Judgment: C Cohen v ABSA Bank

13 February 2024

Dear Members

In considering the prospects of success on the merits, the SCA crystallized the issue before it as follows: whether s 31(2) of the Insolvency Act affords a shield to a surety and co-principal debtor to escape liability under a deed of suretyship given in favour of a creditor for the due performance by the principal debtor of its obligations under a loan advanced to it by the creditor in circumstances where the principal debtor failed to pay the full indebtedness, was liquidated, and the surety alleges that, before its liquidation, the insolvent in collusion with the creditor disposed of property belonging to the insolvent in a manner which had the effect of prejudicing the insolvent’s creditors or of preferring one of them above another.

The SCA stated that the High Court was correct in holding that the interpretation contended for by Mr Cohen was at odds with the text and purpose of ss 31 and 32 and was not supported by the relevant authorities, adding further that the High Court correctly rejected Mr Cohen’s s 31(2) defense and dismissed his counterclaim due to his lack of standing.

In the result, the SCA concluded that Mr Cohen’s s 31(2) defense was unmeritorious and, therefore, did not trump the unsatisfactory explanation for the delay. The application for condonation and the reinstatement of the appeal was dismissed and the appeal was struck from the roll.

Kindly sent to us by Haroon Laher of Fasken Inc.

Take care,
René Bekker
Chief Operating Officer

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