Blu Label Unlimited has lost a Supreme Court of Appeal (SCA) bid to claw back R347 531 in virtual vouchers it supplied to an outlet that turned out to be in liquidation – a ruling that shows a five-decade-old law applies to the internet era.
The company – also known as BLU – had a 2019 agreement with Cape Basic Products (CBP) that allowed CBP to sell virtual prepaid products to consumers – airtime, data, electricity, betting and ticketing – through its terminal equipment.
CBP paid over R347 531.81 to BLU in eight transactions between March and June 2020 so it could sell the products.
Bridget Letsholo, head of business restructuring and insolvency at CMS South Africa, says the court’s unanimous dismissal of BLU’s appeal “is a clear, principled and entirely unsurprising application of long-standing South African insolvency law”.
The ruling “delivers important practical guidance for the fintech, telecommunications and prepaid-product distribution sectors that dominate much of South Africa’s retail landscape,” Letsholo says.
Eloise Cilliers, a senior associate and corporate disputes attorney at commercial law firm Barnard, says the judgement confirms that the Companies Act of 1973 applies equally to automated, high-volume digital distribution models.
“What the SCA did in this case was simply refuse to carve out a commercial exception for a high-volume, automated distribution model,” says Letsholo.
Not just a middleman
Cilliers explains: “BLU argued that it was not the true recipient of the payments, but merely an intermediary or conduit. The SCA rejected that argument, finding that the contractual relationship between Blu Label and Cape Basic Products reflected a debtor-creditor relationship rather than a mere agency arrangement.”
A recipient cannot avoid repayment simply by describing itself as an intermediary if the agreement and the facts show it was the party that received the disposition, says Cilliers.
In its agreement with CBP, the outlet paid money to BLU in eight transactions between March and June 2020, which was then allocated as credit and enabled it to place orders.
Ms Janse van Rensburg, a chartered accountant employed as a shared executive by BLU, told the court that the deposit was not payment for the purchase of stock but rather a credit amount that enabled CBP to purchase items, sell these, and earn commission.
Until a customer bought a product and paid CBP, BLU was not entitled to use the funds, and CBP could withdraw any unused funds. When the deal was terminated, the balance was to be returned to CBP, says Janse van Rensburg.
Appeal judge Heaton Nicholls notes, however, that “these contentions… are not recorded in the written terms of the agreement”.
BLU claimed CBP suffered no actual loss, since funds deposited were recycled through customer purchases. Customers paid CBP for products, and these payments were then forwarded to suppliers, resulting in no net change for CBP.
Cilliers says it did not matter whether the payments reduced the asset base or whether that asset base was later replenished. “What mattered was that the payments had been made after liquidation proceedings had commenced.”
Time matters
Cilliers notes the timing of payments is critical. “In this case, the payments were made after the provisional liquidation order had already been granted.” Because of this, the SCA held that BLU was obliged to repay CBP.
The court held that the agreement was cancelled because CBP went into liquidation. Under the law, Nicholls says the payments are treated as if they never occurred, and BLU therefore had an immediate obligation to repay the money.
Nicholls also notes that, once provisional liquidation is in place, control of the company’s assets vests with the Master of the Court, which limited BLU’s ability to enforce contractual arrangements. “This, too, is another insurmountable difficulty for Blue Label. The liquidators were entitled to repayment of the eight dispositions,” the judge writes.
BLU reported total revenue of R14.1 billion in 2025, while on a gross basis – including PINless top-ups, prepaid electricity, ticketing and vouchers – the value would have increased 7% to R96 billion.
However, BLU is experiencing margin pressure in the prepaid segment as networks are offering more data and airtime for the same or lower amounts, while the prepaid electricity market continues to face margin compression.
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