Africa's largest lender by assets, Standard Bank under South African banker Sim Tshabalala recently faced a legal setback in a home loan recovery case. Two Standard Bank clients won an appeal last week against the bank's attempt to recover a home loan by arguing that the debt had lapsed due to the passage of time.
The Prescription Act sets term limits on various types of debt, making them unrecoverable after a certain period. For most debts, like credit cards and overdrafts, the term is three years. For mortgage debt, it is 30 years. If a debt is not acknowledged within its term, it is prescribed. If admitted or if the bank issues summons within the period, the prescription period starts anew.
Case Details and High Court RulingThe Pretoria High Court heard an appeal by Aubrey Schneider and Stephen Zagey, who signed surety on a home loan secured by Simcha Properties 10 in 2006. Simcha defaulted in 2011 and was liquidated in 2012. The bank received a R130,000 6,952 dividend from the liquidated estate. In 2014, Schneider and Zagey were served with notices of default but did not pay, leading the bank to issue summons in 2016.
The appellants argued that their debt had prescribed as they were served summons more than three years after Simcha defaulted or was liquidated. The bank initially won a summary judgment in 2016, claiming the loan was secured by a mortgage bond. However, the bank had not specifically pleaded the existence of a bond in court papers.
