In a powerful ruling on surety liability in liquidation, the Western Cape High Court has reaffirmed that principal debtors remain accountable for debts, even when the entity they represent is liquidated.
On 25 April 2025, Nedbank Limited successfully pursued Moussa Baba for R15 million, which he guaranteed as a co-principal debtor for Bestinver Company South Africa (Pty) Ltd, now insolvent.
This judgment, delivered by Judge E Nel, reinforces the binding nature of suretyship agreements, dismissing Baba’s attempt to defer repayment pending external litigation. The case highlights the risk sureties face, particularly when waiving the benefit of excussion, an issue financial institutions and guarantors must carefully consider.
The case, originally heard on 22 April 2025, revolved around a loan agreement concluded on 18 July 2011 between Nedbank and Bestinver, which stipulated a loan amount of R15 million plus interest at a prime rate, structured for repayment over 240 months. However, the agreement’s terms were breached when Bestinver defaulted on payments starting from November 2020, leading to its liquidation in June 2021.
Following this breach, Nedbank sought to reclaim the outstanding debt from Baba, who had signed a suretyship agreement binding him as a co-principal debtor. Baba, although acknowledging the validity of the suretyship agreement, sought to evade liability, arguing that the debt was effectively settled through a separate transaction involving a family-owned entity, Elite Vision Investments (Pty) Ltd.
Bestinver’s breach of contract
This transaction aimed at purchasing immovable property from Bestinver for R14 million has raised questions about the nature of the funds held in trust by the applicant’s conveyancing attorneys. Baba admitted that he concluded the suretyship agreement, and that Bestinver is indebted to the applicant in the sum of R 16 313 121.26. He however attempted to escape liability.
The crux of his opposition was that he would not be prejudiced should the present matter be postponed pending finalisation of the litigation as KWA Attorneys, being the applicant’s attorneys of record, hold R 14 000 000.00 in their trust account. Moreover, he contended that should Ahmadou Baba be successful in such litigation, the funds currently held by KWA Attorneys would be paid over to the applicant in settlement of its claim.
Baba accordingly denied that he is “currently liable” to pay the applicant as Elite Vision remains a willing buyer and has already made the full purchase price available. He stated that he is based in Dubai and was unaware of the fact that there was a difficulty with the sale of the immovable property and therefore thought that the matter was being resolved.
Despite the ongoing litigation linked to the property sale, which could potentially influence the repayment of the debt, the court found that Baba did not present a sufficient defence to the applicant's claim. Judge Nel concluded that Baba’s obligations as a surety were unequivocal; he cannot defer the repayment to await the outcome of unrelated litigation, which only serves to complicate the matter further. The ruling emphasised that Baba’s position as a surety and the explicit waiving of the benefit of excussion further solidified his liability for the debt.
The court dismissed Baba’s argument that the pending litigation would protect him from immediate payment, reiterating that while the applicant holds a significant sum related to the property sale, it was not earmarked specifically to settle the debt owed by Bestinver.
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