THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case no: 1280/2021

In the matter between:

CHAIM COHEN

Appellant

and

ABSA BANK LIMITED

Respondent

Neutral citation:
Cohen v Absa Bank Limited (Case no 1280/2021) [2024] ZASCA
16 (9 February 2024)

Coram:
MOCUMIE, NICHOLLS and MEYER JJA and CHETTY and
KEIGHTLEY AJJA

Heard:
1 November 2023

Delivered:
This judgment was handed down electronically by circulation to the
parties’ representatives via email, publication on the Supreme Court of Appeal website
and release to SAFLII. The date and time of hand-down is deemed to be 11:00 am on
9 February 2024.

Summary:
Insolvency law – Interpretation – s 31(2) read with s 32 of the Insolvency
Act 24 of 1936 – whether a surety has locus standi to invoke s 31(2) to avoid liability
to a creditor after the liquidation of the primary debtor.

ORDER

On appeal from: Gauteng Division of the High Court, Johannesburg (Mahalelo J,
sitting as court of first instance):
1 The application for condonation and reinstatement of the appeal is dismissed
with costs, including those of two counsel.
2 The appeal is struck from the roll with costs, including those of two counsel.

JUDGMENT

Meyer JA (Mocumie and Nicholls JJA and Chetty and Keightley AJJA
concurring):
[1] The appellant, Mr Chaim Cohen (Mr Cohen), seeks to avoid liability under a
deed of suretyship executed in favour of the respondent, Absa Bank Limited (Absa),
on the basis of s 31(2) of the Insolvency Act 24 of 1936 (the Insolvency Act).1 As a
result of the primary debtor, A Million Up Investments 105 (Pty) Limited (AMU), being
unable to meet its obligations under a loan agreement to Absa in full, it was liquidated.
Thereafter, Absa sought to hold Mr Cohen liable as surety. In his defence Mr Cohen
invoked s 31(2) and alleged that, before its liquidation, AMU colluded with Absa to
dispose of property belonging to AMU in a manner which had the effect of prejudicing
AMU’s creditors or of preferring one of them above the others. The question is whether
s 31(2) permits a surety, in these circumstances, to raise this defence. The commercial
court of the Gauteng Division of the High Court, Johannesburg (the high court) said
no. Consequently, it ordered Mr Cohen to pay to Absa 40 million rand plus interest

1 Section 31(2) reads:
‘Any person who was a party to such collusive disposition shall be liable to make good any loss thereby
caused to the insolvent estate in question and shall pay for the benefit of the estate, by way of penalty,
such sum as the Court may adjudge, not exceeding the amount by which he would have benefitted by
such dealing if it had not been set aside; and if he is a creditor he shall also forfeit his claim against the
estate.’

and costs. It is that finding and order which the surety wishes to assail in this appeal.
The appeal is with leave of the high court.

[2] Since the appeal record was filed late, the appeal lapsed under rule 8 of the
Rules Regulating the Conduct of the Proceedings of the Supreme Court of Appeal. Mr
Cohen seeks condonation and the reinstatement of the appeal. His application is
opposed by the Absa. Evidentially, Mr Cowen’s founding affidavit fails to provide a full
and reasonable explanation which covers the entire period of the delay.  It is trite that
‘very weak prospects of success may not offset a full, complete and satisfactory
explanation for a delay; while strong merits of success may excuse an inadequate
explanation for the delay (to a point)’.2 In this case, as I demonstrate below, it is the
absence of any prospects of success that ultimately decide the fate of the application
for condonation and reinstatement of the appeal.

[3] The following factual background is common cause. In 2006, AMU purchased
a property located on Orange Street, Cape Town (the property). Mr Cohen served as
the chief executive officer and chairman of AMU’s holding company, Quantum
Property Group Limited (QPG). He referred to himself as the ‘driving force and
controlling mind on the boards of QPG and AMU’.

[4] There were several financing agreements concluded between Absa and AMU.
Under these agreements, Absa extended substantial loans to AMU to build a hotel on
the property. The hotel, known as 15 on Orange (the hotel), has 129 rooms. There
were also plans for 12 penthouses, 2 567 m² of retail space, and 169 parking spaces
in the basement of the hotel building. July 2006 marked the beginning of construction.
The expected completion date was June 2009, with the hotel scheduled to open on 1
September 2009.

