THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

REPORTABLE
CASE NO:   614/2006

In the matter between

KAREN HARRIET ELEY (formerly MEMMEL)         APPELLANT

and

LYNN & MAIN INC                                                       RESPONDENT

CORAM:
MTHIYANE, LEWIS, PONNAN JJA, HURT AND
KGOMO AJJA

HEARD:

2 NOVEMBER 2007
DELIVERED:
22 NOVEMBER 2007

Summary:
Whether the claim against a surety in respect of a
debt where judgment has been given against a
principal debtor prescribes after three years as
contemplated in s 11(d) of the Prescription Act 68
of 1969, or after 30 years as contemplated in s
11(a)(ii) of the Act.

Neutral Citation: This judgment may be referred to as KH Eley v
Lynn & Main Inc [2007] SCA 142 (RSA).

MTHIYANE JA

MTHIYANE JA:

[1] Section 11(a)(ii) of the Prescription Act 68 of 1969 (‘the Act’)
provides that the period of prescription shall be thirty years in respect of
‘any judgment debt’ and in terms of s 11(d), three years in respect of ‘any
other debt’. In terms of s 15(4) of the Act ‘prescription shall commence to
run afresh on the day on which the judgment of the court becomes
executable’. This appeal is concerned with the question whether the claim
against a surety who has bound herself as surety and co-principal debtor
in respect of a debt which was confirmed and reinforced by a judgment
against the principal debtor, became prescribed after three years or after
30 years as contemplated in s 11(a)(ii) of the Act.

[2] The appeal is against the order of Goldstein J in the Johannesburg
High Court in terms of which he dismissed an application by the
appellant for the rescission of a default judgment. The appellant as surety
had raised a defence that the claim against her had become prescribed
after three years, notwithstanding that a judgment had been obtained
against the principal debtor.

[3] The salient features of the history of the matter are set out in the
appellant’s affidavit in support of her application for rescission. On 29
February 1996 the appellant executed a deed of suretyship in terms of
which she bound herself as surety and co-principal debtor in solidum for
the repayment of ‘all or any sum or sums of money which the debtor may
now or from time to time hereafter owe or be indebted to the bank, its
successors or assigns . . . whether such indebtedness arises from money
already advanced or hereafter to be advanced . . . or otherwise howsoever

. . .’. The bank referred to in the deed of suretyship is Nedbank Limited
(later known as Nedcor Bank Limited). The deed of suretyship was
executed to provide the bank with collateral security for the amounts
advanced or to be advanced to Help Seat It Southern Africa (Pty) Ltd (the
principal debtor) on overdraft. The appellant had, as director of the
principal debtor, signed an application form on the principal debtor’s
behalf on 9 September 1994, for the opening of a cheque account with
Nedbank Limited (‘the bank’). When she was asked by the bank to
provide security she readily acceded to their request. As the appellant put
it in her supporting affidavit:
‘An overdraft was required and Nedbank Limited approached me for a suretyship
which I gave to them.’

[4] A year after executing the deed of suretyship the appellant
experienced marital problems. In 1997 she left her husband and her
chosen domicilium citandi as stated in the suretyship deed, was divorced
and remarried. In the meantime the principal debtor fell into debt and
apparently failed to meet its financial obligations to the bank. The
appellant blames her former husband for the financial woes of the
principal debtor. She emphatically declares that it was he who ‘caused it
to suffer financial hardship.’ Nothing, in my view, turns on this.

[5] As was to be expected the bank sued the principal debtor for the
recovery of the moneys it had advanced and on 21 May 2001 it obtained
judgment by default, for:
‘1.
Payment of the sum of R157 685,55
2.
Interest on R157 685,55 to date of payment at the rate of 15.50 per centum per
year from 1 March 2000.
3.
Costs in the amount of R650,00 plus sheriff’s fees in the sum of R117,07.’

[6] On 25 March 2003 the bank ceded all right, title and interest in and
to the book debts to the respondent with effect from 2 January 2003.

[7] The respondent, as cessionary, thereafter instituted action against
the appellant as surety and co-principal debtor in solidum, for the
repayment of the amount then due and owing by the principal debtor.
Summons was served at the appellant’s chosen domicilium citandi on 14
September 2005. As no appearance to defend was delivered, the
respondent duly took judgment by default on 18 October 2005, for:
‘1.
Payment of the sum of R157 685,55
2.
Interest on R157 685,55 to date of payment at the rate of 15,50 per centum
per year from 1st March 2000
3.
Costs of suit on the scale as between attorney and client to be taxed.’

