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[2017] ZASCA 128
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Investec Bank Limited v Erf 436 Elandspoort (Pty) Limited and Others (1029/2016) [2017] ZASCA 128 (29 September 2017)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no: 1029/2016
In
the matter between:
INVESTEC
BANK LIMITED
APPELLANT
and
ERF
436 ELANDSPOORT (PTY) LIMITED &
OTHERS
RESPONDENT
Neutral
citation:
Investec
Bank Ltd v Erf 436 Elandspoort (Pty) Ltd
(1029/2016)
[2017] ZASCA 128
(29 September 2017)
Coram:
Cachalia, Majiedt and Petse JJA and
Mokgohloa and Gorven AJJA
Heard:
5 September 2017
Delivered:
29 September 2017
Summary
:
Practice: Civil Procedure: extinctive prescription:
claim by bank for
payment of a debt arising from loan agreement: mortgage bond
registered over a notarial lease: lease cancelled
and thus security
falling away: debt no longer secured: period of prescription running
from date when amount payable under the
loan became due as envisaged
in s 12(1) of the
Prescription Act 68 of 1969
.
ORDER
On
appeal from
:
Gauteng
Division of the High Court, Pretoria (Molopa-Sethosa J sitting as
court of first instance):
The
appeal is dismissed with costs.
JUDGMENT
Petse
JA (Cachalia and Majiedt JJA and Mokgohloa and Gorven AJJA
concurring):
[1]
This is an appeal against a judgment of the Gauteng Division of the
High Court, Pretoria (Molopa-Sethosa J) which upheld the
special plea
of prescription raised by the respondents against the appellant’s
claim. I shall, for convenience, hereinafter
refer to the court a quo
as the High Court.
[2]
The essential facts, which are common cause may be summarised as
follows: the appellant, Investec Bank Limited, which is a commercial
bank and company with limited liability, instituted an action against
six defendants for payment of the sum of R3 979 184.50,
together
with interest and costs. These were Erf 436 Elandspoort (Pty) Ltd as
first defendant; Cecilia Joubert NO; Erf 1081 Arcadia
(Pty) Ltd; V &
J Properties (Pty) Ltd; Remaining Ext 764 Brooklyn (Pty) Ltd and Erf
22 Hillcrest (Pty) Ltd as second, third,
fourth, fifth and sixth
defendants respectively.
[3]
The first respondent, to which the appellant had lent money, was sued
as principal debtor whilst the remaining defendants were
sued in
their capacities as sureties. The action was subsequently withdrawn
against the fourth defendant before the commencement
of the trial.
[4]
As security for the loan, the first respondent registered a notarial
covering mortgage bond in favour of the appellant over
a notarial
agreement of lease that it had earlier concluded with a third party,
South African Railway Commuter Corporation Limited
(SARCC). During
January 2002, SARCC cancelled the lease agreement. The cancellation
was confirmed by court order in August 2002.
[5]
On 10 September 2002, pursuant to the cancellation of the lease, the
appellant addressed a letter to the first respondent, through
its
attorneys, in terms of which it advised the latter that it had
committed a breach of the loan agreement. Consequently, the
letter
demanded payment of the outstanding balance of R5 633 177.42.
In particular, the letter also contained an intimation
that failure
to pay the aforesaid amount within seven days would result in action
being instituted against the first defendant.
As already indicated,
on 18 January 2011 – after a period of some eight years –
the appellant instituted action against
the respondents claiming
payment of R3 979 184.50, the amount then owing.
[6]
The respondents defended the action, advancing various defences to
the claim. They also raised a special plea of prescription
against
the claim asserting that the claim had prescribed by 18 September
2002 at the latest as a result of the amount stipulated
in the
appellant’s demand not having been paid. The appellant, in
turn, delivered a replication in terms of which it alleged
that the
claim had not prescribed as it was secured by a mortgage bond as
contemplated in s 11
(a)
of the Prescription Act 68 of 1969 (the
Prescription Act). In
the
alternative, it pleaded that the running of prescription was
interrupted between the period 7 May 2003 and 21 May 2007.
[7]
At the trial, and despite resistance by the appellant, the High Court
directed that the trial be limited to the respondents’
special
plea of prescription only. And more particularly, to the question
whether the period of prescription of the debt in issue
was 30 years
or three years as provided in
s 11
(a)
or
s 11
(d)
of the
Prescription Act respectively
. Accordingly, it ordered a
separation of the issues in terms of Uniform
Rule 33(4).
