SECTION 12(3) OF THE PRESCRIPTION ACT 68 OF 1969
The Prescription Act 68 of 1969 (the Act) provides for the periods of prescription of debts as well as when the said debt becomes prescribed., The Purpose of the Act, inter alia, is to specify the time period during which debtors become liable to pay a debt to the creditor. With creditors claiming monies owed to them and debtors refusing to pay and often raising the special plea of prescription, disputes often arise regarding when prescription of a debt begins to run. It is under these circumstances that the interpretation of Section 12(3) of the Act becomes salient and hence the subject of this article.
In this article, we intend to delve into the details of when prescription begins to run as provided in terms of section 12(3) of the Act. The said provision states that “a debt shall not be deemed to be due until the creditor has knowledge of the identity of the debtor and of the facts which the debt arises: provided that a creditor shall be deemed to have such knowledge if he could have acquired it by exercising reasonable care.”
As is evidenced by the string of case law cited hereinunder as well as the numerous appeals thereof, there is some controversy in interpreting which facts referred to in Section 12(3) are known or deemed to be known by the creditor for prescription to commence. These disputes are common in professional negligence claims where there is difficulty in differentiating the primary facts and the legal conclusions which can be drawn by the creditor from those facts.
The general rule for purposes of Section 12(3) is that legal conclusions are not primary facts and as a result knowledge of legal conclusions are not required by the creditor for prescription to start running. In the case of TRUTER V DEYSEL 2006 (4) SA 168 (SCA) at para 16, the Supreme Court of appeal differentiated between facts and legal conclusions in stating that “in a delictual claim, the requirements of fault and unlawfulness do not constitute factual ingredients of the cause of action but are legal conclusions to be drawn from the facts.”
In LINKS V MEMBER OF THE EXECUTIVE COUNCIL, DEPARTMENT OF HEALTH, NORTHERN CAPE PROVINCE 2016 (4) SA 414 (CC), the Constitutional Court highlighted that until the creditor had knowledge of facts to reasonably think there was negligence which resulted in his disability then there is no knowledge of facts as envisaged in Section 12(3).
Proving that there is difficulty in differentiating between legal conclusions and primary facts, a number of cases have dealt with these distinctions and in MTOKONYA V MINISTER OF POLICE 2018 (5) SA 22 (CC) at para 63, the Court stated that “the knowledge of the facts from which the debt arises includes knowledge that the conduct of the debtor giving rise to the debt is wrongful and actionable in law would render our law of prescription so ineffective that it may as well be abolished”.
In the more recent case of LE ROUX AND ANOTHER V JOHANNES G COETZEE & SEUNS AND ANOTHER [2023] ZACC 46, where a client (the applicants) had launched a professional negligence claim against a legal practitioner as well as the legal firm for which he worked (the respondents) based upon a breach of mandate. In essence, the respondents had failed to comply with the provisions of Section 2 (1) of the Alienation of Land Act on behalf of the Applicant in that they had informed the applicants that there were no documents which needed to be signed by the latter in order for the former to exercise an option to purchase a farm when in actual fact the statute did require a written authority to be signed by the applicants in favour of respondents. The Applicants had only become aware of this requirement when cross-examined on the issue some 5 (five) years later. This matter began in the High Court and found its way all the way up to the Constitutional Court. The crux of the matter that all these courts were seized with determining was when the applicants had knowledge of the fact that the respondents had breached the mandate and whether same were facts contemplated in section 12(3) or in fact, legal conclusions borne of those facts. In essence the question was whether the non-compliance with the Alienation of Land Act by the respondents was a fact as contemplated by Section 12(3) or a legal conclusion borne of that fact.
The High Court granted judgment in favour of the applicants and found that knowledge of the respondent’s non-compliance with the Alienation of Land Act was not a legal conclusion, but a fact that the applicants were required to have knowledge of in terms of section 12(3) of the Act which knowledge was only acquired during the cross-examination of Mr Le Roux.
The Supreme Court of Appeal held that the applicants’ claim against the respondents arising out of a breach of mandate claim had prescribed in terms of the Prescription Act. The Supreme Court of Appeal relied on TRUTER and MTOKONYA in upholding the appeal, and found that, the failure to appreciate the legal consequences which flow from the facts does not delay the date when prescription starts to run. It found that, acquiring the knowledge of non-compliance with the Alienation of Land Act was a legal conclusion and not a fact and was thus unrelated to the commencement of the running of prescription.
The Constitutional Court took matters into its hands and sought to bring clarity when it acknowledged the general rule that emerges from our jurisprudence in that the primary facts which must be known to the creditor need not include the legal consequences that flow from those facts. However, the court reasoned further, in matters concerning professional negligence, a creditor may have knowledge of the facts but still not be able to discern that something wrong has occurred. The facts may objectively be sufficient to institute a cause of action, however a creditor that lacks the expertise will not know this. Therefore, it would be harsh to say that the creditor had knowledge of all the facts.
The exception in this case is imperative because the strict application of the general rule would be unfair to the creditors and the running of prescription, in that prescription would start to run when the legal practitioner breached the mandate or gave the wrong advice without taking into consideration when the creditor acquired such knowledge of the breach or the wrong advice.
This exception is however limited in that it only applies to professional negligence claims against legal practitioners and where a legal conclusion is essential in determining the primary facts that are to be known by the creditor.
There were three judgements in this matter in the Constitutional Court. The first judgement, being that of Justice Kollapen (Maya DCJ, Madlanga J, Majiedt J, Theron J and Rogers J concurring) and being the majority judgment emphasized on the difficulty of having knowledge that the advice being given by a legal practitioner was incorrect or that the legal practitioner breached their mandate. It emphasized, as stated above, that a creditor may have knowledge of the facts but also not be aware that there is a breach because of the lack of expertise.
The second judgment being that of Van Zyl AJ (Makgoka AJ and Potterill AJ concurring) agreed with the conclusions of the first judgment but with different reasons. Van Zyl AJ seemed to put more emphasis on the fact that legal conclusions that are not necessary for purposes of establishing the cause of action may not be taken into account in determining when prescription will start running, it further held that a legal conclusion is an outcome that stems from the primary facts. The second judgement also considered the duty of the legal practitioner to act in good faith, the applicant in this matter entrusted the legal practitioner to perform his duty and carry out the mandate in a proper manner, the applicant therefore would not have expected that there would be a breach because he reasonably believed the legal practitioner was an expert in what he does.
The third judgement, that of Rogers J, in essence took the position that legal conclusions may be part of a creditor’s cause of action, but the creditor would have to be aware of this legal conclusion before prescription can start running.
The more recent case of LE ROUX provides a proper picture as to how cases of prescription can be approached. I am in support of the majority judgment in Le Roux. The approach adopted by Justice Kollapen is fair and just in that the calculation of the time period from when prescription starts to run is based on when the creditor has knowledge of the primary facts as well as knowledge of the legal conclusions which give rise to their cause of action in appropriate circumstances. This judgment maintains the general rule but simultaneously takes into consideration that there are exceptions to every rule and same must be applied where circumstances permit. Prescription in this regard is dealt with on a case-by-case basis. As a result of this approach, prescription would not be a defence which debtors quickly rely on to avoid claims against them and where they do, and circumstances permit, creditors would have a recourse.
Contributor: ASISIPHO MADIKIZELA
Email: asisipho@atmd.co.za
Tel: +27 33 815 1550