The Prescription Act provides that the basic period of
prescription shall be 30 years in respect of 'any judgement
debt' and 3 years for 'any other debt'. The Act
further provides that 'prescription shall commence to run
afresh on the day on which the judgment of the court becomes
In the recent case of KH Eley v Lynn & Main Inc
 SCA 142 (RSA), the question before the Court was whether
a claim against Mrs Eley, bound as surety and co-principal
debtor where the principal debt was confirmed and reinforced by
judgement, prescribed after 3 or 30 years.
Mrs Eley bound herself as surety and co-principal debtor for
the repayment of 'all or any sums of money which the debtor
may now or from time to time hereafter owe or be indebted to
Nedcor Bank Limited ('the bank'), its
successors or assigns...'. Eley acted as director for the
principal debtor, Help Seat It Southern Africa (Pty) Ltd
('HSI'). Upon the bank's request to provide
security for an overdraft facility granted to HSI, she did so.
A year after executing the deed of suretyship, she experienced
marital problems, divorced her husband and left her chosen
domicilium citandi (address appointed for servicee of
process). HSI fell behind with payments and on 21 May 2001 the
bank obtained default judgment against HSI for the principal
debt plus interest. On 25 March 2003 the bank ceded all rights
in and to the book debts (including HSI's overdraft
facility) to Lynn & Main Inc ('LMI') with effect
from 2 January 2003, whereafter LMI instituted further action
against Eley, serving a summons on her on 14 September 2005 and
obtaining default judgment on 18 October 2005.
Eley denied that she was liable to the bank and contended
that the claim against her had prescribed since judgment had
been obtained against HSI on 21 May 2001, while summons was
only served on her (as surety) more than three years later, on
14 September 2005.
The court examined the relevant sections of the Prescription
Act to decide whether the debt of a principal debtor can be
separated from the subsequent debt owed by the surety. The
court referred to Randbank Limited v De Jager 1982 (3)
SA 418 (C), where it was found that in spite of
judgment against a principal debtor the period of prescription
applicable to the surety remained 3 years. Jans v Nedcor
Bank Ltd 2003 (6) SA 646 (SCA) found that the De
Jager case was wrongly decided, and that the common thread
that runs through the cases is that the obligation of a
principal debtor and surety relate to the same debt. If the
principal debt is kept alive by judgment, the surety's
accessory obligation by common law also continues to exist.
The court in Eley specifically highlighted the observation
in the Jans case that the very existence of the debt
is dependent upon the existence of the suretyship, and the
object and function of the suretyship is to ensure proper
payment of the principal debt. Thus to allow a claim against
the surety to prescribe before the claim against the principal
debtor prescribes would be 'almost subversive of the whole
contract of suretyship'. The court in Eley agreed with this
observation and held that the common law claim against a surety
does not prescribe prior to the claim in respect of any
judgment debt against the principal debtor.
This case should serve as a warning to people who
bind themselves as sureties, since they may be held liable for
the debts for an extended period of time arising from a
judgment against the principal debtor of which they are not
The content of this article is intended to provide a
general guide to the subject matter. Specialist advice should
be sought about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
As has long been expected, the Minister of Finance recently exercised his powers under the Collective Investment Schemes Control Act to declare hedge funds collective investment schemes from 1 April 2015.
Under UAE law, the commercial pledge is a possessory pledge, which means that the possession of a pledged asset (but not its ownership) is transferred to a pledgee or to an agreed third party as security for the loan.
Whether the definitions of "advice" or of "intermediary service" contained in the Financial Advisory and Intermediary Services Act, 2002 apply to particular circumstances is perhaps one of the most frequently asked questions in South African financial services law.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”