clearly envisages a sum to which a member of a pension fund
or a
beneficiary is entitled to receive, but has not yet received. So
construed, the amount remains a ‘benefit’ to
the extent
it has not yet been paid to the member or beneficiary. Once the
benefit is paid to him or her, the beneficiary ceases
to be a
‘member’ of the pension fund according to the rules of
the fund,
[2]
and the money ceases to be a ‘benefit’. It loses its
character once in the hands of the beneficiary and ceases to be
a
benefit. The beneficiary may do as they please with it. Such a
beneficiary can thus hardly complain if creditors lay their hands
on
the money to satisfy outstanding debts.
[16]
Thus, all that s 37B entails is
that, while in the hands of a pension fund, the insolvent’s
pension interest cannot be attached
by his or her trustee on the
basis that it forms part of the insolvent’s assets. It protects
only the pension benefit of
a person whose estate is sequestrated,
which Mr M[…]’s estate was not when he received his
pension pay-out. The effect
of a sequestration order is to divest an
insolvent of his or her estate and to vest it in a trustee. Section
37B seeks to establish
an exception to the provisions of s 20(1)(
a
)
of the
Insolvency Act. When
Mr M[…] received the payment, his
estate had not as yet been sequestrated. There was thus no insolvent
estate or trustees
to speak of.
Section 37B
therefore could not find
application when the payment was effected. For that reason, Mr M[…]
could not bring himself
within the exception, and payment could only
have been made into his ‘regular estate’. Having then
disposed of those
monies in the manner in which he did, renders them
susceptible to attack.
This is fortified by
s 23(7)
of the
Insolvency Act which
provides that during the
sequestration, ‘the insolvent may for his own benefit recover
any pension to which he may be entitled.
. .’.
[17]
It follows that if the pension
benefit is received before a beneficiary’s estate is
sequestrated,
s 37B
does not find application. This construction of
s
37B
finds support in cases where similarly worded statutory
provisions have received consideration.
[18]
Jones & Co. v Coventry
[1909] 2 KB 1029
concerned s 141 of the
Army Act of 1881, which prohibited an assignment or charge on a
pension payable to any officer or soldier.
The issue was whether a
garnishee order could attach monies in a bank account into which a
soldier’s pension money was paid.
Darling J held that the money
did not come within the provisions of s 141. He explained:
‘
Pension,
when it has been paid to the person entitled to receive it, ceases
any longer to be pension; it has lost its character
of pension, just
like dividends which, after payment, lose the character of dividends.
It becomes part of the pensioner’s
ordinary money. . . .’
[19]
In
Gibson
v Howard
1918
TPD 185
, s 37 of the Miner’s Phthisis Act 44 of 1916
[3]
was considered. Section 37 provided:
‘
No
amount payable as a benefit under this Act or the prior law shall be
assignable or transferable or be capable of being hypothecated
or
pledged, nor shall any such amount be liable to be attached or
subjected to any form of execution under a judgment or order
of
any court of law.’
[20]
In that matter, the appellant, who
was a judgment debtor of the respondent, received an amount as
compensation from the Miner’s
Phthisis Board under the Phthisis
Act. The respondent obtained a garnishee order on the bank account
into which the money was deposited.
The applicant contended that in
terms of s 37 the amount was not attachable or subject to any form of
execution, as the object
of the Act was to benefit a person suffering
from phthisis, and to prevent creditors from attaching any
compensation paid to him
under the Act.
[21]
The court rejected this
interpretation and held:
‘
Section
37 says “no amount payable” etcetera. There is nothing in
the Act to justify us in saying
that the Legislature meant
that an amount actually paid over shall not be attached. All the
Legislature means is that if money
is awarded to a miner’s
phthisis patient and still in the hands of the Board it cannot be
assigned, ceded or attached
so long as the Board controls
it. When the money is paid over to the patient and
is mixed with his ordinary
money it has no longer any different
character and therefore according to our common law it can be
attached.’
