An August US case has highlighted some important considerations when a surety, who may be a co-surety with others, pays the principal debt in full and seeks to recover its outlay. The court mentioned that here are few doctrines better established than that a surety who pays the debt of another is entitled to all the rights of the person they paid to enforce their right to be reimbursed.

This right is a form of subrogation under the law of indemnity. Subrogation in favour of the surety takes place by operation of law in favour of an obligor who pays a debt owed for others or with others. Subrogation does not take place when a third party pays the debt of another.

Co-sureties are those who are sureties for the same obligation of the same principle debtor. They are presumed to share the burden of the principle obligation in proportion to their numbers. Unless they agreed otherwise, there must be a shared burden among the co-sureties.

Alternatively, a claim can possibly be made under the law of enrichment. To establish unjust enrichment the claimant must show (1) an enrichment of the party sued; (2) an impoverishment of the claimant; (3) a connection between the enrichment and the impoverishment; (4) an absence of justification or cause for the enrichment and impoverishment; and (5) no other remedy at law. The absence of justification is important. If there is a contract between the parties that serves as a legal cause or explanation for the enrichment, the enrichment will not be unjust in the legal sense.

This case involved an elaborate set of facts relating to a bond in favour of the government for decommissioning obligations under an oil and gas lease. The insurer who provided the guarantee unsuccessfully sought recovery from other parties involved.

The law of indemnity stems from Roman-Dutch and Germanic laws and similar considerations apply under the law of indemnity and suretyships in South Africa and elsewhere.

[Lexon Insurance Company, Inc v Chevron USA and Others United States Court of Appeals for the Fifth Circuit, case number 24-20347]