Land and Agricultural Development Bank of South Africa v Factoprops 1052 cc and Another (64702/2010) [2014] ZAGPPHC 511; [2015] 3 All SA 319 (GP) (20 May 2014)

IN THE HIGH COURT OF SOUTH AFRICA

(NORTH GAUTENG DIVISION, PRETORIA)

Case No. 64702/2010

Date: 20 May 2014

Reportable

Of interest to other judges

In the matter between:

Land and Agricultural Development Bank........................................................................................Plaintiff

of South Africa

and

Factaprops 1052 cc...................................................................................................................First Defendant

Ismail Ebrahim Darsot.........................................................................................................Second Defendant

FLY NOTE:

Practice - pleadings-Amendmentof Plea-when granted.

Whether if granted would render pleading excipiable-whether respondent prejudiced due to amendment

Commercial - whether the word "mortgage bond” in Section ll(a)(i) of the 1969 Prescription act wide enough to include reference to a Notarial Mortgage Bond - what the prescription period is in respect of any other debt not covered by rest of Section 11(a); 11(b) and 11(c) of Prescription Act 1969 - and any other Act of parliament - a mortgage bond not a notarial bond - a distinction to be maintained to define characteristics of each- The 30-year period of prescription not applicable to notarial bond it not being a mortgage bond under Section ll(a)(i) of the 1969 Prescription Act - If proved that the source of debt is a notarial contract - 6-year prescription period applies under Section 11(c) of the Act - where cause of debt is the loan agreement - prescription period applicable is 3 years.

JUDGMENT

PHATUDI AJ:

INTRODUCTION:

[1.] The dispute in this matter presents not only a vexed question whether a special Notarial Bond("notariaI bond") could be construed as a mortgage bond within the meaning of Section 11(a)(1) of the Prescription Act1, 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 prescription period in terms of section ll(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 ll(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, 19932("the Securities Act").

[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

[72] On account of the prescription of the principal debt in respect of the first applicant, the indebtedness of the Second Applicant under the deed of suretyship had similarly fallen away.

[73] From the observation made, it follows logically that the debt on which the respondent relies, has its origin in the loan agreement It is patently clear that the respondent's claim is the applicant's failure to perform positively in terms of the loan agreement which is the vinculum juris giving rise to the obligation.

[74] In view of the fact that the debt did not flow from the notarial bond, but from the loan contract, it became due and payable betweenlS^ June 2000 to 15th June 2004. The prescription period that applies to it was, therefore, three years in terms of Section 11 (d) and six years in terms of Section 11c, as the case may be.

74.1 The Supreme Court of Appeal in RUSTENBURG PLATINUM MINES LTD V INDUSTRIAL MAINTENANCE PAINTING SERVICES CC[CASE NO: 448/2007 delivered on 23.09.2008, neutral citation, [2008] ZA SCA 108] in dealing with prescription of debts(para:ll) Mpati JA stated that the word "debt" does not refer to the "cause of action", but more generally to "the claim".

The "cause of action", in my opinion, is ordinarily used to describe the factual basis, and the set of material facts that begets the plaintiffs particulars of claim, and correspondent^, the defendant's "debt", the word we find in the 1969 Prescription Act. The Court went on to state that it should, therefore, be fairly clear that when the Prescription Act, speaks of a "debt", it refers more generally to a "claim", and not the cause of action.

74.2 In the present application, it admits of no doubt, therefore, that the respondent's "claim" against the applicants originated from the loan agreement, which invariably gave rise to the "debt" sought to be recovered. The time frame within which the claim should have been instituted, had clearly become prescribed in terms of Section 11(d) of the Prescription Act, 1969.

[75] It follows that once the debt has become prescribed, the respondent ceased to be a creditor of the applicants.

[76] Given the provisions of the special notarial bond registered later in 2000 to secure the loan , it is clear that the source applicants indebtedness to respondent was the loan agreement per se, and not the notarial bond. This assertion can even be inferred from

the language contained in paragraphs 8 and 9 of the declaration which states that:

76.1 Paragraph 8:

"On 31st August 2010, First Defendant was still indebted to the Plaintiff in respect of the loan agreement".............and

Paragraph 9 states:

76.2 Paragraph 9:

"The loan agreement referred to above is in terms of Section 52 (1) ofAct 15 of 2002, valid and enforceable, despite the repeal of the Land Bank Act 33 of 1944."