[22]
The reasoning in
Gibson
was followed in
Foit v FirstRand Bank
Bpk
2002 (5) SA 148 (T), where ss
2(1) and 3 of the General Pensions Act 29 of 1979 (the Pensions Act)
were in issue. Section
2(1) provides:
‘
No
annuity or benefit or right in respect of an annuity or benefit
payable under a pension law shall be capable of being assigned
or
transferred or otherwise ceded or of being pledged or hypothecated
or, save as is provided in section 11(2) of the Maintenance
Act, 1963
(Act No. 23 of 1963), be liable to be attached or subjected to any
form of execution under a judgment or order of a court
of law.’
In
turn, s 3 provides that ‘[t]he annuity received under any
pension law by any person whose estate is sequestrated, shall
not
form part of the assets in his insolvent estate’.
[23]
As in this case, it was contended in
Foit
that
the relevant sections had to be interpreted to mean that ‘pension
benefits’ did not form part of the assets in
the insolvent
estate of the applicant and her husband. D Basson J was unpersuaded,
and pointed out (at 153H) that the meaning of
s 3 was that a ‘benefit
received under any pension law’ indicated a benefit, ie an
amount of money received in terms
of a pensions law, in terms of
which the beneficiary had a right of action against the pension fund
to receive the money. When
the amount was paid out by the pension
fund, the benefit was ‘received’ as provided in s 3 of
the Act. Accordingly,
the learned Judge held that the pension
benefit paid out and received on 25 January 2000 became
part of the assets
of the estate of the applicant and her husband.
[24]
Section
37A(1), which was raised in argument, does not assist the appellants,
either. It protects any benefit or right to any benefit
provided for
in the rules of a registered pension fund payable to a member of such
fund, against any reduction, transfer, cession,
pledge,
hypothecation, attachment or judicial execution.
[4]
I have already pointed to the definition of ‘benefit’
above. With regard to s 37A(1) the key is the definition of ‘member’
in s 1 of the Act, which is defined in relation to two categories of
pension fund organisations.
[5]
In the first category, it means ‘any member or former member of
the association by which such fund has been established’,
while
in the second category,
[6]
‘member’ means ‘a person who belongs or belonged to
a class of persons for whose benefit that fund has been established’.
Significantly, in respect of both categories, the definition excludes
‘
any
person who has received all the benefits which may be due to that
person from the fund and whose membership has thereafter been
terminated in accordance with the rules of the fund
’
(Emphasis added.)
Although
s 37B refers to ‘any person entitled to a benefit’ as
opposed to a ‘member’, the difference in
the terminology
does not appear to be of any significance. Both must be taken to mean
a beneficiary of a pension benefit. Thus
the definition of ‘member’
applies with equal force to any construction of s 37B.
It
follows that Mr M[…] is excluded from protection under s 37B
of the Act by this definition, as he had ‘received
all the
benefits’ and his membership of the provident fund had been
terminated thereby.
[25]
To conclude on this aspect, I am
constrained to comment on the appellants’ reliance on certain
remarks made by Rogers J in
respect of the protection provisions of s
37A(1) in
Van Heerden and Another v NDPP
and Another
[2015] ZAWCHC 96.
The
learned Judge remarked that since these were meant for the protection
of pension fund members and their dependants, ‘it
is legitimate
to ask what the point would be of shielding from execution a member’s
right to receive payment of a benefit
but not the benefit once
received’. Later (at para 45) the learned Judge remarked that
‘[t]he restrictive interpretation
of “benefit”
seems to render the protection afforded by the section largely
hollow’. In this case, the appellants
placed strong reliance on
these remarks for their submission that the protection of s 37B
extends to the pension benefit after
it is paid out.
[26]
These remarks should be seen in
their proper context. First, they are not an authoritative
pronouncement on the question whether
the provisions of s 37A(1)
extends beyond payment of the pension benefit, as that issue did not
directly arise in that case, and
did not need to be decided – a
fact acknowledged by the learned Judge (at para 42). Second, the
learned Judge acknowledged
(at para 41) the difficulties which would
arise if one construed the word ‘benefit’ in s 37A(1)
as meaning the
money paid to the member or dependant as distinct from
such person’s right to receive payment thereof at a future
date. These
included the fact that a beneficiary could possibly be
subject to the prohibition of s 37A(1) and be precluded from freely
dealing
with the money in that he would not be permitted to cede,
pledge, hypothecate or transfer it.
