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[2013] ZASCA 74
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Van Reenen v Santam Ltd (623/12) [2013] ZASCA 74; 2013 (5) SA 595 (SCA) (29 May 2013)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
REPORTABLE
Case No: 623/12
In the matter
between:
LOURENS WEPENER
VAN REENEN
.................................................
Appellant
and
SANTAM LIMITED
.............................................................................
Respondent
Neutral citation
:
Van Reenen v Santam Ltd
(623/12)
[2012] ZASCA 74
(29 May 2013)
Coram:
MAYA, LEACH, THERON, WILLIS JJA and MEYER AJA
Heard:
21 May
2013
Delivered:
29
May 2013
Summary:
Prescription Act 68 of 1969
– when
‘debt’ claimed in terms of 156 of the
Insolvency Act 24
of 1936
becomes due under
s 12(1)
and (3) of the
Prescription Act –
whether
insurer’s opposition of third party’s action
against liquidated insured constitutes acknowledgement of liability
and
interrupts running of prescription in terms of
s 14(1)
of the
Prescription Act.
>__________________________________________________________________
ORDER
__________________________________________________________________
On appeal from:
North
Gauteng
High Court
(Pretoria) (Webster J sitting as court of first instance):
The appeal is
dismissed with costs.
__________________________________________________________________
JUDGMENT
__________________________________________________________________
MAYA JA (LEACH,
THERON, WILLIS JJA and MEYER AJA concurring):
[1]
This is an appeal against the judgment of the North Gauteng High
Court, Pretoria (Webster J) which upheld the respondent’s
special plea of prescription and dismissed the appellant’s
claim with costs. The appeal is with the leave of the court below.
[2] The background
facts are common cause. The appellant conducted a cattle feedlot
business under the name ‘Beefmaster’.
On 19 May 1993, he
concluded a six-month agreement with Abakor Ltd (Abakor), a merchant
seller of tallow, for the purchase and
supply of tallow to be used as
an ingredient in cattle feed. The contract commenced on 1 April 1993.
It was, subsequently, tacitly
extended on various occasions until
1997 when problems concerning the quality of the tallow arose.
According to the appellant,
between February and August 1997, Abakor
supplied him with tallow that had latent defects in the form of water
and impurities which
substantially impaired its utility and caused
him damages in the sum of R1 917 924,71.
[3] As a result,
during January 2000, the appellant brought a suit in the North
Gauteng High Court against Abakor for breach of
warranty and damages
resulting from the latent defects in the sum of R1 970 926,60. The
matter was enrolled for hearing on 25 November
2001. However, it did
not proceed on that date because on 10 October 2000 Abakor was placed
under provisional liquidation. It was
finally wound up on 31 October
2000 and the appellant became aware of this fact by 27 November 2000.
The final appointment of Abakor’s
liquidators was made on 16
March 2001.
[4] During the
material time – February to August 1997 – Abakor and the
respondent (Santam) were bound by a written
contract of insurance. In
terms of that agreement Santam indemnified Abakor, by means of an
insurance policy issued by it, against
any liability incurred against
third parties for claims arising from the sale and supply of
defective tallow up to the sum of R1,5
million. As at 6 August 1998,
the appellant, as he acknowledged in a letter to his erstwhile
attorneys, was aware of the existence
and terms of this insurance
policy and that it covered the claims he would later institute
against Abakor.
[5] On 13 January
2004, the appellant issued summons against Santam for payment of the
sum of R1,5 million for which Santam was
obliged to indemnify Abakor
under the insurance policy. The claim was brought on the basis that
the contract of insurance obliged
Santam to indemnify Abakor towards
a third party as contemplated in
section 156
of the
Insolvency Act 24
of 1936
.
