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[2016] ZASCA 33
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Fisher v Natal Rubber Compunders (Pty) Ltd (20640/2014) [2016] ZASCA 33; 2016 (5) SA 477 (SCA) (24 March 2016)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 20640/2014
In
the matter between:
BERNARD
GEOFFREY
FISHER
APPELLANT
and
NATAL
RUBBER COMPOUNDERS (PTY) LTD
RESPONDENT
Neutral
citation:
Fisher
v Natal Rubber Compounders
(Pty)
Ltd
(20640/14)
[2016] ZASCA 33
(24 March 2016)
Coram:
Lewis, Wallis,
Willis, Saldulker and Mathopo JJA
Heard
:
4
March 2016
Delivered:
24 March 2016
Summary:
Prescription
─ cession of a claim ─ action instituted by cedent
against the debtor ─ claim ceded after
litis
contestatio
and substitution of cessionary for cedent not objected to ─
debt not prescribed in terms
s 15(2)
and (6) of the
Prescription Act
68 of 1969
.
ORDER
On
appeal from:
KwaZulu-Natal
Local Division of the High Court, Durban (Gyanda J sitting as court
of first instance):
The
appeal is dismissed with costs including the costs of two counsel.
JUDGMENT
Mathopo
JA (Lewis, Wallis, Willis and Saldulker JJA concurring):
[1]
This is an appeal against the judgment of the KwaZulu-Natal Local
Division of the High Court (Gyanda J) dismissing the appellant,
Mr
Bernard Fisher’s (Fisher) special plea of prescription against
the respondent, Natal Rubber Company’s (NRC), claim.
The appeal
is against that finding with the leave of that court. There are no
factual disputes. The parties agreed to approach
the court a quo on
the basis of a stated case and the court ordered a separation of
issues in terms of Uniform
rule 33(4).
[2]
The brief background, is as follows. On 10 November 2010 George
Beaton, trading as Meranti and Board (Meranti) issued a combined
summons against Fisher claiming payment of the sum of R1 077 377 for
goods sold and delivered to a company called Strongwood Manufacturing
(Pty) Ltd (now in liquidation). Fisher had stood surety for the
latter company. The summons was served on him on 18 November 2010.
On
7 January 2011 Fisher filed his plea on the merits and pleadings were
closed. On 22 October 2013, Meranti ceded to NRC ‘all
of its
right, title and interest in and to the claims’ in relation to
its right of action under case number 13172/10 in the
court a quo. In
terms of clause 2.3 of the deed of cession, it was agreed that NRC
would, on fulfilment of the suspensive conditions,
apply for its
substitution in the stead of Meranti as the plaintiff and that it
would thereafter prosecute the case until its final
determination. It
is not in dispute that the suspensive conditions were fulfilled.
[3]
On 9 December 2013 Meranti served a notice in terms of Uniform
rule
28(1)
to amend the summons and particulars of claim by substituting
NRC as the plaintiff. Fisher did not oppose the amendment, which was
thus effected. On 22 January 2014, Fisher amended his plea in
response to the amended particulars of claim by raising a special
plea, contending that, upon cession to NRC after its substitution as
the plaintiff, Meranti’s interruption of prescription
against
Fisher had lapsed and that the claim had been extinguished by
prescription in terms of ss 15(2) and (6) of the Prescription
Act 68
of 1969 (the Act).
[4]
Subsections 15(2) and (6) provide as follows:
‘
(2)
Unless the debtor acknowledges liability, the interruption of
prescription in terms of subsection (1) shall lapse, and the running
of prescription shall not be deemed to have been interrupted, if the
creditor does not successfully prosecute his claim under the
process
in question to final judgment or if he does so prosecute his claim
but abandons the judgment or the judgment is set aside.
.
. .
(6)
For the purposes of this Section, “process” includes a
petition, a notice of motion, a
rule nisi
, a pleading in
reconvention, a third party notice referred to in any rule of Court,
and any document whereby legal proceedings
are commenced.’
This
appeal turns on whether the substitution of NRC for Meranti amounted
to the institution of fresh proceedings, so that the interruption
of
prescription in terms of s 15(2), effected by Meranti’s
service of the summons, ceased to be effective. This involved
the
submission that NRC’s action against Fisher only commenced when
it was substituted for Meranti as plaintiff.
[5]
The argument on behalf of Fisher was the following. The effect of the
cession was to substitute NRC for Meranti as creditor.
When the order
for substitution was made Meranti ceased to pursue the claim and NRC
pursued it in its own name and in its own right.
Effectively this was
a fresh action commenced by the notice of amendment.