[27]
In
Van
Aartsen v Van Aartsen
2006 (4) SA 131
(T) para 23, De Vos J remarked obiter in relation to s 37A(1) that
‘it could also be argued that once [the beneficiary]
had
received his pension payout, it was no longer a pension benefit as
intended in the Act, but rather a sum of money, that is,
a movable
thing and not a legal right or claim’. It was suggested in
Van
Heerden
(at paras 38 and 42) that
Foit
and
Van Aartse
were wrongly decided. The correctness of those decisions was endorsed
by this court in
Sentinel Retirement
Fund and Another v Masoanganye and Others
[2018]
ZASCA 126
para 16. The appellants’
reliance on
Van Heerden
is thus misplaced.
[28]
I
turn now to the provisions of the
Insolvency Act with
regard to the
setting aside of dispositions. This may be done in terms of either of
s 26
(as dispositions without value),
[7]
s 29
(as voidable preferences)
[8]
or
s 31
(as collusive dealings before sequestration). The court a
quo, correctly in my view, identified
s 31
to be the applicable
section on the facts of this case.
Section 31
reads as follows:
‘
Collusive
dealings before sequestration
(1)
After the sequestration of a debtor’s
estate the court may set aside any transaction entered
into by the debtor before
sequestration, whereby he, in collusion with another person, disposed
of property belonging to him in
a manner which had the effect of
prejudicing his creditors or of preferring one of his creditors above
another.
(2)
Any person who was a party to such
collusive disposition shall be liable to make good any
loss
caused to the insolvent’s estate in question and shall pay for
the benefit of the estate, by way of penalty, such sum
as the court
may adjudge, not exceeding the amount by which he would have
benefitted by such dealing if it had not been set aside;
and if he is
a creditor he shall also forfeit his claim against the estate.
(3) Such compensation and
penalty may be recovered in any action to set aside the transaction
in question.’
In terms of
s 32(1)(
a
)
proceedings for the recovery of compensation or penalty under
s 31
may be taken by a trustee.
[29]
It was submitted on behalf of the
appellants that absent an application to impugn the decree of
divorce, the payments made in terms
thereof cannot be set aside. A
similar contention was correctly rejected in
Sackstein
en Venter NNO v Greyling
1990 (2) SA
323
(O) at 327D-E. The appellants also relied on the exclusionary
clause in the definition of ‘disposition’ in
s 2
of the
Insolvency Act for
the contention that the payments cannot be set
aside. The definition of ‘disposition’ in
s 2
is as
follows:
‘
Disposition
means any transfer or abandonment of rights to property and includes
a sale, lease, mortgage, pledge, delivery, payment,
release,
compromise, donation or any contract therefor,
but
does not include disposition in compliance with an order of the
court
; and “dispose” has a
corresponding meaning.’
(Emphasis
added.)
[30]
It brooks no debate that the
payments made by Mr M[…] to Mrs M[…] constitute
‘dispositions’ within the
meaning of the
Insolvency Act.
As
I have already stated, there were two of those. The first was for
R3 500 000 into an attorney’s trust account for
the
credit of Iprolog on 23 June 2009 and used towards the purchase of
property in Iprolog’s name. The second payment was
made shortly
after the divorce decree was finalised. It was submitted that despite
the payment date for the R3 500 000 being
June 2009, the money
only accrued to Mrs M[…] on 26 August 2009, after the decree
of divorce was granted and the property
had been transferred into
Iprolog’s name. Thus, it was said that Mrs
M[…]
was only ‘paid’ after the
divorce order was granted, and ‘in terms’ thereof.
[31]
This submission has merely to be
stated, to be rejected. It was contrived to bring the disposition
within the ambit of the exclusionary
provisions of the definition of
‘disposition’ in
s 2
of the
Insolvency Act referred
to
above. As I have said, the disposition was to Iprolog and occurred on
23 June 2009 when the money was paid into the attorney’s
trust
account. That Iprolog was only free to use it later is irrelevant.
The exclusionary provisions of
s 2
did not apply to this payment, and
it was accordingly susceptible to being set aside in terms of one or
other of the three sections
of the
Insolvency Act referred
to above.
