Hidden Complexities in the Right of Recourse Between Co-debtors and Co-sureties

• Jurisdiction: South Africa
• DOI: 10.10520/ejc-btclq_v15_n4_a3
• Author: Leon Kuschke SC,John Butler SC,Matthew Blumberg SC
• Pages: 9-20
• Date: 01 December 2024
• Published date: 01 December 2024
• Published By: Siber Ink

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Hidden Complexities in the Right

of Recourse Between Co-debtors

and Co-sureties

LEON KUSCHKE SC, JOHN BUTLER SC AND MATTHEW BLUMBERG SC*

ABSTRACT

Does a co-debtor or co-surety who is called upon to pay, and does pay, more

than his or her proportionate share of the principal debt enjoy an ex lege

(ie automatic) right of recourse or contribution against his or her co-debtors

or co-sureties? This is the question that the authors — sitting as an arbitra-

tion appeal panel of three — were called upon to answer in recent arbitration

proceedings.

The common assumption, amongst lawyers and businesspeople alike, is

that there is an ex lege or automatic right of recourse or contribution in these

circumstances. However, as appears from the analysis below, that assump-

tion oversimplif‌i es the legal position — which, on an overview of the relevant

authorities, has two central tenets.

The f‌i rst is that the default or presumptive position is that co-debtors and

co-sureties do enjoy a mutual right of recourse or contribution in the circum-

stances described above.

The second is that the default or presumptive position may be displaced by

the nature of the underlying relationship between the individual co-debtors or

co-sureties. It is their underlying relationship — not merely the existence of a

relationship of co-debtorship or co-suretyship — that is ultimately determina-

tive of whether or not a mutual right of recourse or contribution exists.

As an example, assume that budding entrepreneur A wishes to start a

business. A seeks to borrow R100 as start-up f‌i nance from lending institu-

tion X. To satisfy X’s requirements in respect of security, A’s wealthy relative B

agrees to assume personal liability, jointly and severally alongside A, for repay-

ment of the loan. The position then is that Y, as creditor, is owed R100 by A

and B as co-principal debtors.

On settling the loan in full, does A then enjoy a right to recover R50(half

of the total debt paid by A) from his co-debtor B?

On the common assumption referred to above, the answer would be

yes. But the legal principles, properly understood and applied, yield the

opposite answer. Unlike A, B (the wealthy relative) has no genuine interest in

the advance of the loan. The law recognises that in these circumstances, the

underlying relationship between A and B is inconsistent with the latter owing

the former an obligation to relieve him or her of the full debt burden (ie by

distributing it between the two of them).

In this example, the nature of the underlying relationship between the

co-debtors A and B — which, again, is inconsistent with a mutual right of

recourse or contribution between them — has the result that the default or

presumptive position is displaced and does not apply.

* Members, Cape Bar.

2024 15(4) BTCLQ 9

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