Most examiners are aware of those dreaded Latin clauses in bonds which are regularly waived by the mortgagor. These clauses derived from the claim of debt between the creditor and debtor, as it is trite law that there will be no hypothecation if there is no valid cause of debt or a principal obligation to secure. A valid cause of debt, and to bind property as security will be inter alia for: loans of money for an existing or future debt or a combination thereof; a kustingsbrief which is for the balance of purchase price of property; goods sold and delivered; to give effect to a collateral, surety or indemnity agreement; a performance guarantee; to name but a few.
The most common clause is the beneficium de duobus vel pluribus reis debendi. This is a benefit acquired by the debtor where several debtors are bound jointly, but not severally, and each one is liable for only his/her own share of the whole debt. It often happens that one of the debtors is sequestrated or is in default and all the mortgagors are sued for the full outstanding amount. If a co-debtor pleads the benefit of this clause such debtor may avoid payment of more than his/her share owing.
In practice mortgagees often insist that the beneficium de duobus vel pluribus reis debendi clause be renounced, making all the joint mortgagors jointly and severally liable or in solidum, and enabling the mortgagees to call upon any one of the co-debtors for settling the outstanding amount. In Alcock v Du Preez 1875 Buch 130 and in Coloured Development Corporation Ltd v Sahabodien 1981 (1) SA 868 (C) it was determined that if co-debtors bind themselves jointly and severally or in solidum, the same effect is achieved if the beneficium de duobus vel pluribus reis debendi clause is renounced, and therefore it seems unnecessary.
Examiners should therefore be aware that this clause need not appear in a bond where there is only one mortgager. In the instance where a bond is substituted in terms of Section 57 of the Deeds Registry Act, 47 of 1937 resulting in an increase of mortgagors, or when a new co-owner is substituted this clause may be waived. Take note that an agent may not bind his/her principal as surety in a surety bond unless the general power of attorney specifically entities the agent to mortgage, and such mortgage is to the benefit of the principal. The agent therefore may not renounce this exception or bind the principal jointly and severally unless these actions and clauses are specifically mentioned in the general power of attorney.
The exceptio non numeratae pecuniae clause is commonly found in bonds where the cause of debt is the loan of money, for example monies lent and advanced. This clause means that the loan amount was never paid over to the debtor even though an acknowledgment of debt was signed. In this instance the burden of proof is on the creditor to prove that the debtor has in fact received the monies and that the creditor has performed on the contract.
If the mortgagor waives this clause, he/she will still be able to raise the exception, but when sued for payment he/she will have the burden of proving on the merits of the case that he did not receive the loan amount, thus being a negative burden of proof. In practice he will have to prove that the money or part thereof is not due. Examiners will note that this is the most common clause in mortgage bonds.
The beneficium ordinis seu excussionis clause entitles a surety to ensure that the creditor first proceeds to take action against the principal mortgagor for payment, and thereafter against him for the remainder of the loan amount if due. This benefit must be renounced expressly or tacitly, implying that it may not be renounced in general and must be specifically mentioned in the bond. The renunciation may be registered by variation agreement after registration as well. The renunciation of this benefit entitles the creditor to call upon the surety for payment even before ensuring that the creditor obtains all he can from the principal debtor.
The creditor will be able to institute legal action against the surety immediately if the principal debtor defaults.
Examiners should note that in Featherstone v Trustees of East London Angling Society (1906) 16 CTR 112 it was held that a mortgagor in a surety bond is not bound as co-principal debtor if he executes the bond in solidium, unless the appropriate words are used binding him as such. The surety must raise the benefit of excussion before litis contestatio of being sued. In the case where he has renounced the benefit, he will not be in a position to oppose a claim for payment, even though the principal debtor's mortgaged property was not excussed. For obvious reasons this clause will be found in surety bonds.
