Neon and Cold Cathode Illuminations (Pty) Ltd v Ephron

• Jurisdiction: South Africa
• Judgment Date: 11 November 1977
• Citation: 1978 (1) SA 463 (A)

Neon and Cold Cathode Illuminations (Pty) Ltd v Ephron
1978 (1) SA 463 (A)

1978 (1) SA p463

Citation	1978 (1) SA 463 (A)
Court	Appellate Division
Judge	Trollip JA, Rabie JA, Corbett JA, Kotzé JA and Diemont JA
Heard	September 19, 1977
Judgment	November 11, 1977

Flynote : Sleutelwoorde

C Prescription — Extinctive prescription — Interruption of in terms of sec. 6 (1) (b) of Act 18 of 1943 by service of process — Process must be to enforce the same or substantially the same right — Company director signing lease on behalf of company — Director binding himself as surety and co-principal debtor for due payment of rentals — Lessor's right D against lessee company not the same as its right against the surety — Director not having a joint principal obligation with the lessee — His obligation as surety different — Summons against director "as lessee" does not interrupt prescription — Lessor's right to enforce obligation lost against both company and director as three year period in sec. 3 (2) (c) (iv) of Act had expired.

E Principal and surety — Consequence of surety also signing as co-principal debtor — Such not transforming his accessory obligation as surety into a joint principal obligation in the circumstances.

Appeal — Record — Unsatisfactory state of — Effect on costs.

Headnote : Kopnota

F In section 6 (1) (b) of the Prescription Act, 18 of 1943, which provides that "extinctive prescription shall be interrupted by service on the debtor of any process whereby action is instituted", the process referred to must be a process by which action is instituted to enforce the same or substantially the same right as would otherwise be rendered unenforceable by lapse of time. The substance rather than the form of the previous process must be considered in determining whether or not it interrupted prescription.

The only consequence (albeit an important one) that flows from a surety also undertaking liability as a co-principal debtor is that vis-à-vis the creditor he thereby renounces

1978 (1) SA p464

the ordinary benefits available to a surety, such as those of excussion and division, and he becomes liable jointly and severally with the principal debtor. However, he retains the right, on paying the creditor, to obtain a cession of the latter's rights and securities in order to A recover the full amount from the principal debtor. It follows that, merely by signing a lease as surety and co-principal debtor in respect of the due payment of rentals, he does not transform his accessory obligation as a surety into a joint principal obligation as co-lessee with the lessee.

Appellant, a neon sign manufacturer and supplier, and a company, through its director, respondent, had, in February 1962, signed a lease called a "rental and maintenance agreement", in terms whereof appellant undertook to construct, instal and let to the company a neon display sign for 60 B calendar months, on a monthly rental basis. Respondent had also signed a separate undertaking at the foot of the lease in these terms: "I, the undersigned, a director of (the company) duly authorised on behalf of (the company), hereby bind myself jointly and severally in my personal capacity as surety and co-principal debtor in solidum for the due performance by the lessee company of all its obligations under this agreement". The C company fell into arrears and at the conclusion of the lease in August 1968 a total of R627 had become due and remained unpaid. On 1 April 1970 summons was served on respondent alleging that respondent (not the company) had entered into the lease and was in arrear with the rentals in that amount. In December 1972 appellant's claim was dismissed on the ground that respondent had been incorrectly sued on the lease as the lessee and not as surety and co-principal debtor. No appeal had been noted. In February 1973 appellant again sued respondent, this time as surety and co-principal debtor, in a magistrate's court for payment of the D R627. Respondent's defence was that the entire claim for rentals was prescribed as more than three years had expired since they had accrued. Appellant contended that the period of prescription was six years and that, in any event, prescription had been interrupted by the service of the summons on respondent in 1970. The magistrate's court granted judgment in favour of the appellant, which decision was reversed by a Provincial Division. In a further appeal,

E Held, that, whether the claim was against respondent as co-lessee or as surety, it clearly fell within the ample scope of section 3 (2) (c) (iv) of Act 18 of 1943, which Act was still applicable in terms of section 16 of Act 68 of 1969, and that the period of prescription of three years applied.

Held, further, although respondent had bound himself, not only as surety but also as co-principal debtor with the company, that that did not render F him liable to appellant in a capacity other than that of a surety who had renounced the benefits ordinarily available to a surety against the creditor: he had not himself contracted to hire the neon sign, nor had he intended to use it himself, nor to acquire any rights against appellant except as a surety.

