WHEN A TRUST BECOMES A TRAP

The Supreme Court of Appeal (SCA) handed down a judgment reaffirming that South African courts will not hesitate to pierce the veneer of a trust when it is abused as a vehicle for fraud. In Van Rooyen NO and Another v Mokwena NO and Another, the SCA granted a provisional sequestration order against the Dikwenanyana Trust (“the Trust”), a structure found to be nothing more than a shield for misappropriated funds from a law firm’s trust account.

Read the case here:

https://www.saflii.org/za/cases/ZASCA/2025/130.html

Central to this case is the downfall of Tumi Mokwena Incorporated (“TMI”), a Limpopo-based law firm that collapsed after millions of rands were siphoned from its trust accounts. The firm’s director, Mr. Tumi Mokwena (“Mokwena”), was separately sequestrated for insolvency following years of obstructive and vexatious litigation designed to frustrate liquidators’ efforts to trace missing funds. What emerged from the wreckage was a web of deceit and a Trust at the centre of it all.

The anatomy of a trust gone wrong

The liquidators of TMI, Adriaan van Rooyen and Mmabatho Motimele, uncovered that more than R7.4 million had been transferred from TMI’s accounts to the Dikwenanyana Trust, which was under the control of Mokwena and his family. A forensic report, which was not contested, confirmed that these transfers were entirely unfounded and that the trust had been funded exclusively with embezzled client monies. The shortfall in TMI’s trust account eventually ballooned to more than R16 million.

Despite admitting that all funds originated from TMI, the trust provided no legitimate reason for the payments. Its sole defence was that Mokwena, as the firm’s director, was entitled to use client trust funds “for whatever purpose he wished.” The high court accepted this explanation, dismissing the liquidators’ sequestration application and effectively allowing the Trust to retain assets derived from stolen funds.

The story however did not end there.

From resolution to ruin

Facing appeal proceedings by the liquidators, the parties engaged in settlement negotiations in late 2024. On 29 October, they signed a settlement agreement in which the Trust formally acknowledged receiving R3.5 million from TMI’s trust and business accounts, funds it agreed to reimburse to the liquidators. Crucially, clause 11 of the agreement contained a trigger mechanism, if the Trust defaulted, the full R7.49 million claim would immediately become due, and the liquidators could proceed with the pending appeal unopposed.

When the Trust failed to honour its repayment obligations, the liquidators invoked the clause and revived the appeal on an unopposed basis. The matter was then determined in the SCA on written submissions, without oral argument, under section 19(a) of the Superior Courts Act.

Unmasking the trust

In a judgment penned by Justice SE Weiner (with 3 other judges concurring), the SCA dismantled the Trust’s façade. The appeal court held that the evidence established every requirement for a provisional sequestration order under section 10 of the Insolvency Act 24 of 1936:

A valid claim: The liquidators’ R7.49 million claim was undisputed, arising from the theft of TMI’s trust funds and payments fraudulently channelled to the trust;

Insolvency: The Trust was hopelessly insolvent; its assets were derived from stolen funds, and it had no legitimate source of income;

Advantage to creditors: With Trust properties worth over R13 million against liabilities of about R6.9 million, sequestration would clearly yield a benefit to creditors. It would also enable statutory inquiries that could expose further hidden assets.

The SCA drew heavily on Liberty Group Limited v Moosa, where the court emphasised that provisional sequestration should follow when the evidence makes it “not just appropriate but indeed necessary.” The judge applied that principle with force, stressing that the courts cannot allow technical structures like trusts to be used to shield the proceeds of fraud.

Court Order

The court’s order went further than a typical sequestration. It issued a rule nisi, returnable on 18 March 2026, directing that the trust veil be pierced and that all assets vested in the Trust, or held by its trustees, be made available to the joint estates of the Trust, Mokwena, and TMI. In effect, the court treated the Trust as Mokwena’s alter ego, collapsing the artificial separation between personal, firm and trust assets.

This approach underscores the judiciary’s growing impatience with the misuse of trusts to frustrate creditors and conceal misappropriated wealth. For too long, individuals have used the trust form as a legal fortress against accountability, banking on its technical protections to obscure ownership and dodge liability. The SCA’s decision makes clear that such misuse will not stand scrutiny.

When a clause becomes a weapon

The judgment also highlights the potency of well-drafted settlement clauses. Clause 11 of the agreement proved decisive: transforming a simple breach into an unopposed appeal. When the trust failed to pay, it triggered an automatic acceleration of the full debt and waived its right to contest the matter. The SCA treated the clause as binding and enforceable, an outcome that should give commercial lawyers pause.

Settlement agreements often when breached, leave parties to restart litigation from scratch. Here, the liquidators anticipated default and built an enforcement mechanism directly into the contract, a tactical masterstroke that ultimately delivered victory.

In conclusion

For creditors, the judgment is a lifeline. For trustees, the warning is unmistakable: a trust that operates as a personal piggy bank is no trust at all. When a structure is used to conceal fraud or frustrate justice, the law will treat it as transparent.

The Van Rooyen judgment restores a measure of integrity to both insolvency law and the concept of the trust itself. It confirms that while trusts remain legitimate instruments of estate planning and asset protection, they are not impregnable. The moment they become conduits of fraud, the courts will not hesitate to “look behind the curtain,” as the SCA so decisively did.