The Supreme Court of Appeal has blocked a law firm from recovering fees for work performed while its principal was a director of a firm with an insolvent trustee, ruling that the statutory prohibition cannot be sidestepped by invoicing the estate through a different company.
The ruling followed a challenge by Standard Bank to legal fees included in the liquidation and distribution account of a sequestrated estate. The bank faced a contribution of R1.085 million, most of which arose from the disputed fees.
The SCA dismissed an appeal by FJ Senekal Inc, upholding the decision that the fees for the earlier work could not lawfully be charged to the insolvent estate.
The judgment was delivered on 5 October 2026.
The dispute arose from the sequestration of the estate of JN Herselman in December 2013. Two trustees were appointed to administer the estate, including Tsiu Vincent Matsepe, who was a director of Matsepes Inc.
FJ Senekal Inc’s principal, attorney FJ Senekal, was also a director of Matsepes Inc until October 2017.
The firm was involved in investigations and legal proceedings relating to the insolvent estate. The work included an inquiry into the insolvent’s affairs and efforts to recover money.
The arrangement initially involved Farmsecure Livestock, a creditor that had undertaken to finance the investigation. The proceedings were conducted on a contingency basis, with the financing creditor expected to benefit from the recoveries.
But when Senekal left Matsepes Inc and established his own incorporated firm in October 2017, the files moved with him.
In 2019 and 2020, FJ Senekal Inc invoiced the estate for the work, including services performed before the new firm existed.
The fees were included in the estate’s accounts. A later amended account allocated contributions among creditors, including Standard Bank, whose proven claim was approximately R7.48 million.
Standard Bank objected to the charges, arguing that the work had been performed by Matsepes Inc while Senekal and Matsepe were directors of the same firm and that the fees could not lawfully be recovered from the estate.
The Master of the High Court rejected the objections in May 2023.
Standard Bank then took the matter to the Free State Division of the High Court in Bloemfontein, which set aside the Master’s decision and upheld the objections. FJ Senekal Inc appealed.
The central legal issue was section 63(2) of the Insolvency Act, which prohibits an insolvency trustee, the trustee’s partner and certain people or entities connected to the trustee from receiving remuneration out of the estate for services rendered to it, beyond the remuneration permitted by law.
The SCA said the prohibition was designed to prevent conflicts of interest when a trustee causes work to be awarded to themselves or to people with whom they conduct business.
“If he, or those with whom he is in business, could in addition charge the estate professional fees for work that he causes to be done in the course of the administration, the conflict between his duty to the creditors and his own interest would be obvious,” the court said.
The court said the legislation removed the entitlement to those fees to eliminate the temptation created by such a conflict.
It rejected the argument that the prohibition could be avoided because the invoices were issued by FJ Senekal Inc after Senekal had left Matsepes Inc.
The SCA found that the claim for payment belonged to the firm that had performed the work under the original mandate. FJ Senekal Inc did not exist when much of the work was carried out and could not simply acquire a right to payment for those services by taking over the files.
Even if the claim had been transferred to the new firm, the court said, that would not have improved the position because a party receiving a claim cannot acquire a better right than the party transferring it.
“A statutory disentitlement of this kind cannot be circumvented by transferring the claim to a person who does not fall within the section,” the court said.
The court stressed that the question was not whether the parties had deliberately designed a scheme to evade the law. It was whether the statutory prohibition could be avoided by submitting invoices through a new firm for work performed when the prohibition applied.
The court also rejected the argument that the earlier confirmation of the estate’s accounts prevented Standard Bank from challenging the fees in a later amended account.
It found that the later account imposed a contribution on the bank for the first time. Standard Bank was therefore entitled to object to the charges giving rise to that liability.
The court said it would make little sense to allow a creditor to challenge being required to contribute towards a charge while preventing it from challenging the charge itself.
The SCA upheld the High Court’s decision and dismissed FJ Senekal Inc’s appeal with costs.
The judgment does not establish that the firm committed fraud or that every fee it charged was prohibited. The court’s finding concerned remuneration for services performed before 27 October 2017, when Senekal was still a director of Matsepes Inc. It also noted that the invoices did not adequately distinguish the earlier work from services allegedly performed after the new firm was established.
The ruling reinforces the statutory restrictions on professional fees charged to insolvent estates and confirms that changing firms cannot, by itself, defeat a prohibition designed to prevent conflicts of interest.
