About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2017
>>
[2017] ZASCA 45
|

|

Factaprops 1052 CC and Another v Land and Agricultural Development Bank of South Africa t/a Land Bank (353/2016) [2017] ZASCA 45; 2017 (4) SA 495 (SCA) (30 March 2017)

Links to summary

THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 353/2016
In
the matter between:
FACTAPROPS
1052 CC

FIRST APPELLANT
ISMAIL
EBRAHIM DARSOT

SECOND APPELLANT
and
LAND
AND AGRICULTURAL DEVELOPMENT
BANK
OF SOUTH AFRICA t/a THE LAND
BANK

RESPONDENT
Neutral
Citation:
Factaprops
v The Land Bank
(353/2016)
[2017] ZASCA 45
(30 March 2017)
Coram:
Tshiqi, Zondi and Van der Merwe JJA
and Nicholls and Coppin AJJA
Heard:
1 March 2017
Delivered:
30 March 2017
Summary:
The phrase
‘mortgage bond’ in
s 11(a)(i)
of the
Prescription Act 68
of 1969
has a wide meaning and includes a special notarial bond in
terms of the Security by Means of Movable Property Act, 57 of 1993:
therefore the period of prescription applicable to a debt secured by
such special notarial bonds is thirty years.
ORDER
On
appeal from
Gauteng
Division, Pretoria (Msimeki J sitting as court of first instance):
The
appeal is dismissed with costs on attorney and client scale.
JUDGMENT
Zondi
JA (Tshiqi and Van der Merwe JJA and Nicholls and Coppin AJJA
concurring):
[1]
This appeal concerns the period of prescription applicable to a debt
secured by a special notarial bond for the purposes of
s 11 of the
Prescription Act 68 of 1969 (the
Prescription Act). Is
it thirty or
six or three years? This issue depends on the interpretation of the
phrase ‘mortgage bond’ in
s 11(a)(i)
of the
Prescription
Act and
on, specifically, whether that phrase is wide enough to
include a special notarial bond. The issue must be considered against
the
following factual background.
[2]
In May 1999 the respondent (the Land Bank) and the first appellant
(Factaprops) entered into a written loan agreement in terms
of which
the Land Bank lent and advanced a sum of R250 000 to Factaprops. The
second appellant (Mr Ismail Ebrahim Darsot) is the
sole member of
Factaprops. Payment of the loan amount was secured by the
registration, on 18 April 2000, at the Pretoria Deeds
Registry
office, of a special notarial bond over a number of specified movable
assets
owned
by Factaprops, in favour of the Land Bank as continuing covering
security. As additional security, Darsot signed a deed of
suretyship
in terms of which he bound himself as surety and co-principal debtor
in solidum
to the Land Bank for the repayment, on demand, of all amounts due by
Factaprops to the Land Bank.
[3]
In the deed of suretyship, Darsot renounced all applicable legal
exceptions and agreed that the suretyship was to remain in
force as
additional and continuing security, until all debts by Factaprops to
the Land Bank were fully discharged.
[4]
In terms of the loan agreement, Factaprops was to repay the loan
together with interest as determined by the Land Bank, from
time to
time in five annual instalments. The full balance outstanding would
immediately become due and payable, in the event of
Factaprops
failing to make payment of the amount due and owing on the various
payment dates. The final instalment was due for payment
on 15 June
2004. In breach of the loan agreement, Factaprops defaulted in its
payment.
[5]
On 14 October 2010, the Land Bank issued a summons against Factaprops
and Darsot (the appellants), suing them jointly and severally
the one
paying the other to be absolved, among others, for payment of the
amount of R491 203.05, together with interest at
the rate of 14
per cent per annum, from 31 August 2010 to date of payment, with the
said interest to be calculated and capitalized
monthly. The summons
was served on the appellants on 3 November 2010. The appellants
defended the action and delivered a special
plea in which they
contended that the Land Bank’s claim against them had become
prescribed in terms of
s 11(d)
, alternatively in terms of
s 11(c)
, of
the
Prescription Act. In
their special plea, the appellants alleged
that the payment of the amounts owing to the Land Bank under the loan
agreement became
due and payable between 15 June 2000 and 25 June
2004. They contended that by the time the summons was served on them
on 3 November
2010, being more than three years from the dates on
which the alleged debts became due and payable, the claim against
them had
become prescribed.
[6]
The Land Bank delivered a replication in which it denied that its
claim had become prescribed. It argued that its claim was
for the
payment of a debt which was secured by a special notarial bond and
that the applicable prescription period is thirty years.
[7]
In the court below, the parties agreed on a stated case upon which
the appellants’ special plea of prescription was to
be argued.
They agreed that the Land Bank’s summons was served on 3
November 2010, being a date more than six years from
the date on
which the debt arose. The Land Bank, however, contended that the
prescription period of thirty years was applicable
to its claim for
the payment of a debt that is secured by a special notarial bond. It
therefore argued that its claim had not become
prescribed.
[8]
The court below was requested to adjudicate on the following
question:
‘
Is
the applicable period of prescription in the instant proceedings
thirty years in terms of
section 11(a)
of the
Prescription Act (i.e
.
on the basis that the debt is secured by a mortgage bond) as
contended by the plaintiff, or as contended by the defendants, six