[1]
After hearing argument, the High Court upheld the special plea with
costs. It subsequently granted the appellant leave to appeal
to this
Court.
[8]
The crisp issue is whether, in these circumstances, the 30 year
prescription period provided for in
s 11(a)
(i)
of the
Prescription Act in
respect of any debt secured by mortgage
bond is applicable to the debt. If not, the debt would have become
prescribed 3 years after
the due date for payment (unless the running
of prescription was interrupted in terms of
s 14(1))
in terms of
s
11
(d)
.
[9]
Thus the only issue debated at the hearing of this appeal was
prescription. Consequently, an analysis of the relevant statutory
framework is now apposite.
Section 10(1)
of the
Prescription Act
reads
:
‘
10(1)
. . . a debt shall be extinguished by prescription after the lapse of
the period which in terms of the relevant law applies
in respect of
prescription of such debt.’
Section
11
, in turn provides for periods of prescription of debts which, in
material terms, reads:
’
11
The period of prescription of debts shall be the following:
(a)
thirty years in respect of –
(i)
any debt secured by mortgage bond;
(b)
. . .
(c)
. . .
(d)
save where an Act of Parliament provides otherwise, three years in
respect of any other debt.’
[10]
Section 12(1) provides:
‘
.
. . prescription shall commence to run as soon as the debt is due.’
As
already mentioned, it is common cause that the debt in issue in this
appeal fell due on 18 September 2002.
[2]
What is contested is whether the relevant period is 30 years
(s 11(a)
(i)
of the
Prescription Act) or
three years
(s 11(a)
(d)
of the
Prescription Act). If
the period is 30 years, prescription
will not avail the respondents, but it will if the period is three
years. One of the philosophical
justifications for prescription is
that ‘society is intolerant of stale claims. The consequence is
that a creditor is required
to be vigilant in enforcing his rights.
If he fails to enforce them timeously, he may not enforce them at
all.’
[3]
This consideration assumes significance in this case where the
appellant waited for over eight years before it enforced its right
against the respondents.
[11]
The resolution of the dispute between the protagonists in this appeal
lies in the proper interpretation of the relevant provisions
of the
Act set out above (paras 9-10) in accordance with the
well-established canons of construction of documents. This exercise
entails that the following must be considered, namely: the language
used; the context in which the relevant provisions appear;
the
apparent purpose to which it is directed; and the material known to
those responsible for the production of the document under
consideration.
[4]
[12]
Whilst accepting that the debt in issue became due on 18 September
2002, counsel for the appellant nevertheless contended that
the debt
had not become prescribed by the time the appellant’s summons
was served on the respondents on 21 January 2011
(some
eight years after due date). This was so, so went the argument,
because the debt was secured by a mortgage bond in which
event the
period of prescription was 30 years in terms of
s 11
(a)(i)
of the
Prescription Act. It
was further argued that the fact that the
notarial lease which served as the appellant’s real right under
the mortgage bond
was cancelled did not matter. Counsel placed heavy
reliance on
Oliff v Minnie
1953
(1) SA 1
(A) in support of his contentions. I shall return to
Oliff
later. Suffice to state at this stage that the facts in
Oliff
are distinguishable from the facts of this case.
Oliff
was concerned with the provisions of a statute that were materially
different from those under consideration in this appeal.
[13]
In support of the special plea of prescription, counsel for the
respondents argued that the question whether the debt in issue
was
secured by mortgage bond must be determined in relation to the time
of the service of the summons enforcing the claim. Consequently,
as
the cancellation of the lease agreement had the effect of
extinguishing the first respondent’s rights under the lease
and
terminating the appellant’s real right under the mortgage bond,
the object of the mortgage bond, ie the first respondent’s
rights deriving from the lease agreement, ceased to exist with effect
from 21 August 2002 at the latest. Thus, when prescription
commenced
to run from the due date (ie 18 September 2002) the appellant’s
debt was not secured by mortgage bond and
s 11
(d)
of the
Prescription Act meant
that the debt became prescribed after a
period of three years reckoned from 18 September 2002.
