Strydom N.O. and Another v Snowball Wealth (Pty) Ltd and Others

DexGroup (Pty) Ltd, later placed in final liquidation in October 2016, had sold shares in Trustco Group Holdings Ltd to the respondents during 2010. At all material times DexGroup was allegedly factually insolvent, with liabilities exceeding assets. The joint liquidators alleged that the shares were sold at prices (27c and 48c per share) substantially below their reasonable market value of 67c per share. On this basis, the liquidators claimed that the dispositions constituted dispositions 'not made for value' under s 26(1) of the Insolvency Act 24 of 1936 and sought return of the shares or their value. The respondents excepted to the particulars of claim, arguing that the shares were sold for value, albeit at a discount, and therefore s 26(1) was not applicable.

The appeal was dismissed with costs, including the costs of two counsel where employed.

The judgment clarifies an important point in South African insolvency law by definitively confirming that s 26(1) of the Insolvency Act applies only to gratuitous dispositions made for no value at all, and not to dispositions for inadequate or discounted value. It limits the scope of s 26(1) and preserves commercial certainty in arm’s-length transactions involving insolvent entities.