[8] Subsequently, the appellant launched an application for rescission
of the default judgment. In her supporting affidavit she alleged that she
had been unaware that summons had been issued against her as she had
left her domicilium by the time summons was served. She averred that if
she had been aware of the true situation she ‘would have entered an
appearance to defend immediately.’ She denied that she was liable to the
bank and premised her defence on two points. First, she contended that
the respondent’s claim had become prescribed. This because judgment
against the principal debtor was obtained on 21 May 2001 and summons
was served only on 14 September 2005, more than three years later.
Second, she denied that there had been a cession of the claim based on
the judgment debt by the bank.

[9] When the matter came before Goldstein J the second point was not
argued for reasons that are not readily apparent; the parties requested the

learned judge ‘to decide finally whether the [appellant’s] defence of
prescription is valid, and depending on [his] decision on this point to
grant or dismiss the application.’ The application for rescission was
dismissed with costs. The judge followed and applied Jans v Nedcor
Bank Ltd.1 He held that the prescriptive period in respect of the claim
against the appellant was the same as that in respect of the claim against
the principal debtor, that is 30 years, and granted the appellant leave to
appeal to this court.

[10] The main issue in the appeal is whether the respondent’s claim
against the appellant has become prescribed. In terms of s 15(4), read
with s 11(a)(ii), the period of prescription of the debt owed by the
principal debtor to Nedbank Limited (the judgment creditor) was thirty
years from the date of judgment on 21 May 2001. The question debated
in the court below and in the appeal before us was whether the claim
against the appellant as surety who bound herself as surety and co-
principal debtor would prescribe after the same period or after the lesser
period of three years referred to in s 11(d). In Rand Bank Limited v De
Jager2 the court held that in spite of a judgment against the principal
debtor the period of prescription applicable to the claim against the surety
remained three years and is therefore considerably shorter than that
applicable to the claim against the principal debtor.

[11] In Jans v Nedcor Bank Ltd, Scott JA undertook an exhaustive
analysis of the fundamental principles applicable to suretyship under
South African law. The earlier cases of Cronin v Meerholz3 and Union

1 2003 (6) SA 646 (SCA).
2 1982 (3) SA 418 (C).
3 1920 TPD 403.

Government v Van der Merwe,4 which were not followed in Randbank
Limited v De Jager, were fully discussed and referred to with apparent
approval in Jans. The court held that Randbank was incorrectly decided.
The common thread that runs through these cases (other than Randbank)
is that the obligation of the principal debtor and the surety relate to the
same debt. The thrust of the dicta is, therefore, that if the principal debt is
kept alive by a judgment, the surety’s accessory obligation by common
law continues to exist.

[12] The appellant sought to distinguish Jans v Nedcor Bank Ltd from
the present matter on the basis that Jans was concerned with the
interruption or delay in the running of prescription and not directly with
the issue whether a judgment against the principal debtor results in
prescription against a surety being extended in terms of s 11(a)(ii) of the
Act. Although counsel does not say so in so many words, in my view the
argument advanced on the appellant’s behalf coincides with the approach
adopted in Rand Bank v De Jager, where it was held that in spite of the
judgment against the principal debtor, the period of prescription in favour
of the surety remained three years. That case has, as I have said, been
overruled.

[13] The distinction which the appellant seeks to draw is illusory. Jans v
Nedcor Bank Ltd sets out the fundamental principles applicable to
suretyship contracts in general and is not confined to the effect of the
interruption of the running of prescription against the principal debtor.
This is particularly clear from the judgment where, after discussing the
nature of the contract of suretyship, Scott JA makes the following

4 1921 TPD 318.

observation, relevant to the question we are concerned with in the present
matter:5
‘The very existence of the debt is therefore dependent upon the existence of the
suretyship while the object and function of the latter is, of course, to ensure proper
payment of the former. To permit the claim against the surety in these circumstances
to prescribe before the claim against the principal debtor, in the words of Wessels JP
in Union Government v Van der Merwe (supra at 320), would be “almost subversive
of the whole contract of suretyship.”’

[14] In the appeal before us it was not argued that Jans v Nedcor Bank
Ltd was wrongly decided. There is no reason why it should not be
followed. Accordingly the contention that the claim against the appellant
had become prescribed after three years falls to be rejected.

