Holeni v Land and Agricultural Bank of South Africa (266/08) [2009] ZASCA 9; 2009 (4) SA 437 (SCA) ; [2009] 3 All SA 22 (SCA) ; [2009] 3 All SA 358 (KZP) (17 March 2009)

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Holeni v Land and Agricultural Bank of South Africa (266/08) [2009] ZASCA 9; 2009 (4) SA 437 (SCA) ; [2009] 3 All SA 22 (SCA) ; [2009] 3 All SA 358 (KZP) (17 March 2009)

THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA
JUDGMENT
Case no: 266/08
INGWANE
NELSON HOLENI Appellant
and
THE LAND
AND AGRICULTURAL DEVELOPMENT BANK Respondent
OF SOUTH
AFRICA
________________________________________________________________
Neutral citation:
Holeni v The Land and Agricultural
Development Bank of South Africa
(266/08)
[2009] ZASCA 9
(17
March 2009)
CORAM:
Streicher,
Navsa, Cloete, Jafta JJA and Bosielo AJA
HEARD:
20 February
2009
DELIVERED:
17 March 2009
CORRECTED:
SUMMARY:
Section 11(b)
of the
Prescription Act 68 of 1969
─
‘the State’ does not encompass the Land and Agricultural
Development Bank of South Africa ─ therefore a three-year period

rather than a 15-year period of prescription applies.
________________________________________________________________
______________________________________________________________
ORDER
______________________________________________________________
On appeal from:
High Court, Pretoria (Motata J sitting as
court of first instance).
1. The appeal is upheld with costs.
2. The order of the court below is set aside and is replaced by the
following:
‘
1. The defendant’s special pleas to the plaintiff’s
first and second claims are upheld and both claims are dismissed.
2. The plaintiff is ordered to pay the defendant’s
costs.’
______________________________________________________________
JUDGMENT
______________________________________________________________
NAVSA JA (Streicher, Cloete, Jafta JJA and Bosielo AJA concurring):
[1] This case concerns the application of s 11 of the Prescription
Act 68 of 1969 (the Act). We are called upon to decide whether
the
debts owed by the appellant to the respondent, the Land and
Agricultural Development Bank of South Africa (‘the bank’
1
),
are extinguished after the lapse of a period of three years
or
after 15 years have passed. If the former, the appeal should succeed.
[2] On 19 May 2004 the bank instituted action in the Pretoria High
Court against the appellant, Mr Ingwane Holeni, claiming two
amounts
from him. In addition to contesting the merits of the claim Mr Holeni
raised special pleas of prescription. It was agreed
between the
parties that the special pleas should be adjudicated first and the
court below (Motata J), in terms of Uniform rule
33(4), made an order
in this regard.
[3] The court below dismissed the special pleas with costs. The
present appeal, with the leave of that court, is against this order.
[4] Since the special pleas did not take issue with the bank’s
material averments relating to prescription they were determined
on
the basis of the facts alleged by the bank. The relevant facts appear
in the following two paragraphs.
[5] In respect of claim 1: During May 1999 the parties concluded a
loan agreement, in terms of which the bank lent and advanced
R300 000
to Mr Holeni for the purchase of cattle. The amount was repayable in
monthly instalments over a period of eight years,
with each
instalment of R8 500 being due on the 15
th
day of each
month. The first instalment was due on 15 May 1999. The monies were
advanced to Mr Holeni, who, according to the bank,
has to date paid
it only an amount of R734.18. It was the bank’s case that the full
amount became due and payable as a result
of Mr Holeni’s breach of
the agreement.
2
The bank claimed a total of R707 664.33 which included capital and
interest.
3
[6] In respect of claim 2: During May 1998 the bank granted Mr Holeni
a ‘seasonal loan’ for the production of crops. The total
of R35
000 drawn by him was to be repaid by 15 June 1999. Mr Holeni
defaulted in repaying the debt. According to the bank he has
to date
paid only an amount of R1 039.20. Despite being called upon to do so
Mr Holeni failed to remedy the breach, once again
rendering due and
payable the outstanding balance and interest. The bank claimed a
total of R77 877.63 which includes capital and
interest. As with the
first claim, we need not concern ourselves with the amount being
claimed.
The Issue
[7] The summons containing both claims was served on 20 July 2004,
more than three years after the respective dates on which each
debt
became due. In his special pleas, Mr Holeni relies on the three-year
period of prescription provided for by s 11(d) of the
Act to resist
the bank’s two claims.
[8] The relevant parts of s 11 read as follows:
‘
The periods of prescription of debts shall be the
following:
(a)
thirty years in respect
of─
(i) any debt secured by mortgage bond;
(ii) any judgment debt;
(iii) any debt in respect of any taxation imposed or
levied by or under any law;
(iv) any debt owed to the State in respect of any share
of the profits, royalties or any similar consideration payable in
respect
of the right to mine minerals or other substances;
(b)
fifteen years in respect
of any debt owed to
the State
and arising out of an advance or loan of money or a sale or lease of
land by
the State
to
the debtor, unless a longer period applies in respect of the debt in
question in terms of paragraph
(a)
;
. . .
(d)
save where an Act of
Parliament provides otherwise, three years in respect of any other
debt.’
(My emphasis).
[9] The bank contends that it is directly controlled by the State,
exercises a public power or performs a public function in terms
of
legislation and can thus rightly be described as ‘an organ of
State’ as defined in s 239 of the Constitution. It was submitted

