THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable

Case no: 1274/2021
In the matter between:
CLOETE MURRAY N O

FIRST APPELLANT

THOMAS CHRISTOPHER VAN ZYL N O             SECOND APPELLANT

RAPHAEL GRANT BRINK N O

THIRD APPELLANT

CARON-ANN SCHROEDER N O

FOURTH APPELLANT

(In their capacity as joint liquidators of
Cape Concentrate (Pty) Ltd (in liquidation))

and

HUMANSDORP CO-OPERATIVE LIMITED
RESPONDENT

Neutral citation: Cloete Murray N O and Others v Humansdorp Co-operative
Limited (1274/2021) [2022] ZASCA 187 (30 December
2022)

Coram:
DAMBUZA ADP, NICHOLLS and GORVEN JJA and BASSON
and WINDELL AJJA
Heard:
11 November 2022
Delivered: 30 December 2022
Summary: Company law – Insolvency Act 24 of 1936 – disposition – whether
payment was made in terms of a bank guarantee or it was a payment by the
respondent constituting a disposition in terms of s 2 of the Insolvency Act – if so,
whether the payment was ‘not made for value’ as contemplated in s 26 of the
Insolvency Act – payment was bank guarantee.

________________________________________________________________
ORDER
________________________________________________________________

On appeal from: Eastern Cape Division of the High Court, Grahamstown
(Stretch J, sitting as court of first instance):
The appeal is dismissed with costs, including the costs of two counsel where so
employed.
________________________________________________________________
JUDGMENT
________________________________________________________________

Nicholls JA (Dambuza ADP, Gorven JA and Basson and Windell AJJA
concurring):
[1] This appeal concerns the payment of monies held in the trust account of
Pagdens Incorporated Attorneys (Pagdens) of Gqeberha and made to
Humansdorp Co-operative Limited (the Co-op), the respondent. The question to
be determined is whether the payment was a disposition made not for value as
envisaged in s 261 of the Insolvency Act 24 of 1936 (the Act). Integral to this
issue is whether the payment was made by the appellant, Cape Concentrate (Pty)
Ltd (now in liquidation) (Cape Concentrate), or whether it was a payment made
by or on behalf of The Standard Bank of South Africa Limited (Standard Bank),

1 Section 26(1) of the Act provides:
‘Disposition without value
(1)
Every disposition of property not made for value may be set aside by the court if such disposition was
made by an insolvent –
(a)
more than two years before the sequestration of his estate, and it is proved that, immediately after the
disposition was made, the liabilities of the insolvent exceeded his assets;
(b)
within two years of the sequestration of his estate, and the person claiming under or benefited by the
disposition is unable to prove that, immediately after the disposition was made, the assets of the insolvent exceeded
his liabilities:
Provided that if it is proved that the liabilities of the insolvent at any time after the making of the disposition
exceeded his assets by less than the value of the property disposed of, it may be set aside only to the extent of
such excess.’

of demand guarantees issued in favour of the Co-op for the liabilities of the Tyefu
Community Farming Trust (the Trust). Only if the payment was made by
Cape Concentrate does the question then arise whether it was a disposition by
Cape Concentrate not made for value. If the disposition was not made for value,
then the third issue is whether the Co-op is entitled to be indemnified in terms of
s 33(1) and (2) of the Act. Neither Standard Bank nor the Trust are parties to this
appeal.

[2] The Eastern Cape Division of the High Court, Grahamstown (the high
court) dismissed, with costs, the application brought by the liquidators of Cape
Concentrate to set aside, as a payment without value, the payment of
R22 268 848.85 made to the Co-op on 8 May 2015. The high court found that the
payment was of demand guarantees made by Cape Concentrate to the Co-op and
was a disposition with value.

[3] Cape Concentrate has appealed the judgment and order of the high court.
The Co-op has cross-appealed against the high court’s finding that, although the
payment was made in terms of demand guarantees, it ‘was paid with
[Cape Concentrate’s] money’ rather than a payment by or on behalf of Standard
Bank with money ceded and pledged to Standard Bank. Both leave to appeal and
to cross-appeal to this Court were granted by the high court.