[5] In November 2006, a shareholders’ agreement was concluded between AMU
and Protea Hotel Group (Pty) Limited (Protea). In terms of this agreement, each party
was entitled to 50 percent of the shares in Darwo Trading 75 (Pty) Limited (Darwo),

2 Valor IT v Premier, North West Province and Others [2020] ZASCA 62; [2020] 3 All SA 397 (SCA);
2021 (1) SA 42 (SCA) para 38.

the company that was to lease and operate the hotel. Darwo, in turn, concluded a
management agreement with African Pride (Pty) Limited (AP), a wholly owned
subsidiary of Protea, under which AP agreed to manage Darwo’s hotel operations for
a period of 20 years.

[6] Absa and AMU signed the first loan agreement in 2006. In April 2008, a new
loan agreement was concluded, which replaced the initial one (the 2008 loan
agreement). It was agreed that Absa would provide AMU with up to R370 600 000 in
funding to build the hotel. The loan was due for repayment in May 2009, which was 34
months following the first drawdown in July 2006. The retail areas within the hotel
building were to be fully leased when the hotel opened on 1 September 2009. The
penthouse apartments were to be sold ahead of time and transferred once they had
been built, generating income to reduce the Absa debt.

[7] On 9 January 2008, Mr Cohen signed a deed of suretyship in favour of Absa.
Under the suretyship, he bound himself as surety and co-principal debtor, jointly and
severally with AMU, in favour of Absa for the repayment on demand of any sum or
sums of money which AMU owed or might owe to Absa in the future, from whatever
cause arising. He agreed to be bound by all admissions made by or on behalf of AMU.
This included, but was not limited to, any acceptance of Absa’s claim by a trustee or
liquidator in the case of AMU’s insolvency or liquidation, and any judgment granted by
a competent court against AMU in favour of Absa. Absa’s entitlement to recover from
Mr Cohen was limited to a minimum amount of R20 million, plus any further amounts
for interest and costs that had accrued or would accrue until the date of payment.

[8] The hotel construction was not completed on time or within budget. The hotel
did not open until December 2009, and even then, only two floors of finished rooms
were ready for usage. The retail space areas remained unleased, while the
penthouses were still to be completed. Due to the ongoing construction work, the hotel
was unable to reap the anticipated benefits of being a preferred hotel during the 2010
FIFA World Cup.

[9] AMU needed additional funding due to the delay and cost overruns. It requested
an extension of the Absa credit facility. In November 2009, in an addendum, the parties

agreed upon the provision of extra funds and an extension of the loan repayment date
to 31 March 2010. Due to the loan not being repaid by 31 March 2010, Absa could call
up the loan, apply for AMU’s liquidation if payment was not made, and call on the
sureties, among whom was Mr Cohen, for payment. During that period, Absa was
convinced by AMU and the sureties, including Mr Cohen, that AMU could trade itself
into a better financial position, allowing it to repay the loan. Absa and the AMU
directors engaged in discussions for several months to achieve a mutually acceptable
solution that would enable AMU to repay its debt to Absa.

[10] AMU and QPG finally reached an agreement on 16 November 2010 to sign a
new ‘Commitment Letter’ and ‘Term Sheet’ to restructure the Absa loan (the 2010
Term Sheet). Mr Cohen, the executive chairman of QPG, presided over the QPG
board meeting. On 23 November 2010, the 2010 Term Sheet was signed. It outlined
the principles that would govern the restructuring of the credit facility and the
implementation of the turnaround plan.

[11] The three key components of the financial model that underpinned the 2010
Term Sheet, were the following. First, to lower Absa’s risk and the debt, AMU had to
raise R50 million in external equity capital, plus interest of about R9 million (the equity
injection). The equity injection deadline was 30 November 2011. QPG had suggested
that it would raise funds by issuing and selling debentures. This money could then be
used to purchase shares in AMU. Second, AMU had to acquire the whole 100 percent
benefit of the revenue generated by the operation of the hotel to pay off the Absa debt
(the revenue requirement). In August 2010, AMU board recommended to Absa that
AMU purchase Protea’s 50 percent stake in Darwo, the hotel operating company, to
meet the full revenue requirement. At the time, Protea’s loan account in Darwo topped
R20 million. This meant that in order for AMU to purchase Protea’s shares, it would
also need to acquire its loan account. Third, the penthouses had to be sold and the
money paid to Absa to reduce the loan.