[77] The special notarial bond states in Part A to its preamble that:

“The appearer declared that the mortgager is indebted to the Bank, its successor or assigns in the amount of R250 000,00 arising from money lent and advanced by the Bank to the mortgager".

[78] From the reading of other clauses of the notarial bond, one cannot reasonably conclude that it professed to serve as the source of the applicant's indebtedness, the more so that it was preceded by the loan agreement by more than twelve months before its registration.

[79] Having had regard to the provisions of Sections 11 (a)(i] and 11 (c ) of the Act it is important to note that the wording in the two sections is crucial. It is accordingly not necessary in terms of Section 11 (a) (i) that the mortgage bond should be the origin of the debt before the indebtedness of the mortgager to a mortgagee may arise. The mortgage bond on its own gives rise to an autonomous origin of the debt, and consequently an independent cause of action or debt.

[80] In view of the fact that no amount of money was lent and advanced to the applicants on the basis of a notarial bond, which at any rate was registered ex post facto the loan agreement, it can hardly be said that the notarial bond formed the source or origin of the debt In other words, a notarial bond cannot be regarded as the origin of the debt where no money or loan was advanced on its basis, or if it evinces a totally independent source of liability.

[81] I am firm in my view, therefore, that the differentiation of the legal nature between a "notarial bond” and a "mortgage bond" with reference to prescription of debts, should always be emphasised. This approach, I thought, accords with the provisions of the Deeds Registries Act, 1937, read in conjunction with the Securities Act, 1993. These are two crucial statutory instruments ever passed by the lawmaker in the last century on the subject

[82] The dictum of Rabie J in the unreported judgment of Boeke's case supra, (footnote 15 p.22)did not, with utmost respect, pay due attention differentiating the two Acts referred to for purposes of

interpretation of section 11 of the Prescription Act, 1969.

[83] In fact, the inference the learned Judge has drawn to the effect that the legislature intended to include notarial mortgage bonds in the reference to "mortgage bond’ in section 11 of the Act, should with respect, not be followed. To do so would be to offend the presumption of the interpretation of statutes that in interpreting legislation, the assumption is that the lawgiver did not intend to either repeal or modify the earlier statute20. Accordingly when interpreting Section 11 (a) (i) of the Prescription Act, 1969, the differentiation drawn by the earlier Deeds Registries Act 1937 21and the Insolvency Act, should at all times be borne in mind. An attempt should therefore, be made to interpret the earlier statute and the later one together, and reconcile the two measures22 where feasible.

[84] The approach adopted in Absa bank Ltd V HAMMERLE Group (Pty) Ltd, supra, ffootnote 16,p.30]is the preferred one, and I am rather compelled to follow it for the purposes of the present application.

[85] I shall now, for the sake of convenience and brevity, recapture the broad principles governing the amendment of pleadings within the confines of Rule 28 (4] of the Uniform Rules of Court.

[86] It was submitted on behalf of the Respondent that the application brought by the applicants was for dilatory purposes and lacks bona fides. Relying on the principle that:

" Save in exceptional cases where the balance of convenience or some such reason might render another course desirable, an amendment ought not to be allowed where its introduction into the pleading would render such excipiable23”. I pass now to consider whether the amendment sought to be incorporated would render the amended Plea excipiable.

[87] Having found that the notarial bond referred to was not a mortgage bond and vice versa, it follows in my view that the 30 year period of prescription does not apply to a debt of this nature. The money lent and advanced in the form of a loan, being the main source of the debt, and not the notarial bond, was extinguished by operation of prescription in terms of Section 11 (d] of the Prescription Act , 1969. That being the position, it follows that the amendment sought, would disclose a defence in law, and it cannot therefore be said if allowed to stand, it would render the plea excipiable.

[88] The next enquiry is whether will the respondent be prejudiced if the amendment were allowed to stand, and whether was it not bad in law.24 In the present instance, this court has already made a determination on the question of law raised in terms of Rule 6 (5) (d) (iii) of the Rules.

[89] I am of the opinion that neither is the amendment sought bad in law nor would it occassion any prejudice on the part of the respondent. Both parties will at any rate still vent out their dispute before this court in due course.

