H Dabelstein & 12 Others v M Lane & E Fey NNO

Jürgen Harksen's estate was sequestrated by order of the Cape Provincial Division. Prior to sequestration, Harksen made two payments to the Dabelsteins (thirteen foreign creditors) pursuant to court orders granted in terms of settlement agreements: DM 3.5 million on 31 March 1994 and DM 500,000 in August 1995. Three German creditors (the applicants) sought to attach the Dabelsteins' South African assets ad fundandam vel confirmandam jurisdictionem with a view to instituting an action in the name of the provisional trustees to set aside these payments as impeachable dispositions under sections 26, 29, or 30 of the Insolvency Act 24 of 1936. The applicants alleged that Harksen was insolvent at the time of the payments, that the payments were intended to prefer the Dabelsteins above other creditors, and that the parties lacked bona fides. Van Zyl J in the Cape High Court confirmed a rule nisi authorizing the attachment. The Dabelsteins appealed.

• Whether the court a quo's order was appealable given section 150(4) of the Insolvency Act which prohibits appeals against orders made in terms of the Act
• Whether a disposition made in compliance with a court order falls within the exclusion in section 2 of the Insolvency Act
• Whether the applicants had established a prima facie case for setting aside the dispositions despite them being made pursuant to court orders
• What additional allegations are required to nullify the exclusion in section 2 for dispositions made in compliance with court orders
• Whether fraud, collusion or other improper conduct must be specifically alleged to overcome the section 2 exclusion

The appeal was upheld with costs, including costs of two counsel and costs occasioned by the application to adduce further evidence. The order of the court a quo was set aside and replaced with an order discharging the rule nisi with costs including costs of two counsel.

A disposition made in compliance with a court order (including a consent order) falls within the exclusion in section 2 of the Insolvency Act and cannot be set aside under sections 26, 29, or 30 unless fraud, collusion, or other forms of improper conduct are specifically alleged and established. It is insufficient merely to bring the disposition within the ambit of sections 26, 29 or 30; additional allegations nullifying the effect of the section 2 exclusion must be made. To establish a prima facie case for attachment ad fundandam vel confirmandam jurisdictionem in such circumstances, an applicant must make all allegations in the founding affidavit that will sustain a cause of action, including specific allegations of the improper conduct relied upon to overcome the section 2 exclusion.

The court noted that the time may come to reconsider the dicta in Simon NO v Air Operations of Europe AB regarding the requirements for establishing a prima facie case in attachment applications, suggesting that allegations in a respondent's opposing affidavit which the applicant cannot contradict should weigh in the assessment of evidence. The court also observed that while converting agreements into court orders might open the door to abuse in some circumstances (citing Muller v John Thompson Africa), not all consent orders should be treated as suspect. The court expressly refrained from deciding the precise grounds upon which dispositions in compliance with court orders may be set aside, accepting arguendo that fraud, collusion or perhaps other kinds of reprehensible conduct might suffice. The court's failure to address other rulings in the court a quo (regarding section 18(3) leave requirements and timing of section 32(1)(b) proceedings) should not be taken as agreement with those rulings.

This case is significant in South African insolvency law as it clarifies the requirements for setting aside dispositions that were made in compliance with court orders. It establishes that the exclusion in section 2 of the Insolvency Act for 'dispositions in compliance with an order of the court' applies even to consent orders, and that specific allegations of fraud, collusion or other improper conduct must be made to overcome this exclusion. The case also provides guidance on what constitutes a prima facie case in applications for attachment ad fundandam vel confirmandam jurisdictionem, emphasizing that applicants must make all necessary allegations to sustain their cause of action, not merely allegations bringing the disposition within sections 26, 29 or 30 of the Insolvency Act. It reinforces that attachment is an extraordinary remedy to be applied with care and caution.