Jans v Nedcor Bank Ltd (86/02) [2003] ZASCA 15; [2003] 2 All SA 11 (SCA) (24 March 2003)

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[2003] ZASCA 15
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Jans v Nedcor Bank Ltd (86/02) [2003] ZASCA 15; [2003] 2 All SA 11 (SCA); 2003 (6) SA 646 (SCA) (24 March 2003)

THE
SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Reportable
Case No 86/02
In
the matter between
SHIRLEY JOYCE JANS
Appellant
and
NEDCOR BANK LIMITED
Respondent
CORAM
: VIVIER ADP, SCOTT, FARLAM,
MTHIYANE, et LEWIS JJA
HEARD
: 4 MARCH 2003
DELIVERED
: 24 MARCH 2003
Interruption or delay in the running of prescription in favour of the
principal debtor interrupts or delays the running of prescription
in
favour of a surety.
Rand Bank Ltd v De Jager
1982(3)
SA 418 (C) overruled.
J U D G M E N T
SCOTT JA
/…
SCOTT JA
:
[1] The question in issue in this appeal is one which has been the
subject of debate for centuries. Does an interruption or delay
in the
running of prescription in favour of the principal debtor interrupt
or delay the running of prescription in favour of a surety?
[2] The facts are largely common cause. On 30 May 1995 the appellant
executed a contract of suretyship in terms of which she bound
herself
jointly and severally as surety and co-principal debtor
in
solidum
to the respondent bank for repayment of all sums of
money which Ryday Construction (Pty) Ltd (‘Ryday’) ‘may now or
from time
to time hereafter owe or be indebted to the bank’. Ryday
was a construction company of which both the appellant and her
husband
were directors. Previously, and in terms of a written
agreement dated 29 August 1994, Ryday had opened a current account
with the
bank. In pursuance of that agreement the bank advanced Ryday
moneys on overdraft from time to time. On 4 March 1997 Ryday was
provisionally
liquidated. On 15 April 1997 the liquidation was made
final. On 11 August 1997 the bank submitted its claim for moneys
advanced on
overdraft to Ryday’s liquidator. On 10 October 2000 the
liquidator’s final liquidation and distribution account was
confirmed
by the Master.
[3] It is
convenient at this stage to refer to the
Prescription Act 68 of 1969
.
Section 13(1)
reads:
‘
If –
(a) the creditor is a minor or is insane or is a person
under curatorship or is prevented by superior force including any law
or any
order of court from interrupting the running of prescription
as contemplated in
section 15(1)
; or
(b) the debtor is outside the Republic; or
(c) the creditor and debtor are married to each
other; or
(d) the creditor and debtor are partners and the debt
is a debt which arose out of the partnership relationship; or
(e) the creditor is a juristic person and the debtor
is a member of the
governing
body of such juristic person; or
(f) the debt is the object of a dispute subjected to
arbitration; or
(g) the debt is the object of a claim filed against the
estate of a debtor who is deceased or against the insolvent estate
of the
debtor or against a company in liquidation or against an
applicant under the Agricultural Credit Act, 1966 (Act No 28 of
1966); or
(h) the creditor or the debtor is deceased and an
executor of the estate in question has not yet been appointed; and
(i) the relevant period of prescription would, but for
the provisions of this subsection, be completed before or on, or
within one
year after, the day on which the relevant impediment
referred to in paragraph (a),(b),(c),(d),(e),(f),(g) or (h) has
ceased to exist,
the
period of prescription shall not be completed before a year has
elapsed after the day referred to in paragraph (i).’
It was accepted by this Court in
Kilroe-Daley v Barclays National
Bank Ltd
[1984] ZASCA 90
;
1984 (4) SA 609
(A) at 621I that the impediment
contemplated in s 13(1)(g) commences when the creditor’s claim is
filed. It ceases to exist once
the Master confirms the final
liquidation and distribution account:
Leipsig v Bankorp Ltd
[1993] ZASCA 198
;
1994 (2) SA 128
(A) at 135I. In terms of
s 11
of the
Prescription
Act the
relevant period of prescription was three years. But for the
impediment, the bank’s claim against Ryday would therefore have
prescribed
sometime before 10 October 2000, being the date on which
the impediment ceased to exist. By virtue of the provisions of
s
13(1)
the bank’s claim against Ryday would accordingly not have
become prescribed until a year had elapsed after 10 October 2000.
[4] In early October 2000 the bank instituted action against the
appellant for payment of the sum of R746 891,58 together with
interest
and costs in terms of the contract of suretyship she had
executed on 30 May 1995. Three other sureties and co-principal
debtors were
joined as defendants but they played no role in the
subsequent proceedings. The summons was served on the appellant on 13
October
2000 at her chosen
domicilium citandi et executandi
in
terms of the deed of suretyship. There was no appearance to defend
and on 12 December 2000 the bank obtained judgment by default
against
the appellant.
[5] In August 2001 the appellant launched an application for an order
rescinding the default judgment granted against her on 12 December
2000. In her supporting affidavit she explained that she and her
husband had parted company sometime in January or February 1996
when
she left the dwelling which had been her chosen
domicilium
citandi
. She said that since then she had played no part in the
affairs of Ryday and had only become aware of the summons and the
default
judgment against her on 29 April 2001 when she received
notice from the sheriff that property she owned had been judicially
attached.
