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

In February 2000 Investec Bank advanced a loan to Erf 436 Elandspoort (Pty) Ltd, secured by a notarial mortgage bond over a long-term lease of commercial property. Erf 436 defaulted in 2002, the lease was cancelled, and Investec’s security became worthless. Investec demanded repayment, causing prescription to commence in September 2002. Thereafter, Investec and Erf 436 concluded agreements under which rental income from sub-tenants and later proceeds from the sale of Investec’s leasehold rights were credited to Erf 436’s loan account. Over several years, rental payments and lump-sum payments were made, and correspondence from Erf 436’s director acknowledged the outstanding indebtedness. In January 2011 Investec issued summons for the remaining balance. The respondents raised a special plea that the claim had prescribed.

The appeal succeeded with costs. The High Court order was set aside and replaced with an order declaring that the debt owed by the defendants had not prescribed when summons was served on 21 January 2011, ordering costs against the defendants, and postponing the action sine die on the remaining issues.

The case provides authoritative guidance on the interpretation of s 14 of the Prescription Act, particularly in commercial contexts involving ongoing payments and complex arrangements. It clarifies that a series of payments and related conduct, viewed holistically, can amount to repeated tacit acknowledgements of liability interrupting prescription, thereby protecting creditors who forbear litigation while debtors acknowledge indebtedness.