[6] Santam disputed
liability and raised a special plea. It pleaded that the appellant’s
claim had been extinguished by prescription
under
section 11
of the
Prescription Act 68 of 1969
because his summons was issued more than
three years after the debt became due. This was so, it contended,
because according to
section 156
of the
Insolvency Act, read
with
sections 339 and 348 of the Companies Act 61 of 1973, the claim
became due upon application for Abakor’s winding-up,
on 10
October 2000, alternatively on 31 October 2000 when it was made
final. It was further contended that the appellant knew the
debtor’s
identity and the facts from which the debt arose; or could have
acquired such knowledge by the exercise of reasonable
care by the
dates of Abakor’s provisional and final winding-up,
alternatively 27 November 2000 when he admittedly became
aware of the
liquidation.
[7] In his
replication, the appellant denied that his claim had prescribed. He
pleaded that the debt became due no earlier than
10 April 2001 when
Santam repudiated Abakor’s claim for indemnification arising
out of liquidators’ failure to comply
with certain obligations
under the insurance contract. Thus, the period of prescription ran
afresh from that date. An alternative
allegation was that if the debt
became due before the issue of summons on 13 January 2001, the
running of prescription was interrupted
by Santam’s express or
tacit admission of liability to indemnify Abakor. This admission, it
was pleaded, manifested in Santam’s
engagement of attorneys to
defend his action against Abakor to whom it paid fees and a portion
of their disbursements incurred
up to 9 April 2001.
[8] The parties
agreed at pre-trial proceedings held in terms of Uniform rule 37 that
only the issues raised in the special plea
and replication would be
adjudicated. No evidence would be adduced and the matter would be
decided solely on the basis of ‘agreed
facts’ which are
set out above as background facts. These were duly recorded in a
pre-trial minute. It was agreed that the
period of prescription
applicable to the appellant’s claim is three years in terms of
section 11
of the
Prescription Act. Santam
further accepted that
until its repudiation of Abakor’s claim, on 10 April 2001, it
had conducted itself on the basis that
it would indemnify Abakor
under the insurance contract.
[9] The court below
dismissed the claim on the bases that the appellant’s right to
institute action against Santam arose when
Abakor was liquidated, on
31 October 2000; that his summons was therefore late and that
prescription had not been interrupted.
[10]
The issue on appeal is crisp. We must decide when the appellant’s
claim became due to determine if it was extinguished
by prescription.
(The onus of proving when the debt became due rests on Santam.)
1
And if it
became due before the institution of the action, on 13 January 2001,
the ancillary question is whether the running of
prescription was
interrupted.
[11] Section 12 of
the Prescription Act provides:
‘
(1)
Subject to the provisions of subsections (2) and (3), prescription
shall commence to run as soon as the debt is due.
(2) …
(3) A debt shall not
be deemed to be due until the creditor has knowledge of the identity
of the debtor and of the facts from 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.’
[12]
The meaning of the words ‘debt is due’ in section 12(1),
which must be given their ordinary meaning, is firmly
established.
2
It is that there
must be a debt immediately claimable by the creditor or, put
differently, that there is a debt in respect of which
the debtor is
under an obligation to pay immediately.
3
[13] As indicated
above, the ‘debt’ in issue here arose in terms
section
156
of the
Insolvency Act. The
section reads:
‘
Whenever
any person (hereinafter called the insurer) is obliged to indemnify
another person (hereinafter called the insured) in
respect of any
liability incurred by the insured towards a third party, the latter
shall, on the sequestration of the estate of
the insured, be entitled
to recover from the insurer the amount of the insured’s
liability towards the third party but not
exceeding the maximum
amount for which the insurer has bound himself to indemnify the
insured.’
