ISR 310
Study Theme 4
IMPEACHABLE DISPOSITIONS AND VOID TRANSACTIONS
Nagel et al -Commercial Law 5 Edition: Chapter 34 (par 34.98-314.126)
Common law
Common law
Actio pauliana
Voidable preference
Disposition not made for
value
Insolvency Act Undue preference
Preference
Collusive preference
General
o Common law:
o Ito of the common law = any transaction aimed at defrauding creditors can be set
aside by the actio pauliana if the transaction indeed defrauds the creditors in that
the assets of the person alienating the property are diminished by such alienation
o Actio pauliana – can be instituted where the debtor is sequestrated but also where
there is no sequestration
o The following must be proved:
✓ the alienation must have diminished the debtor’s assets;
✓ the recipient must not have received his own property i.e. the recipient must
not have received an asset to which he/she was entitled such as the
settlement of pre-existing debt
✓ the debtor-alienator must have had the intention to defraud his/her creditors
but if value was received, the recipient must have increased or cause the
insolvency of the debtor
✓ the defrauder must have caused the detrimental consequences (insolvency)
for the creditors i.e. the alienation must have increased or caused the
insolvency of the debtor
1
, o The Insolvency Act:
o Also provides for the setting aside of certain transactions which the insolvent entered
into before sequestration and which prejudiced the creditors or preferred only one
or a few of the creditors above others [sections 26-33]
o In order to maintain equality between creditors retrospectively up to the date of
actual insolvency
• All these transactions are referred to as = DISPOSITIONS within the meaning of the
Act which term means any transfer or abandonment of property or rights to property
• Includes: sale, lease, mortgage, pledge, delivery, payment, release, compromise,
donation or any contract providing therefor. also includes suretyship contract
• Disposition made in accordance with compliance with an order of court is excluded
provided that the insolvent personally effected such disposition in order to comply
with the order of court
• The repudiation or refusal by a nominated beneficiary of life insurance policy
benefits or an heir of inheritance will not amount to a disposition since the
beneficiary merely has a competence or power to accept the inheritance but not
the right in property before such acceptance
Impeachable dispositions
o fraudulent conveyances or preferences
o fraudulent conveyance:
✓ disposition of property by the insolvent that causes or increases his insolvency
✓ actio pauliana and dispositions without value is fraudulent conveyance
✓ section 26
✓ section 31 – collusion (can be fraudulent conveyance or preference
depending on circumstances)
o preference:
✓ settlement of pre-existing debt to a creditor by affording such creditor real
security thereby improving his position in the concursus creditorum
✓ voidable preference (section 29) & undue preference to creditors (section
30)
✓ section 31 – collusion/collusive dealings before sequestration (can be
fraudulent conveyance or preference depending on circumstances)
o Other measures to reclaim assets disposed of prior to sequestration and which may
also cause a disturbance of the concursus creditorum or be prejudicial to creditors –
termed analogous remedies:
• Section 21: vesting of property of solvent spouse
• Section 25(4): the disposition of property by the insolvent after sequestration
and after expiration of an insolvency interdict
• Section 46: set-off prior to sequestration
2
Study Theme 4
IMPEACHABLE DISPOSITIONS AND VOID TRANSACTIONS
Nagel et al -Commercial Law 5 Edition: Chapter 34 (par 34.98-314.126)
Common law
Common law
Actio pauliana
Voidable preference
Disposition not made for
value
Insolvency Act Undue preference
Preference
Collusive preference
General
o Common law:
o Ito of the common law = any transaction aimed at defrauding creditors can be set
aside by the actio pauliana if the transaction indeed defrauds the creditors in that
the assets of the person alienating the property are diminished by such alienation
o Actio pauliana – can be instituted where the debtor is sequestrated but also where
there is no sequestration
o The following must be proved:
✓ the alienation must have diminished the debtor’s assets;
✓ the recipient must not have received his own property i.e. the recipient must
not have received an asset to which he/she was entitled such as the
settlement of pre-existing debt
✓ the debtor-alienator must have had the intention to defraud his/her creditors
but if value was received, the recipient must have increased or cause the
insolvency of the debtor
✓ the defrauder must have caused the detrimental consequences (insolvency)
for the creditors i.e. the alienation must have increased or caused the
insolvency of the debtor
1
, o The Insolvency Act:
o Also provides for the setting aside of certain transactions which the insolvent entered
into before sequestration and which prejudiced the creditors or preferred only one
or a few of the creditors above others [sections 26-33]
o In order to maintain equality between creditors retrospectively up to the date of
actual insolvency
• All these transactions are referred to as = DISPOSITIONS within the meaning of the
Act which term means any transfer or abandonment of property or rights to property
• Includes: sale, lease, mortgage, pledge, delivery, payment, release, compromise,
donation or any contract providing therefor. also includes suretyship contract
• Disposition made in accordance with compliance with an order of court is excluded
provided that the insolvent personally effected such disposition in order to comply
with the order of court
• The repudiation or refusal by a nominated beneficiary of life insurance policy
benefits or an heir of inheritance will not amount to a disposition since the
beneficiary merely has a competence or power to accept the inheritance but not
the right in property before such acceptance
Impeachable dispositions
o fraudulent conveyances or preferences
o fraudulent conveyance:
✓ disposition of property by the insolvent that causes or increases his insolvency
✓ actio pauliana and dispositions without value is fraudulent conveyance
✓ section 26
✓ section 31 – collusion (can be fraudulent conveyance or preference
depending on circumstances)
o preference:
✓ settlement of pre-existing debt to a creditor by affording such creditor real
security thereby improving his position in the concursus creditorum
✓ voidable preference (section 29) & undue preference to creditors (section
30)
✓ section 31 – collusion/collusive dealings before sequestration (can be
fraudulent conveyance or preference depending on circumstances)
o Other measures to reclaim assets disposed of prior to sequestration and which may
also cause a disturbance of the concursus creditorum or be prejudicial to creditors –
termed analogous remedies:
• Section 21: vesting of property of solvent spouse
• Section 25(4): the disposition of property by the insolvent after sequestration
and after expiration of an insolvency interdict
• Section 46: set-off prior to sequestration
2