[1]
As
Meranti did not prosecute its claim to final judgment the
interruption of prescription effected by the service of summons fell
away. By the time NRC was substituted for Meranti more than three
years had elapsed since the claim arose. Accordingly the claim
had
prescribed.
[6]
The counter-argument on behalf of NRC was the following. Prescription
was properly interrupted in terms of s 15(2) of the
Act by
service of the original summons by Meranti. The substitution of NRC
for Meranti was purely procedural and after substitution
NRC
continued to pursue the same claim under the same process. Its
substitution did not involve the commencement of a fresh action
but
the continuation of existing proceedings in respect of the same debt.
Accordingly prescription was interrupted by service of
the summons
and the claim had not prescribed.
[7]
Fisher relied strongly in this regard on
Silhouette
Investments Ltd v Virgin Hotels Group Ltd
.
[2]
Silhouette
is clearly inapplicable to the problem in this case. In that case,
the action had been instituted by Silhouette. It later gave
notice of
intention to amend its particulars of claim by the substitution of
one Dyer as plaintiff on the ground that he had taken
cession of
Silhouette’s claim against the defendant. That amendment was
effected. A plea was then filed in which reliance
was placed upon a
provision in the contract that precluded the cession of Silhouette’s
right. Consequently, Silhouette attempted
to re-amend the particulars
of claim by substituting itself in the place of Dyer as the plaintiff
in the action. As this was done
after the expiry of the prescription
period, the defendant raised a special plea of prescription, relying
on the proposition that
the process by which prescription had
originally been interrupted had not, within the meaning of s 15(2),
been prosecuted to finality,
because the original plaintiff,
Silhouette, had withdrawn and ceased to pursue the action while still
vested with the claim.
[8]
The rationale of
Silhouette
is the following. Silhouette ceased to pursue the claim and Dyer
stepped in when the summons was amended. But Dyer had not acquired
the claim that Silhouette had been pursuing, so there was no
continuity in pursuing the claim as there is in this case. Instead
the party in whom the claim vested at all times simply withdrew and
someone who had no claim continued the action. Accordingly
the
interruption of prescription lapsed because the claim was not
prosecuted under the process in question to final judgment. When
it
was restored to its position as plaintiff that occurred in terms of
the notice of amendment, which became a process under which
it was
pursuing the claim. The correct view of
Silhouette
is
that the party that had the claim ceased to pursue it when Dyer was
substituted as plaintiff and, as Dyer had no claim capable
of being
pursued, the claim was not prosecuted to finality in terms of
s 15(2). When Silhouette was substituted for Dyer,
it was in
effect commencing proceedings afresh. That is wholly different from
the present case, where the same claim has been pursued
throughout.
[9]
In
Waikiwi
Shipping Co Ltd v Thomas Barlow & Sons (Natal) Ltd &
another
[3]
where there was a cession of the claim but no application for
substitution, this court held that there was nothing to prevent the
cedent from continuing with the claim in its own name. Jansen JA said
the following at (678G):
‘
In
practice any purported transfer after
litis
contestatio
could only become effective if the court allowed the cessionary to be
substituted as the plaintiff. This is a matter apparently
within the
discretion of the court and the court will refuse the substitution if
there is any prejudice to the other side. . .
. The transfer is,
therefore, only perfected when the court gives its seal of approval
by granting the substitution.’
And
in
Government
of the Republic of South Africa v Ngubane,
[4]
an earlier judgment of this court concerned with the question whether
an action for pain and suffering could be ceded prior to
litis
contestatio
,
Holmes JA observed that (at 608B):
‘
.
. . it seems to me that, in regard to a cession after
litis
contestatio
,
you are not ceding your interest in the claim but in the result of
the litigation.’
Jansen
JA in
Waikiwi
said the following, when commenting on this
dictum (at 677G-678A):
‘
The
“interest in the claim” and the “interest in the
result of the litigation” are contrasted. However,
there may be
three factors involved: (i) the original founding right, (ii) the
right arising from
litis
contestatio
to proceed with the action to its conclusion, (iii) the
spes
in respect of the benefits that will flow from the successful
conclusion of the proceedings. (As to this last, it may be pointed
out that a
spes
may also be “ceded”. There is, however, a difference of
opinion in respect of the nature and precise effect of such
a
“cession”: De Wet and Yeats
Kontrakreg
en Handelsreg
3 ed at 180;
Schreuder
v Steenkamp
1962 (4) SA 74
(O) at 76A-D. But this dispute does not affect the
present issues.) It would seem that in
Ngubane’s
case this court by “interest in the result of the litigation”
meant the
spes
,
and by “interest in the claim”, right (ii) (perhaps
including right (i)). No doubt a cession may be framed to relate
explicitly to the
spes
(cf the cession in
Hall
v Howe
[1929 TPD 591]
, and
Schreuder
v Steenkamp
(
supra
)),
but the
dictum
seems
to imply that even in other cases a cession after
litis
contestatio
must be construed as a cession of the
spes
.’
