Fraud Claims Against CC Members Don't Expire
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Your client wrote off a fraud loss years ago. Three years passed, they assumed the claim was dead, and they moved on. Now the Supreme Court of Appeal says they may still have a case. Here is what changed.
The case in plain terms
In Godfrey Goliath Nicholls N.O. and Others v Magdalena Gaybba and Another [2025] ZASCA 138, handed down on 25 September 2025, the SCA dealt with a fraud running into millions of rands inside a close corporation called HTI Technologies CC. Ms Gaybba was the sole member.
The Nicholls Vrugteverspreiders Trust alleged that HTI had siphoned off roughly R9.88 million from its business over six years, through concealed payments into multiple bank accounts. The Trust sued Ms Gaybba personally in 2019, relying on three legs, including section 64 of the Close Corporations Act 69 of 1984. Section 64 allows a court to hold a person personally liable when a CC's business is carried on recklessly, with gross negligence, or to defraud creditors.
Ms Gaybba's defence was simple. The debts were due in February 2011. The Prescription Act 68 of 1969 gives creditors three years to sue. Summons only came in April 2019. By then, she argued, the three-year window had closed and the Trust had lost the right to claim.
The Western Cape High Court agreed and threw the whole case out.
What the SCA decided
The SCA disagreed. It found that a section 64 claim is not a "debt" under section 10 of the Prescription Act at all. The reason is technical but useful: no liability exists until a court declares it. The right to be paid only comes into being once the court has exercised its discretion and lifted the corporate veil. Before that moment, there is nothing to prescribe.
The SCA also found that the Trust's alternative delictual claim had not prescribed either, because the facts only emerged once the Trust got HTI's bank statements during insolvency proceedings.
The appeal was upheld with costs. The special plea of prescription was dismissed.
As the Cliffe Dekker Hofmeyr Dispute Resolution team put it in their 19 May 2026 alert, this is "good news for creditors."
Why this matters to your practice
If you advise creditors, this opens a door you may have thought was closed. A client who lost money to a reckless or fraudulent CC member years ago may still have a remedy, even if the underlying debts appear to have prescribed. The SCA held that a section 64 application is not itself a ‘debt’ capable of prescribing before a court declaration is made.
If you advise CC members, the message is harsher. Reckless or fraudulent trading exposure does not fade quietly with time. Members who knowingly participated in concealed transactions, ghost payments, or fraud-like schemes can still be dragged into personal liability years later. The corporate veil is thinner than many CC owners believe.
This sits next to a growing body of case law on personal exposure for CC members. The SCA confirmed in Crous v Wynberg Boys High School earlier in 2025 that mere membership is not enough to impose liability, but participation in wrongdoing is. Read the two cases together and the picture is clear: knowingly being part of the conduct is the trigger.
Practical takeaway
Three things to do this week:
Flag any closed fraud or misappropriation files involving close corporations. If the wrongdoer was a member and the trail involves recklessness or fraud, the claim may still be live under section 64.
When you sign off CC financials, look harder. Concealed payments, circular transactions, and missing supporting documents are not just audit headaches. They are personal liability traps for members and reporting duties for you under section 62 of the Close Corporations Act.
Document your reporting. Section 62(3) requires accounting officers to report irregularities to CIPC immediately. After this ruling, that report becomes more valuable than ever as evidence in any later section 64 application.