The first respondent (Main Road) had a retail pharmacy business which it sold and transferred to the second respondent (Arrie Nel Pharmacy Group). The applicants, being creditors of Main Road, sought an order declaring the transfer to be null and void, setting it aside and ordering the business to be transferred back to Main Road and for the entity to be placed under business rescue. 

The applicants had two grounds on which their application was based. In the first place, they argued that the transfer was void in terms of section 34(1) of the Insolvency Act given that the required notice of transfer was not published in the prescribed way. Secondly, they argued that the transfer was void in common law based on fraudulent collusion between the respondents to detrimentally prejudice the rights of Main Road's creditors. 

Section 34(1) of the Insolvency Act stipulates that if notice of the transfer of a business is not published in the prescribed manner, the transfer shall be void as against the transferor's creditors for a period of six months after the transfer, as well as void against the trustee of the transferor's estate, should the transferor be sequestrated within six months after the transfer.  

It was common cause in this case that the required notice of transfer was not published, and the applicants argued that on a strict reading of section 34(1) the sale was void in the circumstances. The court had to decide whether the transfer is void as a whole for six months for all purposes and against all persons, or merely void as against the persons specified in section 34(1) (namely the seller's creditors and trustee). 

Given that the applicants sought an order setting aside the transaction as a whole and not merely an order for the recovery of the creditor's debt, a finding by the court of a relative meaning for "void" (i.e. only void as against the persons listed in section 34(1)) would result in the application being dismissed. 

The court relied on previous case law in reaching the conclusion that "void" in the context of section 34(1) has a relative meaning. A transfer that does not comply with the notice requirement in section 34(1) is accordingly void for six months as against and to the extent of a valid claim brought by a creditor of the seller, but the transaction as a whole is not invalid or void. 

The court also dismissed the applicants' argument that the transfer was void under the common law Actio Pauliana based on fraudulent collusion between the respondents. The court concluded that Main Road had no intention to defraud the applicants. The court pointed to the fact that Main Road acted overtly by notifying the applicants of the second respondent's intention to purchase the business and by providing the applicants with a first option to purchase the business. The court furthermore dismissed the notion that the purchaser's knowledge of the seller's financial troubles pointed to the purchaser being a party to the fraud. 

The court's decision makes it clear that a transfer of business that does not comply with the notice requirement in section 34(1) of the Insolvency Act is not void as a whole but merely regarded as void for six months as against and for purposes of a valid claim brought by a creditor of the seller. 

It is accordingly important for creditors to institute their claim timeously in such circumstances, failing which a bona fide purchaser of the business can acquire the business free of the creditor's claim and the latter's only remedy (in the absence of real rights of security) would lie against the seller of the business, now divested of the asset.