The payment of R1 023 867 stands on a different footing, as
it was made after the divorce decree was granted
on 21 August 2009,
thus notionally protected by the exclusionary provisions of
s 2.
However, those provisions do not serve as an absolute bar.
[32]
In
Dabelstein and Others v Lane and
Fey NNO
[2000] ZASCA 156
;
2001 (1) SA 1222
(SCA) (at para
7) this court recognised that in certain instances, a disposition
made in terms of a court order may be set aside.
It was pointed out
that where that is sought to be done, it is not sufficient merely to
bring the disposition within the ambit
of one or more of the relevant
provisions of the
Insolvency Act, as
was done in
Sackstein.
Hefer ADCJ
explained,
with reference to
Swadif
(Pty) Ltd v
Dyké NO
1978 (1) SA 928
(A);
[1978] 2 All SA 121
(A)
at
938B-939H),
that under those circumstances,
additional allegations have to be made in order to nullify the effect
of the exclusion in
s 2.
If either fraud, collusion or any other
reprehensible conduct is relied upon, it must be alleged.
[33]
In this case, the respondents’
founding affidavit is replete with allegations of collusion between
Mr and Mrs M[…].
I have referred to some of those allegations
in para 10 above. In fact, the entire premise of the respondents’
case rests
on the existence of such collusion. In my view, the
respondents’ assertions are credible. From the papers filed in
the court
a quo and the record of the oral evidence, it is clear that
there was a carefully designed plan by Mr M[…] to keep the
pension
money from his creditor, Lowveld. Mrs M[…] and Iprolog
were very much part of that plan.
[34]
This commenced in April 2009 when
Iprolog was incorporated. Both served as directors of Iprolog, albeit
at different times. This
was followed by both becoming trustees of
the Trust in May 2009. The Trust became the sole shareholder of
Iprolog. After payment
of R3 500 000 was made into the
attorney’s trust account, the money was used by Iprolog to
acquire two farms in
Kwa-Zulu Natal. When those farms were sold, part
of the profit was used to enable Iprolog to purchase the Edenvale
property, which
Mr and Mrs M[…] continue to jointly
occupy.
[35]
Furthermore, the divorce between the
parties was undoubtedly a sham. Their continued co-habitation at the
Edenvale property serves,
among others, as proof of that. Their
explanation for this is unconvincing. Mrs M[…] is the one who
instituted the divorce,
significantly, a mere two days after Mr
M[…]’s application for leave to appeal was dismissed by
this court. She took
an active part in the settlement agreement,
which resulted in her receiving virtually all of Mr M[…]’s
assets and
money. Given all these, the conclusion is inescapable that
there was collusion between Mr M[…] and Mrs M[…] in
respect
of the disposition of the former’s pension money. Mr
M[…]’s receipt – and almost immediate disposal -
of his pension in the manner described herein, had the effect of his
liabilities exceeding his assets.
[36]
In sum, I find that neither of the
protective provisions in ss 37B or 37A of the Act apply to Mr M[…]’s
pension once
paid to him. The dispositions by him became susceptible
to being set aside pursuant to the provisions of
s 31
of the
Insolvency Act, which
, in my view, have been met: Mr Moreau made a
disposition of his money to Mrs M[…] in collusion with the
latter, which had
the effect of prejudicing Mr M[…]’s
creditor (Lowveld). The prejudice is self evident. Iprolog was
not a creditor
of Mr M[…] and even if one accepts for present
purposes the appellants’ contention that Mrs M[…] was
also Mr M[…]’s
creditor, the disposition had the
effect of preferring her above Lowveld.
[37]
The dispositions were correctly set
aside by the court a quo. The appeal falls to fail. The learned judge
set aside the payment
of the whole amount of R4 639 000 to
Mrs M[…], alternatively the R3 500 000 to Iprolog,
further alternatively,
the difference between the R4 639 000
and R3 500 000 paid to Mrs M[…]. This needs to
be clarified.
