Land and Agricultural Development Bank of South Africa v Factaprops 1052 CC

• Jurisdiction: South Africa
• Judge: Phatudi AJ
• Judgment Date: 20 May 2014
• Citation: 2015 JDR 1011 (GP)
• Hearing Date: 25 March 2014
• Court: Gauteng Division, Pretoria
• Docket Number: 64702/2010

Phatudi AJ:

INTRODUCTION:

[1.]

The dispute in this matter presents not only a vexed question whether a special Notarial Bond ("notarial bond") could be construed as a mortgage bond within the meaning of Section 11(a)(i) of the Prescription Act [1] , but also poses some difficulties as to the correct or proper interpretation thereof which constitutes res nova in our law.

[2]

The factual matrix that gave rise to the present application are briefly the following:

[3]

The applicants (the defendants in the main action) seek leave to amend their plea in terms of the provisions of Rule 28(4) of the Uniform Rules of Court ("the Rules"). The plea sought to be amended incorporates in it a Special Plea of prescription as set out in the notice in terms of Rule 28(1) dated 02.09.2013.

[4]

Upon delivery of the relevant notice in terms of Rule 28(1) referred to, the respondent (plaintiff in the main action) served a Notice of Objection to the proposed amendment, contending that its cause of action is for payment of a debt secured by a notarial bond, and that the applicable

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prescription period in terms of section 11 (a)(i) of the Prescription Act of 1969, ("the Act") is, therefore, thirty (30) years. Consequently, the Special Plea sought to be inserted by the proposed amendment was not only bad in law, but also did not disclose any defence, and would accordingly be excipiable if allowed to stand.

[5]

It was on the basis of the objection aforementioned that the applicants now approached this Court for leave to amend their plea by introducing the Special Plea of prescription of the claims against them.

[6]

The crisp question that calls for consideration is two-fold:

(a)

whether a registered Notarial Mortgage Bond, for a debt, falls within the ambit "mortgage bond" in terms of the provisions of Section 11(a) (i) or a debt arising from a "notarial contract" in terms of section 11(c) or a written loan contract in terms of section 11(d) of the Prescription Act, 1969, or, put differently,

(b)

what the period of prescription is in respect of a debt secured by a notarial bond envisaged in section 1 of the Securities by Means of Movable Property Act, 1993 [2] ("the Securities Act").

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[7]

In an attempt to formulate a proper and acceptable interpretation, and the effect of extinction of debts by prescription, I venture to enter this treacherous terrain by first analysing and reviewing the old authorities on the subject, and where necessary, to evaluate the legal framework applicable.

THE APPLICABLE LEGAL FRAMEWORK

[8]

The legal position that obtains with regard to the extinction of debts by prescription is regulated by Chapter 111, in particular, Sections 10-16 of the 1969 Prescription Act.

Section 10(1) provides:-

"subject to the provisions of this Chapter and of Chapter IV, a debt shall be extinguished by prescription after a lapse of the period which in terms of the relevant law applies in respect of the prescription of such debt".

Section 10(2) provides that:-

"By the prescription of a principal debt a subsidiary debt from such principal debt, shall also be extinguished by prescription".

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[9]

In the premises, it is of cardinal importance to always bear in mind that a debt shall be extinguished by prescription after a lapse of the period which in terms of the "relevant law applies in respect of the prescription of such debt" (my own underlining).

[10]

For the purposes of this judgment, I am called upon to determine the lapse of the period in terms of a debt, which in the present instance, has been secured by a special notarial bond within the purview of Section 1 of the Securities Act, 1993, and also to establish whether such a debt has been consumed by prescription under the relevant provisions of the Prescription Act, 1969. The conclusion arrived at will accordingly pave way whether or not to permit the amendment sought.

[11]

Counsel for the applicants contended, on the one hand, that firstly, and on the formulation of the respondent's declaration, the summons was served more than three (3) years from the dates on which the alleged debts arose, with the result that the respondents' claim is prescribed in terms of section 11(d) of the Act. (Three-year extinction period).

