South African Reserve Bank v Leathern N O and Others

In June 2017 the South African Reserve Bank (SARB) issued a blocking order under Regulations 22A and/or 22C of the Exchange Control Regulations against two bank accounts held by Mr Ahmed Dawood Bhorat at Grobank Limited, suspecting that the accounts were used as conduits for illicit foreign exchange transfers. Five days later Mr Bhorat’s estate was provisionally sequestrated at the instance of SARS. The trustees of his insolvent estate claimed that, by virtue of s 20(2)(a) of the Insolvency Act, the funds standing to the credit of the blocked accounts vested in the insolvent estate and should be paid over to them. SARB refused, maintaining that the funds did not belong to Mr Bhorat and that the blocking order remained valid. The trustees successfully obtained a declaratory order in the High Court that the funds vested in the insolvent estate and that the blocking order be lifted. SARB appealed to the Supreme Court of Appeal.

The appeal was upheld with costs, including the costs of two counsel. The High Court’s order was set aside and replaced with an order dismissing the trustees’ application with costs.

The case clarifies the interaction between insolvency law and exchange control measures, confirming that funds subject to a valid exchange control blocking order do not automatically vest in an insolvent estate. It reaffirms the low threshold of ‘reasonable suspicion’ required for blocking orders and emphasises that ownership or entitlement to funds in a bank account depends on the underlying legal relationship, not merely on the name of the account holder.