Zwarts v Janse van Rensburg NO and Others

The joint liquidators of MP Finance Group CC (in liquidation), which formed part of the so‑called Krion pyramid scheme, sued Mr Daniel Joseph Zwarts to set aside payments made to him as an undue preference under s 29 of the Insolvency Act 24 of 1936 and to recover R266 425 plus interest. Zwarts had invested substantial sums in various entities associated with the Krion Scheme and received ‘dividends’ shortly before liquidation. He defended the action on the basis that he had contracted personally with Ms Marietjie Prinsloo, the mastermind behind the scheme, and not with the corporate entities that were later consolidated in liquidation. The Free State High Court found against Zwarts and ordered repayment. He appealed to the Supreme Court of Appeal.

The appeal was dismissed with costs.

The case forms part of a line of Supreme Court of Appeal decisions arising from the Krion pyramid scheme liquidations. It confirms the approach of looking at the economic and factual substance of pyramid scheme operations, rather than formalistic distinctions, when identifying the debtor for purposes of voidable dispositions. It also reinforces the ability of liquidators of a consolidated estate to recover payments made to investors shortly before liquidation.