Both the main and alternative orders cannot, as framed
by the learned Judge, stand. It is clear that R3 500 000
was paid
on 23 June 2009 into the trust account of
Venn
Nemeth & Hart Attorneys,
which
was then transferred to Iprolog, Mrs M[…] retained the balance
of R1 023 867, which became available to her
on or about 21
August 2009.
[38]
In the result the following order is
made:
1 Save
to the extent reflected in the paragraph below, the appeal is
dismissed with costs, such costs to be paid
by the appellants jointly
and severally, the one paying the others to be absolved;
2
Paragraph 1 of the order of the court a quo is substituted with the
following:
‘
1
The payments made by the insolvent, Mr P[…] A[…] L[…]
M[…], to or for the benefit respectively
of the first
respondent, V[…] I[…] M[…], in the sum
R1 023
867 and the second
respondent, Iprolog (Pty) Ltd, in the sum of R3 500 000,
are set aside and the respondents are ordered
to repay those monies
forthwith to the applicants.
____________________
T M
Makgoka
Judge
of Appeal
APPEARANCES:
For
Appellants:
J Marks
c/o
June Stacey Mark Attorneys, Johannesburg
Claude
Reid Attorneys, Bloemfontein
For Respondents:
T A L L Potgieter SC
Instructed
by:
Pieter
Swanepoel Attorneys, Mbombela
McIntyre
Van der Post, Bloemfontein
[1]
‘
Benefit’
was inserted to the Act as a defined term in 2007 by s 1(
c
)
of Act 11 of 2007.
[2]
Compare
Absa
Bank Ltd v Burmeister and Others
2004 (5) SA 595
(SCA);
[2005] 3 All SA 409
(SCA) para 9 where the
court considered s 37D(1)(
b
)
of the Act.
[3]
This
was in response to a p
ulmonary
tuberculosis called
phthisis
which affected mine workers in the Witwatersrand area, Johannesburg,
in the early 1900s.
[4]
In
its redacted form, s 37A(1) reads as follows:
‘
(1)
Save to the extent permitted by this Act, the Income Tax Act, 1962
(Act 58 of 1962), and the
Maintenance Act, 1998
, no benefit provided
for in the rules of a registered fund . . . be capable of being
reduced, transferred or otherwise ceded,
or of being pledged or
hypothecated, or be liable to be attached or subjected to any form
of execution under a judgment or order
of a court of law, . . . and
in the event of the member or beneficiary concerned attempting to
[do so] the fund concerned may
withhold or suspend payment thereof.
. . .’
[5]
Pension
fund organisation in turn is defined as follows:
‘
(
a
)
[a]ny association of persons established with the object of
providing annuities or lump sum payments for members or former
members of such association upon their reaching retirement dates, or
for the dependants of such members or former members upon
the death
of such members; or
……
..
(c)
any association of
persons or business carried on under a scheme or arrangement
established with the object of receiving, administering,
investing
and paying benefits that became payable in terms of the employment
of a member on behalf of beneficiaries, payable
on the death of more
than one member of one or more pension funds, and includes any such
association or business which in addition
to carrying on business in
connection with any of the objects specified in paragraph (
a
),
(
b
)
or (
c
)
also carries on business in connection with any of the objects for
which a friendly society may be established, as specified
in section
2 of the Friendly Societies Act, 1956, or which is or may become
liable for the payment of any benefits provided for
in its rules,
whether or not it continues to admit, or collect contributions from
or on behalf, of members.
[6]
(
b
)
any business carried on under a scheme or arrangement established
with the object of providing annuities or lump sum payments
for
persons who belong or belonged to the class of persons for whose
benefit that scheme or arrangement has been established,
when they
reach their retirement dates or for dependants of such persons upon
the death of those persons.’
[7]
‘
(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. . . .’
[8]
‘
(1)
Every disposition of his property made by a debtor not more than six
months before the sequestration of his estate or, if
he is deceased
and his estate is insolvent, before his death, which has had the
effect of preferring one of this creditors above
another, may be set
aside by the Court if immediately after the making of such
disposition the liabilities of the debtor exceeded
the value of his
assets, unless the person in whose favour the disposition was made
proves that the disposition was made in the
ordinary course of
business and that it was not intended thereby to prefer one creditor
above another. . . .’