that this meant that the bank could rely on the benefit of the
extended 15-year period of prescription provided for in s 11(b)
of
the Act. It was on this basis that the court below held in favour of
the bank.
[10] The question in this case is whether the court below was correct
in that conclusion. Put differently, can the Land Bank be
considered
to be ‘the State’ as referred to in
s 11(b)
of the
Prescription
Act 68 of 1969
and can it consequently claim the benefit of the
15-year period of prescription? The answer obviously depends upon the
interpretation
of the expression ‘the State’ in that section of
the Act.
The State
[11] The state as a concept does not have a universal meaning. Its
precise meaning always depends on the context within which it
is
used. Courts have consistently refused to accord it any inherent
characteristics and have relied, in any particular case, on
practical
considerations to determine its scope. In a plethora of legislation
no consistency in meaning has been maintained.
4
[12] Baxter provides an example. He points out that for some purposes
such as state liability, where the old doctrine of crown
immunity has
had to be neutralised and compensation is to be paid from the State
Revenue Fund, ‘the State’ covers the organs
and activities of
central government alone while, for purposes such as treason and
sedition, it has been held to include all organs
of public
administration.
5
[13] The Constitution has no definition of ‘state’. In Chapter 4
the composition of Parliament as the national legislative
authority
is spelt out. In Chapter 5 the powers of the President and national
executive authority are described. Chapter 6 deals
with Provinces and
their legislative and executive authorities. Chapter 7 sets out the
status and objects of municipalities which
constitute local
government. Chapter 8 provides for courts and the administration of
justice and in Chapter 9, provision is made
for state institutions
supporting constitutional democracy.
[14] Section 239 of the Constitution, on which the respondent relies,
defines ‘organ of state’ as follows:
‘
(a) any department of state or administration in the
national provincial or local sphere of government; or
(b) any other functionary or institution -
(i) exercising a power or function in terms of the
Constitution or a provincial constitution; or
(ii) exercising a public power or performing a public
function in terms of any legislation, but does not include a
court or
a judicial officer.’
[15] The respondent relies, in particular, on s 239(b)(ii) for the
contention that the bank is a constituent part of the state
and
therefore entitled to rely on s 11(b) of the Act.
[16] The definition of ‘organ of state’ in the Constitution might
be important in respect of constitutional and administrative
law
matters and for other related purposes. The crucial question in the
present case is what the legislature intended by the use
of that
expression in s 11(b) of the Act? This being so, it is in my view
unhelpful to look to other enactments.
[17] It should also be borne in mind that, when the Act was
promulgated, the definition of ‘organ of state’ in s 239 of the