years as provided for in
section 11(c)
(i.e on the basis that the
indebtedness is secured by a notarial contract) or three years as
provided for in
section 11(d)
(on the basis that the debt is one that
arose from the loan agreement)?’
[9]
The court below (Msimeki J) held that the Land Bank’s claim had
not prescribed and accordingly dismissed the appellants’

special plea. It granted judgment in the amount claimed together with
ancillary relief. It concluded that on a proper interpretation
of
s
11(a)(i)
of the
Prescription Act the
phrase ‘mortgage bond’
includes a reference to a special notarial bond. The effect of that
construction, reasoned the
court below, was that the period of
prescription of a debt secured by a special notarial bond is thirty
years, not six or three
years. The court below relied on the judgment
of Rabie J in
Land
and Development Bank of South Africa v Boeke & another
[1]
in
which it was held that the prescription period in respect of a debt
secured by a special notarial bond is thirty years.
[2]
[10]
The appeal, with leave of the court below, is against its order
dismissing the special plea and granting judgment in favour
of the
Land Bank.
[11]
Section 11
of the
Prescription Act is
concerned with the periods of
prescription of debts. It provides 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; (The Afrikaans text says ‘’n
skuld deur verband verseker.’)
(ii) .
. .
(iii) .
. .
(iv) .
. .
(b) .
. .
(c)
six
years in respect of a debt arising from a bill of exchange or other
negotiable instrument or from a notarial contract, unless
a longer
period applies in respect of the debt in question in terms of
paragraph
(a)
or
(b)
;
(d)
save
where an Act of Parliament provides otherwise, three years in respect
of any other debt.’
[12]
The
Prescription Act does
not define the meaning of ‘mortgage
bond’ nor does it make any reference to a ‘notarial
bond’. The question
is whether the term ‘mortgage bond’
in s 11(a)(i) of the Act also includes a special notarial bond. If
that is the
case, then a debt secured by a special notarial bond
prescribes after thirty years and therefore the special plea raised
by the
appellants was correctly dismissed. If this is not so, then
the Land Bank’s claim would be held to prescribe in three or
six years.
[13]
This court has said that when interpreting legislation, what must be
considered is the language used; the context in which
the relevant
provision appears; the apparent purpose to which it is directed; and
the material known to those responsible for its
production.
[3]
[14]
Counsel for the appellants submitted that a mortgage bond and a
special notarial bond are not synonymous in law and for that
reason,
the phrase ‘mortgage bond’ in
s 11(a)(i)
of the
Prescription Act, must
be interpreted restrictively. He relied in
support of his argument on the definition of ‘mortgage bond’
in s 102(1)
of the Deeds Registries Act
[4]
namely
‘a bond attested by the registrar specially hypothecating
immovable property’ and of a ‘notarial bond’
as ‘a
bond attested by a notary public hypothecating movable property
generally or specially’. He further referred
the court to s
53(1) of the same Statute, which states that ‘the registrar
shall not attest any mortgage bond which purports
to bind movable
property or which contains the clause, commonly known as the general
clause, purporting to bind generally all the
immovable or movable
property of the debtor or both and shall not register any notarial
