Duet and Magnum Financial Services CC (in liquidation) v Koster

Duet and Magnum Financial Services CC, a micro-lending close corporation, was wound up on 17 May 2001 and liquidators were appointed on 18 July 2001. In July 2005 the liquidators issued summons against Mr Koster, alleging that the close corporation had made certain impeachable dispositions to him prior to liquidation, falling within ss 26, 29 or 30 of the Insolvency Act 24 of 1936. They sought orders setting aside the dispositions and declaring Koster liable to repay the amounts received. Koster raised a special plea of prescription, contending that the liquidators’ claims constituted ‘debts’ that had prescribed under the Prescription Act 68 of 1969. The High Court upheld the plea, holding that prescription applied, and the liquidators appealed to the Supreme Court of Appeal.

The appeal was dismissed with costs, and the High Court’s order upholding the special plea of prescription was confirmed.

The case authoritatively clarifies that liquidators’ statutory avoidance claims under the Insolvency Act are subject to extinctive prescription. It resolves conflicting High Court authority, overrules Barnard and Lynn NNO v Schoeman, and aligns South African law with comparative jurisprudence by confirming that statutory remedies creating debts by court declaration nonetheless constitute ‘debts’ susceptible to prescription.