Pfeiffer v First National Bank of Southern Africa Ltd (230/96) [1998] ZASCA 50; 1998 (3) SA 1018 (SCA); [1998] 3 All SA 397 (A) (28 May 1998)

Pfeiffer v First National Bank of Southern Africa Ltd (230/96) [1998] ZASCA 50; 1998 (3) SA 1018 (SCA); [1998] 3 All SA 397 (A) (28 May 1998)

The Supreme Court of Appeal held that the rules of appropriation of payments operate between different debts owed by the same debtor to the same creditor, not between different debtors. The appellant, as surety, was a different debtor from the principal debtor, and payments made by the principal debtor to reduce his own liability could not be appropriated to reduce the surety's liability for interest under the deed of suretyship. The liability of the surety was limited to R175 000 and interest thereon, but once the principal debtor's indebtedness exceeded R175 000, the liabilities of the principal debtor and the surety were no longer co-extensive. The surety's liability for interest ran...

Citation
[1998] ZASCA 50
Parties
Appellant: Pfeiffer; Respondent: First National Bank of Southern Africa Ltd
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
28 May 1998
Case Number
230/96
Procedural Posture
Civil Appeal / Final Appeal Before Supreme Court of Appeal
Outcome
Appeal dismissed with costs.
Judges
Harms JA, Nienaber JA, Marais JA
Legal Topics
Suretyship Liability, Appropriation of Payments, Compound Interest, Contractual Limitation of Liability
Banking and Finance Civil Procedure Suretyship Liability Appropriation of Payments Compound Interest Contractual Limitation of Liability

Case Brief

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Parties

Pfeiffer

Appellant

First National Bank of Southern Africa Ltd

Respondent

Procedural Posture

Civil Appeal / Final Appeal Before Supreme Court of Appeal

Legal Issues

  1. 1 Whether payments made by the principal debtor should be appropriated to interest before capital for purposes of calculating the surety's liability.
  2. 2 Whether the surety's liability for interest arises only after demand is made on the principal debtor or surety.
  3. 3 Whether the bank's method of calculating interest on the capped amount under the deed of suretyship is correct.

Ratio Decidendi

The Supreme Court of Appeal held that the rules of appropriation of payments operate between different debts owed by the same debtor to the same creditor, not between different debtors. The appellant, as surety, was a different debtor from the principal debtor, and payments made by the principal debtor to reduce his own liability could not be appropriated to reduce the surety's liability for interest under the deed of suretyship. The liability of the surety was limited to R175 000 and interest thereon, but once the principal debtor's indebtedness exceeded R175 000, the liabilities of the principal debtor and the surety were no longer co-extensive. The surety's liability for interest ran...

Court Disposition

Appeal dismissed with costs.

Orders

  • The order of the court a quo is replaced with an order upholding the appeal against the order of the magistrate (excluding the costs order) with costs and substituting for the magistrate's order the following: Judgment for the plaintiff for payment of interest at the plaintiff's prime overdraft rate from time to...
  • The magistrate's order for costs stands.