[12] AMU and QPG used the 2010 Term Sheet to inform QPG's shareholders that
the loan repayment terms had been extended. Absa and AMU needed to finalize an
‘Amended and Restated Loan Agreement’ (the ARLA), which included the
restructuring plan they agreed on in November 2010. Since December 2010, all parties

concerned have been negotiating the terms of the formal agreement. Mr. Cohen was
actively involved in the early discussions and decisions around this agreement, the
agreements with Protea, and the draft sale agreement between Protea and AMU. His
position as director of AMU and of QPG was subsequently terminated.

[13] The ARLA was ultimately concluded on 31 August 2011. The terms recorded
were almost identical to those recorded in the 2010 Term Sheet. Despite the
abandonment of the debenture arrangement, the deadline for paying the equity
injection requirement was extended to 31 March 2012. To meet the complete revenue
requirement, the ARLA included three sets of agreements: The ‘Operator Restructure
Agreements’; the ‘Hotel Lease Agreement’; and the ‘New Management Agreement’.
These agreements anticipated the sale agreement between Protea and AMU, under
which Protea sold and transferred its 50 percent shareholding in Darwo, as well as its
loan account to AMU for an amount of R25 million. The sale agreement between
Darwo and AMU was concluded on 6 September 2011. AMU settled the acquisition
cost by transferring a penthouse to Protea for an estimated value of R11 million.
Additionally, cash payments of R11 million and R3 million were made using Absa’s
loan facility.

[14] As of 31 March 2012, AMU had not paid Absa the mandatory equity injection
amount. Following the breach, Absa demanded payment from Absa and from Mr
Cohen, qua surety. On 4 June 2012, the board of directors of AMU resolved that ARLA
voluntarily begin business rescue proceedings and be placed under supervision.
Following an application by Absa, the Western Cape high court issued an order on 18
June 2012, setting aside the resolution. On 29 June 2012, AMU was placed under
provisional winding-up by order of court, which order was made final on 14 August
2012. The liquidators accepted Absa’s claim for R576 991 787.69. Following the sale
of the property, the liquidators published the amended second and final liquidation and
distribution account that showed a deficiency of R380 million payable to Absa.

[15] On 1 September 2012, Absa initiated action proceedings against Mr Cohen in
the high court, claiming the amount of R20 million, interest plus costs, in respect of his
liability under the suretyship. The interest that had accrued on the suretyship capital
amount of R20 million attained the in duplum limit. Thus, Mr Cohen was sued for

payment of the amount of R40 million plus costs on the scale as between attorney and
own client, which scale of costs was provided for in the suretyship. Before the trial
ended, Mr Cohen abandoned all but one of his defences. That defence raises the
interpretation of s 31(2) of the Insolvency Act.3

[16] Based on the interpretation contended for by Mr Cohen, he argues that he was
released ex lege from his suretyship obligations due to Absa’s forfeiture of its claim
against the insolvent estate of AMU in terms of s 31(2) of the Insolvency Act. That is
so, he maintains, because AMU entered into a transaction with Absa in terms of which
AMU disposed of property belonging to it in a manner which had the effect of
prejudicing AMU’s creditors through preferring one of its creditors over the other
creditors. Absa, therefore, according to Mr Cohen, was a party to a collusive
disposition within the meaning of s 31(1) of the Insolvency Act and, as a creditor, it
forfeited its claim against AMU’s insolvent estate in terms of s 31(2).

[17] In Gert de Jager (Edms) Bpk v Jones NO & McHardy NO,4 Rumpff JA held that
if the parties to the collusion know that the debtor is insolvent and also know that the
alienation will have the effect of what is mentioned in s 31(1), then it follows that the
collusion is fraudulent in respect of the creditors in the sense that its purpose is to
short change them.5

[18] What constitutes the collusive disposition to which Absa was a party, according
to Mr Cohen, is the disposal of AMU’s property to Protea, which took place in terms of
the sale agreement concluded between Protea and AMU. In concluding the ARLA and
the sale agreement, Mr Cohen argues, AMU, in collusion with Absa, disposed of R14
million as well as a penthouse in the hotel building worth R11 million.

