Consolidated News Agencies (Pty) Ltd (in liquidation) v Mobile Telephone Networks (Pty) Ltd and Another

Consolidated News Agencies (CNA), part of the Wooltru group, entered into an exclusive Retailer Agreement (RA) with MTN Service Provider (M‑Tel), supported by Mobile Telephone Networks (MTN), under which CNA would market MTN products and receive guaranteed minimum income. CNA was later sold to a poorly capitalised purchaser (GKA). Anticipating that CNA would not meet income targets, and to facilitate the sale, the parties concluded an Amended Retailer Agreement (ARA). Under the ARA CNA waived certain income warranties, undertook to pay income into a trust account, ceded rights to MTN, and undertook to reimburse MTN for guarantees MTN issued to Wooltru. MTN paid approximately R86 million under these guarantees. CNA was provisionally wound up shortly thereafter. The liquidators sought to set aside several provisions of the ARA as voidable dispositions not for value under s 26 of the Insolvency Act. MTN and M‑Tel relied on s 33(1) of the Insolvency Act, contending they acted in good faith and were entitled to indemnification before any restoration.

The appeal was dismissed with costs, including the costs of two counsel. The respondents were entitled to rely on the indemnity provided by s 33(1) of the Insolvency Act.

The case is an important authority on the interpretation and application of s 33(1) of the Insolvency Act, particularly the meaning of 'good faith' and 'in return for any disposition'. It clarifies how courts determine a company’s state of mind through the doctrine of the directing mind and will, and underscores the role of objective commercial probabilities in assessing contemplation of insolvency.