She denied that she was liable to the bank. She contended
that prescription began to run in her favour no later than on 15
April
1997 when a final order of liquidation was granted against
Ryday and that the running of prescription in her favour was
unaffected
by any delay in the running of prescription in favour of
Ryday. Accordingly, so the contention went, the bank’s claim
against her
became prescribed in April 2000, some six months before
summons was served on her. The respondent opposed the application. It
contended
that the delay in the running of prescription in favour of
the principal debtor served to delay the running of prescription in
favour
of the surety and that the appellant had therefore failed to
disclose a defence to the claim.
[6] It should be mentioned that the appellant subsequently amplified
her application by seeking condonation for the delay of some
three
months between the time of her becoming aware of the judgment and her
application for its rescission. The respondent initially
opposed the
granting of such condonation, but no longer does so.
[7] The matter was heard by Goldstein J in the Witwatersrand Local
Division on 4 February 2002. The learned judge considered himself
to
be bound by the full bench decisions of
Cronin v Meerholz
1920
TPD 403
and
Union Government v Van der Merwe
1921 TPD 318
and
dismissed the application with costs. At the same time, however, he
granted the appellant leave to appeal to this Court.
[8] The question in issue has arisen in the past mainly in the
context of the service of a summons on, or a judgment against, the
principal debtor or, less frequently, an acknowledgment of debt by
the latter. In the present case the running of prescription was
delayed in terms of
s 13(1)(g)
of the
Prescription Act 1969
and not
interrupted in terms of
s 14
or
s 15.
Nonetheless, it is clear that
the same principles must apply to both situations. Indeed, under the
repealed Prescription Act of 1943
the filing of a claim against a
company in liquidation was treated as an interruption.
[9] As previously indicated, whether or not prescription in favour of
a surety should run independently of prescription in favour
of the
principal debtor is a question which has occupied the minds of
jurists for a long time. Before attempting to trace the history
of
the debate it is convenient to set out briefly the various
characteristics of the contract of suretyship on which the proponents
of the two points of view largely rely in order to advance their
respective contentions. Those who argue that the claim against the
surety should prescribe independently of that against the principal
debtor point in the first place to the fact that the claim against
the former arises from a contract which is quite separate and
distinct from the contract giving rise to the claim against the
latter,
and that both contracts give rise to distinct obligations.
This is undoubtedly so. In the case of the one, the contract is
between
the creditor and the principal debtor. In the other it is
between the creditor and surety. See eg
Bulsara v Jordan and Co
Ltd (Conshu Ltd)
[1995] ZASCA 106
;
1996 (1) SA 805(A)
at 810D-G. (The liability of
the principal debtor may even arise from some cause other than
contract, eg delict.) A contract of suretyship
may be concluded at a
time and place which is different from that at which the contract
with the principal debtor was concluded;
it may even be concluded
without the latter’s knowledge. The obligation of the surety may
also differ in extent; it may be for
a limited period or a lesser
amount. If the benefit of excussion has not been excluded the
surety’s liability will arise later
than that of the principal
debtor. However, in most contracts of suretyship, certainly in more
modern times, it is usual for the
surety to bind him- or herself as
surety and co-principal debtor. But this does not mean that the
surety becomes a party to the
contract between the creditor and
principal debtor. As pointed out by Trollip JA in
Neon and Cold
Cathode Illuminations (Pty) Ltd v Ephron
1978 (1) SA 463
(A) at
471C-G the effect of a surety binding himself as a co-principal
debtor is not to render him liable to the creditor in any
capacity
other than that of a surety who has renounced the benefits ordinarily
available to a surety against the creditor. But where
the surety is
bound as a co-principal debtor he or she will be jointly and
severally liable with the principal debtor and prescription
will
begin to run in favour of both at the same time.
[10] On the other hand, those who take the opposing view acknowledge
that the surety’s liability is founded upon a different contract
giving rise to a distinct obligation, but stress that the surety’s
liability is accessory to that of the principal debtor with
the
result that if the claim against the principal debtor becomes
prescribed or for some other reason ceases to exist, the claim
against the surety likewise becomes prescribed or otherwise ceases to
exist. The point is well illustrated in
Kilroe-Daley v Barclays
National Bank Ltd, supra.
In that case the surety executed a
mortgage bond securing his obligation in terms of a contract of
suretyship. It was held that when
the claim against the principal
debtor became prescribed the claim against the surety likewise became
prescribed and the creditor
was accordingly precluded from invoking s
11(a)(i) of the Prescription Act which provided for a period of
prescription of 30 years
in respect of a mortgage bond. Those of the
opposing viewpoint point out further that although the obligations of
the surety and
principal debtor arise from different contracts, the
obligation of the former merely guarantees performance by the latter;
in other
words, both obligations relate to the same performance or
debt. They contend that, in these circumstances, the very nature of
suretyship
is such that the fortunes of the surety’s obligation
should follow those of the debtor’s obligation as far as
prescription is
concerned.
[11] Against this background I shall attempt to sketch, as briefly as
the circumstances permit, the history of the debate which goes
back
to the time of Justinian. The starting point is a decree, or
‘constitution’, of that emperor in 531 AD addressed to John
of
Cappadocia, but of general application. The modern citation of the
constitution is C8.39(40).4(5). It contains no express reference
to
sureties. It provides in effect that if prescription in favour of one
co-debtor, presumably a debtor
in solidum
, is interrupted,
whether by acknowledgment made to one out of several joint creditors
or otherwise, so that the period of prescription
in respect of that
debtor is extended, the period of prescription will be extended in
respect of all the debtors to the advantage
of all the creditors. The
material portion of the constitution, for present purposes, reads:
‘
.
. . it seems to us to be consistent with the dictates of humanity
that, where prescription has been interrupted, or acknowledgment
of
the debt has been made with reference to one and the same contract,
all the parties should be compelled to pay the debt at the
same time,
whether there are several debtors, or only one of them, or whether
there are several creditors, or not more than one.
Hence we decree that in every case above mentioned,
where part of the debt has been paid or acknowledged, or the other
debtors have
been notified in writing that they are liable, the other
creditors shall enjoy the benefit. Therefore they shall be jointly
responsible
and none of them will be permitted to profit by the
unfairness of another, as a single contract is derived from one
source or liability,
and a debt is incurred by the same act.’
(Scott’s translation. The full text of the constitution is
reproduced in
Rand Bank Ltd v De Jager
1982 (3) SA 418
(C) at
421F-422B. I shall refer in greater detail to this decision later in
this judgment.)
[12] It was probably the Glossators who first sought to equate the
relationship between principal debtor and surety with that between
co-debtors
in solidum
for the purpose of applying
C8.39(40).4(5) to sureties so that interruption of prescription
against the principal debtor would interrupt
prescription against the
surety. (See the Gloss ad D.17.1.29.6.) Carpzovius (1595-1666) in his
Decisiones Illustres Saxonicae Rerum et Quaestionum Forensium
(Leipzig 1646) reports a decision of the Supreme Court of Appeal
of Saxony – Dec Illust 34 – in which it was held that an
interruption
of prescription in respect of the principal debtor did
not avail the creditor in so far as prescription in respect of a
surety was
concerned. In doing so it rejected the contention that
C8.39(40).4(5) was applicable to sureties. Of significance in this
regard
is that it not only rejected the opinion of Heringius
(
Tractatus de Fidejussoribus
(1614)) but also the view
expressed in the Gloss.
[13] Brunnemann (1608-72), on the other hand, took the view that
C8.39(40).4(5) was to be construed as including the case of sureties;
in other words, although the liability of the surety and the
principal debtor arose from different contracts (and to this extent
was different from the liability of co-debtors
in solidum
),
an interruption in the running of prescription in favour of the
principal debtor served to interrupt prescription in favour of
the
surety. In his
Commentarius in Codicem Justinianeum
(1663) ad
C8.39(40).4(5) he argued that those who held the contrary view gave
too narrow a meaning to the words of Justinian’s
constitution; he
pointed out that while the action of the creditor against the
principal debtor was different from the action against
the surety —
‘
. . . in reality (
reipsa
) both actions flow
from the same origin and source and in effect (
in effectu
)
they [the principal debtor and the surety] are bound by the same
thing and there is no culpable delay on the part of the creditor’.
In support of his view he relied not only on the opinion of other
jurists but also on a decision of the Court of Brandenburg, from
which it would appear that the latter Court took a different view
from the decision of the Saxon Court.
[14] Voet in his
Commentarius ad Pandectas
46.1.36, like
Brunnemann, adopted the view that interruption of prescription in
respect of the principal debtor served to interrupt
prescription in
respect of the surety. He justifies his view as follows:
‘
If
in sooth the making of a demand on one of two joint debtors
interrupts prescription in respect of the other also, when each of
them was bound as a principal debtor, far more must we say that an
obligation against a surety is prolonged by a demand which was
made
on the principal debtor. It is more in accord with nature for an
accessory to go with its principal, than for one principal
thing to
be assessed on another.’ (Gane’s translation)
[15] In addition to C8.39(40).4(5), Voet refers to two passages in
the Digest (D45.1.91.4 and D22.1.24.1) as well as to Vinnius –
Selectae Juris Quaestiones
2.10 and Struvius –
Ad
Pandectas
46.1 n 47. Surprisingly he makes no mention of
Brunnemann. The passages in the Digest are somewhat cryptic and not
particularly helpful.
Neither Vinnius nor Struvius adds anything of
consequence.
[16] Pothier, writing some 50 years after the death of Voet, was
similarly of the view that an interruption of prescription against
the principal debtor interrupted prescription against the surety. In
his
Obligations
at para 664 (Evans’s translation) he
acknowledges that the question is a controversial one; he sets out
the two viewpoints and
briefly the contentions of the proponents of
each and thereafter gives his answer to those who oppose his view.
The contention which
he attributes to ‘Brunnemann
ad L Fin Cod
de duob reis
(C8.39(40).4(5)) and the doctors cited by him, and
Catelan, amongst the moderns’, shortly stated, is the following.
The principle
underlying C8.39(40).4(5) is that if a creditor makes
judicial demand against one co-debtor
in solidum
the other
co-debtors cannot say that the creditor has not exercised the claim
which he has against them because the claim against
co-debtors
in
solidum
is one and the same; similarly the claim which the
creditor has against the surety is the same as that against the
principal debtor
and therefore by enforcing the claim against the
principal debtor he is enforcing his claim against the surety. In
summarising the
opposing view, Pothier says
‘They say,
that there is a great difference between sureties and co-debtors
in
solido
. When I have sold a thing to several purchasers, who have
obliged themselves
in solido
for the payment of the price,
the claim against them is one and the same claim having the same
cause, and for which there is only
one and the same kind of action,
viz
the action
ex vendito
against each of them; whence
it follows, that in exercising my claim by the judicial
interpellation of any one of them, I exercise
it against all the
rest. It is otherwise, say they, with respect to the principal debtor
and his sureties; the claim against the
principal and that against
his sureties are indeed claims of one and the same things, and,
therefore, a real or fictitious payment
by the one discharges the
other; but still they are distinct claims, arising from different
contracts, and producing different actions.’
Pothier
answers as follows:
‘
It may be replied that the engagement of the sureties
is a contract purely accessory; sureties do nothing more thereby
than accede
to the debt of the principal debtor; the contract does
not, properly speaking, form a new claim, but only gives the creditor
new
debtors, who accede to the debt of the principal; the claim which
the creditor has against them is the same as that against the
principal.
As to the argument that by the Roman law the action
ex
stipulatu
against the surety is a different action from that
against the principal debtor; I answer that it does not therefore
follow that
it is founded upon a different claim; the stipulation,
upon which the action
ex stipulatu
is founded, is not itself
the title of the claim, but rather the corroboration of it, with the
accession of the sureties.’
(The
paragraph is quoted in full in
Rand Bank Ltd v De Jager, supra
,
at 435B-436B.)
[17] More
than a century later the cudgel was taken up for the view opposed to
that of Pothier and his predecessors by Francois Laurent
(1810-87), a
Belgian jurist and one time professor at Ghent. Writing after the
enactment of the French Civil Code and in the context
of its
provisions he argued in his
Principes de Droit Civil
Francais
2 ed vol 32
paras 151-153 that Pothier’s opinion was
founded on the premise that the obligation of the surety was the same
as that of the principal
debtor, that this was not correct and that
interruption of prescription extended from one person to another only
in the case of solidarity
and indivisibility. He observed, too, that
art 2250 of the Code recognised that interruption of prescription as
against the principal
debtor interrupted prescription as against the
surety, but not the converse. This, he argued, indicated the
exceptional nature of
the article and that it was contrary to
principle. (A translation of all three paragraphs appears in
Rand
Bank Ltd v De Jager,
supra,
at 437E-439B.)
[18] In the
event Laurent, of course, was too late. Not only the French Civil
Code, but also the Belgian Code and the Netherlands
Code (in art
2021) provided that interruption against the principal debtor
interrupted prescription against the surety. (The provisions
of art
2021 of the old Netherlands Code are not repeated in the new code,
but see Book 7 art 851.1 and art 853.) In South Africa
C8.39(40).4(5) was similarly recognised as applying to sureties in
the Transvaal Act 26 of 1908. Section 12(3) provides:
‘
Interruption
as against the principal debtor shall be deemed an interruption as
against the surety.’
Section
14(1) dealt with co-debtors. It reads:
‘
Prescription
shall not be interrupted or affected in respect of one joint debtor
by reason of any fact which would interrupt or affect
prescription in
respect of any other joint debtor except in the case of debtors
in
solidum
.’
Section
12(3) of the Transvaal Act was repeated in identical terms in s 6(2)
of the first post-union statute on the subject, the Prescription
Act
18 of 1943. Section 14(1) of the Transvaal Act was repeated in s 8 of
the 1943 Act with certain minor changes.
[19] The
first case in South Africa in which the issue arose was
Cronin v
Meerholz
1920 TPD 403.
The plaintiff took judgment against the
principal debtor and thereafter sued the surety. At the time there
was no prescription in
respect of a judgment and what had to be
decided was whether the claim against the surety had similarly become
‘imprescribable’.
Both Wessels JP and Mason J held that it had.
To obtain the answer Wessels JP found it necessary (at 406) to:
‘
.
. . consider whether, according to the fundamental principles of our
law, a contract of suretyship must be considered as independent
of
the principal obligation or whether it is to be regarded as so bound
up
with the principal obligation that the
suretyship contract is to be regarded as an accessory obligation’.
In
concluding that the latter was correct the learned judge relied on
Voet 46.1.36 (quoted in para 14 above) and said the following
(at
406-407):
‘
By
our common law the surety undertakes to pay the debt of the principal
debtor so long as that debt exists in law and has not in
fact been
paid by the debtor. If, therefore, the debt is extinguished by
prescription or the remedy is barred by a limitation of
actions the
surety is either discharged or the remedy against him is also barred.
But if the debt is kept alive by judgment, so that
neither
prescription nor limitation will run, the surety’s obligation by
the common law continues to exist, because his obligation
and that of
the principal debtor is one and the same.’
The learned
judge did not, of course, intend to convey in the final sentence of
this passage that the obligations of the surety and
principal debtor
were not distinct. From the context it is clear that what was
intended was that both obligations relate to the same
debt or
performance.
[20] The
following year Wessels JP adopted the same approach in
Union
Government v Van der Merwe
1921 TPD 318.
In the course of his
judgment, with which De Waal J concurred, the judge president said
(at 321):
‘
The
legal scope of the surety’s contract is identical with that of the
principal debtor –
accessorium sui principalis naturam sequitur
.
The surety undertakes the same obligation as the debtor, and
undertakes to perform this same obligation so soon as the debtor,
when
called upon, fails to perform it. Troplong,
Cautionnement,
46. It is true there are two contracts, the one between the creditor
and the debtor and the other between the creditor and the surety.
But
the contract between the creditor and the surety is not an
independent contract with an obligation of its own but an accessory
contract with the very same obligation that exists between the
principal debtor and the creditor.’
[21] In
view of s 6(2) of the 1943 Prescription Act it is not surprising that
the issue did not arise again until after the enactment
of the
Prescription Act of 1969
. The provisions of
s 6(2)
of the repealed
Act were not re-enacted in the 1969 Act. Interestingly enough,
Professor J C De Wet, who was largely responsible
for the 1969 Act,
described the section as ‘onsekerheidstigtend en oortollig’. (See
‘Verjaring’ (1967) in: J J Gauntlett
(ed)
Opuscula Miscellanea
(1979.)) In the event, the non re-enactment of its provisions opened
the way for the revival of the debate which had continued for
centuries. The decision in
Cronin v Meerholz, supra,
was
accepted as correctly reflecting the common law by Caney in
The
Law of Suretyship
2ed (1970) at 214, but not by De Wet. The
thrust of the latter’s criticism, however, is directed not so much
at the distinction
between the liability of a surety and that of a
co-debtor
in solidum
but at C8.39(40).4(5) itself which he
categorises as ill-considered and unpersuasive (De Wet and Van Wyk
Kontraktereg en Handelsreg
5ed at 138 and 399). He points out
that it failed to recognise that prescription does not necessarily
begin to run in favour of all
co-debtors at the same time since the
liability of one may be
pure
, another
sub die
and a
third,
sub condicione
. In this respect, therefore, the
position of co-debtors is little different from that of sureties; if
a surety has not renounced
the benefits of excussion etc,
prescription will begin to run in favour of the principal debtor
before prescription commences running
in favour of the surety. De Wet
argues that as prescription is a personal, not a general defence,
there is no reason why interruption
of prescription in respect of one
co-debtor should interrupt prescription in respect of another
co-debtor. (De Wet and Van Wyk
op cit
at 137-138; ‘Verjaring’
op cit
paras 102-103.) The solution which he in effect
advances is that C8.39(40).4(5) should be rejected so that
interruption of prescription
against one co-debtor
in solidum
should not interrupt prescription against other co-debtors. The same
would apply
a fortiori
to principal debtors and sureties. (See
also C F Forsyth ‘Suretyship and Prescription : A New Direction’
(1984) 101
SALJ
237
at 246-247.) With regard, in particular,
to the reasoning in
Cronin v Meerholz, supra,
De Wet points
out that while the accessory nature of the surety’s obligation has
the effect that prescription of the claim against
the principal
debtor results in prescription of the claim against the surety, it
does not necessarily follow that
interruption
of prescription
against the principal debtor
interrupts
prescription against
the surety. He says that to accept that it does, is to put the cart
before the horse. (De Wet and Van Wyk
op cit
at 398-399 n 53.)
The metaphor is, of course, not entirely accurate. If completion of
the principal debtor’s period of prescription
results in completion
of the surety’s period of prescription, even if prescription in
favour of the latter began to run at a later
date than in the case of
the former, it is neither a big nor an illogical step to accept that
an interruption of prescription against
the principal debtor has the
effect of interrupting prescription against the surety. But in any
event, in arriving at the conclusion
it did, the Court relied not
only on the accessory nature of the surety’s obligation but also on
its commonality with the principal
debtor’s obligation.
[22] Some
60 years after the decision in
Cronin v Meerholz
it was held
in
Rand Bank Ltd v De Jager, supra,
to have been incorrect.
The facts in
Rand Bank
were relatively straight forward. The
Bank sued for payment of money presumably lent and advanced on
overdraft and took judgment against
the principal debtor and a
surety. Neither was able to pay the debt. Subsequently and more than
three years after judgment when prescription
was presumed, at the
latest, to have commenced to run, the bank sued the other surety who
had bound himself as surety and co-principal
debtor
in solidum
.
The latter raised the defence of prescription. The magistrate upheld
the defence solely on the strength of the opinion of De Wet,
as
expressed in De Wet and Yeats
Kontraktereg en Handelsreg
4 ed.
The appeal to the Cape Provincial Division was dismissed. In the
course of a long and extremely industrious judgment Baker
J, with
whom Lategan J concurred, referred to a vast array of authorities,
including many which were silent on the issue, and ultimately
came to
the conclusion that the plea of prescription should be upheld. The
learned judge placed considerable store on the views of
De Wet and
clearly agreed with the latter’s criticism of C8.39(40).4(5). (See
eg at 434 F-H.) Nonetheless, the
ratio
of the judgment was
that C8.39(40).4(5) applied to co-debtors only and that Voet
incorrectly extended its application to sureties.
[23] The
judgment had a mixed reception. K M Kritzinger, ‘Prescription of
Suretyship for a Judgment Debt’
(1983) 100
SALJ
35
, pointed
out that the contract of suretyship in the
Rand Bank
case was
couched in terms wide enough to include a judgment which would have
given rise to a new cause of action and that the cause
of action
actually relied upon was indeed the judgment. He argued that the
period of prescription both in respect of the principal
debtor and
the surety was 30 years and that the claim against the surety had
accordingly not prescribed. (See generally
E A Gani (Pty) Ltd v
Francis
1984 (1) SA 462
(T);
Bulsara v Jordan and Co Ltd
(Conshu Ltd), supra
). C F Forsyth, ‘Suretyship and Prescription
: A New Direction’
(1984) 101
SALJ
237
, doubted
whether on the facts of the
Rand Bank
case the period of
prescription for the claim against the surety would have been 30
years. However, elsewhere in the article, which
was generally
favourable to the judgment, the learned author seemed to accept that
‘it is implicit in the surety’s agreeing to
undertake his
obligation that he will be bound for the laid-down prescription
period of the principal debt’ (at 249). The
Rand Bank
case
was considered to have been correctly decided in subsequent editions
of Caney’s
The Law of Suretyship
, by Forsyth and Pretorius
(see also C F Forsyth ‘Suretyship’ in Zimmermann and Visser (eds)
Southern Cross
at 428-430; C F Forsyth ‘Prescription,
Suretyship and the Unwelcome Revival of Correality’ (1999) 11
SA
Merc
LJ
384) but sharply criticised by Styrian,
‘Verjaring van Borgverpligtinge Redux’
2001 (64)
THRHR
316
and its correctness doubted in LAWSA First Reissue vol 26 para 217.
It was followed in
Bank of the Orange Free State v Cloete
1985
(2) SA 859
(E),
Absa Bank Bpk v De Villiers
1998 (3) SA 920
(O) and
Nedcor Bank Ltd v Shapiro and Others
2002 JDR 766 (W).
It was also followed, but subject to qualification, in
Commissioner
for Customs and Excise v Standard General Insurance Company Ltd
[1998] 4 All SA 46
(W). To the extent, however, that Flemming DJP
in the latter case sought to rely on the distinction between
‘solidarity’ and
‘correality’ it is worthy of note that
Zimmermann,
The Law of Obligations : Roman Foundations of the
Civilian Tradition
(1992), at 129 suggests that such theorizing
in respect of these notions should be avoided as being an
‘ahistorical enterprise’.
On the other hand, the
Rand Bank
case was disapproved and not followed in
Jordan and Co Ltd v
Bulsara
1992 (4) SA 457
(E) and
Nedcor Bank Ltd v Sutherland
1998 (4) SA 32
(N). In
Leipsig v Bankorp Ltd, supra,
this
Court assumed without reference to the
Rand Bank
case that the
filing of a claim by the creditor against the principal debtor’s
insolvent estate would serve to delay the completion
of prescription
in respect of the claim against the surety but in the event the claim
against the principal debtor was found to have
prescribed. The same
assumption was made in
Kilroe-Daley v Barclays National Bank Ltd
,
supra,
but in that case the Court expressly cautioned (at
628D-E) that the judgment was to be construed as neither agreeing nor
disagreeing
with the decision in
Rand Bank
.
[24] Baker
J summarised his conclusions (at 454G to 455H). He said in effect
that Voet, relying on dubious authority, was incorrect
to have
applied C8.39(40).4(5) to sureties as the text clearly referred to
co-debtors
in solidum
and not to sureties. He said that right
from the beginning there was a dispute about this, that to his mind
the argument of Pothier
was ‘unconvincing’ while that of Laurent
was ‘logical and sound’, and added that C8.39(40).4(5) was an
‘ill-considered
piece of legislation’ which demonstrated a
failure on the part of Justinian to appreciate that joint debtors
in
solidum
are liable not by virtue of a single obligation but by
virtue of a series of obligations directed to a single performance.’
[25] It is
convenient to begin with the reference to Pothier and Laurent. As
previously indicated, the gravamen of Laurent’s complaint
was that
Pothier’s opinion was founded on the premise that the obligation of
the surety was the same as that of the principal debtor.
But it is
clear from the passages from Pothier’s
Obligations
quoted
above that Pothier was fully aware that the respective obligations of
the surety and the principal debtor arose from different
contracts
and in that respect were distinct. His reference to the creditor
having the same claim against the surety as against the
principal
debtor is clearly a reference to the content of the claim, not to the
vinculum juris
itself. Brunnemann, who was referred to by
Pothier, similarly appreciated that the actions which the creditor
had against the principal
debtor and against the surety were based on
different contracts, each of which would give rise to correspondingly
different obligations.
His point was that having regard to what in
essence is a commonality between the creditor’s respective actions
(and corresponding
obligations) both as to origin and content, they
should be treated as one for the purpose of prescription. He argued
that to make
a distinction between the two actions would involve
reasoning which was overly subtle (
subtilis ratio
). Wessels
JP, too, in
Cronin v Meerholz, supra,
refers to the
obligations of the surety being ‘the same’ as that of the
principal debtor. It is clear from the context that the
learned judge
was referring to the content of the respective obligations, ie to the
debt or performance to which both relate. Baker
J, in criticising
Wessels JP, points out that the liability of the surety arises from a
contract which is totally separate from that
between the principal
debtor and creditor (at 447H-448B). But Wessels JP, like Brunnemann
and Pothier, obviously appreciated this.
He expressly said as much in
Union Government v Van der Merwe, supra
, at 321 (quoted in
para 20 above). The emphasis on the distinction between the
obligations of the surety and principal debtor as
an argument against
the extension of C8.39(40).4(5) to sureties is in any event to some
extent misplaced. The obligation of one co-debtor
in solidum
may differ from the obligation of another. As De Wet (De Wet and Van
Wyk,
supra
, at 138) points out, the obligation of one may be
pure
, that of another
sub die
and that of a third
sub
condicione
. Indeed, Baker J in his summary (at 455B-C) makes the
point that co-debtors
in solidum
are liable to the creditor by
virtue of ‘a series of obligations directed to a single
performance’. In these circumstances, the
distinction between the
relationship between the principal debtor and the surety on the one
hand, and between co-debtors
in solidum
on the other, is less
compelling than the antagonists of Pothier’s view would contend it
to be. This is particularly so when the
surety has renounced the
benefits ordinarily available to a surety, which today is an almost
invariable practice.
[26] It is
true, as Baker J observes (at 444D-H), there is a clear distinction
between the obligation of a co-debtor
in solidum
and the
accessorial obligation of a surety. But once again, this is hardly
something which would have escaped the attention of those
who
favoured the extension of C8.39(40).4(5) to sureties. It is also true
that the authorities to which Voet refers are not particularly
compelling. But his understanding of the law reflects a viewpoint
that went back as far as the Gloss and enjoyed the support of
many
before him, including the likes of Heringius and Brunnemann.
[27] It is
not clear why Baker J in summarising his conclusions (under the
heading of ‘Conclusions’) found it necessary to criticise
C8.39(40).4(5), as ultimately his decision appears to have been based
on the conclusion that its extension to include sureties was
incorrect. In criticising ‘this ill-considered piece of
legislation’ he was of course echoing the view of De Wet. But
whether
one likes it or not the legislation was part of the Roman Law
which in turn became part of the Roman Dutch Law accepted in South
Africa. It cannot be dismissed simply because it does not fit into a
particular perception of the law as a logical edifice.
[28] Before
turning to the further point raised by Baker J which relates to what
he says is the unfairness resulting from the approach
adopted by
Voet, it is appropriate at this stage to comment on certain aspects
of what has already been said. Voet is high authority
in South
Africa. The same may be said of Pothier and Brunnemann. Although
opinion on the issue is divided, and has been for centuries,
the
weight of authority appears to be on the side of Voet. No Roman Dutch
lawyer contends for the opposing view. Moreover, Voet’s
view has
generally prevailed. It was incorporated into the codes of the
Netherlands, France, Belgium and other European countries
and was
accepted in South Africa until the
Rand Bank
case in 1982.
There are undoubtedly significant differences between the
relationship that exists between principal debtor and surety
on the
one hand and that between co-debtors
in solidum
on the other.
It is also true that there is some inconsistency in applying
Justinian’s constitution to sureties to the limited
extent that
interruption of prescription against the principal debtor interrupts
prescription against the surety but not applying
it to the converse
situation. It was probably this that Baker J had in mind when he
categorised Pothier’s view as ‘unconvincing’
and that of
Laurent as ‘logical and sound’. But ultimately the differences,
in my view, are not so profound as to have precluded
those jurists
seeking in the past to develop the law from extending the principle
embodied in C8.39(40).4(5) to sureties to the extent
referred to.
Once Justinian’s enactment is accepted to be the law, as it must, I
do not think that the extension involves a step
in terms of legal
theory which is so far-reaching as to justify rejecting the view of
Voet, particularly in the absence of other
Roman Dutch authority, and
in effect putting the clock back after so many years. The position,
of course, may well be otherwise
if interruption or delay in the
running of prescription in favour of a surety in accordance with the
principle embodied in C8.39(40).4(5)
were to cause undue hardship or
operate in a manner contrary to social utility. This is the question
to which I now turn.
[29] The
unfairness which Baker J refers to may arise, he says, in the
following circumstances if Voet’s approach is adopted. A
surety who
renounces the benefit of excussion and who guarantees a debt which
would ordinarily prescribe after three years, could,
without his or
her knowledge, be saddled with 30 years of jeopardy if the creditor
were to take judgment against the principal debtor
within the
three-year period without notice to the surety. This was said to be
‘manifestly unfair’ (at 455E) and to ‘go against
the grain’
(at 421E). In passing, it should be observed that in similar
circumstances a surety who has not renounced the benefit
of excussion
may notionally end up in virtually the same situation because
prescription would ordinarily begin to run against the
surety only
upon excussion of the principal debtor. However, the point remains
that if prescription running in favour of the surety
is interrupted
or delayed without the latter’s knowledge, he or she may well be
unfairly prejudiced, particularly if the validity
of the suretyship
or the creditor’s claim against the principal debtor is contested.
A surety who believes a claim has prescribed
may lose touch with
potential witnesses, allow relevant documents to be lost or
destroyed, or generally act in a manner prejudicial
to his or her
best interests.
[30] By its
very nature a contract of suretyship is burdensome. The surety
undertakes responsibility for the fulfilment of another’s
obligation. No doubt for this reason the law affords protection to a
surety in a number of different ways. At common law, for example,
a
surety will be released if the creditor does something in his
dealings with the principal debtor which has the effect of
prejudicing
the surety (Caney’s
The Law of Suretyship
5 ed
at 205). In order to be valid, contracts of suretyship must now also
be embodied in a written document signed by or on behalf
of the
surety (s 6 of Act 50 of 1956). But a balance must be struck.
Sureties do not assume the obligations of others against their
wills,
but with their free consent. Once having done so they cannot expect
to be entitled simply to disabuse their minds of the fortunes
of the
principal debtor’s liability and then require the law to protect
them against their ignorance. If prescription in favour
of the
principal debtor is delayed or interrupted without their knowledge,
they generally have themselves to blame. The example given
by Baker J
postulates a surety whose interest in the debt is no greater than
that of a friend of the principal debtor. But today
that is an
infrequent occurrence. The typical surety in modern society is one
who binds him- or herself as co-principal debtor and
guarantees the
debts of a company or close corporation which has little in the way
of share capital or assets but is dependent on
credit in order to
conduct its business. More often than not the business is that of the
surety or a spouse who for various reasons
chooses to conduct it
through the medium of a company or close corporation with limited
liability. A creditor will ordinarily refuse
to afford credit to such
a legal
persona
in the absence of a personal suretyship and
few businesses can operate successfully without credit. The very
existence of the debt
is therefore dependent upon the existence of
the suretyship while the object and function of the latter is, of
course, to ensure
proper payment of the former. To permit the claim
against the surety in these circumstances to prescribe before the
claim against
the principal debtor, in the words of Wessels JP in
Union Government v Van der Merwe, supra,
at 320, would be
‘almost subversive of the whole contract of suretyship’. Indeed,
in the type of situation sketched above it is
frequently the surety
himself who brings about, or at least participates in, the
interruption or delay of prescription against the
principal debtor,
eg by acknowledging liability or accepting service of judicial
process on behalf of the principal debtor, or by
submitting a dispute
to arbitration, or by initiating proceedings to have the principal
debtor placed in liquidation. The acceptance
of Voet’s view would
certainly not result in unfairness to a surety having a commercial
interest in the principal debtor’s liability.
But even if the
surety is a disinterested party, I have difficulty in appreciating
the unfairness complained of. Admittedly the period
of prescription
may be extended by reason of circumstances which relate solely to the
claim against the principal debtor, but that
is not an unreasonable
or illogical consequence of assuming responsibility for the
fulfilment of another’s obligation. Provided
only that the surety
exercises some vigilance in relation to the fortunes of the claim
against the principal debtor, there will be
no prejudice.
[31] Those opposed to Voet’s view contend that where the surety is
also bound as co-principal debtor there is nothing to prevent
the
creditor from instituting action against the surety within the
ordinary period of prescription; in other words, there is no reason
why a delay or interruption of prescription in respect of the
principal debtor should be visited on the surety. I do not agree. The
linking of the surety’s period of prescription to that of the
principal debtor, quite apart from considerations of uniformity
and
convenience as far as the creditor is concerned, will in many
instances serve the interests of the surety as well. One would
imagine that even when the surety has waived the benefit of excussion
he or she would welcome the creditor’s first excussing the
principal debtor before looking to the surety for the balance of the
claim. But if prescription in favour of the surety is not to
be
interrupted by the institution of proceedings against the principal
debtor, the creditor is likely to be compelled to sue the
surety
jointly with the principal debtor or at some stage before excussion
of the latter. As an alternative, the creditor may be
compelled to
commence proceedings against the surety merely in order to prevent
the claim prescribing while he or she litigates against,
or attempts
to recover payment from, the principal debtor. Such a step serves
little purpose other than to increase the costs of
recovering the
debt. Similar situations may arise if the surety is unaffected by a
delay in the running of prescription in favour
of the principal
debtor. If the principal debtor is liquidated, instead of filing a
claim against the liquidator and recovering first
what may possibly
prove to be a substantial dividend and then looking to the surety for
the balance, the creditor may be compelled
to sue the surety first,
leaving it to the latter to proceed against the liquidator. The
alternative would be to institute proceedings
against the surety and
allow the matter to remain dormant, if possible, pending confirmation
of the liquidator’s account which,
as I have said, merely serves to
increase the costs. The same would be the case where the principal
debtor dies, or is sequestrated
(see s 13(1)(g) quoted in para 3
above). If a disputed claim against the principal debtor is subjected
to arbitration (see s 13(1)(f))
the creditor may be compelled to
institute action against the surety to interrupt prescription. If the
matter were resolved by arbitration
the action against the surety
would once again have been a needless exercise resulting in wasted
costs. Yet another example of an
anomalous situation that may arise
is the case of debts between spouses. The effect of s 13(1)(c) is
that prescription in such a
case is delayed during the subsistence of
the marriage. But the creditor spouse would have to sue the surety
within the ordinary
period of prescription. The surety, in turn,
would have to sue the debtor spouse timeously, regardless of whether
the marriage still
subsisted and, if it did, the very object of s
13(1)(c) would be undermined. (See Styrian,
supra
,
at
319.)
[32] To sum up, I am unpersuaded that the acceptance of Voet’s view
is unfair to sureties. On the contrary, it leads to a result
which is
both convenient and equitable, particularly when considered against
the backdrop of the commercial realities of our modern
society. In
the circumstances, I can see no justification for departing from it.
In my view therefore the position in the South African
law is that an
interruption or delay in the running of prescription in favour of the
principal debtor interrupts or delays the running
of prescription in
favour of the surety. If, of course, prescription in respect of the
claim against the surety has not yet commenced
to run, any
interruption or delay relating to the claim against the principal
debtor will not affect the position of the surety,
but in the present
case, of course, prescription began to run in respect of both the
principal debtor and the surety at the same
time.
[33] It follows that in my view
Rand Bank Ltd v De Jager
was
wrongly decided.
[34] The appeal is dismissed with costs.
D G SCOTT
JUDGE OF APPEAL
Concur:
VIVIER ADP
FARLAM JA
MTHIYANE JA
LEWIS JA