Background
[4] Cape Concentrate was incorporated in 2006 and built, at large expense, a
tomato paste processing plant at Coega in Gqeberqa. A sister company with the
same shareholders, Rumibyte (Pty) Ltd (Rumibyte) was established to procure
tomatoes for processing by Cape Concentrate. Both experienced financial
difficulties, partly because Rumibyte had difficulty in securing a reliable supply
of tomatoes, and both were simultaneously placed under business rescue in

May 2013. A practising attorney and director of Pagdens, Francois Vienings
(Vienings), was appointed as the business rescue practitioner of the two
companies.

[5] At the first business rescue meeting, on 24 May 2013, Vienings expressed
the view that the companies were capable of being saved. This was subject to
raising funds of approximately US$90 million. The creditors were duly convinced
and the proposed business rescue plan was adopted. However, as at November
2013, Cape Concentrate had liabilities exceeding R133 million and had been
trading at a loss for several months. Vienings and the directors of Cape
Concentrate approached Africa Agriculture and Trade Investment Fund
(AATIF), a non-profit fund advocating the enhancement of agricultural
production and food security in Africa, for a loan to finance the operations of
Cape Concentrate during the business rescue process.

[6] Pursuant thereto, a term facility was concluded, on 18 August 2014,
between AATIF and Cape Concentrate, represented by Vienings, in terms of
which AATIF would loan Cape Concentrate amounts for the financing of its
tomato farming and processing operations. The Co-op was defined as the
investment partner. As to the purpose of the agreement, it was recorded that
Cape Concentrate would apply all amounts borrowed, firstly, to the payment of
existing lease and supplier indebtedness. Secondly, Cape Concentrate would
apply it to pay existing income tax indebtedness, acquisition of new farming
equipment to support the operation and for the financing of Cape Concentrate’s
working capital requirements.

[7] In the interim, and without it having been included in the business rescue
plan, in December 2013 Vienings established the Trust to involve local
community farmers in the production of tomatoes for supply to Cape Concentrate.

Rumibyte and Cape Concentrate were the founders of the Trust. The Trust
required a substantial amount of money for the production of tomatoes.
Discussions, facilitated by Vienings, took place between the Co-op and AATIF
for funding, and in April 2014 the Co-op indicated to AATIF that it would
provide loans to community farmers on commercially negotiated terms.

[8] Vienings then proceeded to make applications for a production loan to the
Co-op on behalf of the Trust, first in his capacity as the business rescue
practitioner for Cape Concentrate, and then in his capacity as a director of
Pagdens. The Co-op required security if they were to loan and advance monies to
the Trust. These included, inter alia, a cession of the proceeds of the tomato crop
which would be supplied to Cape Concentrate, a cession of any insurance on the
crops and most importantly a bank guarantee for the sum of the loan facility.

[9] Vienings tendered certain security for the loan, including a cession of the
proceeds of all tomato produce sold by the Trust to Cape Concentrate in favour
of the Co-op. It was contemplated that the crop would be produced and delivered
to Cape Concentrate, who would pay the Co-op for the value of the tomatoes in
terms of the cession and by so doing the production loan would be repaid and the
bank guarantees would not have to be called up.

[10] On 14 August 2014, an Investment Partner Agreement was concluded
between AATIF and the Co-op, in terms of which the Co-op agreed that it would
ensure that its clients would have the ability to pay their obligations without being
over-indebted. On 28 August 2014, Vienings confirmed that Cape Concentrate
had deposited R5 million into the trust account of Pagdens, which would serve as
security, and asked for confirmation that the Co-op would provide a loan to the
Trust. Shortly thereafter, the Co-op agreed to grant loan facilities to the Trust,
subject to a bank guarantee in respect of the R5 million. It also required a

resolution from the Trust that it would apply for credit and membership of the
Co-op. On 3 September 2014, the Trust executed a deed of cession of the
proceeds of all its crop in favour of the Co-op. It also made application to the Co-
op for membership (which was approved on 28 November 2014). Thereafter,
Vienings sent the required documents to the Co-op, including a Standard Bank
Corporate Saver guarantee.

