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[2014] ZAGPPHC 419
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First Rand Bank Limited v Austin and Another (55320/2011) [2014] ZAGPPHC 419 (29 May 2014)
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REPUBLIC
OF SOUTH AFRICA
IN THE HIGH COURT
OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
CASE NO:
55320/2011
DATE: 29 MAY 2014
FIRST
RAND BANK
LTD
...........................................................................................................
PLAINTIFF
and
HENDRIK WILLENM
AUSTIN
........................................................................................
1
st
DEFENDANT
LORRAINE
AUSTIN
..........................................................................................................
2
nd
DEFENDANT
JUDGMENT
KHUMALO J
INTRODUCTION
[1] The Plaintiff
instituted an action against the Defendants for the payment of a debt
that arose from monies that were advanced
to the Defendants in terms
of two loan agreements they concluded with Saambou National Building
Society on 3 November 2001 and
July 2005. The Society subsequently on
28 August 2008 changed its name to First Rand Finance Company Limited
and eventually on
1 March 2009 to FirstRand Bank Limited, that took
over all the assets with the consent of the Minister of Finance in
terms of s
54 (1) of the Banks Act 94 of 1990.
[2] It is common
cause between the parties that the amounts of the first and second
loans were R221 000.00 and R600 000.00 respectively
and in December
2001 and July 2005 the Defendants registered a Bond, in that order,
in respect of the loans, over the property
described as Erf [...]
R[...] Extension 10 Township, Registration Division J.R. Province of
Gauteng ("the property"),
in acknowledgement and as
security of their indebtedness to the Plaintiff. The second Bond was
a continuing covering security for
all and any sums of money which
may now or in future be owing to or claimable by the Plaintiff from
the Defendants.
[3] The terms of the
loans provided for the amounts owing in the Bonds to be payable in
240 monthly instalments and had an acceleration
clause that in the
event of a failure by the Defendants to timeously make payment or
perform any obligation in terms of the second
bond or should the
Defendants breach any condition in respect of the second bond, or
should the Defendants breach the condition
of any other agreement
with the Plaintiff, all amounts owing to the Plaintiff by the
Defendants shall forthwith be payable in full
and the Plaintiff may
institute proceedings for the recovery thereof and for an order
declaring the property executable.
[4] It is also
common cause that on 15 February 2007 the Defendants were in arrears
and Plaintiff proceeded to issue and serve a
summons upon the
Defendants under case number 4428/2007, claiming the whole amount
that was owing on the two bonds at the time
and invoking the
acceleration clauses as provided for in the two agreements. The
Plaintiff also alleged the Defendants to have
been in arrears for
60.52 months. The Defendant filed a Notice to defend and on 28
February 2008. Plaintiff withdrew the summons.
[5] On 27 September
2011, the Plaintiff again issued a summons against the Defendant for
the total debt outstanding from the two
bonds (consolidating the
amounts).
[6]
The Defendants raised a Special Plea that the Plaintiff's full claim
has prescribed. The parties have agreed to deal with the
Special Plea
before getting into the principal case. Defendants pleaded and argued
that when Plaintiff exercised its option in
the 2007 summons to call
upon the full amount as per the acceleration clause, the full unpaid
amount on the bonds became due and
payable. The Prescription period
then started to run from that date
when
the bond became due and payable,
which
prescription period, according to Mr Coetzee appearing on behalf of
the Defendants, became now of a shorter period of three
years. The
Defendants therefore allege that Plaintiff's claim under the bond
prescribed on February 2010. Mr Coetzee also conceded
that the last
payment was made on 28 October 2006.
[7] Plaintiff
contends that the prescription period applicable on the debt is 30
years as it is secured by a mortgage bond as provided
in s 11 of the
Prescription Act 68 of 1969 ("the Act"). It is argued on
its behalf that the issuing of the summons in
2007 calling upon the
whole debt might have made the whole amount owing in the bonds due
and payable but the period of prescription
applicable remained
calculable at 30 years.
APPLICABLE LAW
[8] The periods of
prescription applicable to debts are set out in the relevant sections
of the Act as follows:
"s 11. Periods
of prescription of debts
The periods of
prescription of the debts shall be the following:
(a)
30 years in respect
of
(i) Any debt secured
by a mortgage bond
(ii) Any judgment
debt
(iii) ..........
