Standard Bank of South Africa Ltd v Miracle Mile Investments 67 (Pty) Ltd and Another

• Jurisdiction: South Africa

Standard Bank of South Africa Ltd v Miracle Mile Investments 67 (Pty) Ltd and Another
2017 (1) SA 185 (SCA)

2017 (1) SA p185

Citation	2017 (1) SA 185 (SCA)
Case No	187/2015; [2016] ZASCA 91
Court	Supreme Court of Appeal
Judge	Leach JA, Saldulker JA, Swain JA, Mbha JA and Baartman AJA
Heard	May 13, 2016
Judgment	June 1, 2016
Counsel	S Symon SC (with X Stylianou) for the appellant.; HB Marais SC (with AJ Venter) for the respondents.

Flynote: Sleutelwoorde E

Prescription — Extinctive prescription — Commencement — Amount claimable under acceleration clause — Loan, to be repaid in instalments, and containing provision that full amount could be claimed on fulfilment of certain conditions, including default on an instalment, and notice of election to F claim full amount — Whether prescription on full amount started to run on default, or election — Prescription Act 68 of 1969, s 12(1).

Headnote: Kopnota

Standard Bank (the creditor) concluded a loan facility with a debtor, with the debtor to repay what it borrowed in instalments. The agreement contained a provision that the creditor could claim the full amount owing if the debtor G failed to pay an instalment; the creditor gave notice demanding payment; the debtor failed to pay; and the creditor gave notice that it elected to claim the full amount (see [6]). The debt was secured by suretyships and mortgage bonds executed by the respondents.

The debtor later failed to pay instalments; the creditor gave it notice to do so; and the debtor made a last payment. However the creditor did not then give H notice of its election to claim the full amount.

Years later, with an action for the full amount pending, the respondents applied for an order that the creditor consent to cancellation of the bonds. This on the basis that the debt they secured — the full amount owing — had prescribed.

The High Court, following authority, held that the debt had indeed prescribed. I (The authority was to the effect that on the first failure to pay an instalment, prescription began to run on the full amount claimable under the acceleration clause (see [12] – [14]).) This caused the creditor to appeal to the Supreme Court of Appeal.

The issue there was when the debt comprising the full amount became 'due', so causing prescription to begin to run (s 12(1) of the Prescription Act 68 of J

2017 (1) SA p186

A 1969). Did it become due on the first default; or only on notice of election to claim the full amount (see [2])?

It held that only when a debt could be claimed, was the debt 'due'; and it was only when all of the agreed preconditions had been fulfilled (including notice of election), that the full amount could be claimed and was due (see [24], [26]).

Here this meant that the debt comprising the full amount had not prescribed, B and that the High Court's decision had to be reversed.

Cases cited

Bankorp Ltd v Leipsig 1993 (1) SA 247 (W): not followed

Big Rock (Pty) Ltd v Hoffman 1983 (1) SA 534 (T): referred to

Deloitte Haskins & Sells Consultants (Pty) Ltd v Bowthorpe Hellerman Deutsch (Pty) Ltd C 1991 (1) SA 525 (A) ([1990] ZASCA 136): dictum at 532G applied

First Consolidated Leasing Corporation (Pty) Ltd v Servic SA (Pty) Ltd and Another 1981 (4) SA 380 (W): not followed

Hamilton Plase (Edms) Bpk v Stadler 1977 (3) SA 361 (NC): not followed

HMBMP Properties (Pty) Ltd v King 1981 (1) SA 906 (N): referred to

Miracle Mile Investments (Pty) Ltd and Another v Standard Bank of SA Ltd 2016 (2) SA 153 (GJ): reversed on appeal D

Nkata v FirstRand Bank Ltd and Others 2014 (2) SA 412 (WCC) ([2014] ZAWCHC 1): referred to

Orton v Barhouch 1973 (2) SA 565 (D): not followed

Primavera Construction SA v Government, North-West Province, and Another 2003 (3) SA 579 (B): referred to

The Master v IL Back & Co Ltd and Others 1983 (1) SA 986 (A): referred to E

Truter and Another v Deysel 2006 (4) SA 168 (SCA) ([2006] ZASCA 16): dictum in para [16] applied

Western Bank Ltd v SJJ van Vuuren Transport (Pty) Ltd and Others 1980 (2) SA 348 (T): not followed.

F Legislation cited

The Prescription Act 68 of 1969, s 12(1): see Juta's Statutes of South Africa 2015/16 vol 1 at 2-885.