[11] As early as mid-September 2014, the Co-op raised its reservations about
the planning and management of the Trust. The Co-op pointed out the risks
involved and expressed the view that it would be difficult to find another financial
institution prepared to finance such a scheme.  Undeterred, Vienings saw to it that
a further R4 million and R12 million were deposited into the Pagdens trust
account, by Cape Concentrate, on 5 November and 18 November 2014
respectively. Vienings confirmed in an email to the Co-op that Cape Concentrate
was not in a position, nor was it ever the intention, to provide security for the
Trust’s farming operations. The credit facility for a production account was
approved by the Co-op on 11 February 2015.

[12] Various payments were made by Cape Concentrate into the Pagdens trust
account, over the period 1 September 2014 to 31 January 2015. It was on the
strength of those payments that the guarantees were issued by Standard Bank.
Between 1 September 2014 and 14 January 2015, Vienings provided the Co-op
with six demand bank guarantees in the total sum of R25 million. These were
issued by Pagdens utilising the Standard Bank electronic system, Third Party
Fund Administration (TPFA), as follows: R5 million on 5 September 2014; R2
million on 7 October 2014; R4 million on 6 November 2014; R3 million on 19
November 2014; R9 million on 19 November 2014; and R2 million on 14 January
2015.

[13] Each guarantee is identical, apart from the transaction number, issue date
and the amounts reflected therein. It bears the Standard Bank logo and reads as
follows:
‘Electronically generated DEMAND GUARANTEE – only presentable and payable by
electronic means.
Standard Bank
TRN No. [M567801]

TPFA Guarantees Standard Bank

P O Box 61029

Marshalltown

2107
Beneficiary Name: HUMANSDORP KOOPERASIE
Account Number: 0001940000110
Beneficiary Reference: TYEFU
Beneficiary Address: HUMANSDORP
Issue Date: [05/09/2014]
DEMAND GUARANTEE
We, The Standard Bank of South Africa Limited Registration Number 1962/000738/06 (“the
Bank”), undertake to pay HUMANSDORP KOOPERASIE BPK (“the Beneficiary”) the sum
of 5000000 (FIVE MILLION RAND) (“the Guaranteed Amount”) on receipt of a first written
demand for payment from the Beneficiary stating that the amount is due and payable by THE
TYEFU COMMUNITY FARMING TRUST IN THE EVENT OF IT NOT BEING ABLE TO
MAKE PAYMENT OF THE PRODUCTION LOAN FROM THE BENEFICIARY WHEN
IT BECOMES DUE AND PAYABLE (“the Principal”) in terms of an agreement
(“the Agreement”) between the Principal and the Beneficiary.
The Bank’s liability under this guarantee is principal in nature and is not subject to any
agreement. The Bank’s liability shall not be reduced, or in any way be affected by any alteration
of the terms of the Agreement, or any other arrangements made between the Principal and the
Beneficiary.
The Bank will pay on demand and will not determine the validity of the demand or the
correctness of the amount demanded, or become party to any claim or dispute of any nature
which any party may allege.

Escape clause The Bank reserves the right to withdraw from this guarantee at its entire
discretion by giving the Beneficiary 3 (three) months’ written notice of its intention to do so.
The Beneficiary may, however, claim under this guarantee during the mentioned notice period
from the date that such notice is given. The Bank’s liability shall cease on expiry of the notice
period and no further claims will be considered.
The cancellation of, or any change to the terms and/or conditions of this guarantee, must first
be agreed to in writing by the Beneficiary, the Principal and the Bank.
This Guarantee is neither negotiable, transferable nor payable upon presentation at a Branch of
Standard Bank and must be returned to us either against payment of the abovementioned sum
or in the event of our withdrawal from the undertaking in terms of the preceding paragraph.’

