Judicial Precedent

Mackay v Fey NO and Another

CitationNot expressly stated in the judgment text; the official law report citation is not provided in the extract and cannot be determined with certainty from the text alone.

JurisdictionZA

Area of Law

Insolvency LawLaw of ContractProperty Law

Facts of the Case

The respondents were the joint trustees of the insolvent estate of Jurgen Harksen. The appellant purchased an expensive property in Clifton and, in February 2001, entered into a written lease which reflected Mrs Jeannette Harksen (the insolvent’s wife) as lessee. The lease was for ten months at a rental of R25 000 per month plus expenses, and substantial payments were made to the appellant. The trustees later sued the appellant for repayment, alleging that the true lessee was the insolvent himself, that the lease in Mrs Harksen’s name was simulated, and that the insolvent had paid the rental without the trustees’ knowledge or consent. The High Court found the transaction to be simulated and held the lease voidable at the instance of the trustees under s 23(2) of the Insolvency Act.

Judicial Outcome

The appeal was dismissed and the order of the court a quo upheld, with the result that the trustees were entitled to repayment of the rental received by the appellant.

Legal Significance

The case is important for its authoritative discussion of simulated transactions in South African law and for clarifying the operation of s 23(2) of the Insolvency Act, particularly that contracts entered into by an insolvent are not void but voidable, and for its analysis of the remedial consequences of avoidance.