Botha v Standard Bank of South Africa Ltd

• Jurisdiction: South Africa
• Court: Supreme Court of Appeal
• Judge: Cachalia JA, Saldulker JA, Plasket JA, Dlodlo JA and Weiner AJA
• Judgment Date: 06 September 2019
• Citation: 2019 (6) SA 388 (SCA)
• Hearing Date: 06 September 2019
• Docket Number: 445/2018 [2019] ZASCA 108
• Counsel: R Goslett for the appellant. S Symon SC (with N Konstantinides SC) for the respondent.

Botha v Standard Bank of South Africa Ltd
2019 (6) SA 388 (SCA)

2019 (6) SA p388

Citation	2019 (6) SA 388 (SCA)
Case No	445/2018; [2019] ZASCA 108
Court	Supreme Court of Appeal
Judge	Cachalia JA, Saldulker JA, Plasket JA, Dlodlo JA and Weiner AJA
Heard	September 6, 2019
Judgment	September 6, 2019
Counsel	R Goslett for the appellant.; S Symon SC (with N Konstantinides SC) for the respondent.

Flynote : Sleutelwoorde

Prescription — Extinctive prescription — Period of prescription — Debt secured by mortgage bond — Whether cancellation of mortgage bond, after mortgage debt becoming due and prescription beginning to run, changing C prescription period of debt from 30 years to three years.

Headnote : Kopnota

Section 11 of the Prescription Act 68 of 1969 provides for periods of prescription of debts according to their classification, inter alia, 30 years in respect of 'any debt secured by mortgage bond' and three years 'in respect of any other debt'. The legal issue in this appeal was whether the cancellation of a mortgage bond, after a mortgage debt became due and prescription had D begun to run against it, had the effect of changing the prescription period of the debt from 30 years to three years.

Held

Prescription periods applicable to debts secured by mortgage bonds ran from the date that the right of action accrued and the debt became due. Once fixed, the period was immutable and unaffected by the subsequent cancellation of E the bond; it was not alterable retroactively through the subsequent cancellation of the bond. This was because the classification of the debt conclusively determined the period of prescription, not the fate of the security. (See [23] and [28].)

Cases cited

Southern Africa F

Investec Bank Ltd v Erf 436 Elandspoort (Pty) Ltd and Others [2017] ZASCA 128: criticised and distinguished

Lief NO v Dettmann 1964 (2) SA 252 (A): referred to

Miracle Mile Investments 67 (Pty) Ltd and Another v Standard Bank of SA Ltd G 2016 (2) SA 153 (GJ): referred to

Oliff v Minnie 1953 (1) SA 1 (A) ([1953] 1 All SA 151): applied

Reichlin v Efthimiou 1979 (2) SA 445 (W): referred to

Thienhaus NO v Metje & Ziegler Ltd and Another 1965 (3) SA 25 (A): referred to.

England H

Bristol & West plc v Bartlett and Another; Paragon Finance plc v Banks; Halifax plc v Grant [2002] EWCA Civ 1181 ([2002] 4 All ER 544 (CA)): applied

West Bromwich Building Society v Wilkinson and Another [2005] UKHL 44 ([2005] 1 WLR 2302 (HL)): applied.

Legislation cited

The I Prescription Act 68 of 1969, s 11(a): see Juta's Statutes of South Africa 2018/19 vol 1 at 2-756.

Case Information

R Goslett for the appellant.

S Symon SC J (with N Konstantinides SC) for the respondent.

2019 (6) SA p389

An appeal from the Gauteng Division of the High Court, Pretoria A (Tuchten J).

Order

The appeal is dismissed with costs, including the costs occasioned by the employment of two counsel.

Judgment

Cachalia JA (Saldulker JA, Plasket JA, Dlodlo JA and Weiner AJA B concurring):

Introduction

[1] The legal question raised in this appeal is whether the cancellation of C a mortgage bond after a mortgage debt is due, and prescription has begun to run against it, has the effect of changing the prescription period of the debt from 30 years to three years. The Gauteng Division of the High Court (Tuchten J) held that the cancellation of the bond had no bearing on the prescription period. The consequence of this finding is D that the appellant, Ms Antoinette Botha, was ordered to pay the respondent, Standard Bank of South Africa Ltd, an amount of R1 265 871 plus interest. The claim against her as surety was for the shortfall of a debt secured by mortgage bonds over her husband's immovable property. His estate was subsequently sequestrated, the bonds cancelled and the property sold to a third party. E

[2] When the bank sought to recover this shortfall from her, she attempted to avoid liability on the ground that the principal debt had become prescribed after three years in accordance with s 11(d) of the Prescription Act 68 of 1969 (the Act). [1] She contended that once the bonds were cancelled the debt was no longer secured by a mortgage F

2019 (6) SA p390

Cachalia JA (Saldulker JA, Plasket JA, Dlodlo JA and Weiner AJA concurring)

bond, A and the bank could therefore not rely on the 30-year period of prescription applicable to such debts in terms of s 11(a)(i) of the Act. The bank, on the other hand, maintained that the cancellation of the bonds did not change the character of the debt, since it remained a debt secured by a mortgage bond as contemplated in s 11(a)(i). The court a quo B upheld the bank's contention but granted the appellant leave to appeal to this court. There is a further issue concerning the interruption of prescription, which was also decided in the bank's favour. In this appeal the parties maintain their respective stances.