[14]
I return to
Oliff
whose facts are conveniently set out in the headnote of the judgment
as follows. In 1930 the respondent had passed a second mortgage
bond
in favour of the appellant as security of a debt payable on 1
September 1931. During December 1933 the holder of the first
mortgage
bond caused the mortgaged property to be sold in execution. The sale
did not realise enough to reduce the indebtedness
on the second bond.
The property was transferred to the purchaser and without the
encumbrances of the bonds. On 12 February 1931,
the appellant gave
the respondent notice to pay the amount due under the bond within
three months and upon liability being repudiated
issued provisional
sentence summons on 20 September 1951 based on the bond. The court of
first instance refused provisional sentence
holding that when the
mortgaged property was transferred free of the bonds the appellant’s
mortgage bond lost its security
so that the shorter period of
prescription of eight years applied and not 30 years as would have
been the case if its security
was still in place. On appeal this
Court, accepting that the running of prescribed commenced only from
the date when the appellant’s
right of action accrued, ie 1
September 1931, held that the mortgage bond did not cease to be such
simply because it had become
valueless as security. Provisional
sentence was consequently granted. It must be emphasised that in
Oliff
the
plaintiff sued for provisional sentence, solely relying on the
mortgage bond passed by the mortgagor, ie the defendant in that
case.
In addition, the statutory provision under consideration in
Oliff
was materially different from that with which this case is concerned.
[15]
The decision in
Oliff
has been commented upon by some academic writers. The learned authors
of
The
Law of Property
,
[5]
inter alia, point out that a mortgage bond will be extinguished by
the mortgagee releasing the property which is the subject of
his or
her mortgage bond. And when this happens the security is released but
the principal obligation remains. They go on to say
that as the debt
in
Oliff
was no longer secured by a mortgage bond, prima facie,
Oliff
is no longer authority for the interpretation of the [current]
Prescription Act, unless
a court is prepared to hold that
s 11
(a)(i)
[of the
Prescription Act] ‘means
any debt which was initially
secured by a mortgage bond and justify such construction by reference
to the ratio
decidendi
in
Oliff
’.
[6]
[16]
Professor Loubser
[7]
supports the views expressed in
Silberberg
and Schoeman’s
The
Law of Property
referred to in the preceding paragraph and in turn explains the
position as follows:
‘
Where
the bond is cancelled before payment or performance of the debt, the
thirty-year prescription period will no longer be applicable
and if
more than the otherwise applicable shorter prescription period has
elapsed since the due date of the debt, the debt will
become
prescribed upon cancellation of the bond when the operation of the
thirty year period falls away.’
[17]
Similarly, Saner in
Prescription in South African Law
says the
following (at 3-35):
‘
In
a situation where a mortgage bond is cancelled before payment or
performance of the debt in question and the debt would, but
for the
registration of the mortgage bond, have prescribed in the meanwhile,
the debt will immediately become prescribed upon cancellation
of the
bond due to the falling away of the 30 year period.’
The
weight of academic authority therefore supports the view that once
the security ceases to exist, the debt is no longer secured
and the
prescription period then becomes 3 years as it is with any other debt
(s 11
(d)
).
[18]
In this case counsel for the appellant accepted that the appellant’s
action was based, not on the mortgage bond as in
Oliff
but
squarely on the loan agreement. As already mentioned, he also
accepted that prescription commenced to run from 18 September
2002, this being the due date of the debt. In
Deloitte Haskins &
Sells Consultants (Pty) Ltd v Bowthorpe Hellerman Deutsch (Pty) Ltd
[1990] ZASCA 136
;
1991 (1) SA 525
(A) this Court said the
following in relation to when prescription commences to run as
intended in
s 12(1)
of the
Prescription Act (at
532G-H):
‘
.
. . This means that there has to be a debt immediately claimable by
the creditor or, stated in another way, that there has to
be a debt
in respect of which the debtor is under the obligation to perform
immediately.’
