Setting aside Transactions from Pyramid Schemes as Impeachable Dispositions under South African Insolvency Legislation

Zingapi Mabe

Abstract


South African courts have experienced a rise in the number of cases involving schemes that promise a return on investment with interest rates which are considerably above the maximum amount allowed by law, or schemes which promise compensation from the active recruitment of participants. These schemes, which are often referred to as pyramid or Ponzi schemes, are unsustainable operations and give rise to problems in the law of insolvency. Investors in these schemes are often left empty-handed upon the scheme’s eventual collapse and insolvency. Investors who received pay-outs from the scheme find themselves in the defence against the trustee’s claims for the return of the pay-outs to the insolvent estate. As the schemes are illegal and the pay-outs are often in terms of void agreements, the question arises whether they can be returned to the insolvent estate. A similar situation arose in Griffiths v Janse van Rensburg 2015 ZASCA 158 (26 October 2015). The point of contention in this case was whether the illegality of the business of the scheme was a relevant consideration in determining whether the pay-outs were made in the ordinary course of business of the scheme.

This paper discusses pyramid schemes in the context of impeachable dispositions in terms of the Insolvency Act 24 of 1936.


Keywords


Insolvency law; pyramid schemes; impeachable dispositions; setting transactions aside.

Full Text:

PDF XML

References


Bibliography

Literature

Bertelsmann et al Mars

Bertelsmann E et al Mars: The Law of Insolvency in South Africa 9th ed (Juta Cape Town 2008)

Meskin et al Insolvency Law

Meskin PM et al Insolvency Law and its Operation in Winding-up

(LexisNexis Butterworths Durban Last updated October 2015)

Sharrock, Van der Linde and Smith Hockly’s Insolvency Law

Sharrock J, Van der Linde K and Smith A Hockly’s Insolvency Law 9th ed (Juta Cape Town 2012)

Visser Unjustified Enrichment

Visser D Unjustified Enrichment (Juta Cape Town 2008)

Woker 2013 SA Merc LJ

Woker TA "If It Sounds Too Good to Be True It Probably Is: Pyramid Scheme and Other Related Frauds" 2013 SA Merc LJ 237-249

Case law

Afrisure v Watson 2008 ZASCA 89 (11 September 2008)

Amalgamated Banks of South Africa Bpk v De Goede 1997 4 SA 66 (SCA)

Cooper v Merchant Trade Finance Ltd 2000 3 SA 1009 (SCA)

Eliasov v Arenel (Pvt) Ltd 1979 3 SA 415 (R)

Estate Hunt v De Villiers 1940 CPD 79

Estate Jager v Whittaker 1944 AD 246

Estate Wege v Strauss 1932 AD 76

Fourie v Edeling 2005 4 All SA 393 (SCA)

First National Bank of Southern Africa Ltd v Perry 2001 3 SA 960 (SCA)

Gazit Properties v Botha 2012 2 SA 306 (SCA)

Griffiths v Janse van Rensburg 2015 ZASCA 158 (26 October 2015)

Gore v Shell South Africa (Pty) Ltd 2004 2 SA 521 (C)

Hendriks v Swanepoel 1962 4 SA 338 (A)

Hill v Maria Christ 1927 SWA 50

Janse van Rensburg v Botha 2011 ZASCA 72 (25 May 2011)

Janse van Rensburg v Griffiths 2014 2 All SA 670 (ECP)

Klerck v Kaye 1989 3 SA 669 (C)

Louw v DMA Fishing Enterprises Pty Ltd 2002 2 SA 163 (SE)

Moodaley v King 2009 ZANCHC 52 (30 October 2009)

MP Finance Group CC (In Liquidation) v Commissioner, South African Revenue Service 2007 5 SA 521 (SCA)

Paredes-Tarazona v Cobalt Capital (Pty) Ltd 2012 ZAGPJHC 75 (23 April 2012)

Pretorius’ Trustee v Van Blommenstein 1949 1 SA 267 (O)

Rousseau v Visser 1989 2 SA 289 (C)

Simon v Coetzee 2007 2 All SA 110 (T)

Venter v Volkskas Ltd 1973 3 SA 175 (T)

Legislation

Banks Act 94 of 1990

Consumer Protection Act 68 of 2008

Insolvency Act 24 of 1936

National Credit Act 34 of 2005




DOI: http://dx.doi.org/10.17159/1727-3781/2016/v19i0a1236

Refbacks

  • There are currently no refbacks.


Copyright (c) 2016 Zingapi Mabe

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.