Estelle Le Roux and Another v Dielemaar Holdings (Cape) Pty Ltd and Another (414_2023) [2024] ZASCA 118 (25 July 2024)

Did the claim against the applicants as sureties prescribe, and does the principle of res judicata bar their counterclaim in light of the arbitration proceedings and the subsequent judgment?

The case involves Estelle le Roux and Marthinus van der Spuy le Roux, who acted as sureties and co-principal debtors for a close corporation named Be Positive Trading. Between 2008 and 2011, Be Positive Trading entered into three commercial property tenancy lease agreements with Dielemaar Holdings (Cape) Pty Ltd and IPIC Properties (Pty) Ltd, the respondents in this matter. The applicants provided surety for the debts arising from these lease agreements through four deeds of suretyship.

The first lease agreement was concluded on 30 September 2008, where Be Positive Trading rented shops 3, 7, and 8 at IPIC Shopping Centre in Kenridge, Durbanville. The second lease agreement was signed on 15 September 2010 for the rental of shop 23 at IPIC Shopping Centre, Aurora, Durbanville, with Estelle le Roux acting as surety. The third lease agreement, an extension of the first, was concluded on 3 August 2011 for the rental of shops 7 and 8 at the same shopping centre, with both applicants binding themselves as sureties.

Be Positive Trading fell into arrears on the rental payments for all three leases, with amounts owed totaling R32,782.75, R198,782.59, and R803,841.29, respectively. When the principal debtor was unable to pay upon demand, the respondents initiated three actions against Be Positive Trading and the sureties. The first two actions were brought in the magistrate's court, while the third was filed in the regional court. These actions were eventually consolidated for hearing in the regional court.

The applicants and Be Positive Trading defended the actions and filed a counterclaim against the respondents. The respondents sought summary judgment, which the regional court denied, citing an arbitration clause in the third lease agreement. Consequently, the actions were stayed pending arbitration.

On 5 December 2013, an arbitrator was appointed to adjudicate the disputes, including the actions related to the first two leases. During the arbitration, the applicants challenged the arbitrator's jurisdiction over their liability, arguing that the deeds of suretyship did not provide for arbitration. On 11 February 2015, the arbitrator upheld this challenge and discharged the applicants from the arbitration proceedings.

 The arbitration against Be Positive Trading continued, but on 22 July 2015, the principal debtor failed to appear, leading the arbitrator to issue a final award in favor of the respondents and dismiss the counterclaim. This award was later made an order of the high court on 29 March 2016.

In July 2016, the respondents initiated an action in the high court against the applicants in their capacities as sureties. The high court ruled against the applicants, who subsequently sought leave to appeal. The key legal issues revolved around the defenses of prescription and res judicata, particularly whether the claim against the applicants had prescribed and whether the applicants were barred from raising their counterclaim due to the arbitration proceedings. The high court denied the applicants' request for leave to appeal, leading to the current appeal before the Supreme Court of Appeal.

The ratio decidendi of the case centers on two key legal principles: the interruption of prescription in relation to suretyship and the application of res judicata.

Firstly, the court established that the interruption of prescription for a debt owed by a principal debtor also serves to interrupt the prescription for the corresponding debt owed by a surety. This principle is grounded in the understanding that the surety's obligation is accessory to that of the principal debtor. Therefore, when the principal debtor's debt is subject to arbitration, the running of prescription is delayed for both the principal debtor and the surety, regardless of the surety's withdrawal from the arbitration proceedings.

Secondly, the court affirmed the application of the doctrine of res judicata, which prevents a party from relitigating an issue that has already been adjudicated in a previous proceeding. In this case, the applicants' counterclaim was dismissed during the arbitration due to their failure to prosecute it. As a result, they were estopped from raising the same claim in subsequent proceedings against the respondents, as the requirements for res judicata were met: the prior judgment was between the same parties, based on the same cause of action, and concerning the same subject matter.

In summary, the core legal principles underlying the decision are that the interruption of prescription for a principal debtor's debt also applies to the surety, and that a party is barred from relitigating issues that have been previously decided, thereby upholding the finality of arbitration awards.

The court relied on several key cases in its reasoning process, including:

1. Jans v Nedcor Bank [2003] ZASCA 15; 2003 (6) SA 646 (SCA). This case addressed the question of whether the interruption or delay in the running of prescription in favor of the principal debtor also interrupts or delays the running of prescription in favor of the surety.

2. Eley (formerly Memmel) v Lynn & Main Inc [2007] ZASCA 142; [2008] 1 All SA 315 (SCA); 2008 (2) SA 151 (SCA). This case confirmed the principle that if the principal debt is kept alive by a judgment, the surety’s accessory obligation continues to exist.

3. Caesarstone Sdot-Yam Ltd v World of Marble and Granite 2000 CC and Others [2013] ZASCA 129; 2013 (6) SA 499 (SCA). This case discussed the interpretation of the requirement of "same party" in relation to the defense of res judicata.

4. Aon South Africa (Pty) Ltd v Van Den Heever NO and Others [2017] ZASCA 66; [2017] 3 All SA 365 (SCA); 2018 (6) SA 38 (SCA). This case elaborated on the implications of res judicata and the importance of finality in litigation.