Van Rooyen NO and Another v Mokwena NO and Another

The appellants, joint liquidators of Tumi Mokwena Incorporated (TMI), an insolvent firm of legal practitioners, applied for the sequestration of the Dikwenanyana Trust and to pierce the trust veneer. TMI was owed R7,497,069 by the Trust. The Trust was funded entirely by TMI through funds misappropriated from TMI's trust and business accounts by Mr Tumi Mokwena, totaling R3,544,601.88, with a trust account shortfall exceeding R16 million. Mr Mokwena was sequestrated due to insolvency and acts of insolvency. The Trust admitted receiving payments from TMI but provided no valid reasons. The high court dismissed the sequestration application. After leave to appeal was granted, the parties entered into a settlement agreement on 29 October 2024, where the Trust acknowledged receiving the funds and agreed to repay them. The settlement agreement contained a clause providing that if the Trust breached the agreement, the full amount would become due and the appellants could proceed with the appeal unopposed. The Trust failed to comply with the settlement agreement and did not respond to demands for compliance.

• Whether the requirements for a provisional sequestration order under section 10 of the Insolvency Act 24 of 1936 were satisfied
• Whether the trust veneer should be pierced given the abuse of the trust form to conceal assets misappropriated from TMI
• Whether the appellate court could grant a provisional sequestration order and rule nisi on appeal
• The effect of the settlement agreement clause allowing the appeal to proceed unopposed upon breach

The appeal was upheld. The order of the Limpopo Division of the High Court, Polokwane was set aside and replaced with: (a) a provisional sequestration order returnable on 18 March 2026; (b) publication in the Government Gazette and Citizen Newspaper; (c) service on the Trust, Master of the high court and SARS; (d) a rule nisi for piercing the trust veneer with assets to vest jointly in the Trust, the insolvent estate of Mr Mokwena, and TMI, to satisfy their debts; (e) the rule nisi returnable on 18 March 2026; (f) notification to all known creditors; (g) costs of the application to be costs in the administration of the Trust; and (h) costs of the appeal, including costs of two counsel on scale C and B respectively, to be costs in the administration of the Trust.

Where a prima facie case is established under section 10 of the Insolvency Act 24 of 1936 that: (a) the petitioning creditor has a valid claim; (b) the debtor has committed an act of insolvency or is insolvent; and (c) sequestration will be to the advantage of creditors, a court may grant a provisional sequestration order. An appellate court is empowered to issue a provisional sequestration order with a return date on appeal where the requirements are satisfied. A trust veneer may be pierced where a trust has been abused as a fraudulent vehicle to conceal assets misappropriated from creditors and to protect those assets from legitimate claims. A settlement agreement clause providing that a party may proceed with an appeal unopposed upon breach of the agreement is enforceable.

The Court observed that the abuse of the trust form in this case was aimed at achieving the exact result that materialized: TMI was liquidated for being unable to pay its debts, Mr Mokwena was sequestrated, but if the assets remained within the Trust, the property purchased with funds unlawfully misappropriated would be protected from their creditors because of the trust form. The Court noted that the Trust's defence—that Mr Mokwena was entitled as a director of TMI to utilize TMI's funds, including trust money belonging to defrauded trust creditors, for whatever purpose he wished—was concerning. The Court emphasized that an enquiry under the Insolvency Act may reveal additional assets available for distribution to creditors. The matter was disposed of without oral hearing in terms of section 19(a) of the Superior Courts Act 10 of 2013, demonstrating the procedural flexibility available to appellate courts in appropriate cases.

This case is significant for establishing that an appellate court has the power to grant a provisional sequestration order and rule nisi on appeal where the requirements of section 10 of the Insolvency Act are satisfied. It demonstrates the willingness of South African courts to pierce the trust veneer where a trust has been abused as a fraudulent vehicle to conceal misappropriated assets and protect them from creditors. The case also confirms the enforceability of settlement agreement clauses allowing matters to proceed unopposed upon breach. It reinforces the principle that trust forms cannot be used to shield assets obtained through fraudulent or unlawful means from legitimate creditors, particularly in the insolvency context.