R169 Million Housing Dispute: Court Refuses to Block Liquidators' Claim
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Williams NO and Another v eThekwini Municipality and Others (13624/2022P)
In Williams NO and Another v eThekwini Municipality and Others, the court refused an application by eThekwini Municipality to force liquidators of a failed construction company to provide security for legal costs before continuing with a R169 million claim against the municipality.
So if an insolvent company sues you, you worry: if I win, this broke company won't be able to pay my legal bill. To protect against that, the law lets you ask the court to order the company to put up money in advance, called security for costs. If the company can't find that money, the case effectively dies before it starts.
What Happened
Zikhulise Cleaning Maintenance and Transport CC (ZCMT) was a close corporation that won public housing contracts in KwaZulu-Natal. It fell into serious tax debt, and SARS applied to wind it up in 2016. It went into final liquidation in 2020.
A court order required eThekwini to pay ZCMT for completed housing work. Instead, between January and August 2021, eThekwini paid about R169 million to Zikhulise Group (Pty) Ltd, a separate company set up by ZCMT's sole member, Ms Mabong Mkhize. These payments were made years after ZCMT went into liquidation.
The municipality says it was told the close corporation had been converted into Zikhulise Group. The liquidators say that is false. The conversion was to a differently named company, Zikhulise Group was always separate, and the supposed conversion was later set aside by a court. The judgment also records that Ms Mkhize did not disclose the liquidation to CIPC and that an auditor's letter was altered to help a tender go to Zikhulise Group.
The liquidators sued to recover the R169 million for the insolvent estate and its creditors.
The Application and the Ruling
Before trial, eThekwini asked for security for costs. In plain terms, it wanted the liquidators to set aside money in advance, in case eThekwini won and the liquidators could not pay its legal bill. Its main point was that ZCMT is insolvent. The court dismissed the application with costs. Its reasons were:
Insolvency alone is not enough. eThekwini had to show a real reason to believe the liquidators could not pay costs, and it put up no facts to prove that.
SARS, the only proved creditor, is obliged by law to cover any shortfall in costs.
eThekwini had not filed a plea, so the court could not weigh the claim or any defence. Its prescription argument had no basis set out.
There was no fact-based claim that the case was reckless, vexatious, or an abuse.
The judge was critical. This case involves serious allegations about public money, and eThekwini even admitted its officials were deceived. A municipality should support an investigation into such payments, not try to block it.
The court added an important point. Government bodies carry a higher constitutional duty. Because an order for security limits access to the courts, the state must make a compelling case, showing the litigation is frivolous, vexatious, or weak, before it can seek security against a private litigant.
Key Lessons for CIBA Members
Insolvency is not a bar to litigation. Courts look at whether creditors can contribute and whether the case is genuine. When an insolvent company (or its liquidators) wants to sue someone, and the other side may try to shut that down by demanding "security for costs." This did not stand in this case. The liquidators were able to sue to recover the R169 million for the insolvent estate and its creditors.
Similar entity names create real risk. Overlapping names and changed payment instructions during liquidation are exactly where money goes astray. Insist on entity checks, audit trails, and control over banking changes.
Public sector payment controls matter. Supplier verification, CIPC checks, and liquidation status reviews would have caught this. One missed check became R169 million in litigation.
Accountants are a frontline defence. Strong oversight protects public money, keeps businesses alive, and supports the wider economy. That is work worth being recognised, and paid, for.