[15] The judgment in Bulsara v Jordan & Co Ltd6 also relied on by the
appellant does not assist her. In Bulsara, judgment was given against the
principal debtor on 23 May 1989 after summons had been served on him
on 20 March 1987. Summons was served on Bulsara (as surety) on 28
May 1990. In construing the deed of suretyship the court held that it
included the judgment debt against the principal debtor as the subject of
the suretyship. In any event the summons on Bulsara was served well
within the three-year period of prescription referred to in s 11(d). The
court in Bulsara expressly refrained from considering the correctness of
the decision in Randbank, but there is nothing in the judgment that is
inconsistent with the principles laid down in Jans. And there is nothing in
the deed of suretyship at issue in this matter that warrants a different
construction.

5 Para 30.
6 1996 (1) SA 805 (A).

[16] I turn to the second point which was raised on the pleadings but not
argued in the court a quo. Counsel for the appellant submitted that the
cession of the claim based on the judgment debt was not apparent from
the deed of cession annexed to the summons. The argument is without
merit. In terms of the deed of cession Nedbank Limited ceded to the
respondent ‘all right, title and interest in and to the book debts and any
judgment in respect of any such book debts . . . . For purposes of the
foregoing, ‘book debts’ means collectively the book debts owed to
Nedbank by various debtors, a list of which is annexed hereto, and
includes all claims . . . against any third party (whether or not such third
party is jointly or severally liable with such debtors) for, or in relation to,
the debts comprising such book debt . . . and includes all security
provided to Nedbank’. . . . (My emphasis.) The principal debtor’s name
(Help Seat It Southern Africa (Pty) Ltd) appears on the schedule to the
cession. The said schedule was annexed to the particulars of claim.

[17] The case pleaded is that Nedbank ceded to the respondent its claim
against Help Seat It Southern Africa (Pty) Ltd (the principal debtor)
including any judgment in respect thereof and all security provided to
Nedbank in respect thereof. The appellant bound herself to Nedbank
Limited as surety and co-principal debtor, in consequence of which the
respondent was entitled to claim the debt from the appellant. It has never
been suggested that the judgment against the principal debtor related to
something other than the banking facilities which the appellant applied
for as director of the principal debtor. The wording of the suretyship deed
expressly covers a judgment against the principal debtor. I agree with
counsel for the respondent that it would be artificial to hold that the
suretyship covers the book debt, but not a judgment obtained in respect of

the book debt. It follows that the argument that the claim was not
properly pleaded must also fail.

[18] Accordingly the appeal is dismissed with costs.

______________________
KK MTHIYANE

JUDGE OF APPEAL

CONCUR:

LEWIS JA
PONNAN JA
HURT AJA
KGOMO AJA

THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal

Date:
22 November 2007

Status:
Immediate

Please note that the media summary is intended for the benefit of the
media and does not form part of the judgment of the Supreme Court of
Appeal.

KH ELEY v LYNN & MAIN INC [2007] SCA 142 (RSA).

[1] Today the Supreme Court of Appeal dismissed an appeal by Ms
Karen Harriet Eley (formerly Memmel) against an order of the
Johannesburg High Court. Ms Eley had signed a deed of suretyship on 9
September 1994, binding herself as surety and co-principal debtor for the
repayment by a company of which she was a director, Help Seat It
Southern Africa (Pty) Ltd, of the sums of money lent and advanced by
Nedcor Bank to the company. The bank obtained judgment against the
company on 21 May 2001.

[2] When Ms Eley was sued by Lynn & Main Inc, to which Nedcor
Bank had ceded its claim against the principal debtor amounting to R157
685,55 plus interest and costs on 14 September 2005, she pleaded that the

claim against her had become prescribed, in that she had not been served
with the summons within three years after judgment was obtained against
the principal debtor, Help Seat It Southern Africa (Pty) Ltd.

[3] This defence was however rejected by the SCA which held that the
principal debt is kept alive by a judgment, and that the surety’s accessory
obligation by common law continues to exist, because the obligation of
the surety and that of the principal debtor relate to the same debt.

[4] The SCA also rejected an alternative defence raised by Ms Eley
that there had not been a proper cession of the debt. It was clear from the
deed of cession, held the SCA, that the judgment debt against the
principal debtor was included.