[10]
This view was endorsed by Nienaber JA in
Brummer
v Gorfil Brothers Investments (Pty) Ltd en andere
,
[5]
where he expressed himself as follows at (410F):
‘
Die
beginsel wat na my mening uit die
Waikiwi
-beslissing
te abstraheer is, is dit: waar ’n vorderingsreg wat die
onderwerp van ’n geding is na
litis
contestatio
sedeer word, moet die sessionaris, as hy die geding in eie naam wil
voortsit, by the Hof aansoek doen om as eiser gesubstitueer
te word;
alvorens hy dit doen, beskik hy nie oor die nodige
locus
standi
nie; die keersy is dat die sedent, tot tyd en wyl sodanige
substitusie plaasvind, nie sy
locus
standi
verbeur nie. Dit is ’n suiwer prosesregtelike aangeleentheid
waarvoor daar gesonde praktiese redes bestaan.’
[6]
[11]
What Nienaber JA said in effect about cession after
litis
contestatio
is that the cessionary stepped into the shoes of the cedent, but that
the cedent did not lose his locus standi until the cessionary
has
been substituted. In other words in the absence of substitution,
Meranti would still have been entitled to pursue the action
in its
own name and obtain judgment. See also
Van
Rensburg v Condoprops 42 (Pty) Ltd
,
[7]
where Leach J held that because there had been no objection to
substitution it was no longer open to the defendant to raise
prescription.
In the same judgment he said the following (para 12):
‘
When
litis
contestatio
was reached, the rights of the defendant . . . in regard to such debt
were frozen, and the subsequent cession of Nissen’s
right,
title and interest in the debt did not divest her of her right to
prosecute that claim until such time as Van Rensburg was
substituted
as plaintiff.’
I
fully accept the rationale in
Waikiwi
and
Brummer
,
that subject to the need for the cessionary to be substituted as
plaintiff, a right of action may be ceded after
litis
contestatio
.
This is what Leach J found in
Van
Rensburg
.
Where a cession of a claim takes place after
litis
contestatio
,
the cessionary cedes his or her interest not in the claim but in the
result of the litigation.
[12]
The cession alone does not transfer the right to prosecute the action
to the cessionary. That right only accrues to the cessionary
when it
is substituted for the cedent as plaintiff. The subject matter of
pending litigation can be ceded freely and fully until
litis
contestatio
.
Such a right may be ceded subject to one limitation: the cessionary
is not entitled subsequently to pursue concurrent litigation
in its
own name. The corollary is that the cedent may continue the existing
litigation in its own name. The cession would
not divest the
cedent of its locus standi nor vest the cessionary with it unless the
court on application permits the substitution
of the parties. Such an
application will not succeed if the substitution will prejudice the
debtor.
[8]
On substitution, the cessionary can pursue the action in its own
name.
[13]
This review of the law dealing with the implications of a cession
after
litis
contestatio
highlights
an absurdity in the argument on behalf of Fisher. If Meranti
had simply continued to pursue the action in its own
name, either
because that was so agreed with NRC, or because the court refused to
authorise a substitution, the point of prescription
would not have
arisen. But in those circumstances the claim would still have been
pursued for the benefit of NRC, albeit the named
plaintiff remained
Meranti. It would be absurd to hold that the effect of a substitution
was to create a defence of prescription
where none previously
existed.
[14]
This approach is reinforced by
Tecmed
.
[9]
There the original plaintiff, after having issued summons in respect
of its claim, merged with another entity and a new entity
was formed.
The original plaintiff ceased to exist and all its rights and
obligations were transferred to the new entity by operation
of law.
It was then sought to substitute the new entity in the place of the
original plaintiff. A plea of prescription was raised.
Brand JA said
the following in para 20:
‘
At
the heart of
Silhouette
Investments
lies
the notion that the legal effect of a cession after
litis
contestatio
is to terminate the proceedings instituted by the cedent, with the
corollary that the substitution of the cessionary as the plaintiff
must be regarded as the institution of new proceedings. As to whether
that underlying notion is correct in respect of cessions,
is not
necessary to consider in this case. I say that because Sojitz does
not rely on a transfer of rights by means of a cession.
