By Patrick Bracher
I refer to the article by Robert dos Santos ‘The lazy man’s suretyship: Are unlimited debts of limited application?’ (2015 (Sept) DR 26). I believe that it is irresponsible to argue in favour of a conclusion and to disguise the flaws in the agreement by suggesting that a commonly and correctly held view is ‘questionable’ or that ‘the possibility arises that … there may be non-compliance’.
The author would have us believe that a suretyship in terms of which the surety is liable for ‘the due and punctual payment and performance by the debtor of all debts and obligations of whatsoever nature and howsoever arising which the debtor may now or in future owe to the creditor’ may not be enforceable because s 6 of the General Laws Amendment Act 50 of 1956 (the Act), requires the scope of the surety’s obligations to be ascertainable from the document.
Such clauses have been widely used and enforced before and after the Act was passed. There is nothing open-ended about that standard provision. The surety stands surety for all debts that the debtor may now or in future owe to the creditor. That wording is clear and enforceable. If you want to know what debts the surety is securing you simply look to see whether the principal debt is a debt owed by the debtor to the creditor. As long as anything is owing, the surety has an accessory obligation to the creditor.
Wide language was enforced by the appellate division in Sapirstein and Others v Anglo African Shipping Co (SA) Ltd 1978 (4) SA 1(A) where the suretyship related to ‘all sums of money which the debtor may have in the past owed or may presently or in the future owe to you [followed by some listed debts] … or any cause of indebtedness whatsoever’. The court found that the suretyship, in essence, amounted to a promise by each of the sureties to the creditor to guarantee any indebtedness which the debtor may incur to the creditor and judgment was granted in favour of the creditor. It is true that some specific debts were listed but this did not detract from the generality of the provision. In Cope v Atkinson’s Motor Garages Ltd 1931 AD 366 the appellate division enforced a bond ‘in respect of the indebtedness upon any just cause of indebtedness whatsoever’. The court, in Sapirstein, was happy to enforce the mortgage bond, which it saw as an ‘unlimited continuing guarantee for payment of all sums of money which the principal debtor may in future owe to the creditor’.
The issue was again dealt with in Swift Air Freight CC v Singh 1993 (1) SA 454 (D). The court was considering a suretyship ‘for the due, proper and faithful performance by the debtor of the conditions, stipulations and obligations arising from various transactions between the creditor and the debtor’. It was argued for the surety that the suretyship was unenforceable by virtue of the Act because ‘various transactions’ could mean some transactions and not others or different and unspecified transactions but not all transactions. The court held that the expression ‘various transactions’ must be taken to mean all transactions even though they may be of different classes. The intention of the creditor was to cast the net as wide as possible. The suretyship did not offend against the provisions of s 6 of the Act.
In Vitamax (Pty) Ltd v Executive Catering Equipment CC and Others 1993 (2) SA 556 (W) Mahomed J had no difficulty enforcing a suretyship by which the sureties bound themselves as sureties with the customer of a catering equipment company ‘for the due fulfilment of all the customer’s present and future obligations to Vitamax without limitation’. Similarly, the Eastern Cape High Court upheld the validity of a suretyship for ‘the due and punctual … performance of any obligation, all of which may now or in future become owing by the debtor for any reason whatsoever’ (De Villiers v Nedfin Bank, a division of Nedcor Bank Ltd 1997 (2) SA 76 (E)). There have probably been thousands of unopposed unreported judgments since 1956 upholding this form of suretyship.
It is also strange to argue that the standard wording becomes enforceable if the general words are followed or preceded by a reference to identified principal debts. In that case you are either enforcing the general words or the specific words depending on the drafting and it adds nothing to the argument. The surety is not being held liable for debts not envisaged by the suretyship. The debts for which the surety is bound are clear and intrinsic evidence is admissible to show that the amount claimed is money owed by the debtor to the creditor.
If the purpose of the article under discussion is to urge those drafting sureties to do so carefully and to describe things plainly, no one would argue with that suggestion.
That is why the standard wording has been upheld as long as the Act has been part of our law. It clearly, succinctly and enforceably sets out what creditors want covered and what sureties owe.
Patrick Bracher Attorneys Admission Diploma (Unisa) is an attorney at Norton Rose Fulbright in Johannesburg.
This article was first published in De Rebus in 2016 (Jan/Feb) DR 56.
