Sumeil (Pty) Ltd v Coogal Finance (Pty) Ltd (In Liquidation) and Others

Coogal Finance (Pty) Ltd (in liquidation) leased four Volvo trucks to Sumeil (Pty) Ltd in March 2016 under four master rental agreements. Each agreement required monthly instalments of R10,000 (excluding VAT) and a final balloon payment of R165,000 (excluding VAT) upon maturity on 28 February 2019, at which point Sumeil would acquire ownership. Mr Nel was sole director of Coogal and co-director of Sumeil with his wife. Coogal's liquidation was deemed to have commenced on 4 February 2019 when the application for liquidation was presented to court. At that date, Coogal's customer ledger showed Sumeil owed R185,000, but Sumeil's general ledger showed Coogal owed Sumeil R1,412,906.83. The balloon payments totaling R759,000 were due on 28 February 2019, after the deemed liquidation date. On 18 February 2019 (after deemed liquidation), the Maritz Nel Family Trust paid R728,043.52 directly to ABSA Bank to discharge Coogal's instalment sale agreements for the trucks. The liquidator, Ms Fortein, brought an application seeking payment of R944,000 (R185,000 + R759,000 in balloon payments) from Sumeil. The high court granted the payment order, dismissing Sumeil's defence based on set-off. The full court confirmed this order.

• Whether the Plascon-Evans rule was correctly applied to determine disputed facts in the application for money payment
• Whether set-off could operate in respect of mutual debts after the deemed date of liquidation and establishment of the concursus creditorum
• Whether the balloon payments were due and payable at the deemed date of liquidation (4 February 2019) or only at maturity (28 February 2019)
• Whether payments made by a third party (the Trust) to ABSA after the deemed liquidation date could discharge Sumeil's debt to Coogal
• Whether a liquidator seeking to enforce an executory contract with reciprocal obligations must tender performance of the insolvent company's obligations in order to claim payment

1. The appeal is upheld with costs. 2. The order of the full court dismissing the appellant's appeal is set aside and substituted with: '1. The appeal is upheld with costs. 2. Paragraphs 31.4 and 31.5 of the order of the court a quo are set aside and replaced with: "The application against the first respondent for payment to the applicant of the amount of R944,000 (nine-hundred and forty-four thousand rands) and interest on that amount, is dismissed."'

1. Once a concursus creditorum is established by the deemed liquidation of a company, set-off can only occur if mutuality of respective claims existed at the time of liquidation, with reciprocal debts both liquidated and payable before the concursus was established. 2. Where a liquidator elects to abide by and enforce an executory contract containing reciprocal obligations, the liquidator must tender performance (or prove performance) of the insolvent company's obligations under that contract in order to validly claim payment from the counterparty. 3. The deemed date of liquidation under section 348 of the Companies Act 61 of 1973 is the date when the liquidation application is presented to court, and this is the critical date for determining which debts and set-offs are valid for purposes of the concursus creditorum. 4. Transactions occurring after the deemed date of liquidation cannot create the mutuality required for set-off, as this would give certain creditors undue preference and undermine the rationale of the concursus.

The Court noted that Mr Nel appeared to have confused the date when the liquidation order was granted with the deemed date of liquidation, leading to his incorrect assertion that payments were made before liquidation. The Court observed that some of Mr Nel's averments did not withstand scrutiny and that he stated the exact opposite in his affidavit of what was later submitted on behalf of Sumeil regarding the purpose of the Trust's payment to ABSA. The high court had mentioned that it was for the liquidator to investigate and pursue whether the payments to ABSA were void or voidable, though the high court itself did not make such a finding. The SCA did not need to address this issue given its findings on the substantive legal requirements for the claim. The judgment also references the broader context of the application, which originally sought the liquidation of Sumeil and piercing of corporate veils, though these claims were dismissed by the high court and were not the subject of the appeal.

This case clarifies important principles regarding set-off in the context of corporate liquidation and the enforcement of executory contracts by liquidators. It reinforces that: 1. Set-off can only operate if mutuality of debts existed at the deemed date of liquidation when the concursus creditorum is established. Transactions after this date cannot create the necessary mutuality. 2. The deemed date of liquidation (when the application is presented to court) is critical for determining which debts and set-offs are valid, not the date when the liquidation order is granted. 3. Liquidators seeking to enforce executory contracts with reciprocal obligations must tender performance of the insolvent company's obligations before claiming payment from the counterparty. The exceptio non adimpleti contractus applies. 4. The case demonstrates the application of fundamental principles of insolvency law concerning the protection of the concursus creditorum and the equal treatment of creditors. The judgment emphasizes the procedural requirements for applications and the importance of making out a complete legal case for the relief sought, particularly in the context of reciprocal contractual obligations.