What it
relies upon is a universal succession of all Nissho Iwai’s
rights and obligations by operation of Japanese law.’
That
case was no different from the present one. A claim vested in one
legal entity passed by operation of law to another and that
party was
substituted as plaintiff in the action. Central to the court’s
rejection of the argument that the claim had prescribed
was the
finding that there was an essential continuity in pursuing the claim.
[15]
It follows that since the underlying debt was not altered, the
cessionary was entitled to proceed with the claim. As the cessionary,
NRC stepped into the shoes of the cedent, Meranti, the right of the
cedent to pursue the claim fell away. Upon substitution, the
cessionary acquired by way of cession, all rights and obligations
vested in the cedent at the time of the substitution. What was
bestowed on NRC by cession was a claim in respect of which the
running of prescription had been interrupted by the service of the
summons. In my view the original interruption of prescription by the
timeous service of the summons was not affected in any way
by the
cession or subsequent amendment. The amendment was a mere procedural
step followed to effect the substitution. (See
Tecmed
and
Van
Rensburg
.)
[16]
To demonstrate the fallacy in Fisher’s argument one has to look
at the ‘debt’
and the ‘process’ (summons) –
in terms of the Act – under which the debt was pursued. To my
mind the debt
remains the same throughout. It is illogical to contend
that when the cessionary sues on a ceded claim the underlying debt
changes.
All that happens is that the identity of the person entitled
to enforce the debt changes, but not the debt itself.
[17]
It
seems to me clear that the process under which the debt was being
pursued remained the same throughout. To suggest that the summons
operated to interrupt the running of prescription when it was
initially served but ceased to fulfil that function when there was
a
notice of amendment or substitution is clearly not consistent with
the Act. Any judgment that is granted in favour of NRC in
this case
will be granted in terms of the original summons and particulars of
claim, not in terms of the application for substitution.
In the
result the original process that interrupted prescription will be
prosecuted successfully. That is what is required by s 15(2)
of
the Act. There is no doubt that it is only the identity of the party
(NRC) now pursuing the debt that changes. The debt remains
the same
and unaffected by prescription.
[18]
For these reasons, the special plea must fail. In the result the
following order is made:
The
appeal
is
dismissed with costs including the costs of two counsel.
______________
R
S Mathopo
Judge
of Appeal
Appearances
For Appellant:
K J Kemp SC (with him L E Combrink)
Instructed by:
Shepstone & Wylie Attorneys,
Durban
Matsepes Inc, Bloemfontein
For
Respondent:
C P
Hunt SC
Instructed by:
Evershed Attorneys, La Lucia Ridge
E G Cooper & Majiedt Inc,
Bloemfontein
[1]
Mias de Klerk Boerdery (Edms) Bpk
v Cole
1986 (2) SA 284
(N). On the facts that case is distinguishable. Summons had been
issued in the name of Mr de Klerk instead of the company. A
notice
of amendment to substitute the company for Mr de Klerk was served
within the three-year prescriptive period. The respondent
contended
that this was not process in terms of s 15(6) and therefore
that the claim prescribed. The court rejected the
contention on the
basis that the company commenced proceedings by way of the notice of
amendment and that this constituted a
process.
[2]
Silhouette Investments Ltd v
Virgin Hotels Group Ltd
2009
(4) SA 617 (SCA).
[3]
Waikiwi Shipping Co Ltd v Thomas
Barlow & Sons (Natal) Ltd & another
1978
(1) SA 671 (A).
[4]
Government of the Republic of
South Africa v Ngubane
1972
(2) SA 601 (A).
[5]
Brummer v Gorfil Brothers
Investments (Pty) Ltd en andere
1999
(3) SA 389 (SCA).
[6]
To my mind the principle to be
extracted from
Waikiwi
is this: where a claim that is the subject of proceedings is ceded
after
litis contestatio
,
the cessionary must, if he wants to continue the proceedings in his
own name, apply to court to be substituted as plaintiff;
before he
does that, he lacks the necessary locus standi; the converse is that
the cedent, until such substitution takes place,
does not lose his
locus standi. This is a purely procedural matter for which there are
sound practical reasons. (My translation.)
[7]
Van Rensburg v Condoprops 42
(Pty) Ltd
2009 (6) SA 539
(E).
[8]
Devonia Shipping Ltd v MV Lius
(Yeoman Shipping Co Ltd Intervening)
1994
(2) SA 363
(C);
Rosner
v Lydia Swanepoel Trust
1998
(2) SA 123
(W) para 8.
[9]
Tecmed (Pty)
Ltd & others v Nissho Iwai Corporation & another
2011 (1) SA 35
(SCA).