[12]

It was furthermore contended on behalf of the applicants in the

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alternative to reliance on Section 11(d) thereof, that the respondents' claim is prescribed in terms of the provisions of Section 11(c) of the Act. It was further submitted that by virtue of the fact that the indebtedness was secured by a "notarial contract" with more than six (6) years having passed from the dates on which the alleged debt had arisen, and the period of service of the summons, the debt was extinguished by operation of prescription (the six-year period of extinction).

[13]

Counsel for the respondents, on the other hand, opposes the application. The respondents' opposition is predicated on the question of law raised in its notice in terms of Rule 6(5)(d)(iii) of the Rules of this Court. In its notice of objection to the proposed amendment, the respondents' contention was that the proposed amendment, if allowed, would not disclose a defence in law, and would, therefore, technically be excepiable. The submission on behalf of the respondent, is simply that because its cause of action is premised on payment of a debt secured by a mortgage bond in respect of which a thirty-year period of prescription applies, the claim has not prescribed.

[14]

It is against this construction that the applicants take issue, and

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have now approached this court for intervention and to provide guidance on the proper interpretation on the two opposed contentions.

[15]

As already shown, the period of prescription of debts is governed by the provisions of Section 11 of the 1969 Prescription Act which stipulates as follows:

Section 11:

"The periods of prescription of debts shall be the following:

Section 11 (a):

"thirty years in respect of:

(i)

any debt secured by mortgage bond,

(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);

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(d)

save where an Act of Parliament provides otherwise, three years in respect of any other debt.

[16]

Having restated the periods of prescription of various debts, the next logical question is when does prescription begin to run for each debt? The position is regulated by the provisions of Section 12(1) of the Act which recites:

Section 12(1):

"Subject to the provisions of subsections (2), (3), and (4), prescription shall commence to run as soon as the debt is due".

I may however remark although, orbiter that in modern commercial parlance, for prescription to begin to run, the debt must have been due and payable.

[17]

Turning to the contentious issues in the present application one needs to examine closely, the nature of and the type of the secured debt the respondent seeks to enforce in its claim in the main action.

[18]

The respondent's particulars of claim were formulated and attached to its summons which was issued on 27th October 2010. The respondent's declaration dated 18th March

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2011,was delivered on the applicant's attorneys on 22nd March 2011. I shall, for the sake of convenience and brevity, refer only to the relevant portion thereof to demonstrate the cause of debt, its source, and how it has been circumscribed in the declaration.

[19]

In Paragraph 3 of the declaration, the respondent alleged that the parties had entered into a written loan agreement dated 25.05.1999 which agreement ought to be read in conjunction with Section 34 of Act No. 13 of 1944 [3] . The said Act has currently been replaced by Act No. 15 of 2002 [4] , its successor-in-title. It appears from the Acceptance letter signed on behalf of the applicants that the effective date was 31st May 1999, when the applicants accepted its terms and conditions.

[20]

The respondent had, in terms of the said loan agreement, lent and advanced to the first applicant an amount of R250 000,00 for the purposes of acquiring equipment for a humidity cold room. The loan was repayable in five equal annual instalments of capital, together with interest, the first instalment payable on the first due date succeeding the date of the first payment under the loan.

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[21]

As security for the loan, a Notarial Bond had to be registered over the equipment to be purchased out of the proceeds of the loan, and the second applicant, as the sole member of the first applicant, was required to sign surety for the loan, presumably also as a co-principal debtor in the event the first applicant defaulted in its contractual obligations.

[22]

A "Special Notarial Bond" as envisaged in the loan agreement, was subsequently registered during 2000 by the Registrar of Deeds under Protocol No. 828. I must, however, remark that there appears conflicting registration dates ex facie the registered notarial bond itself. The one date appears as 20th July 2000 while the other was captured as 18.04.2000. The discrepancy, in my view, does not, however, alter the position, which at any rate is not in dispute.

[23]

The Special Notarial Bond, was registered under the provisions of the Security by Means of Movable Property Act, 1993 (captioned in this judgment "the Securities Act 1993"). The purpose of the said Notarial Bond, in short, was for the mortgagor to pass the bond in question over the movable property specified namely, the 8 x Nordis K air cooling systems, as security...