Investec Bank Ltd v Erf 436 Elandspoort (Pty) Ltd and Others

• Jurisdiction: http://justis.com/jurisdiction/166,South Africa
• Judgment Date: 16 September 2020
• Citation: 2021 (1) SA 28 (SCA)

Investec Bank Ltd v Erf 436 Elandspoort (Pty) Ltd and Others
2021 (1) SA 28 (SCA)

2021 (1) SA p28

Citation	2021 (1) SA 28 (SCA)
Case No	410/2019; [2020] ZASCA 104
Court	Supreme Court of Appeal
Judge	Petse DP, Saldulker JA, Dambuza JA, Plasket JA and Poyo-Dlwati AJA
Heard	September 16, 2020
Judgment	September 16, 2020
Counsel	FJ Erasmus SC for the appellant.; HF Oosthuizen SC for the respondents.

Flynote : Sleutelwoorde

Prescription — Extinctive prescription — Interruption — By acknowledgment of liability — Whether series of payments in reduction of loan constituted acknowledgments of liability interrupting prescription — Prescription Act 68 of 1969, s 14.

Headnote : Kopnota

The appellant Investec had advanced a loan to the first respondent company Erf 436, secured by the passing of a notarial mortgage bond over a 50-year long notarial lease, in respect of a commercial property, concluded by Erf 436 as lessee and the South African Rail Commuter Corporation (SARCC) as lessor. The further respondents stood as sureties for Erf 436's debt under the loan. It was a term of the loan agreement that Investec had an option to replace Erf 436 as lessee in the event of Erf 436 defaulting on its obligations to SARCC. Erf 436 did default, and so, as it was entitled to, Investec demanded, on 10 September 2002, payment within seven days of the full outstanding amount. The commencement of prescription of the debt was thus 17 September 2002, being the due date of payment.

When payment was not forthcoming, Investec elected to exercise its option and conclude a lease with SARCC. Despite this, an agreement was reached between Investec and Erf 436 that the latter would continue to manage the property, collect monthly rental from subtenants, and pay those amounts over to Investec to be credited to its loan account. The parties so conducted themselves until around mid-2003, when another agreement was reached between Investec and Erf 436 providing that the former would take over management of the property, itself collect rental from subtenants and credit the Erf 436 account with the amounts collected each month. It was further understood that endeavours would be made to find a purchaser for Investec's rights in the property and the purchase price would be credited to Erf 436's loan. Investec so managed the lease until July 2009, when it sold its rights as lessee to the entity Johnny Prop, and credited Erf 436's loan account with the purchase price, as agreed.

Investec subsequently, in a summons issued in the High Court served on 21 January 2011, claimed the outstanding amount it alleged was owing in terms of the loan agreement — R3 979 184,50 — from Erf 436, as well as the sureties. Erf 436 and the sureties raised a special plea of prescription. Investec, in response, pleaded that, on the basis of the number of payments made to reduce its loan, as well as various statements made in letters on behalf of it, Erf 436 had made a series of acknowledgments of liability, the effect of each acknowledgment being to interrupt prescription against Erf 436, and hence against the sureties too. The High Court, however, upheld the special plea of prescription. Investec appealed to the SCA to press its case.

The court first stressed that, in order to determine whether the various payments and statements amounted to acknowledgments of debt for the purposes of interrupting prescription in terms of s 14 of the Prescription Act 68 of 1969,

2021 (1) SA p29

they had to be viewed holistically and in their broader context. Here in particular, the two agreements referred to above relating to the management of the property. (See [32] and [43].)

The SCA held that the following acts, given the context in which they took place, constituted acknowledgments of debt by Erf 436, each of which had the effect of interrupting prescription:

•

During the period in which Erf 436 was responsible for collection of the subtenants' rental, the multiple payments made by Erf 436 to Investec, the last of which occurred on 30 September 2003. (See [33].)

•

Two letters, dated 7 May 2003 and 13 June 2003, respectively written by one of the directors of Erf 436 in which he expressly acknowledged liability on behalf of Erf 436. (See [33].)

•

During the period in which Investec managed the property, the multiple payments made by Investec to reduce Erf 436's loan account, the last of which occurred on 17 July 2008. (See [38].)

•

A payment to Investec on 29 March 2006 made by another entity, for the purpose of, as agreed with Investec, reducing Erf 436's loan. (The court held that such payment could be inferred to have been made on behalf of Erf 436, given the involvement and acquiescence of a director common to both entities.) (See [36].)

•

Queries on 21 May 2007 by a director of Erf 436 as to the mechanics of the monthly payments into the Erf 436 account, and relating to how the VAT components of the rentals would be dealt with. (See [37] – [38].)

•

The payment of the purchase price of Investec's rights in the property into the Erf 436 account in around July 2009.