[14] It was not long before the Trust was unable to make payment towards the
loan facility provided to it by the Co-op. The Co-op’s attorneys directed a letter
to Pagdens, on 7 May 2015, stating that the Trust was indebted to their clients in
the sum of R22 268 848.85 and demanding immediate payment of the guarantees
to the said value. The demand guarantees were hand-delivered to Pagdens by the
Co-op at 18h00 later that day. On 8 May 2015, Pagdens loaded the release of the
amount of the guarantees from the two TPFA accounts and authorised the transfer
of R12 057 148.99 and R11 049 210.88. Payment was then effected to the Co-op
by Pagdens transferring these amounts into their Nedbank trust account and from
there to the Co-op’s account.

[15] The following day, Rob Parker (Parker) directed a letter to his fellow
director, Vienings, confirming that the Co-op had made demand on 7 May 2015
and that Pagdens had made payment of R22 268 848.85, which left R839 180.08
remaining in the trust account of Cape Concentrate.

[16] AATIF immediately dispatched a letter to Vienings asking how it was
legally possible that R25 million of the AATIF loan to Cape Concentrate was put
in a guarantee account in the name of the Trust when AATIF was not a lender to

the Trust. Vienings was requested to explain the grounds on which he had opened
guarantee accounts in the name of the Trust with funds provided by AATIF under
a facility agreement with Cape Concentrate. The accounts were, in fact, not in the
name of the Trust but in that of Cape Concentrate. The letter went on to ask how
it was possible that a colleague from the same firm instructed Vienings to make
this payment.

[17] Approximately a month later, in June 2015, Vienings resigned as business
rescue practitioner of Cape Concentrate and was replaced by Daniel Terblanche.
On 15 December 2015, Mr Terblanche applied for the liquidation of
Cape Concentrate and the final order of liquidation was granted on 29 March
2016.

Referral to oral evidence
[18] The application launched by the liquidators in the high court to set aside
the payment of R22 268 848.85 was brought on the basis that it was a disposition
without value made by Cape Concentrate. In response, the Co-op asserted that
the monies were paid by Pagdens on behalf of Standard Bank in terms of a
demand guarantee issued in respect of the Trust. In reply, the liquidators stated
that the Trust only became a member of the Co-op on 28 November 2014, after
five of the six guarantees had been issued, and that the credit facility for the Trust
was only approved on 11 February 2015, after all the guarantees had been issued.

[19] This prompted the Co-op to file various supplementary affidavits,
explaining how the payments were made by Pagdens for or on behalf of Standard
Bank, utilising the Standard Bank TPFA. Finally, by agreement, a court order
was granted on 15 October 2020 for ‘the hearing of oral evidence in respect of
the facts and circumstances surrounding and involving the issuing, presentation
and payment of the six demand guarantees of the Standard Bank Ltd’. The order

also provided that certain witnesses from Pagdens and Standard Bank be called
to give evidence, including Mr Antonie Pick (Pick), the Standard Bank solutions
manager for various products, including TPFA guarantees. The other witnesses
named in the order were Mr Brett Weddell (Weddell) and Parker, both of whom
were directors at Pagdens, and had provided affidavits.

[20] In the end, the Co-op, who had introduced the affidavit of Pick, elected not
to call him as a witness and it was the liquidators who called Pick to testify. Even
though Weddell and Parker’s version was pertinently put to Pick, after Pick’s
evidence, the Co-op decided not to call Weddell and Parker as witnesses. Pick
was thus the sole witness on some of the issues.

[21] In evaluating Pick’s evidence, the high court found that this was not a
matter where the application had been referred to trial and where the affidavits
stood as pleadings, with evidence to be adduced. The high court favoured the
version of Weddell and Parker over the oral evidence of Pick, whose evidence
the high court found did not add value to the issue. Instead, the high court found
that the affidavits of Parker and Weddell had clarified the position on the issuing
of, the presentation of and the payment of the demand guarantees.2

[22] In Lekup Prop Co No 4 (Pty) Ltd v Wright,3 this Court pronounced on the
status of affidavits in a referral to evidence in the following manner:
‘. . . A referral to trial is different to a referral to evidence on limited issues. In the latter case,
the affidavits stand as evidence save to the extent that they deal with dispute(s) of fact; and
once the dispute(s) have been resolved by oral evidence, the matter is decided on the basis of
that finding together with the affidavit evidence that is not in dispute.’