[90] It was submitted further on behalf of the respondent that applicants must show prima facie that they had something deserving of consideration, a triable issue. A triable issue is a dispute which if proved on the basis of the evidence foreshadowed by the applicant in the application, will not be innocuous, albeit a dispute which will probably be established by the evidence thus foreshadowed.

[91] In deciding whether to grant or refuse an application for an amendment, the court exercises a discretion, and in doing so, leans in favour of granting it in order to ensure that justice is served by deciding the real issues between the parties.

[92] The special plea raised, in my view, is capable of raising a triable issue. The real issue in this case would be whether the respondent's claim has not prescribed , and if not whether are applicants liable to repay the debt claimed.

[93] Furthermore, the court has discretion to permit an amendment even at a late stage, if it leads to a proper ventilation of the dispute and if it does not occasion an injustice to the opposing party which cannot be remedied by an appropriate costs order25.

[94] In an application where an objection based on prescription is raised, it is useful to identify the debt or ascertain what the claim was in the broad sense of the meaning of that word. The test is one of substance, and not form, whether or not the “debt” is the same or different.

[95] In the light of the aforegoing considerations, and bearing in mind the issues raised, I come to the conclusion that there exists no real impediment why an amendment should not be permitted introducing the Special Plea of Prescription. Such an amendment,

would in my view not be excepiable as disclosing no valid defence.

I accordingly, do not hesitate to grant the application sought, and it is hereby granted. I, therefore, make the following Order:

COURT ORDER:

1. The Applicants (“defendants in the main action"] are hereby granted leave to amend the Plea dated 19th April 2011, through the introduction of the Special plea formulated in the Notice in terms of Rule 28 (1) of the Uniform Rules of Court.

2. The Applicants are ordered to deliver and file their amended pages within ten (10) days from the granting of this order.

3. The costs of application are costs in the cause.

M.G PHATUDI

ACTING JUDGE OF THE GAUTENG HIGH COURT

PRETORIA

APPEARANCES:

Counsel for Applicants: Adv. C. BESTER

Instructed by: ISMAIL AYOB & PARTNERS

SOPHIE DE BRUYN & PRETORIUS STREET

PRETORIA, 0002 TEL: [012] 335 1138

Counsel for Respondent: Adv. B. BERGENTHUIN SC

Instructed by: VAN ZYL LE ROUX ATTORNEYS

MONUMENT PARK

0002

TEL: (012) 435 9444

Dated Heard: 5th March 2014

Date of Judgment: 20th May 2014

1 Act 68 of 1969

2 Act 57 of 1993

3 The Land Bank Act, 1944(now repealed)

4 The Land and Agricultural Development Bank Act, 2002

5 Act No. 24 of 1936

6Act 47 of 1937

706th Edition, at p.146 et seq.

8 Paragraph 3.1 at p.35-37, See also para 3.2 at p.37

9 Butterworths 2007, p.165-166

101992(3) SA 60{A) and 1992(3) SA 868(A) respectively

11At page 116 thereof

12Service Issue 20.09.2013. Pp3 - 43

131964(2) ALL SA 448 (A) (Parallel citation 1964 (2) SA 252(A)

14 2003(2) SA 253 (SCA)

15 Land & Agricultural Development Bank of South Africa v A Boeke & Another (Unreported Case NO. 12506/2007) delivered on 17.02.2011

16Absa Bank Ltd v Hammerle Group (Pty) Ltd- Case No. 7457/2013 ZAGPPHC 402

17At Paragraph 27

18 17 Paragraph 2.2, Paragraph: 3.1 to 3.6 of Plaintiffs Heads of argument in respect to leave to amend

19 Coloured development corporation Ltd v Sahabodien 1981 (1) SA 868 (CPD) at 870A-D

20 Kent V SA Railways & harborours 1946 405 (AD)

21Section 50(2) of the Act real with Section 1 of Insolven

22Wendywood Development (Pty) Ltd V Rieger 1971 (3) SA28(A)

23Cross v Ferreira 1950(3) SA 443 C at 450

24Krische V RAF 2008 (4) SA 358 (WLD)

25Kasper V Andre Kemp Boerdery CC 2012 (3) SA 20 (WCC)