bond which purports to bind immovable property.’
He argued that
the provisions of s 102(1) and s 53(1) of the Deeds Registries Act
provide a clear indication that the Legislature
intended that a
distinction between the two types of bonds be maintained.
[15]
Counsel for the appellants also referred in support of his argument
to the Security by Means of Movable Property Act
[5]
read
with s 2 of the Insolvency Act.
[6]
His
argument was that the distinction which the Insolvency Act draws
between a mortgage bond hypothecating immovable property and
a
notarial mortgage bond hypothecating specially described movable
property, is an indication that the Legislature did not intend
to
treat a mortgage bond and a notarial bond as synonymous.
[16]
On the other hand, counsel for the Land Bank argued in favour of a
wide meaning for the phrase ‘mortgage bond’.
He submitted
that the term ‘mortgage bond’ in
s 11(a)(i)
of the
Prescription Act should
be interpreted expansively so as to include a
special notarial bond hypothecating movable property in terms of the
Security by
Means of Movable Property Act. He, inter alia, relied on
the following indicators to support his wide interpretation of the
Prescription Act:
(a
)
the ordinary grammatical meaning of ‘mortgage bond’;
(b)
the Afrikaans translation of ‘mortgage bond’ in both the
1943 and 1969 Prescription
Acts;
(c)
the history of the Act.
[17]
A close analysis of the language used in
s 11(a)(i)
of the
Prescription Act and
its history shows conclusively, in my view, that
a wider interpretation contended for by counsel for the Land Bank,
must be
the correct one. This construction is reinforced by the
following considerations. First, as regards its ordinary grammatical
meaning,
the Shorter Oxford English Dictionary on Historical
Principles defines ‘mortgage’ as:
‘
The
conveyance of real or personal property by a debtor (called the
mortgagor
)
to a creditor (called the
mortgagee
)
as security for a money debt, with the proviso that the property
shall be reconveyed upon payment to the mortgagee of the sum
secured
within a certain period. Also applied to the deed effecting this, the
rights conferred on the mortgagee, and the condition
of being
mortgaged. . . .’
From
this definition, it is apparent that ‘mortgage’ may be
used in relation to hypothecation of immovable property
(real
property) or movable property (personal property).
[18]
Secondly, the Afrikaans texts in both the 1943 and 1969 Prescription
Acts use the word ‘verband’ for ‘mortgage
bond’.
The meaning of ‘verband’ according to HAT Verklarende
Handwoordeboek van die Afrikaanse Taal is ‘verbintenis
volgens
wetlike bepaling waardeur eiendom as sekuriteit gegee word vir ‘n
lening; while the Kritzinger and Labuschagne Verklarende
Afrikaanse
Woordboek 8
th
ed gives its meaning as ‘verpanding van, beswaring op ‘n
eiendom’. It is apparent from these definitions that
‘verband’
may be used to cover both a mortgage bond in respect of immovable
property, and a notarial bond in respect
of movable property.
[19]
Moreover, if one has regard to the history of the
Prescription Act it
is apparent that the term ‘mortgage bond’ had been
consistently used in a wider sense. The Transvaal Prescription
Amendment Act of 1908
[7]
,
which predates the Prescription Act of 1943, did not differentiate
between mortgage bonds and notarial bonds for the purposes
of
prescription. It simply referred to ‘mortgage bond, general or
special...’ There is no indication that the Legislature

