Al-Kharafi & Sons and Another v Pema and Others NNO (2008/12359) [2008] ZAGPHC 273 (27 August 2008)

Al-Kharafi & Sons and Another v Pema and Others NNO (2008/12359) [2008] ZAGPHC 273 (27 August 2008)

The court found that the set-off and cession between Kharafi and Protech were not effected in the ordinary course of business. The transaction was unique, of extraordinary size, and executed in a roundabout manner, with no evidence of similar transactions between the parties or in the industry. The cession was intended to avoid payment of arbitration indebtedness and to prejudice other creditors, amounting to a fraud on third parties. The applicants failed to establish that MAK and Kharafi operated as a single economic entity justifying the piercing of the corporate veil, as their ownership and control structures were distinct. The court held that the Master correctly exercised his...

Citation
[2008] ZAGPHC 273
Parties
Applicant: Mohammed Abdulmohsin Al-Kharafi & Sons for General Trading, General Contracting and Industrial Structures WLL; Applicant: MAK (Pty) Limited; Respondent: Pema, Jayant Daji N.O.; Respondent: Motala, Enver Mohammed N.O.; Respondent: Berman, Philip David N.O.; Respondent: Bekker, Vanessa N.O.; Respondent: Beginsel, Mark Bradley N.O.; Respondent: Beaucamp, Sandile Osborn N.O.; Respondent: The Master of the High Court (Transvaal Provincial Division)
Court
High Courts - Gauteng
Jurisdiction
South Africa
Judgment Date
27 August 2008
Case Number
2008/12359
Procedural Posture
Review Application / Judgment on Review of Master's Decision Under Section 46 of the Insolvency Act
Outcome
Application dismissed with costs, including costs of two counsel.
Judges
Malan
Legal Topics
Set Off, Insolvency Act Section 46, Piercing Corporate Veil, Voidable Dispositions, Review of Master Decision, Promotion of Administrative Justice Act
Banking and Finance Civil Procedure Set Off Insolvency Act Section 46 Piercing Corporate Veil Voidable Dispositions Review of Master Decision Promotion of Administrative Justice Act

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Parties

Mohammed Abdulmohsin Al-Kharafi & Sons for General Trading, General Contracting and Industrial Structures WLL

Applicant

MAK (Pty) Limited

Applicant

Pema, Jayant Daji N.O.

Respondent

Motala, Enver Mohammed N.O.

Respondent

Berman, Philip David N.O.

Respondent

Bekker, Vanessa N.O.

Respondent

Beginsel, Mark Bradley N.O.

Respondent

Beaucamp, Sandile Osborn N.O.

Respondent

The Master of the High Court (Transvaal Provincial Division)

Respondent

Procedural Posture

Review Application / Judgment on Review of Master's Decision Under Section 46 of the Insolvency Act

Legal Issues

  1. 1 Whether the set-off between Kharafi and Protech was effected in the ordinary course of business under section 46 of the Insolvency Act.
  2. 2 Whether the Master correctly exercised his discretion to disregard the set-off.
  3. 3 Whether the corporate veil should be pierced to treat MAK and Kharafi as a single economic entity.

Ratio Decidendi

The court found that the set-off and cession between Kharafi and Protech were not effected in the ordinary course of business. The transaction was unique, of extraordinary size, and executed in a roundabout manner, with no evidence of similar transactions between the parties or in the industry. The cession was intended to avoid payment of arbitration indebtedness and to prejudice other creditors, amounting to a fraud on third parties. The applicants failed to establish that MAK and Kharafi operated as a single economic entity justifying the piercing of the corporate veil, as their ownership and control structures were distinct. The court held that the Master correctly exercised his...

Court Disposition

Application dismissed with costs, including costs of two counsel.

Orders

  • The application is dismissed with costs, including the costs of two counsel.