Constitution was more than two decades into the future. It can hardly
be contended that the legislature, at that time, had in mind
a
broader meaning of ‘the State’ to coincide with what is presently
contained in that definition. In any event, the Constitution
itself
differentiates between the state and organs of state. The
Constitution can therefore not be used as authority for the
proposition
that ‘the State’ in the Act should be interpreted so
as to include organ of state.
[18] I agree with the submission on behalf of Mr Holeni that, since s
11(b) of the Act provides for a 15-year prescription period
─ an
exception to the general prescription period of three years ─ the
meaning attributed to ‘the State’ should be restricted.
6
[19] The benefit for the state provided by s 11(1(b) came about
because it was thought that the treasury should be protected.
7
To my mind, contextually, the plain meaning of ‘the State’ as it
appears in s 11(b) of the Act is that of a juristic person,
capable
of suing in its own name for what is due to the treasury.
8
It is being referred to in its incarnation as government, going about
government business and recovering monies due to treasury.
9
Further support for this conclusion appears in the next three
paragraphs.
[20] The state is referred to in two other places in the Act. In s
19, the following appears:
‘
This Act shall bind the State.’
This provision was necessary because of the rule, at the time, that
the state is not bound by its own laws.
10
The reference here must be to the state as a governing entity with
legal personality.
[21] In s 11(a)(iv) of the Act, referred to above, the state has the
benefit of a 30-year period of prescription in respect of
any share
of profits, royalties or any similar consideration payable in respect
of the right to mine minerals or other substances.
There can be no
doubt that the reference to the state in that context must mean the
state in its role as government acting for
the benefit of the
treasury.
[22] Thus, in terms of the rule of interpretation that the same words
must be similarly interpreted in different parts of an act,
the
reference to ‘the State’ in s 11 must also be to the state as
government and as a juristic person in its own right,
11
unless there are indications to the contrary. I turn to consider that
question.
Is the bank ‘the State’ for purposes of s 11(b) of the Act?
[23] Counsel for the bank referred to s 25(5) of the Constitution
which provides that the state should take all reasonable legislative

and other measures, within its available resources, to foster
conditions which enable citizens to gain access to land on an
equitable
basis and contended that the Land and Agricultural
Development Bank Act 15 of 2002 (LADA), to which the bank owes its
existence,
was a legislative measure to that end. It was pointed out
that the bank was using taxpayers’ money in furtherance of state
objectives.
Counsel submitted that the bank, which was subject to
government control, was therefore operating as part of the State and
as such
was entitled to the preferential treatment provided for in
s 11(b) of the Act.
[24] Furthermore, counsel for the bank contended that in interpreting
s 11(b) of the Act we were obliged, in terms of s 39(2) of
the
Constitution, to promote the spirit, purport and objects of the Bill
of Rights. This meant that we should interpret it in a
manner that
ensures that the bank’s funds are protected to enable it to meet
its constitutional objectives. It was submitted
that this was best
achieved by interpreting ‘the State’ in s 11(b) in such a manner
as to encompass the bank.
[25] LADA came into operation on 10 June 2002. It repealed the Land
Bank Act 13 of 1944 (the LBA).
12
Section 2(1) provides:
‘
The Bank established under section 3 of the Land Bank
Act, 1912 (Act 18 of 1912), and which continued to exist in terms of
section
3 of the Land Bank Act, 1944 (Act 13 of 1944), continues to
exist under the name of the Land and Agricultural Development Bank of

South Africa despite the repeal of those Acts.’
[26] Significantly, s 2(2) of LADA provides as follows:
‘
The Bank is a legal person and is, in its corporate
capacity, capable of suing and being sued and is, subject to the
provisions
of this Act, capable of purchasing or otherwise acquiring,
holding or alienating property, movable or immovable, and of
performing
such acts as legal persons may generally by law perform.’
[27] The objects of the bank are set out in s 3 and include what
might broadly be described as the promotion, facilitation and
support
of agriculture and land reform. The bank is required to address the
legacy of racial and gender inequality in the agricultural
sector.
13
[28] Section 4 of LADA provides for the bank to be controlled by a
board appointed by the Minister responsible for Agriculture.
14
However, it is the board that directs and controls the operations and
business of the bank, implements policies laid down in the
Act and
develops strategies for the efficient management of the bank.
15
It must develop a code of good practice. Section 5(2) of LADA
provides:
‘
In carrying out its functions, the Board must
exercise utmost care and act in the best interests of and for the
benefit of the Bank.’
Board members are individually and collectively accountable to the
Minister.
16
[29] The funds of the bank consist of its capital, monies derived
from its operating activities, interest on investments, amounts