[14] The gist of the
contentions made on the appellant’s behalf before us is that as
these provisions allow the third party
to exercise the insured’s
right to indemnity against the insurer, they effectively constitute a
statutory cession of the
insured’s claim against the insured to
the third party. Santam gave no hint that it would not indemnify
Abakor until its
repudiation of Abakor’s claim on 10 April
2001. And by assisting Abakor’s opposition to the appellant’s
claim,
Santam was in fact indemnifying Abakor and complying with its
obligations under the insurance contract. Thus, Abakor, and in turn
the appellant, would not have been entitled to sue Santam for
specific performance of its contractual obligations before
repudiation
because there was no breach thereof until then. It is
only at that stage, therefore, that the appellant’s claim
against Santam
became due, on 10 April 2001. As summons was served
less than three years after that date, the claim did not prescribe.
[15]
Although the provisions of
section 156
of the
Insolvency Act refer
to
‘person’, they apply to the winding-up of companies by
virtue of section 339 of the Companies Act.
4
For present
purposes, therefore, as envisaged by section 156, the insurer is
Santam, the insured is Abakor and the third party is
the appellant.
[16]
The purpose and meaning of the section has been considered by our
courts. In
Coetzee
v Attorneys’ Insurance Indemnity Fund
,
5
this court described
it thus:
‘
In
the absence of [the] section the insured’s creditor, upon the
former’s sequestration, would have to prove a claim
in his
insolvent estate and be content with whatever dividend is paid to the
concurrent creditors; whilst the insured’s rights
under the
policy would vest in his trustee, who would claim from the insurer
for the benefit of the general body of creditors.
The effect of the
section, therefore, is that the creditor is granted the considerable
advantage that he does not have to share
the proceeds of the policy
with other creditors. To that end he is given a direct right of
action against the insurer. However
… the section was not
designed to confer any additional favour upon that creditor. He would
have to prove not only his claim
against the insured, but also that
the insured would have succeeded against the insurer in his claim for
an indemnity.’
6
[17]
What may be gleaned from these authorities and indeed the clear
wording of section 156, therefore, is that its provisions create
a
right which does not exist before insolvency. Whilst it allows the
third party to exercise the insured’s rights against
the
insurer, it nonetheless confers upon the third party no greater
rights than those enjoyed by the insured. And, importantly,
the
section does not transfer to, nor vest the existing rights of an
insolvent in the third party.
7
In that case, the
notion proposed by the appellant’s counsel, that the section
creates some form of statutory cession, is
without merit. The section
rather creates a new and distinct cause of action for the third
party, on the sequestration of the insured,
as a means to recover
from the insurer precisely what the latter owes the insured under the
insurance contract.
[18]
I find no ambiguity in the words ‘on the sequestration of the
insured’ used in section 156. Given their ordinary
meaning,
they must mean what they say – when the insured is wound up by
an order of court. In the present matter, that occurred
on 31 October
2000. That is the date on which the appellant’s claim arose.
All that the appellant had to do to bring himself
within the purview
of the section was to show (a) that Abakor had incurred a liability
to him; (b) that Santam was contractually
obliged to indemnify Abakor
in respect of that liability; and (c) the amount which Santam would
have been obliged to pay Abakor.
8
The subsequent
repudiation of Abakor’s claim by Santam is wholly irrelevant
for purposes of the appellant’s claim.
[19] As mentioned,
it is not in dispute that the appellant knew (a) the identity of
Abakor, its debtor, and the facts from which
the debt Abakor owed him
arose in January 2000; (b) that Santam was obliged to indemnify
Abakor in respect of that liability in
terms of the insurance policy;
(c) the amount of the indemnity by August 1998; and (d) that Abakor
had been finally wound up by
27 November 2000.
[20]
On the appellant’s own version, his cause of action against
Santam had fully accrued in terms of
section 12(3)
of the
Prescription Act by
the latter date, less than four weeks after the
winding-up.
9
Nothing at any
time thereafter precluded him from instituting action and obtaining
judgment against it. This view is, in fact, fortified
by allegations
made by the appellant himself in his Particulars of Claim which read:
‘
15.1
The … contract of insurance was one in terms whereof the
defendant was obliged to indemnify Abakor Limited in respect
of a
liability incurred by Abakor Limited towards third party, in
particular the [appellant], as contemplated in
section 156
of the
Insolvency Act 24 of 1936
.