[Citations
omitted]
[19]
Apparently emboldened by the rider to what the learned authors of
Silberberg
and Schoeman’s The Law of Property
say
(in para 16.4.9(f) at 379 referred to in para 15 above), counsel for
the appellant contended that the phrase ‘any debt
secured by
mortgage bond’ in
s 11(a)
(i)
can be interpreted to mean ‘any debt that was
at
any time
’
secured by mortgage bond. (My emphasis.) And that if this were done
the period of prescription would be 30 years, meaning
that the claim
had not prescribed. In my view this argument is untenable. The
language of
s 11
(a)(i)
of the
Prescription Act is
clear. And it is hardly the sort of
language that the legislature would have used if the intention was
that the loss of the security
or the cancellation of the mortgage
bond would have no effect on the period of prescription. In my view
this interpretation accords
with the tenets of purposive and
contextualised statutory interpretation and does not result in an
absurdity.
[8]
[20]
It was not the appellant’s pleaded case, nor was any evidence
adduced to establish such a case – given the approach
adopted
in the High Court – that there is a lacuna in
s 11
(a)(i)
of the
Prescription Act rendering
it necessary to read in the words
‘that was
at
any time
’
to cure such lacuna.
[9]
Consequently, if this Court were disposed to uphold the appellant’s
counsel’s argument it would thereby ‘cross
the divide
between interpretation and legislation’.
[10]
Counsel for the appellant was understandably constrained to concede
as much.
[21]
As already alluded to in para 8 above, the only issue adjudicated
upon by the High Court was whether the period of prescription
of the
debt sought to be enforced by the appellant was 30 years or three
years. The High Court held that the relevant period of
prescription
was three years. Since this was the only issue argued in this Court,
and has been determined against the appellant,
it follows that the
appeal must fail.
[22]
In the result the following order is made:
The
appeal is dismissed with costs.
_________________
X
M Petse
Judge
of Appeal
APPEARANCES:
For
Appellant:
F J Erasmus
Instructed by:
V D T Incorporated,
Pretoria
Peyper Attorneys,
Bloemfontein
For
Respondent:
H F Oosthuizen SC
Instructed
by:
Nöthling
Attorneys, Pretoria
De
Villiers Attorneys, Bloemfontein
[1]
In terms of
rule 33(1) of the Uniform Rules of Court, parties to a dispute may
agree upon a written statement of facts in the
form of a special
case for the adjudication of points of law. This statement sets out
the facts agreed upon and the questions
of law in dispute between
the parties, as well as their contentions. Rule 33(3) gives the
court the discretion to draw any inference
of fact or law from the
facts and documents as if proved at trial. See in this regard:
Mighty
Solutions t/a Orlando Service Station v Engen Petroleum Ltd &
another
[2015] ZACC 34
;
2016 (1) SA 621
(CC) para 61, and
Bane
& others v D’Ambrosi
[2009]
ZASCA 98
;
2010 (2) SA 539
(SCA) para 7 where this court said that
rule 33(1) and (2) made it clear that the resolution of a stated
case proceeds on the
basis of a statement of agreed facts, and is,
after all, seen as a means of disposing of a case without the
necessity of leading
evidence.
[2]
See
List
v Jungers
1979 (3) SA 106
(A) at 121C-D where this Court held that there is a
difference between when a debt comes into existence on the one hand
and when
it becomes recoverable on the other hand, although these
dates may coincide.
[3]
Cape
Town Municipality v Allie NO
1981 (2) SA
1
(CPD) at 5G-H;
Murray
& Roberts Construction (Cape) (Pty) Ltd v Upington Municipality
1984
(1) SA 571
(A) at 578F-H.
[4]
See:
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012
(4) SA 593
(SCA) para 18.
[5]
Badenhorst
Pienaar Mostert Sibberberg and Schoeman’s
The
Law of Property
,
5ed (2006) at 378, para 16.4.9(c).
[6]
Idem at
page 379 para 16.4.9(f).
[7]
M M
Loubser:
Extinctive Prescription (1996) at 38.
[8]
Jaga v
Dönges NO & another
;
Bhana
v Dönges NO & another
1950
(4) SA 653
(A) at 664E-H;
Dadoo
Ltd & others v Krugersdorp Municipal Council
1920 AD 530
at 543;
Dengetenge
Holdings (Pty) Ltd v Southern Sphere Mining and Development Company
Ltd & others
(CCT 39/2013) [2013] ZACC 48; 2014 (5) SA 138 (CC).
[9]
Phillips
& others v National Director of Public Prosecutions
[2005]
ZACC 15
;
2006 (1) SA 505
(CC) paras 36-38.
[10]
Endumeni
footnote 4
above, para 18.