appropriated by Parliament, loans obtained by it, deposits and
donations or grants.
17
The bank is entitled to raise additional funds by way of borrowing,
from such persons and on such terms as may be determined by
the
board, subject to a borrowing policy approved by the Minister and the
Minister of Finance.
18
[30] The business of the bank is to provide agricultural and rural
financial services in furtherance of the objects of the bank.
19
The Board of the bank must ensure that its annual budgets, corporate
plans, annual reports and audited financial statements are
prepared
and submitted in accordance with the provisions of the Public Finance
Management Act 1 of 1999 (the PFMA).
20
[31] Section 36 entitles the bank to establish subsidiaries, if
necessary, for its effective operation and the carrying out of
its
objectives. The majority of directors of the subsidiary must be
members of the board, although it need not consist exclusively
of
such members. Section 37 entitles the bank, with board approval and
subject to the PFMA, to enter into a joint venture with
any person
for purposes of furthering the objects of the bank.
[32] Importantly, s 38(2) provides that the bank may at the request
of the Minister or another government department or organ of
state
act as an advisor to them in respect of matters within or associated
with the bank’s objectives on such terms as may be
determined by
the Minister. Furthermore, s 45 of the Act provides that a judicial
management order in terms of the Companies Act
61 of 1973 may be
granted in respect of the bank by a competent court on application by
the Minister or the board.
[33] As can be seen from the provisions of s 2(1) of LADA as set out
in para 25 above the bank was established as far back as 1912.
Then
already it was established as a distinct body corporate, capable of
suing and being sued, and of doing or performing such
acts and things
as a body corporate may by law do and perform.
21
It is true that in relation to all three statutes that regulated the
bank during its existence there was government involvement
and
control in relation to the appointment of board members. Funds were
provided by Parliament for it to meet its objectives.
[34] It is clear that it is the board of the bank that directs and
controls the operations and business of the bank. It must, of
course,
do so within the parameters of its empowering statute. As set out in
para 27, the bank may raise its own funds within a
borrowing policy
approved by the Minister. Its funds need not exclusively be those
appropriated by Parliament and it can even receive
donations and
grants.
[35] It is also true, as set out above, that the bank is accountable
to government and has to comply with the PMFA. However, the
bank
operates and conducts business as a distinct corporate entity and
interacts with different persons
and
the state.
22
Section 46 of the LBA, the predecessor of the Act,
23
drew a distinction between the bank acting in its own capacity and
acting on behalf of government. Section 46 of the LBA was the
only
section in which the bank was authorised to make advances
on
behalf
of government for particular purposes out of monies
appropriated by Parliament. That authority did not extend to the type
of advances
made to Mr Holeni. It follows that where the bank was
acting outside the provisions of s 46, it was acting in its own name
and
stead as a distinct and separate legal entity.
[36] It would be a startling proposition for the state, in
appropriate circumstances, to be liable to be placed under judicial

management under the Companies Act as is provided in LADA in respect
of the bank. It is as ludicrous to suggest that the state
is able to
establish subsidiaries in the same way as the bank may do.
[37] The bank has been in existence for almost a century. Having
regard to what is set out above it comes as no surprise that we
were
not referred to a single instance or authority in which during that
time the bank was equated with the state.
[38] To sum up: LADA makes it clear that the bank is a separate
juristic person acting in its own name and right, distinct from,

although not entirely independent of government.
[39] I am unable to understand how the spirit, purport and objects of
the Bill of Rights are served by interpreting s 11(b) of
the Act to
provide the benefit of the 15-year prescription period. In my view,
the objects of the bank are best met by an alert
management that
recovers monies due to it diligently and promptly so as to optimise
the use of its funds to meet the urgent demands
of land reform and
modernisation of South African agriculture. The facts of this case
speak volumes of the bank’s laxity in recovering
funds due to it.
[40] Furthermore, the modern trend in comparable jurisdictions is
towards streamlining prescription periods and not making special

provision for public authorities.
24
[41] In addition, persons interacting with the bank commercially
would, in the face of a 15-year prescription period being imposed

upon them, encounter difficulties in providing in their books of
account for possible future recoveries by the bank and might be

reluctant to do business with it.
[42] In any event, the legislature was astute to ensure in the
provisions referred to above, and in other sections of LADA, that
the
bank’s funds be carefully controlled and monitored. Several
safeguards have been built into the Act. Accountability and
transparency appear to be the watchwords. It appears to me that the
spirit, purport and objects of the Bill of Rights are best served
by
permitting the bank to conduct its affairs within the confines of its
empowering statute and to restrict the meaning of state
in s 11(b) of
the Act as referred to above.
[43] For all the reasons set out above the appeal should succeed. It
was submitted on behalf of the bank that, since there was
no
acceleration clause in the agreement in terms of which the advance in
relation to claim 1 was made, those instalments that fell
outside of
the three-year prescription period could still be recovered by it and
that we should refer that part of claim 1 to the
court below for
further consideration. I am afraid that this submission cannot
succeed. It was the bank’s case that the entire
amount was due and
payable because Mr Holeni had breached the agreement.
25
It is on that basis that the special plea was decided and it is on
that basis that the appeal is to be decided.
[44] A special plea of prescription is often referred to as a
peremptory exception in the sense that, if established, it renders

