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Sureties, Co – Principal Debtors and Prescription

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Sureties, Co – Principal Debtors and Prescription

28th April 2020

By: Creamer Media Reporter

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In Liberty Group Limited v Illman (1334/2018) [2020] ZASCA 38 one of the issues the court had to determine was whether sureties who also bind themselves as co-principal debtors become co-debtors with the principal debtor and with each other. On the back of that whether the service of a summons on any of the sureties interrupts the running of prescription in favour of the others.

Sureties are essential mechanisms to secure rights and in the current climate should be understood so that they are appropriately utilised, when and if necessary.

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In this case, the court stated that the obligations of the principal debtor and the surety are the same, i.e. to pay the debt of the principal debtor. The words 'co-principal debtor' does not only operate as a renunciation of the benefits of the surety but have a 'still greater force'. These words show that the surety intended that his obligation shall be co-equal in extent with that of the principal debtor.

Moreover, in Caney’s Law of Suretyship, the undertaking of the surety is accessory to the main contract. It is an undertaking that the obligation of the principal debtor will be discharged, and if not, that the creditor will be indemnified.

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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 and co-principal debtors, unless they have agreed to that effect.

In other words, the court had to decide whether the interruption of prescription in respect of a surety serves to interrupt prescription in respect of a principal debtor. Once so determined, it was said, the further logical extension of the principle would be that interruption of prescription. The disruption, in favour of a  surety, would also interrupt prescription  in favour of a co-surety.

The court reiterated the court a quo statement as below:

'Neither in the Roman law nor the Roman-Dutch law had it ever been suggested that the converse should apply - in other words, that interruption of prescription against the surety should constitute an interruption of prescription against the principal debtor. To find that interruption of prescription against one surety constitutes not only interruption of prescription against the principal debtor but even against the other sureties, constitutes a substantial deviation of the common law principles on the topic.

Suretyship – a surety who binds himself as co-principal debtor does not become a co-debtor with another surety and co-principal or with the principal debtor. When enforcing rights, this should be kept in mind and papers appropriately drafted and served. Contact an expert at SchoemanLaw Inc for any of your litigious, collection or contract drafting needs. 

Written by Nicolene Schoeman-Louw, Managing Director, Schoeman Law         

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