IN THE NORTH GAUTENG HIGH COURT,

Case number:   18146/2005
Date: 30/07/2010
In the matter between

(in their capacities as joint-trustees of

and

JUDGMENT
FABRICIUS J:

It appears that the correct case number of the so-called consolidation application is 2002, and not 2003.

23. The Scheme had been driven, managed and conducted by the said Prinsloo, who had received the monies from the so-called investors in cash, who in turn received cash payments from her under the name of MP Finance Services.

24. The Defendant denied that Section 29 of the Insolvency Act was applicable to him in that he denied that any payment had been made to him by the Krion Scheme, as I have said, or that the Krion Scheme had any creditors.

25. its replication, the Plaintiff admitted that Krion Financial Services Ltd did have a bank account for the period 7 March 2002 to 1 June 2002, that the other entities forming part of the Krion Scheme did not have a bank account, that no formally registered entity under the name of M&B Corporation Ltd existed, but that it was in fact one of the names under which the Krion Scheme was conducted, which trading name was also included in the consolidation order of 4 February 2003, under case number 21098/02 and that none of the entities forming part of the Krion Scheme had in fact any form of financial statements. The illegality and the fraudulent nature of the Krion Scheme was admitted but it was pleaded that the said Prinsloo did not conduct this Scheme in her personal name, but under various names, including those referred to in the particulars of claim that I have mentioned.

26. It was then pleaded that "Plaintiffs case is not to pierce the corporate veil of the different entities to hold Marietjie Prinsloo personally liable, but to wind up the estates of such different entities which were consolidated into a single estate to be known as MP Finance Group CC per direction of the Court order dated 4 February 2003 under case number 21098/02."

27. Defendant denied that the jurisdictional facts required by Section 29 of the Insolvency Act had been proven and/or that they existed objectively. He denied having been bound by any of the previous Court orders.

28.      Section 29 of the Insolvency Act, insofar as it is applicable in the present proceedings, reads as follows:
"SECTION 29(1)
Every disposition of his property made by a debtor not more than six months before the sequestration of his estate or, if he is deceased and his estate is insolvent, before his death, which has the effect of preferring one of his creditors above another, may be set aside by the Court if immediately after the making of such disposition the liabilities of the debtor exceeded the value of his assets, unless the person in whose favour the disposition was made proves that the disposition was made in the ordinary sense of business, in that it was not intended thereby to prefer one creditor above another"

29. In this context it is simply Defendant's case that the Plaintiffs' claim is based on a Statutory provision, and that if the Plaintiffs do not bring themselves within each and every jurisdictional fact contained in such provision, they cannot succeed. As a general principle, this submission is of course correct.

30. It was submitted that Section 29 deals with dispositions, and that there was no evidence in this case that any of the mentioned entities referred to, either received monies or paid out any monies. This meant that it had to be determined who had in fact received the monies, who had repaid them and whose monies they were, so it was contended.

31. in turn argued that Prinsloo had received the cash ostensibly on behalf of legal entities and then had in fact repaid such amounts ostensibly on behalf of those legal entities.

Defendant regarded this as mere speculation. Essentially, therefore, it was Defendant's case that Plaintiffs had to prove that:
31.1. disposition had been the property of the insolvent;
31.2. insolvent had disposed of his assets;
31.3. disposition had the effect of preferring one creditor above the other;
31.4. after such disposition, the liabilities of the insolvent exceeded the value of his estate;
31.5. insolvent was not capable of paying its debts.
32. that context, the first question had to be: who was the insolvent?
33. Plaintiffs in this instance relied on the entity MP Finance Group CC. Defendant argued that no such entity existed in law and that a Court could not create such. No CC of that name had been registered and a Close Corporation could only be a creature of statute if registered according to the relevant legislation. This Group could not be the insolvent and a Court was not empowered to "manipulate" the provisions of the Companies Act or the Close Corporations Act or the Insolvency Act, or interfere with the rights of persons who were not part of any so-called consolidation order.