Facts C

[3] It will be helpful to set out the facts in more detail so that the issues in this appeal are better understood. The appellant's husband, Mr Christoffel Theunis Botha, to whom I shall refer as the principal debtor, concluded a home-loan agreement with the bank on 20 November 2008. D Clause 14.1 contained one of several suspensive conditions for the use of the loan. It required him to register a mortgage bond over the property for an amount of R450 000 in the bank's favour, and also to obtain a suretyship from the appellant. Clause 18 contained two 'special conditions' relevant to this appeal. The first was that the loan would be E consolidated with the existing loan(s) secured by the property, offered as mortgage security for repayment over the period of the loan. The second was that the mortgage bond would stipulate that the bank secure an additional sum, equivalent to 25% of the bond amount. This would represent further security (cover) for situations where the bank would be obliged to pay amounts on the principal debtor's behalf for which he F would be liable, such as for the preservation of the property, rates and taxes, and legal costs.

[4] Pursuant thereto, the principal debtor registered three mortgage bonds over the property in favour of the bank, to secure the loan and his G indebtedness to the bank arising from the home-loan agreement. And the appellant bound herself in favour of the bank as surety and co-principal debtor. In terms of the suretyship, her liability would not be affected by any 'delay or omission in the enforcement of the bank's rights'. It is not clear whether this clause has any bearing on the appellant's right to rely on prescription to resist the claim, but this was H not an issue in the appeal and need not be considered. In addition, the appellant accepted that any acknowledgment of indebtedness by the principal debtor of proof of a claim against his insolvent estate would be binding upon her.

[5] I On 28 November 2011 the principal debtor's estate was finally sequestrated and trustees appointed to administer it. The bank sought to recover the full outstanding balance then owing to it by the principal debtor from the insolvent estate. On 27 September 2012 the bank proved its claim against the estate in an amount of R2 315 043. The principal debt, and thus the surety's debt, then became due, and J prescription began to run against the debt as contemplated by s 12(1) of

2019 (6) SA p391

Cachalia JA (Saldulker JA, Plasket JA, Dlodlo JA and Weiner AJA concurring)

the Act. [2] But, since the principal debt was the object of the bank's claim A in the principal debtor's insolvent estate, it constituted an impediment to the continued running of prescription in terms of s 13(1)(g). [3] It is common cause that this impediment ceased to exist on 26 January 2015 when the Master accepted the trustees' final liquidation account. Consequently, prescription then began running again. B

[6] The appellant contends that prescription ran for one more year by operation of s 13(1)(i) [4] when the principal debt prescribed on 26 January 2016. The bank maintains that prescription continued to run beyond this date because the 30-year period, and not the three-year period, applies. C

[7] In the meantime, the trustees sold the property to a third party who took transfer on 8 November 2012, and the bonds were cancelled. The trustees made a provisional payment of R1 million to the bank two weeks later. On 9 June 2014 the trustees paid a further R74 374 in terms of the first and final liquidation, distribution and contribution account, D leaving a balance of R1 285 871 still owing by the principal debtor. These payments form the basis of the bank's alternative submission, which is that they constituted an acknowledgment of liability and therefore interrupted prescription in accordance with s 14(1) of the Act. [5] So that even if the three-year prescription period applies, summons was issued before its effluxion. As mentioned earlier, the court a quo E determined this issue too in the bank's favour.

[8] On 26 January 2015 the Master confirmed the first and final liquidation, distribution and contribution account in the principal debtor's insolvent estate. As at 10 June 2016 the principal debt, as F

2019 (6) SA p392

Cachalia JA (Saldulker JA, Plasket JA, Dlodlo JA and Weiner AJA concurring)

certified A in terms of the home-loan agreement, stood at R1 285 871 (not R1 265 871 attributed in error by the court a quo). The bank issued summons claiming this shortfall from the appellant as surety for the principal debt, together with interest, more than a year later, on 26 July 2016.

[9] B I turn to consider whether the cancellation of the bonds changed the prescription period applicable to the debt, from 30 years to three years. I commence this analysis with this court's judgment in Oliff v Minnie in 1953....