[19] Absa, in contrast, asserts the following. First, Absa was the only creditor who
could have been prejudiced by the penthouse’s sale and the R14 million payment to

3 Op cit fn 1.
4 Gert de Jager (Edms) Bpk v Jones NO & McHardy NO 1964 (3) SA 325 (A) at 330H-331.
5 Own loose translation of the following passage in which Rumpff JA held that ‘. . . as die partye tot die
samespanning weet dat die skuldenaar insolvent is en ook weet dat die vervreemding die gevolg sal
hê wat in art. 31(1) genoem word, dan volg dit dat die samespanning bedrieglik is ten opsigte van die
skuldeisers in die sin dat die oogmerk daarvan is om hulle tekort te doen’.

Protea. This is because Absa held a mortgage bond that entitled it to the proceeds of
the sale of the penthouse, and the R11 million and R3 million payments were made
using the loan facility that Absa provided. Second, the ARLA and the sale agreement
had a legitimate purpose, not a fraudulent one, to provide AMU with the best chance
of trading out of its debt-laden distressed situation. In extending the additional loan
facility to AMU in accordance with the ARLA, Absa facilitated AMU’s ability to pay its
existing and continuing current creditors. Furthermore, in order to satisfy the debt
owed to Absa, the intention of the sale agreement was to secure the full revenue
generated from the hotel operations. Absa contends that the absence of evidence
refutes a finding of collusion between AMU and Absa, or a finding that the sale
agreement, or the ARLA, was concluded or implemented with a fraudulent purpose. I
find Absa’s assertions to be plausible, taken at face value. Nonetheless, the anterior
question is whether Mr Cohen has the locus standi to invoke one of the remedies
enumerated in s 31(2) of the Insolvency Act.

[20] I shall proceed to an interpretative analysis of s 31(2), using the established
triad of language, context, and purpose.6 Sections 31 and 32 read thus:
‘31 Collusive dealings before sequestration
(1)  After the sequestration of a debtor’s estate the Court may set aside any transaction
entered into by the debtor before the sequestration whereby he, in collusion with
another person, disposed of property belonging to him in a manner which had the effect
of prejudicing his creditors or of preferring one of his creditors above another.
(2) Any person who was a party to such collusive disposition shall be liable to make good
any loss thereby caused to the insolvent estate in question and shall pay for the benefit
of the estate by way of penalty, such sum as the Court may adjudge, not exceeding
the amount by which he would have benefitted by such dealing if it had not been set
aside; and if he is a creditor he shall also forfeit his claim against the estate.
(3) Such compensation and penalty may be recovered in any action to set aside the
transaction in question.
32 Proceedings to set aside improper disposition

6 Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; [2012] 2 All SA 262
(SCA); 2012 (4) SA 593 (SCA) para 25; Commissioner for the South African Revenue Service v United
Manganese of Kalahari (Pty) Ltd ZASCA 16; 2020 (4) SA 428 (SCA), para 8; Capitec Bank Holdings
Limited and Another v Coral Lagoon Investments 194 (Pty) Ltd and Others [2021] ZASCA 99; [2021] 3
All SA 647 (SCA); 2022 (1) SA 100 (SCA).

(1)(a)  Proceedings to set aside any improper disposition of property under section 26,
29, 30 or 31, or for the recovery of compensation or a penalty under section 31,
may be taken by the trustee.
(b)
If the trustee fails to take any such proceedings, they may be taken by any creditor
in the name of the trustee upon his indemnifying the trustee against all costs
thereof.
(2)  . . .
(3) When the Court sets aside any disposition of property under any of the said sections,
it shall declare the trustee entitled to recover any property alienated under the said
disposition or in default of such property the value thereof at the date of the disposition at
the date on which the disposition is set, whichever is the higher.’

[21] Section 31 is in a part of the Insolvency Act in which the provisions address the
following topics: (a) disposition without value (s 26);7 (b) antenuptial contracts (s 27);8