34. It was also contended that even if it was accepted for the benefit of Plaintiffs, that MP Finance Group CC did exist, it was the high water mark for Plaintiffs that the insolvent in this case was either MP Finance Consultants CC, Madikor 20 (Pty) Ltd, Martburt Financial Services Ltd and Krion Financial Services Ltd. Accordingly, and on that basis, Plaintiffs had to prove that one or all of those entities were the owners of the assets that were disposed of, that such disposition occurred viz a viz the Defendant, and that the Defendant was a creditor of such entity. Further, at the time of such disposition, that the liabilities of such entities exceeded the value of their assets.

35. had to be asked who was the owner of the cash that was admittedly paid? All payments were made in cash, and they were packed in containers and safeguarded by Prinsloo who, in turn, provided such cash to her agents and via them to the investors. That was after she had taken her share and had paid the agents their commission.

36. Those facts were never in dispute in the present proceedings and it is unnecessary to refer in that context to the detailed evidence given by the witnesses called in these proceedings.

37. It was alleged that Prinsloo had therefore kept such investor money separately, that it had never been her intention to have become the owner thereof and that her intention had in fact been to use that money to pay existing investors. There was therefore no evidence that those monies belonged to any of the legal entities for which the liquidators acted. Apart from that, there existed "other entities who were not legal persons at alt. There was no evidence that any of those companies or entities had functioned, and that there was any record of any of the monies received by them. The only record of payments were those in the name of MP Financial Services, which was Prinsloo herself. There was also no acceptable evidence that any of those companies did business as MP Financial Services. Accordingly, Plaintiffs had not proven that monies had been received were the monies of any of those legal entities on behalf of which the Plaintiffs acted, and that those monies had belonged to them.

38. had therefore failed to prove that the specific dispositions had taken place by any of those legal entities for which they acted.

A disposition of property is a factual matter, it was contended, and it was clear that the monies emanated from the containers which had been kept by Prinsloo and had been under her control. There was no evidence at all in these proceedings that she had acted on behalf of any of the legal entities referred to and that was mere speculation.

39. Accordingly, Plaintiffs could not succeed with a claim under Section 29 of the Insolvency Act. Whether they had any other claim in law was irrelevant for present purposes.

40. It was further contended that Plaintiffs also had not proven that the Defendant was a creditor of any of the entities for which the Plaintiffs appeared herein.

41. It was also contended, lastly, that the Defendant was not bound by the so-called consolidation order, and it was denied that a Court could issue a declaratory order in vacuo viz a viz persons who were not a party thereto or had at least been given notice thereof. In any event, the consolidation order was not competent in law. Neither Section 18 of the Insolvency Act nor Section 386(4)(a) of the Companies Act made provision for such. A Court could also not create any company or legal entity or close corporation except insofar as this was done in accordance with the relevant legislation.

42. I was referred to a number of judgments handed down by other Judges of this Division and others. Some of those are distinguishable on the facts, and some of those were not correct, so it was contended. It is not necessary to deal with them.

43. Defendant's submissions are supported by the evidence herein as far as the facts are concerned. The legal arguments are similarly sound, and their rationale have also been found to be sound by Tuchten A.J. in the unreported decision of JH Janse Van Rensburq & Others v SJL Steyn, case number 18137/2005, delivered on 30 October 2009. The Learned Judge was similarly astounded by the notion that a Court (in the present context) has the power to "create" legal entities and obligations outside the applicable statutory provisions that regulate them.

44. I agree with Plaintiffs contentions that:
44.1. a Court is not competent to "create" a company or a close corporation or any other statutory entity unless this is done strictly in accordance with the applicable Statute;
44.2.      the so-called consolidation order that I have been referred to, did not and does not bind the Defendant;
44.3.      the Plaintiffs have not proven the jurisdictional elements
required by Section 29 of the Insolvency Act, on which they specifically and solely rely, and I have mentioned which of those facts have not been proven herein.
45.      Accordingly, I have no choice but to dismiss the Plaintiffs' claim with costs, which I do.

DATED at PRETORIA on this the 30th day of JULY 2010.
SIGNED:     HJ FABRICIUS
JUDGE OF THE HIGH COURT, NORTH GAUTENG DIVISION
Counsel for Plaintiff:       F Du Toit SC
Counsel for Defendant:   T Strydom