South Africa: SCA Sets Aside Dispositions Resulting In Creditors Getting 70c In The Rand

Last Updated: 15 April 2014
Article by Claire Morgan and Brigette Jamieson

Most Read Contributor in South Africa, November 2017

On 28 March 2014, the Supreme Court of Appeal (SCA) handed down judgment in Gavin Cecil Gainsford N.O. & others v Tanzer Transport (Pty) Ltd & others (Tanzer). The liquidators of Costa Logistics SA (Pty) Ltd ("the company") were the appellants. Tanzer was the respondent. The ENSafrica insolvency team acted for the liquidators.

The judgment is important because Tanzer raised a number of technical points to avoid liability, and, in the court of first instance, succeeded in having the matter dismissed on such a technicality. The SCA not only overturned this technicality, but ruled against every other technicality raised by Tanzer. In so doing, the ENSafrica insolvency team respectfully submits that the judgment is one of a number of judgments handed down by the SCA recently that are robust and commercial, and prevent the likes of Tanzer, who received unlawful payments from the company, from evading liability.

There were two applications in the South Gauteng High Court (the court of first instance):

  • in the first application, the liquidators applied for an order declaring certain payments void in terms of section 341(2) of the Companies Act, no. 61 of 1973. The payments, exceeding R14 million, were made to Tanzer by the company after its liquidation. Section 341(2) provides that "every disposition of its property ... by any company being wound up and unable to pay its debts made after the commencement of the winding-up, shall be void unless the Court otherwise orders";
  • in the second counter-application, Tanzer applied for an order setting aside the liquidation of the company.

In the court of first instance, the judge dismissed the first application on the technicality (raised by Tanzer) that the liquidators lacked locus standi, because they had sued in their representative capacities on behalf of the company, rather than in the name of the company itself. The judge simultaneously referred the second application to trial. Both orders were appealed.

In handing down judgment, the SCA dealt with a number of issues relating to the authority of liquidators to sue and the voidable disposition section, s341(2) of the Companies Act.

Section 386(4)(a) of the Companies Act provides that liquidators must bring or defend proceedings "in the name and on behalf of the company."

Tanzer relied on Fey N.O. & another v Lala Govan Exporters (Pty) Ltd 2011 (6) SA 181 (W). In that matter, the judge held that section 386(4)(a) required liquidators to sue in the name of the company, rather than in their own names nomine officio (i.e. by virtue of their official capacities as liquidators). The judge reasoned that the distinction was evident from other provisions in the Companies Act which enabled a liquidator to act in his or her own name.

There is another line of authority in Shepstone & Wylie & others v Geyser N.O. 1998 (1) SA 354 (N), which recognises that, in practice, liquidators often sue in their own names with the letters N.O. (nomine officio) appended, that is, in their representative capacities, as the liquidators had done in this matter.

The SCA held that the distinction between the two forms was "without a difference", "pedantic or illusory. To disqualify liquidators properly appointed from acting on behalf of a company in liquidation would truly be elevating form above substance."

Tanzer raised two more preliminary points.

At the second meeting of creditors of the company, a resolution had been adopted authorising the liquidators "to collect any outstanding debts due to the company." The liquidators relied on this resolution as their authority to sue. However, in case the resolution was not wide enough, they also applied to the court for leave to sue. Tanzer seized on this uncertainty and argued that the resolution was not wide enough, because it made no reference to voidable dispositions.

The SCA disagreed. It held that the resolution was wide enough to include any debt owed to the company, including by virtue of voidable dispositions.

The final preliminary point raised by Tanzer was that the liquidators ought to have proceeded by way of trial action, rather than on application. Tanzer argued that the liquidators should have foreseen that material disputes of fact, not capable of determination on application papers, would arise. The material dispute of fact in question, according to Tanzer, was whether the company was indeed insolvent at the time of its liquidation.

The ENSafrica insolvency team had advised the liquidators to proceed on application – rather than by way of a trial – to save costs. In the team's view, the insolvency of the company could be set out on the papers, with reference to the company's financial statements and a report prepared by KPMG showing that the company had net liabilities of R50 million.

The SCA held that the "evidence [on the papers] demonstrated that at the time the company was liquidated, it was factually insolvent and manifestly unable to pay its debts."

Having thus disposed of Tanzer's preliminary points, the SCA turned to deal with the merits of the first application.

Tanzer contended that the payment to it of R14 million after the company's liquidation was not void, because Tanzer had allegedly been paid "bona fide in the ordinary course of business". According to Tanzer, the company's staff had paid it in ignorance of the company's liquidation.

The SCA was unimpressed with this argument. It held that: "There is ... no acceptable basis provided by Tanzer for justifying a departure from the well-established rule of law which prohibits any disposition by the company after ... its winding-up. Ordinarily a court will consider whether fairness and justice require the rule to be disregarded. No such considerations were disclosed ... On the contrary, the evidence demonstrates that the exercise of a discretion in favour of validity would result in extreme and irreparable prejudice to the creditors of the company."

Having thus dealt with the first application, the SCA turned to the second application for the setting aside of the liquidation of the company. Tanzer argued two points:

  • The company was solvent when it was liquidated – this point was disposed of as above;
  • The liquidation of the company was tainted by fraud, in that the company had paid R4.5 million to its holding company, which payment preferred the holding company above the company's other creditors.

The liquidators had already sued the holding company to recover the R4.5 million. The company itself had no staff or operations, and was "less than a shell".

The SCA held: "... one can rightly ask what would the purpose be of setting aside the liquidation, other than preserving the undue preference that Tanzer enjoyed? The interest of the creditors of the company dictates that the company should remain in liquidation and that the unlawful payments made to Tanzer should be repaid into the estate to be distributed by the liquidators amongst the proven creditors of the company in accordance with the laws of insolvency."

The appeal was thus dismissed. Tanzer was ordered to repay the R14 million it had received after the company's liquidation.

The company has four proved creditors. The major creditor is Pick 'n Pay, whose claim exceeds R14 million. Three other creditors have claims totalling about R1 million. Following this judgment, on repayment by Tanzer, Pick 'n Pay and the other creditors will receive an estimated dividend of at least 70c in the Rand.

*The above article refers to provisions in the previous Companies Act, no. 61 of 1973. All these provisions remain in force in terms of item 9 of Schedule 5 to the Companies Act, no. 71 of 2008.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions