Estelle Le Roux and Another v Dielemaar Holdings (Cape) Pty Ltd and Another

Between 2008 and 2011, the respondents (Dielemaar Holdings and IPIC Properties) concluded three commercial property lease agreements with Be Positive Trading CC (principal debtor). The applicants, Ms Estelle le Roux and Mr Marthinus van der Spuy le Roux, bound themselves as sureties and co-principal debtors in solidum for the principal debtor's obligations under four deeds of suretyship. The principal debtor fell into arrears totaling over R1 million across the three leases. The respondents instituted actions in the magistrate's and regional courts. The regional court refused summary judgment due to an arbitration clause in the third lease. An arbitrator was appointed on 5 December 2013. The arbitrator issued an interim award on 11 February 2015 excusing the sureties from the arbitration as their suretyship deeds lacked arbitration clauses. The principal debtor withdrew from defending the arbitration. On 22 July 2015, the arbitrator made a final award in default against the principal debtor, upholding the claims and dismissing the principal debtor's counterclaim for damages of R1,924,623.88. This award was made an order of the high court on 29 March 2016. In July 2016, the respondents instituted action in the high court against the applicants as sureties.

• Whether the claims against the sureties had prescribed in terms of the Prescription Act 68 of 1969
• Whether the interruption or delay in the running of prescription in favor of the principal debtor also interrupted or delayed prescription in favor of the sureties
• Whether the sureties' withdrawal from the arbitration proceedings caused prescription to resume running independently against them
• Whether the principle of res judicata or issue estoppel applied to prevent the sureties from raising the counterclaim that had been dismissed by the arbitrator against the principal debtor

The application for leave to appeal was dismissed with costs.

1. An interruption or delay in the running of prescription in favor of a principal debtor interrupts or delays the running of prescription in favor of a surety who is bound as co-principal debtor in solidum (following Jans v Nedcor Bank). 2. Where a debt is subjected to arbitration in terms of s 13(1)(f) of the Prescription Act, prescription is interrupted for both the principal debtor and the surety, even where the surety withdraws from the arbitration proceedings due to lack of jurisdiction. 3. A surety bound as co-principal debtor in solidum cannot claim independent prescription running merely by withdrawing from arbitration proceedings that continue to bind the principal debtor. 4. Proceedings stayed in terms of s 6 of the Arbitration Act pending arbitration are not 'abandoned' for purposes of s 15(2) of the Prescription Act. 5. The principle of res judicata or issue estoppel applies to prevent a surety from raising a counterclaim that was dismissed in arbitration proceedings involving the principal debtor, where the surety had the opportunity to participate but failed to prosecute the claim.

The Court noted the anomaly identified in Jans v Nedcor Bank, whereby if a disputed claim against a principal debtor is subjected to arbitration under s 13(1)(f) of the Prescription Act, a creditor may be compelled to institute action against the surety to interrupt prescription, which could result in needless litigation and wasted costs if the matter is ultimately resolved by arbitration. The Court also observed that in contracts of suretyship, particularly in modern times, it is usual for the surety to bind himself or herself as surety and co-principal debtor, but this does not mean the surety becomes a party to the contract between the creditor and principal debtor; rather, the surety renounces the benefits ordinarily available to a surety against the creditor and becomes jointly and severally liable with the principal debtor.

This case clarifies important principles of South African law regarding the intersection of suretyship, prescription, and arbitration. It reinforces the principle established in Jans v Nedcor Bank that prescription runs jointly for principal debtors and sureties bound in solidum, and that interruption of prescription in favor of the principal debtor also benefits the surety. The judgment confirms that a surety cannot evade this principle by withdrawing from arbitration proceedings that bind the principal debtor. It also applies res judicata principles to prevent sureties from re-litigating counterclaims that were dismissed in arbitration proceedings involving the principal debtor, particularly where the surety is closely identified with the principal debtor (as a member of a close corporation). The case provides guidance on the proper interpretation of s 13(1)(f) and s 15 of the Prescription Act in the context of arbitration and suretyship, and confirms that proceedings stayed pending arbitration are not 'abandoned' for purposes of s 15(2) of the Prescription Act.