{"id":43349,"date":"2025-10-08T09:41:04","date_gmt":"2025-10-08T07:41:04","guid":{"rendered":"https:\/\/stbb.co.za\/dev2\/?p=43349"},"modified":"2026-08-05T15:52:37","modified_gmt":"2026-08-05T13:52:37","slug":"pulse-assessing-section-64-liability-the-sca-dismisses-prescription-defence-in-trust-fraud-dispute","status":"publish","type":"post","link":"https:\/\/stbb.co.za\/dev2\/pulse-assessing-section-64-liability-the-sca-dismisses-prescription-defence-in-trust-fraud-dispute\/","title":{"rendered":"Pulse | Assessing section 64 liability: The SCA dismisses prescription defence in trust fraud dispute"},"content":{"rendered":"<p>Late last month, the Supreme Court of Appeal (\u2018the SCA\u2019) delivered a decisive ruling in <a href=\"https:\/\/stbb.co.za\/dev2\/wp-content\/uploads\/2025\/10\/STBB_Pulse_October2025_1_Case865-2023_Heard06May2025-Decided25September2025.pdf\" target=\"_blank\" rel=\"noopener\"><u><em>Nicholls v Gaybba<\/em><\/u><\/a> \u2013 a dramatic case centring on personal liability and the prescription of fraud-related claims under section 64 of the Close Corporations Act.<\/p>\n<p><strong><em>The facts<\/em><\/strong><\/p>\n<p>The dispute arose from allegations that Magdalena Gaybba \u2013 sole member of HTI Technologies CC (\u2018the CC\u2019) \u2013 and her late husband, Johann Gaybba, orchestrated a fraudulent scheme that siphoned more than R21 million from the Trust between 2006 and 2011. Mr Gaybba \u2013 the Trust\u2019s former bookkeeper \u2013 allegedly channelled funds through the CC using fictitious transactions and circular payments. While some of the money was repaid, a shortfall of nearly R10 million remained outstanding.<\/p>\n<p>Years later, the Trust instituted three claims against Ms Gaybba, holding that she was liable under section 26 of the Close Corporations Act (\u2018the CC Act\u2019), personally liable under section 64 of the CC Act for reckless or fraudulent trading, and alternatively, delictually liable as a co-wrongdoer with her late husband.<\/p>\n<p>In the Western Cape High Court, Ms Gaybba raised a special plea of prescription. The High Court found that the Trust\u2019s claims had lapsed in terms of the Prescription Act. It reasoned that the \u2018debts\u2019 became due in February 2011, when HTI was deregistered, and that the trustees had, or could reasonably have acquired, knowledge of the relevant facts more than three years before the summons was served in April 2019. On this reasoning, all three claims were dismissed.<\/p>\n<p><strong><em>The issues on appeal<\/em><\/strong><\/p>\n<p>On appeal, the central questions before the SCA were:<\/p>\n<ol>\n<li>Does a claim under section 64 of the CC Act constitute a \u2018debt\u2019 capable of prescription?<\/li>\n<li>If so, when did prescription begin to run?<\/li>\n<li>Had the Trust\u2019s alternative delictual claims prescribed?<\/li>\n<\/ol>\n<p><strong><em>Section 64 and prescription<\/em><\/strong><\/p>\n<p data-start=\"185\" data-end=\"349\">Section 64 of the CC Act creates a mechanism to hold individuals personally accountable when a close corporation\u2019s business is conducted recklessly, with gross negligence, or with intent to defraud. If a court finds that any person knowingly participated in such conduct, it may declare them personally liable for all or part of the corporation\u2019s debts and liabilities. The court may also issue any additional orders necessary to enforce that liability.<\/p>\n<p>In a careful analysis, the SCA held that a claim under section 64 is not a \u2018debt\u2019 within the meaning of section 10 of the Prescription Act, which governs the prescription of debts by extinction. Indeed, liability under this provision is not determined by the &#8216;normal&#8217; rules of prescription and only arises once a court exercises its discretion to declare a member personally liable for the CC\u2019s debts. Until such a declaration is made, there is no enforceable obligation. In other words, prescription cannot run against a right that does not yet exist.<\/p>\n<p>Crucially, the SCA distinguished section 64 claims from insolvency cases where a liquidator seeks to set aside impeachable transactions, noting that in those cases the right exists before litigation and is thus subject to prescription.<\/p>\n<p><strong><em>Delictual claims<\/em><\/strong><\/p>\n<p>Turning to the delictual claims, the SCA considered whether the trustees had knowledge of the facts giving rise to their cause of action more than three years before serving summons. The Court accepted that suspicions existed earlier, particularly following investigations by auditors, but found that conclusive knowledge of Ms Gaybba\u2019s role only emerged after the Trust obtained the CC\u2019s bank statements during insolvency proceedings in late 2018.<\/p>\n<p>The Court emphasised that prescription under section 12(3) of the Prescription Act only begins when a creditor has knowledge of the identity of the debtor and the material facts of the claim, or could reasonably have acquired such knowledge. In this case, those facts only became available to the Trust within three years of serving the summons.<\/p>\n<p><strong><em>The outcome<\/em><\/strong><\/p>\n<p>The SCA accordingly upheld the appeal with costs, set aside the High Court\u2019s order, and dismissed the special plea of prescription. It held that the section 64 claim was not susceptible to prescription and that the delictual claims had been instituted within the prescribed period.