7 Section 26 reads:
‘(1)      Every disposition of property not made for value may be set aside by the Court if such disposition
was made by an insolvent—
(a)      more than two years before the sequestration of his estate, and it is proved that, immediately
after the disposition was made, the liabilities of the insolvent exceeded his assets;
(b)      within two years of the sequestration of his estate, and the person claiming under or benefited
by the disposition is unable to prove that, immediately after the disposition was made, the assets of the
insolvent exceeded his liabilities: Provided that if it is proved that the liabilities of the insolvent at any
time after the making of the disposition exceeded his assets by less than the value of the property
disposed of, it may be set aside only to the extent of such excess.
(2)      A disposition of property not made for value, which was set aside under subsection (1) or which
was uncompleted by the insolvent, shall not give rise to any claim in competition with the creditors of
the insolvent’s estate: Provided that in the case of a disposition of property not made for value, which
was uncompleted by the insolvent, and which—
(a)      was made by way of suretyship, guarantee or indemnity; and
(b)      has not been set aside under subsection (1),
the beneficiary concerned may compete with the creditors of the insolvent’s estate for an amount not
exceeding the amount by which the value of the insolvent’s assets exceeding his liabilities immediately
before the making of that disposition.’
8 Section 27 reads:
‘(1)      No immediate benefit under a duly registered antenuptial contract given in good faith by a man
to his wife or any child to be born of the marriage shall be set aside as a disposition without value,
unless that man’s estate was sequestrated within two years of the registration of that antenuptial
contract.
(2)      In subsection (1) the expression “immediate benefit” means a benefit given by a transfer, delivery,
payment, cession, pledge, or special mortgage of property completed before the expiration of a period
of three months as from the date of the marriage.’

(c) voidable preferences (s 29);9 (d) undue preference to creditors (s 30);10 (e)
collusive dealings before sequestration; and (f) proceedings to set aside an improper
disposition (s 32). ‘Disposition’ is defined in s 2 to mean-
‘[A]ny transfer or abandonment of rights to property and including a sale, lease, mortgage,
pledge, delivery, payment, release, compromise, donation or any contract therefor, but does
not include a disposition in compliance with an order of court; and “dispose” has a
corresponding meaning;’

[22] Sections 26, 29, 30 and 31 detail the several forms of ‘improper dispositions’
that may be set aside by the court. Additionally, these sections set out the substantive
requirements that must be met for the setting aside of each form of disposition. Section
32 governs the procedure for the setting aside of each form of ‘improper disposition’.
Each of ss 26, 29, 30 and 31 must be read alongside s 32. Only the trustee or liquidator
of the insolvent estate has the locus standi to bring any such proceedings. Only if the
liquidator fails to bring such proceedings, may a creditor do so in the liquidator’s name,
as long as the creditor indemnifies the liquidator for all costs. The compensation and
penalty provided for in s 31(2), may in terms of s 31(3), be recovered in any action to
set aside the collusive transaction or disposition at issue. The default position is that if
the liquidator, or a creditor in the liquidator’s name, fails to initiate legal proceedings

9 Section 29 reads:
‘(1)      Every disposition of his property made by a debtor not more than six months before the
sequestration of his estate or, if he is deceased and his estate is insolvent, before his death, which has
had the effect of preferring one of his creditors above another, may be set aside by the Court if
immediately after the making of such disposition the liabilities of the debtor exceeded the value of his
assets, unless the person in whose favour the disposition was made proves that the disposition was
made in the ordinary course of business and that it was not intended thereby to prefer one creditor
above another.
(2)      . . .
(3)      Every disposition of property made under a power of attorney whether revocable or irrevocable,
shall for the purposes of this section and of section 30 be deemed to be made at the time at which the
transfer or delivery or mortgage of such property takes place.
(4)      For the purposes of this section any period during which the provisions of subsection (1) of
section 11 of the Farmers’ Assistance Act, 1935 (Act 48 of 1935), applied in respect of any debtor as
an applicant in terms of the said act, shall not be taken into consideration in the calculation of any period
of six months.’
10 Section 30 reads:
‘(1)      If a debtor made a disposition of his property at a time when his liabilities exceeded his assets,
with the intention of preferring one of his creditors above another, and his estate is thereafter
sequestrated, the Court may set aside the disposition.
(2)      For the purposes of this section and of section 29 a surety for the debtor and a person in a
position by law analogous to that of a surety shall be deemed to be a creditor of the debtor concerned.’

to set aside such ‘improper disposition’, the disposition remains valid. This is because
the transaction is not void, but voidable.11

[23] As to the purpose of the Insolvency Act, this Court recently in Emontic
Investments (Pty) Ltd v Bothomley NO and Others,12 reaffirmed that:
‘A concursus creditorum is established with a trustee or liquidator who is entrusted with the
estate’s assets, including the property rights and obligations of the insolvent or company. The
liquidator is obliged to hold and administer the estate and distribute the proceeds among the
competing creditors in the manner and order of preference specified in the Insolvency Act.
This procedure is followed after an estate is sequestrated or a company is liquidated. The
hand of the law is laid upon the estate and no transaction can thereafter be entered into
regarding estate matters by a single creditor to the prejudice of the general body of creditors.
The claim of each creditor must be dealt with as it existed at the issue of the order. That is the
fundamental purpose of insolvency legislation.’ (Footnotes omitted.)