(iv) ..........
save where an Act of
Parliament provides otherwise, three years in respect of any other
debt."
[9] s 12 When
prescription begins to run-
subject to the
provisions subsections (2), (3), prescription shall commence to run
as soon as the debt is due.
sl5 provides for
Judicial interruption of prescription as follows:—
(1) The running of
prescription shall, subject to the provisions of subsection (2), be
interrupted by the service on the debtor
of any process whereby the
creditor claims payment of the debt.
(2) Any interruption
in terms of subsection (1) shall lapse, and the running of
prescription shall not be deemed to have been interrupted,
if the
person claiming ownership in the thing in question does not
successfully prosecute his claim under the process in question
to
final judgment or if he does so prosecute his claim but abandons the
judgment or the judgment is set aside.
(3) If the running
of prescription is interrupted as contemplated in subsection (1), a
new period of prescription shall commence
to run, if at all, only on
the day on which final judgment is given.
[10]
The security of a bond is intended that it must be able to support a
claim arising therefrom for a period of 30 years excluding
such a
claim from the operation of a shorter period of prescription as the
documents are of public record and are easily proved
and not exposed
to loss as writings in private custody. See
Oliffv
Minni
1953
(1) SA 1
(A.D).
[11]
In
Oliffit
was
also concluded that a mortgage bond which had become valueless as
security did not cease to be a mortgage bond within the meaning
of
the section; that section (s 2 of Chapter 23 of the Orange Free State
Law Book, the equivalent of s 11 (a) (i) of the Act) was
not
concerned with the security. It was held that as the action was
brought on a mortgage bond, according to the common law it
was not
prescribed.
[12]
It is important to set out the facts in
Oliff
to
give a better perspective of the principle as aforementioned: 'During
1930 Respondent passed a second mortgage bond over his
farm in favour
of Appellant as security of a debt of $1 000 owing to Appellant and
payable on 1 September 1931. The bond was duly
registered on 10 July
1930. During December 1933, the owner of a first mortgage bond caused
the mortgage property to be sold in
execution, not realizing enough
to reduce the indebtedness of the 2
nd
Bond as well. The property was transferred to the purchaser free of
both bonds and respondent's title deeds were endorsed with
"Sold
in execution by Sheriff". On the 12 February 1951, Appellant
gave respondent notice to pay the amount due under
the bond within
three months and upon liability being repudiated issued summons on
20
th
September 1951. Appellant's claim for provisional sentence, was found
to have prescribed and dismissed on the basis that the action
was not
one on a mortgage bond within the contemplation of s 2 (sll), which
excluded from the new period of prescription (which
on this case
would be three years) the mortgage bonds duly attested and registered
against the title of the property hypothecated
by it. The court a quo
argued that had the bond retained its original character and
functions, the claim would not have prescribed.
That after the sale
in execution of the mortgaged property, it ceased to be a mortgage
bond and became merely an acknowledgement
of debt so that the period
of prescription applicable to acknowledgements of debts began to run
against it afresh. On Appeal Van
den Heever, JA (as he was) in
overturning the dismissal held that the section makes provision for
only one point of time from which
prescription runs and that is from
the time of
actio
nata
and
that in the present case, certain type of written instruments
represent the genus and a species, mortgage bonds, receive a favoured
treatment without any provision express or implied for its migration
from one class to another. He concluded by saying on 5B that:
"It seems,
therefore, that this section excludes from the operation of the
shorter period of prescription documents which,
though they may
relate to "transactions long gone by", are of public
record, are easily proved and are not as much exposed
to loss as
writings in private custody. To these considerations it is quite
irrelevant what a person entitled may hope to recover
by suing on
such instrument.”
[13]
On behalf of the Defendants, Mr Coetzee mentioned
the decision in
Kilrce-Daley
v Barclays National Bank Ltd
[1984] ZASCA 90
;
[1984]
2 All SA 551
(A) ("referred to hereafter as the Dodo case) to
support the argument that the debt became due in 2007, and that the
prescription
period that became applicable was three years from that
date. In Dodo's case the principal debt secured by the bond
registered
by the surety (appellant) became due on a certain date and
the surety argued that the claim against it was bound by that date as
its due date and therefore the claim (as it is against the principal
debtor) prescribed three years from that date, which was presumably
a
year after the liquidator's account was confirmed.