2 Paragraph 52 of the high court judgment.
3 Lekup Prop Co No 4 (Pty) Ltd v Wright [2012] ZASCA 211; 2012 (5) SA 246 (SCA); [2012] 4 All SA 136
(SCA) para 32.

[23] The facts in this matter are those which appear from the affidavits of
Weddell and Parker, which are either consistent with, or not disputed by, the oral
evidence of Pick. Accordingly, the oral evidence of Pick must prevail where there
is a dispute.

[24] Pick testified that the TPFA is a fully automated electronic system which
is accessed on the business online platform of Standard Bank. It allows managers
of those funds to open the accounts, transact on the accounts, close the accounts
and to issue guarantees electronically. Pick’s evidence was that attorneys could
only issue property guarantees using the TPFA system. This was for
conveyancing matters and once the guarantee was issued, the funds in the TPFA
account were automatically pledged to Standard Bank, and paid to the seller upon
registration.

[25] The relationship between Standard Bank and the attorney would be
regulated by a written agreement, whereby the attorney acts as agent for the
investor principal. The attorney would sign a pledge and cession of all trust
monies held in the TPFA trust account, which, according to Pick, was for property
matters only. Notwithstanding his insistence that Pagdens was only authorised to
issue property guarantees, Pick was unable to dispute the contractual obligations
that the guarantee created between Standard Bank and the Co-op, nor the fact that
the online options available to Pagdens were not limited to property guarantees
and the system’s functionality extended to property guarantees, demand
guarantees, and lease guarantees.

[26] According to Pick, the pledges placed on the TPFA accounts would remain
in place while the guarantees were ‘live’ on the TPFA system. Three of the
guarantees had expired on the system and the other three were cancelled on 7
May 2015, after 16h00. He stated that this meant that none of these could be paid

through the TPFA system. If Pagdens were to cancel the guarantees, they would
phone or email Standard Bank to arrange for cancellation. He later conceded that
the terms of the guarantee required any cancellation or change in terms to be
agreed upon in writing between the bank, the beneficiaries and the principal.

[27] The common thread running through Pick’s evidence is his emphasis on
how the system worked, which frequently conflicted with the terms of the
guarantee. He focused on the functioning of the system and methodology of
payment, without having sufficient regard to the binding terms of the guarantee
itself.

On appeal
[28] The liquidators submit that Pagdens paid the Co-op the amount required to
settle the production loan it had granted to the Trust, using the funds of
Cape Concentrate. As such, it was a disposition without value within the meaning
of s 26 the Act. The Co-op’s position is that the payment was pursuant to a
demand guarantee and that, with the issuing of guarantees, the funds deposited in
the Standard Bank TPFA accounts became the subject of a pledge and cession in
favour of Standard Bank and payable on demand.

[29] Both parties agree that if the payment was made in terms of a demand
guarantee, then there has been no disposition as defined in s 24 of the Act and this
is dispositive of the appeal.

[30] The following facts are common cause. A debt was owed to the Co-op by
the Trust. While Cape Concentrate was under business rescue, the business rescue

4 A disposition is defined in s 2 of the Act as meaning ‘any transfer or abandonment of rights to property and
includes a sale, lease, mortgage, pledge, delivery, payment, release, compromise, donation or any contract
therefor, but does not include a disposition in compliance with an order of the court’.

practitioner caused monies of Cape Concentrate to be paid into the trust account
of Pagdens. Pagdens paid that money from its trust account to the credit of
Standard Bank TPFA accounts, in order for Pagdens to cause guarantees to be
issued by its utilisation of the Standard Bank’s TPFA system. The guarantees
were to secure the debts of the Trust to the Co-op. The Trust was not able to
honour its debt to the Co-op, which made demand in terms of the guarantees.
When demand was made, the guarantees were not presented to Standard Bank for
payment, but to Pagdens. Crucially, it is not disputed that the bank guarantees
were binding on Standard Bank.

