The respondent stood surety as co-principal debtor in solidum for his son's debt to the appellant bank. The respondent's son's estate was provisionally sequestrated on 30 April 1992, with the principal debt (R717,045) already due and payable at that time. A final sequestration order was issued on 4 June 1992. The appellant bank proved six claims against the insolvent estate, including one based on the principal debt, which were all accepted by the trustees. On 13 September 1993, the Master confirmed the first final liquidation and distribution account, with no dividend awarded for the principal debt. Legal proceedings against the surety (respondent) were instituted in February 1996. On 4 February 1997, an amended second and final liquidation and distribution account was confirmed by the Master, again with no dividend for the principal debt. The respondent raised defences of novation or prescription, arguing that the suretyship debt had been extinguished. The appellant argued that completion of prescription was postponed in terms of section 13(1)(g) of the Prescription Act 68 of 1969, and that this postponement was still in effect when the action was instituted.
The appeal was dismissed with costs.
The binding legal principles established are: (1) The party relying on postponement of prescription under section 13(1)(g) of the Prescription Act 68 of 1969 bears the onus of proving such postponement, including proving the period during which the debt was the subject of a claim against an insolvent estate. (2) Upon confirmation by the Master of the first final liquidation and distribution account in insolvency proceedings, where there is no realistic prospect of any dividend being paid, the impediment to prescription under section 13(1)(g) ceases to exist, as the debt is no longer the subject of a claim against the insolvent estate. (3) If the principal debt prescribes, the suretyship debt is automatically extinguished, as confirmed in Leipsig v Bankorp Ltd 1994 (2) SA 128 (A).
The Court noted it was unnecessary to decide: (1) whether novation had occurred in this case; and (2) whether a suretyship debt prescribes independently of the principal debt, and therefore whether the decision in Rand Bank v De Jager 1982 (3) SA 418 (C) was correctly decided. The Court also observed that a subsequent amended or reopened liquidation account cannot revive or extend an impediment under section 13(1)(g) that has already ceased to exist, particularly where there is no evidence of realistic prospects of a dividend.
This case is significant in South African law for clarifying: (1) that the onus of proving postponement of prescription under section 13(1)(g) of the Prescription Act rests on the party relying on such postponement; (2) that confirmation of the first final liquidation and distribution account in insolvency proceedings provides sufficient finality to terminate the impediment under section 13(1)(g), following the principle in Leipsig v Bankorp Ltd; and (3) that if a principal debt prescribes, the accessory suretyship debt is automatically extinguished. The case demonstrates the strict evidentiary requirements for parties seeking to rely on postponement of prescription and reinforces the accessory nature of suretyship obligations.