ABSA Bank Limited v Cohen (32870/2012) [2021] ZAGPJHC 386 (9 June 2021)

ABSA Bank Limited v Cohen (32870/2012) [2021] ZAGPJHC 386 (9 June 2021)

The court held that section 31(2) of the Insolvency Act does not provide a defence to a surety unless proceedings have been successfully brought to set aside the collusive disposition under section 31(1). The forfeiture of a creditor's claim is contingent upon a court finding liability for compensation and/or penalty in the context of such proceedings. Only the liquidator or a creditor acting in the liquidator's name may bring such proceedings. The defendant did not object to the liquidation and distribution accounts or bring any application to set aside the disposition. The underlying debt owed by AMU to ABSA was proved and accepted by the liquidators, and the defendant is bound by those...

Citation
[2021] ZAGPJHC 386
Parties
Plaintiff: ABSA Bank Limited; Defendant: Chaim Cohen
Court
South Gauteng High Court, Johannesburg
Jurisdiction
South Africa
Judgment Date
9 June 2021
Case Number
32870/2012
Procedural Posture
Civil Judgment / Trial Judgment
Outcome
Judgment for the plaintiff. Defendant is liable for the suretyship debt and interest. Counterclaim dismissed.
Judges
Mahalelo
Legal Topics
Suretyship, Collusive Disposition, Insolvency Act Section 31, Liquidation, Interest Calculation
Banking and Finance Civil Procedure Suretyship Collusive Disposition Insolvency Act Section 31 Liquidation Interest Calculation

Case Brief

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Parties

ABSA Bank Limited

Plaintiff

Chaim Cohen

Defendant

Procedural Posture

Civil Judgment / Trial Judgment

Legal Issues

  1. 1 Whether the defendant, as surety, is entitled to rely on section 31(2) of the Insolvency Act to defeat the plaintiff's claim.
  2. 2 Whether the disposition of R25 million to Protea constituted a collusive disposition prejudicing other creditors.
  3. 3 Whether the defendant's suretyship has been discharged due to alleged prejudice or collusion.

Ratio Decidendi

The court held that section 31(2) of the Insolvency Act does not provide a defence to a surety unless proceedings have been successfully brought to set aside the collusive disposition under section 31(1). The forfeiture of a creditor's claim is contingent upon a court finding liability for compensation and/or penalty in the context of such proceedings. Only the liquidator or a creditor acting in the liquidator's name may bring such proceedings. The defendant did not object to the liquidation and distribution accounts or bring any application to set aside the disposition. The underlying debt owed by AMU to ABSA was proved and accepted by the liquidators, and the defendant is bound by those...

Court Disposition

Judgment for the plaintiff. Defendant is liable for the suretyship debt and interest. Counterclaim dismissed.

Orders

  • The defendant is liable to pay the plaintiff an amount of R40 million.
  • The defendant is liable to pay interest on the above amount from date of judgment to date of payment at the prescribed applicable rate.