intended to deviate from that meaning when it used ‘mortgage
bond’ in the 1969 Prescription Act.
[20]
The phrase ‘mortgage bond’ has also been used to describe
a notarial bond. For example, in
Oliff
v Minnie
[8]
it
was interpreted to mean an instrument hypothecating immovable
property and other goods. In that case, the court was concerned
with
the question whether a mortgage bond over certain property remained a
mortgage bond for the purposes of the computation of
the period of
prescription under Chapter 23 of the Orange Free State Law Book, even
though the bond had become valueless as a security
inasmuch as the
first bond holder had caused the property to be sold in execution. It
had been contended that, as there was no
longer any property then
hypothecated, the document had become merely an acknowledgement of
debt subject to a much shorter term
of prescription. Van den Heever
JA said at 3D that:
‘
a
mortgage bond as we know it is an acknowledgement of debt and at the
same time an instrument hypothecating landed property or
other
goods.’
[9]
[21]
Thirdly, Chapter III of the Prescription Act, in which s 11(a)(i) is
located, concerns prescription of debts and one of the
philosophical
justifications for prescription is that it relieves a debtor from
having to defend a claim long after the event.
Differently stated,
prescription is about proof of debts and the purpose of the Act is to
protect a debtor against claims that
he may be unable to defend due
to lack of evidence caused by the passage of time. Therefor
e
lo
nger periods
of prescription are justified where transactions are matters of
public record as is the case with special notarial
bonds. The purpose
of the Prescription Act thus provides a strong indication that the
wider meaning of ‘mortgage bond’
was intended.
[22]
Therefore, and accepting for the moment that in certain contexts, the
phrase ‘mortgage bond’ might be given a narrow
meaning
that could exclude a notarial bond, I see no reason for adopting such
a meaning in the interpretation of s 11(a)(i) of
the Prescription
Act. The preferable meaning is the one expressed by Van den Heever JA
in
Oliff
which is also espoused by the learned author Loubser in
Extinctive
Prescription
[10]
at
37. It follows, therefore, that the conclusions reached by Phatudi AJ
in
Land
and Agricultural Development Bank of South Africa
,
para 74
[11]
and
Mabuse J in
Absa
Bank Ltd v Hemmerle Group (Pty) Ltd,
para
27,
[12]
cannot
be sustained.
[23]
The construction of the provision of s 11(a)(i) contended for by the
appellants must be rejected. It ignores the language of
the section,
the context in which it appears, its purpose and the material known
to its drafters. The appellants’ reliance
on the definition
sections in the Deeds Registries Act and s 2 of the Insolvency Act,
as tools for the interpretation of s 11(a)(i)
of the Prescription
Act, is misplaced. The fact that the phrase ‘mortgage bond’
in the Deeds Registries Act, is used
in respect of immovable property
and the phrase ‘notarial bond’ in respect of movable
property, does not provide a
basis for the conclusion that all other
statutes should be interpreted in this manner. For instance, s 2 of
the Insolvency Act
uses the phrase ‘mortgage bond’ with
reference to movable property in its definition section.
[13]
Each
Act must be interpreted with its particular objectives.
[24]
The distinction between mortgage and notarial bonds in s 102 of the
Deeds Registries Act
[14]
serves
a specific purpose, namely to assist the registrar in the performance
of his duties under s 3 of the Deeds Registries Act,
that is to say,
which deeds he may or may not attest. This is so because not all
deeds registered in a deeds office are attested
by the registrar.
Others, such as notarial contracts and bonds over movables are
required to be attested by a public notary. Thus,
when deeds are
submitted to the registrar for registration or execution, he must
examine them and reject those that purport to
bind property which
they may not bind under the Act or any other law.
[15]
In
other words, the distinction which s 102 draws between a mortgage
bond and a notarial bond is only relevant for purposes of deeds