[24] The purpose of ss 26, 29, 30 and 31 of the Insolvency Act is to empower a
trustee or liquidator to institute proceedings against the parties (or beneficiaries of the
dispositions) listed in those sections, for the setting aside of an ‘improper disposition’,
and to obtain the remedies therein provided for the benefit of the body of creditors.
And, the purpose of s 31(2) is to provide the remedies therein specified to a liquidator
who has successfully secured an order to set aside a collusive transaction.

[25] Mr Cohen argues that the correct interpretation of s 31(1) and 31(2) reveals
that s 31(1) defines the phrase ‘collusive disposition’ and the word ‘such’ in the first
line of s 31(2) refers to a collusive disposition as it is defined in s 31(1), regardless of
whether it has been set aside. The interpretation offered by Mr Cohen is legally
unsustainable.  Section 31(1) concerns a specific disposition from a specific debtor’s
estate, which may be set aside by the court. It does not provide a definition of a
collusive disposition. Instead, it provides the substantive requirements that must be
satisfied before such a disposition may be set aside.

11 Galaxie Melodies (Pty) Ltd v Dally NO 1975 (4) SA 736 (A) at 743.
12 Emontic Investments (Pty) Ltd v Bothomley NO and Others [2024] ZASCA 1 para 17.

[26] The subject of the introductory line in s 31(2) is a person who was a party to
such collusive disposition. In grammatical usage, specifically in formal contexts, the
determiner ‘such’ is employed to refer to the ‘type previously mentioned’. The collusive
disposition mentioned in the first line of s 31(2) is the one specified in that subsection.
That is a collusive disposition in respect of which a trustee (or creditor in the name of
the trustee) may commence legal proceedings to set aside the disposition in question
and seek to recover compensation and the penalty stipulated in s 31(2).

[27] The ensuing terminology employed in s 31(2), which imposes sanctions on
transgressors, affirms the clear meaning that the word ‘such’ in the first line refers to
the specific transaction mentioned in s 31(1). The first consequence imposed on a
‘party to such collusive disposition’ is the liability ‘to make good any loss thereby
caused to the insolvent estate in question’. This reinforces the link between the specific
transaction being set aside in terms of s 31(1) and the liability consequence imposed.
No such liability can be imposed if the transaction is not set aside. Undoubtedly, a third
party, such as a surety, could not come along after the winding up and use this
provision to seek compensation from a transgressor. The second sanction, the
penalty, imposed in s 31(2) is payable ‘for the benefit of the estate’. The penalty can
only be payable to the same estate in which the collusive disposal is set aside under
s 31(1). If the disposal has not been set aside, no penalty is imposed. A third party,
such as a surety, cannot use this provision to seek payment of a penalty from a
transgressor.

[28] The third consequence, forfeiture, is not separate from the first and second
consequences: rather, it follows them, as the conjunctions ‘and’ and ‘also’ indicate.
The forfeiture sanction necessarily requires that the collusive disposition be set aside
and that the remedies of restoring value to the insolvent estate and paying a penalty
have been exercised as a first step. If the transgressor is also a creditor of the insolvent
estate, the liquidator imposes an additional sanction: the claim against the insolvent
estate is forfeited.

[29] In Louw NO and Another v Sobabini CC and Others,13 Plasket J said:

13 Louw NO and Another v Sobabini CC and Others [2015] ZAECGHC 153 paras 76-78.

‘First, on the setting aside of the dispositions, s 31(2) envisages Jackson having to make
good any loss occasioned to the trust by his actions. In this matter, that is simple enough. I
shall order him to return the cattle and the equipment that he took or pay their value.
Secondly, s 31(2) makes provision for a penalty to be imposed on the person guilty of
collusive dealing. The use of the word ‘shall’ in this respect, followed close on the heels of the
same word used in relation to making good any loss occasioned by the collusion indicate to
me that the imposition of a penalty is not discretionary. The quantum of the penalty, however,
lies within the discretion of the court but may not exceed the value of the benefit which would
have accrued to the person had the disposition not be set aside.  . . .
Thirdly, s 31(2) makes provision for the forfeiture of the creditor’s claim against the insolvent
estate – and that means any claim which the creditor may have against the insolvent estate.
This is an automatic consequence of the finding of collusive dealing. The court has no
discretion in this regard. [Gert de Jager (Edms) Bpk v Jones NO & McHardy NO 1964 (3) SA
325 (A) at 337E-F; Mohamed’s Estate v Khan 1927 EDL 478 at 488.]’