Held, therefore, that respondent, by also signing as a co-principal debtor, had not transformed his accessory obligation as a surety into a joint principal obligation as co-lessee with the company.

G Held, accordingly, that the right which appellant had sought to enforce against respondent in 1970 had been non-existent, since the company and not the respondent was the lessee: moreover, appellant's right enforceable against the lessee was quite different from the one the appellant was seeking to enforce in the present proceedings against respondent as surety and co-principal debtor, i.e. they were not virtually the same as was contended for on appellant's behalf.

H Held, therefore, that appellant's previous action in 1970 had not interrupted prescription of the rights it was now seeking to enforce against respondent, and thus that appellant's rights against both the company and respondent in respect of the entire balance of rentals under the lease had become prescribed. Appeal accordingly dismissed with costs.

Semble: That, had the appeal not failed, the Court would have made an appropriate order of costs relating to offending aspects of the appeal record, in which vital documents were unclear whilst the proceedings in the magistrate's court, which had been unnecessary, had been included, an unforgiveable manner of preparing a record at a time when every effort should be made to curtail the high costs of litigation.

1978 (1) SA p465

The decision in the Transvaal Provincial Division in Ephron v. Neon and Cold Cathode Illuminations (Pty.) Ltd., confirmed.

Case Information

Appeal from a decision in the Transvaal Provincial Division (IRVING STEYN A and MOSTERT, JJ.). The facts appear from the judgment of TROLLIP, J.A.

M. W. Friedman, for the appellant: Although the failure to pay the rental instalment constitutes a separate cause of action, the rights conferred on the appellant by the acceleration clause in para. (g) (ii) is additional B to and not in substitution for the ordinary rights attaching to the debt and further conferred on the appellant the right to claim payment of the full balance of rental for the remainder of the lease or, alternatively, while the respondent was still using the sign after 1968 to claim from the respondent the amount due for use of the sign subject, however, to the period of prescription. See Bourbon-Leftley v. Turner, 1963 (2) SA at C p. 106E; Sapro v. Schlinkman, 1948 (2) SA 637; Tooth and Another v Maingaard and Mayer (Pty.) Ltd., 1960 (3) SA 127; Bester en Andere v Van Zyl, 1972 (4) SA at p. 582H; Crest Enterprises (Pty.) Ltd. v Rycklof Beleggings (Edms.) Bpk., 1972 (2) SA at p. 870; First Industrial Excavation Land Development Engineering & Clearing Corp. of SA Ltd. v. D Duncker and Others, 1967 (1) SA at p. 320E; Stadler v. Hamilton Plase (Edms.) Bpk., 1977 (1) SA 211. The fact that the appellant sued for the full balance owing, namely R627, in no way illustrates that the appellant abandoned or failed to exercise its right to sue for each monthly instalment. Appellant was entitled to sue for the full amount owing in terms of the rental and maintenance agreement after the said agreement had E expired, namely after 1 August 1968, and this action would only prescribe in three years, that is by 1 July 1971. Alternatively, the appropriate period of prescription was six years. The respondent, is a surety who has undertaken the obligations of a co-principal debtor; his obligations in the latter respect are co-equal in extent with those of the principal F debtor and thus of the same scope and nature. He is liable with him jointly and severally. See Caney, The Law of Suretyship, 2nd ed., p. 51; Union Government v. Van der Merwe, 1921 T.P.D. at p. 321; Segell v. Kerdia Investments (Pty.) Ltd., 1953 (1) SA at p. 26E; Demetriou v. O'Flaherty and Another, 1973 (4) SA at p. 694C. Appellant could therefore institute action against the respondent for the rental due. See G Mahomed v. Lockhat Bros. & Co. Ltd., 1944 AD 238; Wille, Principles of South African Law, 7th ed., p. 357. The fact that the respondent was sued as surety does not represent a different cause of action but arises from the same obligations as the respondent undertook in terms of the deed of suretyship that he signed. The cases of Park Finance Corporation (Pty.) H Ltd. v. Van Niekerk, 1956 (1) SA 669; O.K. Motors v. Van Niekerk, 1961 (3) SA 149; Miller v. H. L. Shipper & Co. (Pty.) Ltd., 1969 (3) SA 447, are clearly distinguishable and are not applicable in the instant case. See Western Bank Ltd. v. Wood, 1969 (4) SA at p. 135H; Schnellen v. Rondalia Assurance Corp. of SA Ltd., 1969 (1) SA 517; Yu...