<\/p>\n<p><strong><em>Significance of the case<\/em><\/strong><\/p>\n<p>The judgment clarifies that a section 64 claim under the CC Act does not constitute a \u2018debt\u2019 for prescription purposes as liability arises only after a discretionary court order. Critically, it also highlights the importance of identifying precisely when creditors gain sufficient knowledge of a debtor\u2019s role in fraudulent conduct for prescription to begin.<\/p>\n<p>The case is a timely reminder for trustees, creditors, and legal practitioners that actual or reasonably attainable knowledge of material facts is required before the prescription clock starts ticking.<\/p>\n<p>Are you dealing with a similar dispute or are concerned that your matter may prescribe? For expert legal assistance, contact our team of litigation and dispute resolution attorneys at <a href=\"mailto:litigation@stbb.co.za?Subject=RE:%20STBB%20Pulse%20Assessing%20section%2064%20liability:%20The%20SCA%20dismisses%20prescription%20defence%20in%20trust%20fraud%20dispute%20enquiry\"><u>litigation@stbb.co.za<\/u><\/a>.<\/p>\n<p style=\"font-size: 12px; text-align: left;\"><em>This content is the property of STBB. We encourage the sharing of our content for informational purposes. However, if you wish to copy or reproduce our content on your own platform or website, please ensure that proper credit is given to STBB<\/em>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Late last month, the Supreme Court of Appeal (\u2018the SCA\u2019) delivered a decisive ruling in Nicholls v Gaybba \u2013 a dramatic case centring on personal liability and the prescription of fraud-related claims under section 64 of the Close Corporations Act.<\/p>\n","protected":false},"author":364,"featured_media":43350,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_exactmetrics_skip_tracking":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[98,137,193],"tags":[],"class_list":["post-43349","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-articles-published-litigation-and-dispute-resolution","category-latest","category-pulse"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Pulse | Assessing section 64 liability: The SCA dismisses prescription defence in trust fraud dispute - STBB<\/title>\n<meta name=\"description\" content=\"Is the &#039;debt&#039; incurred by a member of a close corporation through fraud subject to the normal rules of prescription? No, says the SCA.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/stbb.co.za\/dev2\/pulse-assessing-section-64-liability-the-sca-dismisses-prescription-defence-in-trust-fraud-dispute\/\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Samantha Smith\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/stbb.co.za\\\/dev2\\\/pulse-assessing-section-64-liability-the-sca-dismisses-prescription-defence-in-trust-fraud-dispute\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/stbb.co.za\\\/dev2\\\/pulse-assessing-section-64-liability-the-sca-dismisses-prescription-defence-in-trust-fraud-dispute\\\/\"},\"author\":{\"name\":\"Samantha Smith\",\"@id\":\"https:\\\/\\\/stbb.co.za\\\/dev2\\\/#\\\/schema\\\/person\\\/805b4884d2d0620da8c730a20588b52a\"},\"headline\":\"Pulse | Assessing section 64 liability: The SCA dismisses prescription defence in trust fraud dispute\",\"datePublished\":\"2025-10-08T07:41:04+00:00\",\"dateModified\":\"2026-08-05T13:52:37+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/stbb.co.za\\\/dev2\\\/pulse-assessing-section-64-liability-the-sca-dismisses-prescription-defence-in-trust-fraud-dispute\\\/\"},\"wordCount\":831,\"publisher\":{\"@id\":\"https:\\\/\\\/stbb.co.za\\\/dev2\\\/#organization\"},\"image\":{\"@id\":\"https:\\\/\\\/stbb.co.za\\\/dev2\\\/pulse-assessing-section-64-liability-the-sca-dismisses-prescription-defence-in-trust-fraud-dispute\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/stbb.co.za\\\/dev2\\\/wp-content\\\/uploads\\\/2025\\\/10\\\/STBB_Pulse_October2025_1_s1.png\",\"articleSection\":[\"Articles Published - Litigation and Dispute Resolution\",\"Latest\",\"Pulse\"],\"inLanguage\":\"en-ZA\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/stbb.co.za\\\/dev2\\\/pulse-assessing-section-64-liability-the-sca-dismisses-prescription-defence-in-trust-fraud-dispute\\\/\",\"url\":\"https:\\\/\\\/stbb.co.za\\\/dev2\\\/pulse-assessing-section-64-liability-the-sca-dismisses-prescription-defence-in-trust-fraud-dispute\\\/\",\"name\":\"Pulse | Assessing section 64 liability: The SCA dismisses prescription defence in trust fraud dispute - STBB\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/stbb.co.za\\\/dev2\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/stbb.co.za\\\/dev2\\\/pulse-assessing-section-64-liability-the-sca-dismisses-prescription-defence-in-trust-fraud-dispute\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/stbb.co.za\\\/dev2\\\/pulse-assessing-section-64-liability-the-sca-dismisses-prescription-defence-in-trust-fraud-dispute\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/stbb.co.za\\\/dev2\\\/wp-content\\\/uploads\\\/2025\\\/10\\\/STBB_Pulse_October2025_1_s1.png\",\"datePublished\":\"2025-10-08T07:41:04+00:00\",\"dateModified\":\"2026-08-05T13:52:37+00:00\",\"description\":\"Is the 'debt' incurred by a member of a close corporation through fraud subject to the normal rules of prescription? 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