Factaprops 1052 CC v Land and Agricultural Development Bank of South Africa t/a The Land Bank

In May 1999, the Land Bank lent R250,000 to Factaprops, a close corporation whose sole member was Mr Ismail Ebrahim Darsot. The loan was secured by a special notarial bond registered on 18 April 2000 over specified movable assets owned by Factaprops. Darsot also signed a suretyship binding himself as surety and co-principal debtor. Under the loan agreement, Factaprops was to repay in five annual instalments with the final instalment due on 15 June 2004. Factaprops defaulted on payment. On 14 October 2010, the Land Bank issued summons against both Factaprops and Darsot, which was served on 3 November 2010. The appellants defended the action, raising a special plea that the claim had prescribed under s 11(d) or alternatively s 11(c) of the Prescription Act 68 of 1969, arguing that more than three or six years had passed since the debt became due. The Land Bank argued that the applicable prescription period was thirty years under s 11(a)(i) as the debt was secured by a special notarial bond.

• Whether the phrase 'mortgage bond' in s 11(a)(i) of the Prescription Act 68 of 1969 includes a special notarial bond registered in terms of the Security by Means of Movable Property Act 57 of 1993
• What is the applicable prescription period for a debt secured by a special notarial bond - thirty years, six years, or three years
• Whether the distinction between mortgage bonds and notarial bonds in other statutes (particularly the Deeds Registries Act 47 of 1937) should influence the interpretation of s 11(a)(i) of the Prescription Act
• Whether the parties' agreement on attorney and client costs in the notarial bond should be enforced

The appeal was dismissed with costs on an attorney and client scale.

The phrase 'mortgage bond' in s 11(a)(i) of the Prescription Act 68 of 1969 bears a wide meaning and includes a special notarial bond registered in terms of the Security by Means of Movable Property Act 57 of 1993. Therefore, the period of prescription applicable to a debt secured by a special notarial bond is thirty years, not six or three years. The interpretation of the term 'mortgage bond' must be guided by its ordinary grammatical meaning, its Afrikaans translation ('verband'), the historical context of prescription legislation, and the purpose of the Prescription Act (protecting debtors from stale claims while recognizing that longer periods are justified for publicly registered transactions). The distinction between mortgage bonds and notarial bonds in the Deeds Registries Act 47 of 1937 serves the specific purpose of deeds attestation and registration and does not determine the meaning of 'mortgage bond' for prescription purposes.

The court observed that not all deeds registered in a deeds office are attested by the registrar - some, such as notarial contracts and bonds over movables, are required to be attested by a public notary. The court also noted that a court should give effect to an agreement between parties concerning their liability for legal costs arising out of a dispute between them (citing Sapirstein & others v Anglo African Shipping Co (SA) Ltd 1978 (4) SA 1 (A) at 14), and there was no reason to depart from this principle in the present case. The court referenced the definition of 'mortgage' in the Shorter Oxford English Dictionary and definitions of 'verband' in Afrikaans dictionaries to support the wider interpretation. The court also noted that Van den Heever JA in Oliff v Minnie 1953 (1) SA (1) A had stated that 'a mortgage bond as we know it is an acknowledgement of debt and at the same time an instrument hypothecating landed property or other goods.'

This judgment is significant for South African law as it definitively resolves a conflict in the case law regarding the prescription period for debts secured by special notarial bonds. Prior conflicting judgments had held that special notarial bonds were not mortgage bonds for prescription purposes (Factaprops 1052 CC judgment by Phatudi AJ and Absa Bank Ltd v Hammerle Group by Mabuse J), while other judgments had held they were (Land and Development Bank v Boeke by Rabie J and Land and Agricultural Development Bank v Phato Farms by Molopa-Sethosa J). By authoritatively establishing that special notarial bonds fall within s 11(a)(i) of the Prescription Act, the judgment provides certainty for lenders and borrowers in commercial transactions secured by movable property. It confirms that such debts prescribe only after thirty years, not three or six years, which significantly impacts the rights and obligations of parties to such security arrangements. The judgment also demonstrates the importance of purposive statutory interpretation and the dangers of importing definitions from one statute into another without considering the specific objectives of each piece of legislation.