This blog post was co-authored by Adrienne Hendricks, Candidate Attorney.

In a September 2024 decision of the high court, a bank brought a claim based on two certificates of balance against a surety, who had bound himself as surety for all debts owed by the debtor under an overdraft facility agreement with the bank.

The surety’s first defence was that the certificates failed to prove his indebtedness because one of the certificates was not signed by the bank’s manager (as required by the suretyship agreement) and, while the amount due was not disputed, the date from which interest was calculated and the rate of interest applicable to the amount due were unclear.

The signatory for the bank signed the certificate in his capacity as “Head” but omitted that he was a “manager,” which was later confirmed by a witness. The overdraft facility agreement provided that a certificate would, on production, be sufficient proof of “any amount due and/or owing,” which the surety alleged referred to the principal amount, but not the amount of interest owed.

The court reaffirmed that the main purpose of a certificate is to clearly “facilitate proof of the amount of the principal debtor’s indebtedness”. A certificate will not be entirely disregarded merely because it is inaccurate or unreliable. Its validity will be determined by the court based on the evidence. The certificate must be sufficiently clear to ascertain the amount of the debt without extrinsic evidence.

The court found that the amount due was sufficiently clear from the certificate and ordered the payment. However, the applicable rate of interest was only determinable with reference to the interest clause in the overdraft facility agreement, which is extrinsic evidence. The court found that the rate of interest was not sufficiently ascertainable from the certificate. Interest was ordered from the date of the demand at a rate to be proved.

The surety’s other defence was that the suretyship agreement’s definition of “debt” as “all the present and future debts of any kind” was unclear and did not comply with section 6 of the General Law Amendment Act. The Act requires that the “terms” of a contract of suretyship be set out in the agreement, specifically, the identities of the creditor, surety, and principal debtor, as well as the nature and amount of the debt. Extrinsic evidence is admissible to prove the existence of the principal obligation and to establish the amount of the principal obligation, unless that evidence attempts to supplement the suretyship agreement. The bank led evidence of the principal debt under the overdraft facility to clarify the definition of “debt” under the suretyship agreement. The court found that the nature and amount of the debt were thus identified with reference to the overdraft facility agreement, and that the suretyship agreement complies with the Act.

The court has not adopted a strict, literal interpretation of the certificates, but has rather accepted their prima facie evidentiary value on the basis that the certificates effectively facilitated proof of the debt. It remains advisable for lenders to prepare all certificates and suretyship agreements by clearly specifying the nature of the debt and amount of the debtor’s indebtedness where possible, and to comply with the contractual requirements governing the certificates, to ensure their evidentiary value.

The full judgement can be accessed here: Standard Bank of South Africa Ltd v Clulow and Another (12161/2018) [2024] ZAGPPHC 909 (6 September 2024) (saflii.org)