[31] Once the monies had been credited to the Standard Bank TPFA account,
they became subject to a pledge and cession in favour of Standard Bank. In its
heading, the pledge and cession document executed by Pagdens and Cape
Concentrate specifically stipulated that it was a ‘[p]ledge and cession of trust
funds held in the Third Party Fund Administration (“TPFA”) account on behalf
of the investor principal, in favour of The Standard Bank of South Africa Limited
to cover property guarantees issued on the instruction of the Pledgor from time to
time’. It was not in dispute that, in this instance, Cape Concentrate was the
pledgor.

[32] Paragraph 1 of the pledge and cession then provided that Pagdens:
‘acting in [their] capacities as duly authorised agents of the investor principal (“the Pledgor”),
transfers all rights to (cedes), surrenders and pledges to The Standard Bank of South Africa
Limited (“the Bank”), or anyone who takes transfer of the Bank’s rights under this pledge and
cession, trust funds held in the TPFA account, from time to time, on behalf of the investor
principal (“Trust Funds”) upon the terms and conditions set out in [the] agreement.’
The cession therefore divested Cape Concentrate of its rights to the monies once
they were paid into the TPFA system accounts. Those rights became vested in
Standard Bank.

[33] The trust funds and interest thereon were ‘given and transferred’ to
Standard Bank as a continuing covering security for property transaction
guarantees issued on the pledgor’s (Cape Concentrate’s) instructions. Cape
Concentrate would only have the right to redelivery of the funds on cancellation
of the pledge and cession by Standard Bank. The guarantees could only be
withdrawn by Standard Bank on three months’ notice and could only be cancelled
by way of an agreement to do so.

[34] The submission, on behalf of the liquidators, that when Pagdens made the
payments on 8 May 2015 the monies had reverted to Cape Concentrate, because
the guarantees had already been cancelled, is unsustainable. The guarantees had
not been cancelled as provided therein. Instead, the demand for payment was
made on the date of their expiry on the TPFA system. In any event, the cession
and pledge over the funds, which was intended to secure the guarantees, remained
in place until the guarantees were paid.

[35] The fact that the cession was in respect of a property guarantee, as opposed
to a demand guarantee, is irrelevant. Once a guarantee is valid on the face of it,
the contractual obligation of the bank is to pay the nominated beneficiary once
the conditions are met.5

[36] The evidence of Pick does not assist. He was constrained to agree that the
guarantee was issued by Standard Bank using electronic means; that demand was

5 See Lombard Insurance Company Limited v Landmark Holdings and Others [2009] ZASCA 71; 2010 (2) SA
86 (SCA); [2009] 4 All SA 322 (SCA) para 20, where this Court stated that disputes which arise are of no moment
insofar as the bank’s obligation to pay is concerned; See also Joint Venture between Aveng (Africa) (Pty) Ltd and
Strabag International GmbH v South African National Roads Agency SOC Ltd and Another [2020] ZASCA 146
(SCA); 2021 (2) SA 137 (SCA) paras 7-9; Raubex Construction (Pty) Ltd v Bryte Insurance Company Ltd [2019]
ZASCA 14; [2019] 2 All SA 322 (SCA) para 6; State Bank of India and Another v Denel SOC Limited and Others
[2014] ZASCA 212; [2015] 2 All SA 152 (SCA) paras 6-7; Coface South Africa Insurance Co Ltd v East London
Own Haven t/a Own Haven Housing Association [2013] ZASCA 202 (SCA); 2014 (2) SA 382 (SCA) paras 12-
13.

all that was required to trigger payment; the demand could only be made to
Pagdens; and payment could only be made by Pagdens.

Conclusion
[37] In conclusion, the guarantees were presentable and payable by electronic
means, by making a demand to Pagdens. When the demand was made by the Co-
op for payment under the guarantees, payment of the pledged and ceded monies
was made by Pagdens, in line with its obligations under the guarantees. The
payment was therefore made by Standard Bank in satisfaction of the demand
guarantee.

