Liberty Group Limited v Warren Patrick Broughton Illman

On 10 March 2003, Liberty concluded a broking agreement with ECE Financial Holdings (ECE) to act as an independent intermediary. Between March 2003 and February 2005, eight individuals including the respondent signed separate but identical deeds of suretyship binding themselves as sureties and co-principal debtors in solidum with ECE for all monies ECE might owe Liberty. Between March 2003 and March 2011, Liberty advanced commissions to ECE on contracts that later lapsed, were cancelled or terminated. The total amount of commissions that became repayable was R1,029,963.50. Liberty ceded its claim to the appellant. On 22 September 2011, the appellant issued summons against all sureties. The summons was served on one surety (Mr September) on 29 September 2011, and default judgment was obtained against him on 27 January 2012. The summons was only served on the respondent on 31 March 2016, approximately five years after issuance. The respondent raised a special plea of prescription, asserting that the claim based on termination on 14 March 2011 had prescribed after three years in terms of section 11 of the Prescription Act 68 of 1969.

• Whether sureties who bind themselves as co-principal debtors become co-debtors with the principal debtor and with each other
• Whether service of summons on one surety interrupts the running of prescription in favour of other sureties
• The legal effect of the phrase 'co-principal debtor' in a deed of suretyship
• Whether interruption of prescription against one surety interrupts prescription against the principal debtor and other co-sureties
• The application of Justinian's decree (Codex 53 C8.39(40).4(5)) regarding interruption of prescription among co-debtors

The appeal was dismissed with costs.

A surety who binds himself as co-principal debtor does not become a co-debtor with the principal debtor, nor does he become a co-debtor with other co-sureties and co-principal debtors, unless they have expressly agreed to that effect. The addition of the words 'co-principal debtor' to a suretyship agreement does not transform the contract into anything other than one of suretyship. The sole consequence is that the surety renounces the benefits ordinarily available to a surety (such as excussion and division) and becomes liable jointly and severally with the principal debtor. The undertaking of a surety remains accessory to the main contract - it is an undertaking that the obligation of the principal debtor will be discharged, and if not, that the creditor will be indemnified. Service of summons on one surety does not interrupt the running of prescription in favour of other co-sureties. The principle that interruption of prescription against a principal debtor interrupts prescription against a surety does not apply conversely - interruption of prescription against a surety does not interrupt prescription against the principal debtor or other co-sureties.

The court clarified the proper interpretation of the dictum in Union Government v Van der Merwe 1921 TPD 318, explaining that when Wessels JP stated that a surety's obligation 'shall be of the same scope and nature as that of the principal debtor', he did not mean that the surety became a party to the main contract. The court noted that the Roman-Dutch law writers who wrote extensively on Justinian's decree and debated its pros and cons were unanimous that the converse should not apply - that interruption of prescription against a surety should not constitute interruption against the principal debtor. The court observed that the common law writers had considered the extension of Justinian's decree and decided it should be applied to the extent recognized and no further, and that extending it to allow interruption against one surety to affect other sureties would constitute a substantial deviation from common law principles.

This case confirms and clarifies fundamental principles of South African suretyship law regarding the accessorial nature of suretyship obligations and the effect of binding oneself as a 'co-principal debtor'. It reaffirms the jurisprudence established in Kilroe-Daley and Neon that a surety does not become a co-debtor with the principal debtor merely by binding himself as co-principal debtor. The case is significant for its application to prescription in the context of multiple sureties, establishing that service of summons on one surety does not interrupt prescription running in favour of other co-sureties. The judgment provides important guidance on the limits of Justinian's decree regarding interruption of prescription among co-debtors and its application (or non-application) to sureties. It demonstrates the court's approach to maintaining established common law principles and declining to extend them beyond their recognized boundaries.