The court concluded that, at the time of service of summons, the claim in question had not prescribed, given the series of interruptions of prescription. The court upheld Investec's appeal. (See [47] – [48].)

Cases cited

Southern Africa

Agnew v Union and South West Africa Insurance Co Ltd 1977 (1) SA 617 (A): dictum at 622H – 623C applied

Benson and Another v Walters and Others 1984 (1) SA 73 (A): distinguished

Botha v Standard Bank of South Africa Ltd 2019 (6) SA 388 (SCA) ([2019] ZASCA 108): referred to

Cape Town Municipality v Allie NO 1981 (2) SA 1 (C): dictum at 7B – 8G applied

First Consolidated Leasing Corporation (Pty) Ltd v Servic SA (Pty) Ltd and Another 1981 (4) SA 380 (W): compared.

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

Jans v Nedcor Bank Ltd 2003 (6) SA 646 (SCA) ([2003] 2 All SA 11; [2003] ZASCA 15): dictum in para [32] applied

KLD Residential CC v Empire Earth Investments 17 (Pty) Ltd 2017 (6) SA 55 (SCA) ([2017] ZASCA 98): referred to

Murray & Roberts Construction (Cape) (Pty) Ltd v Upington Municipality 1984 (1) SA 571 (A): referred to

Pentz v Government of the Republic of South Africa 1983 (3) SA 584 (A): dictum at 594A – E compared

Petzer v Radford (Pty) Ltd 1953 (4) SA 314 (N): dictum at 317H – 318B applied

Standard Bank of South Africa Ltd v Oneanate Investments (Pty) Ltd 1995 (4) SA 510 (C): dictum at 556E – 557D applied.

2021 (1) SA p30

England

Bradford & Bingley plc v Rashid [2006] 4 All ER 705 ([2006] UKHL 37): referred to.

Legislation cited

Statutes

The Prescription Act 68 of 1969, s 14: see Juta's Statutes of South Africa 2019/20 vol 1 at 2-757.

Case Information

FJ Erasmus SC for the appellant.

HF Oosthuizen SC for the respondents.

An appeal from the Gauteng Division of the High Court, Pretoria (Fabricius J sitting as court of first instance).

Order

1.

The appeal succeeds with costs, including the costs of two counsel where employed.

2.

The order of the court below is set aside and replaced with the following:

'1.

It is declared that the debt owed by the defendants to the plaintiff, as formulated in the particulars of claim, had not prescribed when summons was served on 21 January 2011.

2.

The costs of the hearing of 18 to 21 February 2019 are to be paid by the first, second, third, fifth and sixth defendants jointly and severally. Those costs shall include the costs of two counsel.

3.

The action is postponed sine die in respect of the remainder of the issues in dispute.'

Judgment

Plasket JA (Petse DP, Saldulker JA, Dambuza JA and Poyo-Dlwati AJA concurring):

[1] The issue for decision in this appeal is whether a debtor acknowledged its liability to a creditor and, in this way, interrupted the running of prescription. In a trial on this separated issue, Fabricius J, in the Gauteng Division of the High Court, Pretoria, held that a claim by the appellant, Investec Bank Ltd (Investec), against the first respondent, Erf 436 Elandspoort (Pty) Ltd (Erf 436), as principal debtor, and the remaining respondents as sureties, had prescribed. Flowing from this finding, he dismissed Investec's claim with costs, but granted it leave to appeal to this court.

[2] At the commencement of the appeal, Investec moved an application for condonation for the late filing of the record and for the reinstatement of the appeal which had lapsed. The application was not opposed. Condonation was duly granted and the appeal was reinstated. We then proceeded to hear the appeal.

Background

[3] In February 2000 Investec advanced a loan to Erf 436. It was secured by a notarial mortgage bond, the subject of which was a notarial lease for a period of 50 years in respect of a commercial property in Pretoria concluded by Erf 436 as lessee and the South African Rail Commuter

2021 (1) SA p31

Plasket JA (Petse DP, Saldulker JA, Dambuza JA and Poyo-Dlwati AJA concurring)

Corporation (the SARCC) as lessor. The loan agreement contained a tripartite agreement between Investec, Erf 436 and the SARCC in terms of which an option was granted to Investec to replace Erf 436 as lessee in the event of Erf 436 defaulting on its obligations to the SARCC.

[4] Erf 436 defaulted about two and a half years later. The lease was cancelled by an order of court on 21 August 2002. This rendered Investec's security worthless. On 10 September 2002 Investec demanded, as it was entitled to do following Erf 436's default, payment by Erf 436 within seven days of the full outstanding balance of the loan. It is not in dispute that prescription in respect of this debt began to run on 17 September 2002, the date on which payment was due.

[5] Investec then exercised its option and concluded a lease...