[38] In light of the above, it is unnecessary to determine the other issues that
arose on the pleadings. It is also unnecessary to make an order on appeal in respect
of the findings of the high court against which the Co-op cross-appealed. The
high court did not make any specific order in relation thereto and once a finding
is made that the R22 268 848.85 payment was made in satisfaction of Standard
Bank’s demand guarantees, any further order would be superfluous.

[39] In the result, the following order is made:
The appeal is dismissed with costs, including the costs of two counsel where so
employed.

______________________
C HEATON NICHOLLS
JUDGE OF APPEAL

Appearances

For appellants:
J E Smit
Instructed by:
Werksmans Attorneys, Johannesburg

Symington De Kock, Bloemfontein

For respondent:
D H de la Harpe SC and K L Watt
Instructed by:
De Jager & Lordan Incorporated, Grahamstown

Phatshoane Henney Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF
APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:

30 December 2023
Status:
Immediate
The following summary is for the benefit of the media in the reporting of this case and does not
form part of the judgments of the Supreme Court of Appeal
Cloete Murray N O and Others v Humansdorp Co-operative Limited (1274/2021) [2022] ZASCA 187
(30 December 2022)
Today the Supreme Court of Appeal (SCA) handed down judgment dismissing the appeal against the
order of the Eastern Cape Division of the High Court, Grahamstown (the high court).
The high court dismissed, with costs, the application brought by the liquidators of the appellant, Cape
Concentrate (Pty) Ltd (Cape Concentrate) to set aside, as a payment without value, the payment of
monies made to the Respondent from trust account of Pagdens (a firm of attorneys of which the
business rescue practitioner was a director). The high court found that the payment was a demand
guarantees made by Cape Concentrate to the Respondent and was a disposition with value.
The issues for determination before the SCA was whether the payment of monies amounted to a
disposition not made for value as envisaged in s 26 of the Insolvency Act 24 of 1936 (the Act); whether
the payment was made by Cape Concentrate, or whether it was a payment made by or on behalf of
The Standard Bank of South Africa Limited (Standard Bank), of demand guarantees issued in favour of
the Co-op for the liabilities of the Tyefu Community Farming Trust (the Trust).
On evaluating the facts before it, the SCA held that it was common cause that a debt was owed to the
Respondent by the Trust. While Cape Concentrate was under business rescue, the business rescue
practitioner caused monies of Cape Concentrate to be paid into the trust account of Pagdens. Pagdens
paid that money from its trust account to the credit of Standard Bank Third Party Trust Administration
(TPFA) accounts, in order for Pagdens to cause guarantees to be issued by its utilisation of the Standard
Bank’s online TPFA system. The guarantees were to secure the debts of the Trust to the Respondent.
The Trust was not able to honour its debt to the Respondent, which made demand in terms of the
guarantees. When demand was made, the guarantees were not presented to Standard Bank for
payment, but to Pagdens.
Crucially, the SCA held, it was not disputed that the bank guarantees were binding on Standard Bank.
Once those monies were credited to the Standard Bank TPFA account, they became subject to a pledge
and cession in favour of Standard Bank. The fact that the cession was in respect of a property
guarantee, as opposed to a demand guarantee, was irrelevant, said the SCA. Once a guarantee is valid
on the face of it, the contractual obligation of the bank is to pay the nominated beneficiary if the
conditions are met. The SCA held that when the demand was made by the Respondent for payment
under the guarantees, payment of the pledged and ceded monies was made by Pagdens on behalf of
Standard Bank, in line with its obligations under the guarantees. The  payment was therefore made by
Standard Bank in satisfaction of the demand guarantee and not by Cape Concetrate.

In light of the above, the SCA held, it was unnecessary to make a determination in respect of the other
issues that arose in the pleadings. As a result, the SCA made an order dismissing the appeal with costs,
including the costs of two counsel where so employed

~~~~ends~~~~