[30] Section 31(3) strengthens the unity of the subsections of s 31. It allows for the
compensation and penalty remedies to be claimed ‘in any action to set aside the
transaction in question’. Once again, the phrase ‘in question’ can only be a reference
back to the specific transaction being set aside in terms of s 31(1).

[31] An interpretative analysis of s 31(2) leads to the inevitable conclusion that s 31
establishes a unified process in which: (a) a collusive disposition is set aside provided
the requirements of s 31(1) have been established; (b) the loss occasioned to the
insolvent estate due to the transgressor’s actions is made good; (c) a penalty is
imposed upon the transgressor; and (d) the ex lege forfeiture of the creditor’s claim
against the insolvent estate if the transgressor is also a creditor of the insolvent estate.

[32] Thus, s 31(2) of the Insolvency Act does not afford a shield to the surety who
seeks to escape liability on the basis that the insolvent primary debtor colluded with
the creditor prior to its liquidation to dispose of the insolvent’s property in a manner
which had the effect of prejudicing the insolvent’s creditors or of preferring one of them
above another. Only the liquidator (or a creditor in the liquidator’s name), and not a
third party, such as a surety, has locus standi to rely on the remedies outlined in s 31.
In other words, s 31 serves as a sword for the liquidator in winding up the insolvent
estate, rather than a shield for third parties in subsequent litigation. If the liquidator (or

a creditor in the liquidator’s name) did not take proceedings to set aside a collusive
disposition, the disposition remains valid, and neither the liquidator nor anyone else
has recourse to the remedies outlined in s 31(2).

[33] The high court correctly held that the interpretation contended for by Mr Cohen
is at odds with the text and purpose ss 31 and 32 and is not supported by the relevant
authorities, and concluding that-
‘. . . section 31 does not stand on its own and does not provide any relief in and in itself. It
operates together with section 32 of the Insolvency Act which expressly regulates the
proceedings to set aside a disposition of property under sections 26, 29 and 30. Section 32
provides the procedure to be followed by an aggrieved person intending to challenge the
disposition in terms of the substantive requirements of each of sections 26, 29, 30 and 31.’

[34] The high court correctly rejected the s 31(2) defence Mr Cohen raised and
relied upon and dismissed his counterclaim due to his lack of standing. It thus did not
decide whether AMU, prior to its liquidation, entered into a transaction whereby it, in
collusion with Absa, disposed of property belonging to AMU which had the effect of
prejudicing its creditors or of preferring one over another. The question likewise does
not need to be decided by this Court.

[35] Mr Cohen’s s 31(2) defence is unmeritorious and does not trump the
inadequate explanation for the delay.

[36] In the result, the following order is made:
1 The application for condonation and reinstatement of the appeal is dismissed with
costs, including those of two counsel.
2 The appeal is struck from the roll with costs, including those of two counsel.

P.A. MEYER
JUDGE OF APPEAL

Appearances

For the appellant:
A F Arnoldi SC
Instructed by:
Ian Levitt Attorneys, Johannesburg

Lovius Block Inc, Bloemfontein

For the respondent:
D A Turner (with O Motlhasedi)
Instructed by:
Webber Wentzel, Johannesburg

Webbers Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:

9 February 2024
Status:
Immediate
The following summary is for the benefit of the media in the reporting of this case and does not
form part of the judgments of the Supreme Court of Appeal
Cohen v Absa Bank Limited (Case no 1280/2021) [2024] ZASCA 16 (9 February 2024)
Today the Supreme Court of Appeal (SCA) dismissed an application for condonation and reinstatement
of the appeal with costs including those of two counsel. It further struck the appeal from the roll with
costs including those of two counsel. The appeal emanated from the commercial court of the Gauteng
Division of the High Court, Johannesburg (the high court) and was brought by the appellant, Mr Chaim
Cohen (Mr Cohen), who was dissatisfied with the high court’s order in favour of the respondent, Absa
Bank Limited (Absa).
Before the SCA, Mr Cohen applied for condonation and reinstatement of the appeal as, according to
rule 8 of the Rules Regulating the Conduct of the Proceedings of the SCA, the appeal had lapsed due
to the appeal record not being timeously lodged. This application was opposed by Absa.
In pointing out that Mr Cohen’s founding affidavit failed to provide a full and reasonable explanation
covering the entire period of the delay, the SCA proposed to consider Mr Cohen’s prospects of success
on the merits of the appeal before reaching a conclusion on the fate of his application for condonation
and reinstatement of the appeal.
In considering the prospects of success on the merits, the SCA crystallised the issue before it as follows:
whether s 31(2) of the Insolvency Act 24 of 1936 (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 upshot of the matter was that on 1 September 2012, Absa initiated action proceedings against Mr
Cohen in the high court, claiming the amount of R20 million, interest plus costs, in respect of the liability
he incurred under his suretyship. The interest that had accrued on the suretyship capital amount of R20
million attained the in duplum limit. Thus, Mr Cohen was sued for payment of the amount of R40 million
plus costs on the scale as between attorney and own client, which scale of costs is provided for in the
suretyship. Despite having raised several defences against Absa’s claim, Mr Cohen abandoned all but
one before the conclusion of the trial, which defence raised the interpretation of s 31(2) of the Insolvency
Act.

Based on the interpretation contended for by Mr Cohen, he argued that he was released ex lege from
his suretyship, because Absa forfeited its claim against the insolvent estate of AMU in terms of s 31(2)
of the Insolvency Act. That was so because A Million Up Investments 105 (Pty) Limited (AMU) entered
into a transaction with Absa in terms of which AMU disposed of property belonging to it in a manner
which had the effect of prejudicing AMU’s creditors through preferring one of its creditors over the other
creditors. Absa, therefore, according to Mr Cohen, was a party to a collusive disposition within the
meaning of s 31(1) of the Insolvency Act and, as a creditor, it forfeited its claim against AMU’s insolvent
estate in terms of s 31(2).
What constituted the collusive disposition to which Absa was a party, according to Mr Cohen, was the
disposal of AMU’s property to Protea Hotel Group (Pty) Limited (Protea), which took place in terms of
the sale agreement concluded between Protea and AMU. In concluding the Amended and Restated
Loan Agreement (the ARLA) and the sale agreement, so Mr Cohen argued, AMU, in collusion with
Absa, disposed of R14 million as well as a penthouse in the hotel building worth R11 million.
Absa, conversely, asserted as follows: First, it was the sole creditor who might have suffered any
prejudice by the penthouse’s sale and the R14 million payment to Protea. This is because Absa held a
mortgage bond entitling it to the proceeds of the penthouse’s sale, and the R11 million and R3 million
payments were financed through the loan facility Absa provided.
Second, the ARLA and the sale agreement had a legitimate purpose, not a fraudulent one. Its purpose
was to provide AMU with the best chance of trading out of its debt-laden distressed situation. By
extending the additional loan facility to AMU, in accordance with the ARLA, Absa facilitated AMU’s
ability to pay its existing and continuing current creditors. Furthermore, in order to satisfy the debt owed
to Absa, the intention of the sale agreement was to secure the full revenue generated from the hotel
operations. Absa contended that the absence of evidence refutes a finding of collusion between AMU
and Absa, or a finding that the sale agreement, or the ARLA, was concluded or implemented with a
fraudulent purpose.
The SCA found that the above assertions made by Absa appeared to contain much force, finding that
the anterior question in the matter was whether Mr Cohen has the locus standi to invoke one of the
remedies outlined in s 31(2) of the Insolvency Act.
After a consideration of the merits, the SCA reasoned that the purpose of s 31(2) is to provide the
remedies therein specified to a liquidator who successfully secured an order to set aside a collusive
transaction, holding further that an interpretative analysis of s 31(2) leads to the inevitable conclusion
that s 31 establishes a unified process whereby the following occurs: (a) a collusive disposition is set
aside provided the requirements of s 31(1) have been established; (b) the loss occasioned to the
insolvent estate due to the transgressor’s actions is made good; (c) a penalty is imposed upon the
transgressor; and (d) if the transgressor is also a creditor of the insolvent estate, the ex lege forfeiture
of the creditor’s claim against the insolvent estate.
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) defence and
dismissed his counterclaim due to his lack of standing.
In the result, the SCA concluded that Mr Cohen’s s 31(2) defence 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.
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