Constantia Insurance Company Limited v The Master of the High Court, Johannesburg and Others

Constantia Insurance Company Limited provided performance guarantees to third parties in respect of contractual obligations of operating companies within the Protech Khuthele group. In return, all group companies, including Protech Khuthele Property Investments (Pty) Ltd (in liquidation), executed a deed of indemnity in favour of Constantia. After Protech Investments was liquidated, Constantia proved claims of approximately R182 million based on this indemnity. The joint liquidators disputed the claims and reported to the Master that the indemnity constituted unlawful financial assistance under s 45 of the Companies Act 71 of 2008, as there was no board resolution or compliance with statutory requirements. The Master expunged the claims. Constantia unsuccessfully reviewed this decision in the High Court and appealed to the Supreme Court of Appeal.

The appeal was dismissed with costs, including the costs of two counsel; the expungement of Constantia’s claims was upheld.

The judgment clarifies the test the Master must apply when expunging claims under s 45(3) of the Insolvency Act, requiring a sufficient ground rather than mere suspicion. It authoritatively interprets s 45 of the Companies Act by holding that the statutory definition of 'financial assistance' is exhaustive, that indirect assistance is included, and that compliance with s 45 involves substantive board decisions. The case underscores the strict consequences of non-compliance with s 45 and limits the protective scope of s 20(7).