the claim permanently unenforceable.
26
In the event of the special plea being upheld, the bank’s claims
fall to be dismissed. There is no indication in the record that
the
parties intended otherwise; the contrary is the case.
[45] The following order is made:
1. The appeal is upheld with costs.
2. The order of the court below is set aside and is replaced by the
following:
‘
1. The defendant’s special pleas to the plaintiff’s
first and second claims are upheld and both claims are dismissed.
2. The plaintiff is ordered to pay the defendant’s
costs.’
_________________
M S NAVSA
JUDGE OF APPEAL
APPEARANCES:
For
Appellant: J G Bergenthuin SC
Instructed
by
Thys
Cronjé Incorporated Pretoria
Van
der Merwe & Sorour Bloemfontein
For
Respondent: A A Louw SC
P
Nonyane
Instructed
by
Motla
Conradie Incorporated Pretoria
Naudes
Attorneys Bloemfontein
1
T
his appellation will be used throughout to refer
to the bank in its various legislative incarnations over a period of
nearly a
century.
2
See para 43.
3
For present purposes we do not need to consider the
in duplum
rule.
4
Baxter
Administrative Law
(1984) pp 94-96.
Greater Johannesburg
TMC v Eskom
2000 (1) SA 866
(SCA) at
para 16. M M Loubser
Extinctive
Prescription
(1996) p 42.
5
Administrative Law
p 96.
6
See
L C Steyn
Die
Uitleg van Wette
5ed (1981) pp 80-82.
7
J C de Wet
Opuscula
Miscellanea
(1979) p 111. Section
13(2) of the Prescription Act 18 of 1943 which first provided for
the 15-year benefit for the state was
introduced by s 30(1) of the
Finance Act 46 of 1945.
8
In the sense described in
Die Regering van die
Republiek van Suid-Afrika v SANTAM Versekeringsmaatskappy Bpk
1964 (1) SA 546
(W). Executive power was seen as the embodiment of
the State for that purpose.
9
See Loubser
Extinctive
Prescription
p 42.
10
Boardman v Minister van Finansies
1984 (1) SA 259
(T) at 267C-E.
11
Sinovich v Hercules Municipal Council
1946 AD 783
at 804.
12
The LBA was the operative act when the advances
were made to the respondent.
13
Section 3(e).
14
Hereinafter referred to as the Minister.
15
Section 5.
16
Section 6.
17
Section 22.
18
Section 24.
19
Section 26(1).
20
Section 35(3).
21
Section 3(1) of Act 18 of 1912.
22
In terms of s 38(2) of LADA the bank may act as
an advisor to government and organs of state in respect of matters
within or associated
with the bank’s objectives on such terms as
may be determined by the Minister from time to time.
23
The LBA was the prevailing statute at the time
that the advances were made.
24
In a memorandum in 1955 to the Law Review Commission, Professor J C
de Wet expressed reservations about disparate periods of

prescription but reasoned that since the treasury was being
protected it would be a lost cause to attempt to persuade the
legislature
otherwise ─ see J C de Wet
Opuscula
Miscellanea
p 77
et seq
. In its Issue Paper in August
2003 dealing with prescription periods the South African Law Reform
Commission considered investigations
by law reform bodies in the UK,
Australia and Vancouver pp 2-3 of Issue Paper 23 (Project 125) ─
the popular recommendation
was that special provision not be made
for public authorities.
25
In para 4.2 of the bank’s particulars of claim
the following appears:
‘
The
annual payment is repayable in monthly instalments on the 15
th
day of every month (the due date) in 96 instalments over a period of
8 years. The first instalment is payable on 15
th
May 1999 amounting to R8 500.00 per month.’
Mr Holeni requested
further particulars as follows:
‘What entitled
plaintiff to claim the full outstanding amount notwithstanding the
fact that the date of payment of several instalments
had not arrived
when summons was issued?’
The bank’s response to
that request was as follows:
‘Because Defendant
breached the terms of the agreement.’
26
See Van Winsen, Cilliers, Loots
Herbstein
& Van Winsen
edited by
Dendy The Civil Practice of the Supreme Court of South Africa
4 ed (1997) p 477 and the authorities cited there.