The
argument was premised on a fact that her liability as surety and
co-principal debtor was accessory to the principal debtor's
liability.
The
Plaintiff on the other hand argued that the prescriptive period
applicable against the surety's liability as secured by the
bond was
30 years, alternatively 30 years from the date when confirmation of
the Liquidator's account (of debt by principal debtor)
took place. It
further argued that the suretyship contract was a separate contract
from that of the principal creditor and that
there was thus no reason
to exclude the debt of a surety and co-principal debtor secured by a
mortgage bond from the provisions
of the wide terms of s 11.
[14]
What separates the contentions in this matter and Dodos is the
question that the court in Dodos had to first decide upon before
adjudicating on the law and principles applicable, which is, what was
the debt secured by the Appellant? Although the distinctiveness
of
the suretyship was recognized it was however found to be accessory to
the main contract such that the surety undertakes the
same obligation
as the principal debtor which it undertakes to fulfill on failure by
the principal debtor to do so. The words "co-principal
debtor
were expressly denoted to imply that the surety's obligations shall
be coequal in extent, meaning of the same scope and
nature as that of
principal debtor, referring in that regard to the decision in
Mahomed
v Lockhat Ros and Co Ltd
1944
AD 230
at p238. Therefore the execution of a bond by the surety did
not amount to entering into a contract separate from her contract of
suretyship that is why her liability in terms of the debt owed by the
principal debtor did not assume a new life of its own that
extended
to a period beyond that of the main debt. It did not assume a new
liability independent from the principal debt. That
is confirmed by
the finding by the court that:
"It was that
accessory and dependent debt which was secured by the bond. It
follows that if the principal debt, ie, Dodos debt,
became prescribed
or for any other reason ceased to exist, the appellant's debt became
prescribed and ceased to exist. In the result
the bank cannot invoke
s 11 (a) (i)."
[15] In this matter
we are dealing with a totally different situation where the claim
itself that arose from the mortgage bond is
the principal debt not an
accessory to any debt. Both Defendants are main debtors with no
sureties or secondary debtors. The existence
of a mortgage bond was
the only issue in the decision that had any slight relevance to this
matter.
[16]
The other matters mentioned by Mr Coetzee, specifically the recent
decision of
Jans v
Nedcor Bank Ltd
[2003]
2 All SA 11
(SCA), are grounded on the same factual and legal issues
like Dodos. They all deal with issues regarding suretyships and
therefore
fall under the same principle that the mortgage bond
secures the ancillary debt which secures the accessory and dependent
debt
and as a result, the accessory's scope and nature (or extent)
determines the scope, nature and extent of the ancillary debt.
[17]
In
Bankorp Ltd v
Leipsig
1993
(1) SA 247
(WLD) it was dealt comprehensively with the difference
between the security of the principal debtor's obligation by bond and
a
bond that secures the ancillary liability of the surety to the
principal debt (principal debtor's obligation). On para 250A Flemming
DJP (as he was then) came to a conclusion that:
'if a mortgage bond
secured only the tie between the creditor and the surety, s 11 (a)
(i) of the Act did not apply; if the obligation
of the principal
debtor was not secured by the mortgage bond, the principal debtor's
liability ended (prescribed) after three years
and the extinction of
the claim against the principal debtor had the result of destroying
the accessory claim against the surety.
The conclusion reached in
Kilroe-Daly... at 623 applies. The period of prescription was
therefore three years and not 30 years.
[18] The reverse is
therefore that if a mortgage bond secured the liability between the
principal debtor and the creditor as in
this action the debtor's
liability would have ended after 30 years, including that of surety.
[19] Under the
circumstances, the Plaintiffs claim against the Defendants under the
bond has not been proven to have prescribed.
The Special Plea has no
merit. I therefore make the following order:
[19.1] The
Defendant's Special Plea of prescription is dismissed with costs.
N V KHUMALO J
JUDGE OF THE HIGH
COURT
GAUTENG DIVISION:
PRETORIA
Heard on: 28 May
2014
For the Plaintiff:
Adv Denichaud C
Instructed by:
Glover Inc
c/o Hahn& Hahn
Attorneys
For the
Respondent:Coetzee M
Instructed by: Mario
Coetzee Attorneys
North Gauteng:
Pretoria