Karen Harriet Eley (formerly Memmel) v Lynn & Main Inc

On 29 February 1996, the appellant executed a deed of suretyship binding herself as surety and co-principal debtor in solidum for all amounts owed by Help Seat It Southern Africa (Pty) Ltd (the principal debtor) to Nedbank Limited. The principal debtor obtained banking facilities from Nedbank but failed to meet its financial obligations. On 21 May 2001, Nedbank obtained default judgment against the principal debtor for R157,685.55 plus interest and costs. On 25 March 2003, Nedbank ceded all rights, title and interest in the book debts to the respondent (Lynn & Main Inc) with effect from 2 January 2003. On 14 September 2005, the respondent served summons on the appellant as surety at her chosen domicilium citandi. The appellant did not enter appearance to defend, and default judgment was granted against her on 18 October 2005. The appellant subsequently applied for rescission of the default judgment, raising two defenses: (1) that the claim had prescribed as more than three years had elapsed since the judgment against the principal debtor, and (2) that there had been no proper cession of the claim. The Johannesburg High Court (Goldstein J) dismissed her rescission application, and she appealed to the Supreme Court of Appeal.

• Whether a claim against a surety who bound herself as surety and co-principal debtor prescribes after three years in terms of section 11(d) of the Prescription Act 68 of 1969, or after 30 years in terms of section 11(a)(ii) where judgment has been obtained against the principal debtor
• Whether the cession by Nedbank to the respondent properly included the claim against the surety based on the judgment debt against the principal debtor
• Whether the judgment debt against the principal debtor extends the prescriptive period applicable to the surety's accessory obligation

The appeal was dismissed with costs.

Where a surety has bound herself as surety and co-principal debtor in solidum for the debts of a principal debtor, and judgment has been obtained against the principal debtor, the prescriptive period applicable to the claim against the surety is the same as that applicable to the judgment debt against the principal debtor, namely 30 years in terms of section 11(a)(ii) of the Prescription Act 68 of 1969, not three years as contemplated in section 11(d). The obligation of the principal debtor and the surety relate to the same debt. If the principal debt is kept alive by a judgment, the surety's accessory obligation by common law continues to exist for the same period. The fundamental nature of a suretyship contract requires that the claim against the surety not prescribe before the claim against the principal debtor.

The court made observations approving the dicta in earlier cases including Cronin v Meerholz 1920 TPD 403 and Union Government v Van der Merwe 1921 TPD 318, which had established that the obligation of the principal debtor and surety relate to the same debt. The court noted approvingly the statement from Union Government v Van der Merwe that to permit the claim against the surety to prescribe before the claim against the principal debtor would be 'almost subversive of the whole contract of suretyship.' The court also observed that Bulsara v Jordan & Co Ltd 1996 (1) SA 805 (A), while not directly deciding the issue, contained nothing inconsistent with the principles laid down in Jans. The court noted that nothing turned on the appellant's allegation that her former husband had caused the principal debtor's financial hardship.

This case authoritatively confirms the principle established in Jans v Nedcor Bank Ltd that where a judgment has been obtained against a principal debtor, the prescriptive period applicable to a claim against a surety who has bound herself as surety and co-principal debtor is 30 years (in terms of section 11(a)(ii) of the Prescription Act), not three years (section 11(d)). The case is significant for clarifying that the surety's accessory obligation is inextricably linked to the principal debt, and where the principal debt is reinforced and kept alive by a judgment, the surety's obligation continues to exist for the same prescriptive period. The judgment reinforces fundamental principles of suretyship law in South Africa, particularly the accessory nature of the surety's obligation and the principle that the surety and principal debtor's obligations relate to the same debt. It provides important guidance to banks, creditors and sureties on the application of prescription periods in suretyship contracts, and confirms that allowing a surety's obligation to prescribe before the principal debt would undermine the very purpose of suretyship contracts.