attestation and registration.
[16]
The
provisions of ss 50(2), (3), (4) and (5) of the Act make it clear
that, although these two bonds are constituted differently
and the
subject matter to which they relate is different, they may be
registered to secure an existing debt, or a future debt,
or both and
once they are registered they give rise to similar legal
consequences.
[25]
As to costs, counsel for the Land Bank asked for costs to be paid on
attorney and client scale on the basis that the notarial
bond
stipulates that should the Land Bank institute legal proceedings
against the appellants, it will be entitled to attorney and
client
costs. The relevant clause of the notarial bond provides:
‘
The
mortgagor shall pay all legal expenses, stamp duty, costs and charges
in preparing and registering this Notarial Bond and the
costs of
cancellation thereof, and in general all costs, including costs
between attorney and client and collection commission,
which may
arise out of or as a consequence of any claim or demand made, or
legal proceedings instituted against the mortgagor in
terms of this
Notarial Bond.’
[26]
It was stated in
Sapirstein
& others v Anglo African Shipping Co (SA) Ltd
[17]
that
‘a court should give effect to an agreement between parties
concerning their liability for legal costs arising out of
a dispute
between them.’ There is no reason to depart from this principle
in this case. The parties agreed that the appellants
would pay costs
as between attorney and client which may arise out of legal
proceedings instituted against them in terms of the
notarial bond.
[27]
In conclusion I hold that the phrase ‘mortgage bond’
appearing in s 11(a)(i) of the Prescription Act should be
read as
including a special notarial bond and it follows, therefore, that the
applicable period of prescription in respect of a
debt secured by a
special notarial bond is thirty years. The court below correctly
dismissed the appellants’ special plea
of prescription.
[28]
In the result the appeal is dismissed with costs on attorney and
client scale.
________________
D
H Zondi
Judge
of Appeal
Appearances
For
the Appellants:
C C Bester (with him L Mashilane)
Instructed
by:
Ismail
Ayob & Partners, Johannesburg
Phatshoane
Henney Attorneys, Bloemfontein
For the Respondent: J G Bergenthuin SC
Instructed by:
Van
Zyl Le Roux Attorneys, Monumentpark
Honey
Attorneys, Bloemfontein
[1]
Land
and Development Bank of South Africa v Boeke & another
TPD unreported case no number 12506/07 of 17 February 2011.
[2]
A similar conclusion was reached by Molopa-Sethosa J in
Land
and Agricultural Development Bank of South Africa v Phato Farms
(Pty) Ltd & others
2015 (3) SA 100
(GP) para 69, although the issue before the court in
that case related to the prescription period of a debt secured by a
general
notarial bond. Msimeki J disapproved of the reasoning and
conclusion in the judgments of Phatudi AJ in
Land
and Agricultural Development Bank of South Africa v Factaprops 1052
CC & another
[2015] 3 All SA 319
(GP) para 74 and Mabuse J in
Absa
Bank Ltd v Hammerle Group (Pty) Ltd
[2013] ZAGPPHC 402 (20 December 2013) para 27, in which it was held
that a special notarial bond is not a mortgage bond for the
purposes
of the Prescription Act.
[3]
Natal
Joint Municipal Fund v Endumeni Municipality
2012 (4) SA 593
(SCA);
[2012] JOL 28621
(SCA); [2012] 2 BPLR 133
(SCA) para 18.
[4]
The
Deeds Registries Act 47 of 1937
.
[5]
The Security by Means of Movable Property Act 57 of 1993.
[6]
The
Insolvency Act 24 of 1936
.
[7]
Transvaal Prescription Amendment Act of 1908, a statute which was
later replaced by the Prescription Act of 1943. Sections 8
and 9
provided as follows:
‘
8.
The period of prescription on any bill of exchange, or other liquid
document or in respect of any written acknowledgment of
debt or
written contract of any nature (other than a mortgage bond, general
or special or a promissory note not negotiated) shall
be six years.
9.
The period of prescription in respect of matters for which a period
is not hereinbefore fixed shall be thirty years; provided
that there
shall be no prescription in respect of a judgment of a court of
law.’
[8]
Oliff v
Minnie
1953 (1) SA (1) A;
[1953] 1 All SA 151
(A) at 153.
[9]
See
also
Lief,
NO v Dettmann
1964
(2) SA 252
(A) at 264H.
[10]
M M Loubser
Extinctive
Prescription
(1996) at 37-38.
[11]
Land
and Agricultural Development Bank of South Africa v Factaprops 1052
CC & another
[2015]
3 All SA 319 (GP).
[12]
Absa
Bank Ltd v Hammerle Group (Pty) Ltd
[2013]
ZAGPPHC 402 (20 December 2013).
[13]
Section
2
of the
Insolvency Act 24 of 1936
defines ‘special mortgage’
as:
‘
a
mortgage bond hypothecating any immovable property or a notarial
mortgage bond hypothecating specially described movable property
in
terms of
section 1
of the Security by Means of Movable Property Act,
1993 (Act No. 57 of 1993), or such a notarial mortgage bond
registered before
7 May 1993 in terms of section 1 of the Notarial
Bonds (Natal) Act, 1932 (Act No. 18 of 1932), but excludes any other
mortgage
bond hypothecating movable property.’
[14]
Section 102
of the
Deeds Registries Act 47 of 1937
.
[15]
H S Nel
Jones
Conveyancing in South Africa
4 ed (1991) at 14-15.
[16]
Town
Council of Springs v Moosa & another
1929 AD 401
at 417.
[17]
Sapirstein
& others v Anglo African Shipping Co (SA) Ltd
1978 (4) SA 1
(A) at 14; See also
South
African Permanent Building Society v Powell & others
1986 (1) SA 722
(A) at 726 G-H.