Beneficium divisionis where in a surety bond more than one surety bind themselves as co-sureties, the benefit of this exception provides that each surety is liable for only his/her share in the principal debt, and may therefore be sued pro rata accordingly, or for the amounts that he has bound himself for as stipulated in the surety bond only. The impact of the beneficium divisionis clause is that even if they become co-sureties at different times, they are liable in solidum, and as determined in Klopper v Van Straaten (1894) 11 SC 94 any surety may be held liable for the full outstanding debt. As with the excussionis clause, this clause is always renounced in surety bonds and may be renounced after registration as well by virtue of a section 3(1)(s) application. The impact hereof is that the creditor may call upon any surety individually to pay back the full principal debt, unless the excussion clause was still in force. Interesting to note that in Kwazulu-Natal the divisionis benefit is automatically renounced as stipulated in Law 46 of 1884.
The exceptio non causa debiti is interpreted as there is no reason/cause for the debt. This clause relates to bonds where the cause of debt is other than monies lent or advanced for example: “goods sold and delivered” or “performance guarantee”. When the benefit is renounced, the burden of proof is placed on the debtor. As there is no proof of monies delivered, the debtor has to prove that there is no existing causa or reason for the obligation, or that the debt the debt has settled and no monies are owned.
Exceptions relating "to errors of calculation and revision of account - errore calculi and no value received. These exceptions relate to bonds where goods were sold and delivered, and are usually renounced together. They will be found in covering bonds, and bonds where the capital is paid ever in instalments for example building bonds. There are mostly calculations involved and debtors will receive monthly statements. Before a debtor renounces these benefits he/she would have to satisfy himself/herself that the correct amount was received, as there will be no recourse after the renunciation.
In conclusion: Examiners are aware of Section 50A of the Deeds Registry Act, 1937 that stipulates that the registrar must not examine conditions in a bond, but to be aware of these exceptional clauses provides clarity on the impact of the waiver thereof.
In terms of Section 90(5) of the National Credit Act 34 of 2005 the Minister may prescribe certain common law rights that may not be waived in a “credit agreement”. These rights are contained in regulation 32 of the said Act, namely:
While a mortgage bond is not necessarily a “credit agreement”, it is an instrument which is usually derived from a credit agreement. Does it serve any purpose to still refer to the waiver of the above mentioned three exceptions in bonds, in view of the provisions of the NCA? – Editor
I think that borrowers waive a "right" and not a "clause". Having waivers in bond documents which are not in the credit agreement will be of no legal force. This is my reasoning - A mortgage bond is not a contract and can not and does not create a debt - a "causa". A debt is an obligation to pay or perform. A bond merely gives a creditor security for the debt and obviously this must be a legally valid debt. Without a legally valid debt, the bond has no legal force at all. If the instrument of debt between the parties does not contain a waiver, or a provision that the terms of a proposed bond are included in the contract, then any such waiver or term in the bond will have no legal force.
I think Sara's statement that a bond is not an instrument of debt is too wide - if the bond is signed by the mortgagor AND the mortgagee, it can be an instrument of debt - and if that has been done and that is not what the lender intended then the Loan Agreement needs to contain a provision that in the event of a conflict, the loan agreement overrides the bond ...
A mortgage in its pure form is a charge against a property. The reason for it is immaterial. A mortgage bond can both create a mortgage and be an instrument of debt. However, see S50A for deeds office obligations in that case. From a conveyancing point of view and especially with econveyancing looming it is preferable that the instrument of debt is separated from the mortgage and the deeds office is not burdened with the instrument of debt.
While I agree that a mortgage bond, unless signed by both parties, is not an instrument of debt, waivers generally are often unilateral and validly so. Therefore, a borrower may as a general rule, after signing the instrument of debt or loan agreement, waive some of his or her rights unilaterally, as they have done for many years, in the bond and more particularly in the power of attorney with bond document attached. The question is, can a waiver of these legal exceptions still be validly done, unilaterally or otherwise in the mortgage bond, in light of the Consumer Protection Act, and I think not.
However I would still advise clients to include it in their documents with a further proviso that should any of the provisions of the bond be found to be invalid, those particular provisions should be disregarded, keeping the rest of the bond intact and valid. As for placing an obligation on the deeds registry, I do not see how that would be - it is not for the deeds registry to enforce but where the bond security is enforced by court , the creditor will rely on the waiver of the exceptions to ease the creditors burden of proof.