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Sureties, co-sureties and prescription by Marieke du Toit

MARIEKE DU TOIT

The question arising in the recent case of Liberty Group Limited v Illman  2020 ZASCA 38 was:  Does the service of a summons on any one of a number of co-sureties interrupt the running of prescription for the debts of the others?  This question arose against the background of the following rules on prescription and the debts of sureties:

  • A surety’s debt is accessory to the principal debt and follows its fortunes, also in respect of prescription. In terms of section 10(2) of the 1969 Prescription Act prescription of a principal debt has the effect that the surety’s debt also becomes prescribed.
  • The interruption of prescription resulting from service of summons on or acknowledgement of liability by the principal debtor also interrupts prescription for the surety’s debt.

(See on these rules, Max Loubser, Extinctive Prescription, 2nd ed, 2019, pp 63-64.)

In the Liberty Group case, Liberty took cession of the rights to payment of commission under an agreement between Charter Life Insurance Company Ltd and a company named ECE, which was subsequently deregistered.  The respondent, Mr Illman, and seven others had signed as sureties and co-principal debtors in solidum with ECE for the payment of commission which ECE could in future owe under the agreement.  The agreement was terminated on 14 March 2011.  On 29 September 2011, Liberty issued summons against all the sureties for outstanding commission owed by ECE, but summons was only served on one of the sureties, Mr September.  Mr September failed to deliver a notice of intention to defend and default judgment was granted against him on 27 January 2012.  Summons was served on the respondent, Mr Illman, approximately five years later, on 31 March 2016.  Mr Illman raised a special plea of prescription in terms of section 11 of the Prescription Act 68 of 1969, as summons was served three years after cancellation of the agreement on 14 March 2011.

Liberty argued that as Mr Illman and Mr September had bound themselves to Liberty as sureties and co-principal debtors in solidum with ECE, they became ‘co-debtors’, and as service of summons on Mr September was within the prescription period, the running of prescription in favour of Mr Illman and all other sureties was interrupted.  Accordingly, it was pleaded, the claim against Mr Illman had not become prescribed.  The High Court upheld Mr Illman’s special plea of prescription.

On appeal to the Supreme Court of Appeal (SCA), Liberty argued that the two sureties were co-debtors, and that service of summons on either of them interrupted the running of prescription in respect of all the sureties.  This argument was based on the rule referred to above, deriving from Roman-Dutch law, that interruption of prescription resulting from service of summons on or acknowledgement of liability by the principal debtor also interrupts prescription for the surety’s debt.  Liberty urged the court to apply this principle also to the converse situation, in other words, to accept that the interruption of prescription in respect of a surety’s debt also interrupts prescription in respect of the principal debt.  According to this argument the further logical extension of the principle would be that interruption of prescription in respect of one surety would also interrupt prescription in respect of a co-surety.  The result would be that service of summons on Mr September within the prescription period would also interrupt the prescription period in respect of Mr Illman and the other co-sureties, allowing Liberty to sue them later, having taken timeous legal action against one of them.

The SCA did not accept Liberty’s argument, on the basis that this would constitute a substantial deviation from the common law principles on suretyship, and there were no cogent reasons to allow this.

The SCA re-affirmed the position in our law that a surety and co-principal debtor does not undertake a separate independent liability as a principal debtor; the addition of the words ‘co-principal debtor’ does not transform his contract into any contract other than one of suretyship.  The surety does not become a co-debtor with the principal debtor, nor does he become a co-debtor with any of the co-sureties, unless they have agreed to that effect.  Accordingly, service of summons on surety A will not interrupt prescription in respect of surety B’s debt:  the prescription period will continue to run and can extinguish surety B’s debt, while surety A, who was sued in time, will be liable for payment.

The appeal was dismissed with costs.

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