Case Information

S Symon SC (with X Stylianou) for the appellant.

HB Marais SC (with AJ Venter) for the respondents. G

An appeal from the Gauteng Local Division, Johannesburg (Gaibie AJ), reported at 2016 (2) SA 153.

Order

1.

H The appeal is upheld with costs, such costs to include the employment of two counsel.

2.

The order of the court a quo is set aside and is substituted with the following: 'The application is dismissed with costs.'

Judgment

Mbha JA (Leach JA, Saldulker JA, Swain JA and Baartman AJA I concurring):

[1] This appeal, with the leave of the court a quo, is against the judgment of the Gauteng Local Division, Johannesburg (Gaibie AJ) in which it held that the respondent companies, Miracle Mile Investments 67 (Pty) Ltd (Miracle) and Present Perfect Investments 116 (Pty) Ltd (Present), J the first and second respondent respectively, were entitled to cancel

2017 (1) SA p187

Mbha JA

mortgage bonds registered in favour of the appellant, A Standard Bank of South Africa Ltd, over several of the respondents' immovable properties without payment to the bank on the ground that the bank's claim had prescribed. The debt arose from a facility advanced by the bank to Mr Nicolas Chrysostomos Papachrysostomou (Nicolas) as principal debtor, for which the respondents stood surety. B

[2] The appeal raises an important issue of principle concerning when prescription commences to run in an agreement containing an acceleration clause that entitles the creditor bank to claim the whole outstanding amount payable, upon the occurrence of a breach by the principal debtor. The crux of the dispute is when the debt becomes 'due' in terms C of s 12(1) of the Prescription Act 68 of 1969 (the Act). [1] Put differently, is the debt due when the principal debtor breaches the obligation to pay the monthly instalment, or is it due when the creditor elects to enforce the acceleration clause, in order to render the whole amount payable?

[3] The respondents contend that prescription commenced to run and D that the debt became 'due' when the principal debtor breached his obligation to pay the monthly instalment. On the other hand, Standard Bank avers that since it did not elect to give notice to accelerate payment of the outstanding balance, and until it did, prescription did not begin to run on the full amount. E

[4] Standard Bank also avers that it is entitled to rely on the 30-year prescription period in respect of a debt secured by a mortgage bond in terms of s 11 of the Act; [2] as well as the interruption of prescription F

2017 (1) SA p188

Mbha JA

A by an acknowledgment of liability by Nicolas in terms of s 14 of the Act. [3]

[5] The relevant background facts giving rise to the dispute can be summarised as follows. In August 2005 Standard Bank and Nicolas B entered into a written agreement, the terms of which were incorporated in a letter of grant, a terms and conditions agreement and the bonds [4] — whereby he was granted a line of credit styled a 'Liberator facility' (the facility) [5] for a maximum amount of R13 984 600, which was repayable over a period of 240 months. The first monthly instalment was due 30 days after the first use of the facility. As security expressly required in C terms of the facility, the respondents executed written deeds of suretyship in favour of Standard Bank in terms of which they bound themselves as sureties and co-principal debtors with Nicolas in solidum for his indebtedness to the bank in respect of the facility. The respondents furthermore caused mortgage bonds (the bonds) to be registered D over certain of their immovable properties in favour of Standard Bank as part of the collateral required in terms of the facility.

[6] It was an express term of the agreement that Standard Bank could convert the facility to one repayable on demand, inter alia, if Nicolas E failed to pay any instalment due and not remedy this default within seven days of written notice having been given to him by the bank. In that event (as well as other events of default as specified therein), Standard Bank would have the right, without prejudice to any other rights or remedies

2017 (1) SA p189

Mbha JA

available to it, to terminate the facility and claim immediate payment of A the outstanding balance by giving a further written notice. [6]

[7] Pursuant to the conclusion of the facility agreement, the deeds of suretyship were executed by the respondents and the bonds were registered against their properties in favour of Standard Bank. Thereafter Nicolas drew on the facility, but subsequently defaulted on his monthly B instalment repayments when his debit order payments were reversed due to him having insufficient funds to meet his monthly obligations.

[8] On 12 August 2008, Standard Bank addressed a letter to Nicolas in terms of s 129 of the National Credit Act 34 of 2005 (the NCA). He was advised that he had not met his obligations in respect of the agreement C and that, in order to bring his account up to date, he had to pay the total arrears of R671 072,88 which were due immediately. Of critical importance is that this notice did not contain any intimation by the bank...