Civil Procedure

Actio Pauliana

An action by which creditors can set aside fraudulent dispositions of assets made by a debtor to defeat creditors before insolvency.

Legal Definition

The actio Pauliana allows a creditor to set aside transactions entered into by a debtor with the intent to defraud creditors — for example, transferring assets to a spouse or friend for little or no consideration shortly before sequestration. South African insolvency law codifies this principle: the Insolvency Act allows the trustee in insolvency to set aside dispositions that were not for value and were made within 2 years of sequestration.

📖 Constitutional / Statutory Basis: Section 34 (access to courts)

Practical Example

A debtor transfers their home to their spouse for R100,000 (far below market value) 6 months before declaring insolvency. The trustee applies to set aside the transfer under the Insolvency Act.

Frequently Asked Questions

How far back can fraudulent dispositions be set aside in South African insolvency law?

The Insolvency Act allows dispositions without adequate value to be set aside if made within 2 years before sequestration. Collusive transactions aimed at prejudicing creditors can be set aside even beyond 2 years.

What if the person who received the asset did not know about the fraud?

Good faith recipients of gratuitous (free) dispositions can still have the transaction set aside. Recipients who paid adequate value and had no knowledge of the fraud are better protected — the onus on the trustee is higher.

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