15.2
In
the premises the [appellant] became entitled, on liquidation of
Abakor Limited, to recover from the defendant the amount of Abakor
Limited’s liability towards the plaintiff
…’
.
Emphasis added.
Therefore, whether
one counts from the date of winding-up or benevolently in favour
of the appellant,
from 27 November 2000, three years had elapsed when summons was
issued on 13 January 2004.
[21] The appellant
made an alternative contention. If we should find as we have –
that his claim became due before the issue
of summons – then
the running of prescription was continuously interrupted by Santam’s
express or tacit acknowledgement
of liability until it repudiated
Abakor’s claim. Santam’s admission of its liability to
indemnify Abakor and its conduct
of engaging attorneys to defend its
action against Abakor and paying their fees and portion of their
disbursements constituted
such acknowledgment of liability, so went
the argument.
[22]
Section 14
of
the
Prescription Act reads
:
‘
(1)
The running of prescription shall be interrupted by an express or
tacit acknowledgement of liability by the debtor.
(2) If the running
of prescription is interrupted as contemplated in subsection (1),
prescription shall commence to run afresh from
the date on which the
interruption takes place …’
[23]
These provisions envisage an acknowledgement of liability for the
debt made by the debtor to the creditor or his agent.
10
The appellant
did not contend that
Santam
made any such acknowledgement to him. He could not do so because the
record, in fact, points to the contrary. As far back
as March 1998,
Santam made it clear to him that whilst it indemnified Abakor’s
claims, both it and Abakor denied any liability
to him. The attorneys
engaged by Santam were employed, in terms of clause 7 of the
insurance policy,
11
specifically to
resist his claim and safeguard its rights. I have said that
section
156
does not transfer to or vest the existing rights of an insolvent
estate in the third party. For that reason too, an acknowledgement
of
liability by the insurer to its insured does not avail the third
party. There was, therefore, no interruption of prescription
once it
started running. The claim prescribed and the appeal must,
accordingly, fail.
[24] Lastly, there
is a related issue that requires comment. It is not clear from the
record when the matter was heard by the court
below. But in his
application for leave to appeal, the appellant mentioned that a
period of three and a half years had elapsed
before the high court
delivered its judgment. The trial judge offered no explanation for
the lengthy delay in his judgment. There
may well be a good reason,
although I find it extremely difficult to think of one especially in
a matter which turned on a narrow
question of law such as this one.
Suffice it to repeat the trite saying that ‘justice delayed is
justice denied’. Failure
by judicial officers to dispose of
cases speedily and efficiently cannot be countenanced as it
prejudices litigants and erodes
the respect and confidence of the
public in the courts.
[25] The following
order is made:
The appeal is
dismissed with costs.
____________________
MML Maya
Judge of Appeal
APPEARANCES
APPELLANT: JJ
Roestorf
Instructed by:
Couzyns Inc.,
Johannesburg
Hugo & Bruwer
Attorneys, Bloemfontein
RESPONDENT: JP
Vorster SC
Instructed by:
Du Plessis &
Eksteen Inc., Pretoria
Schoeman Maree
Attorneys, Bloemfontein
1
Gericke
v Sack
1978 (1) SA
821
(A) at 828B.
2
The
Master v I L Back & Co Ltd and others
1983
(1) SA 986
(A) at 1004G.
3
Ibid
at 1004;
Deloitte Haskins
& Sells Consultants (Pty)
Ltd v Bowthorpe Hellerman Deutsch (Pty) Ltd
[1990] ZASCA 136
;
1991 (1) SA 525
(A)
at 532G-I;
Benson and another v Walters and others
1984 (1)
SA 73
(A) at 82.
4
The
section reads: ‘In the winding-up of a company unable to pay
its debts the provisions of the law relating to insolvency
shall, in
so far as they are applicable, be applied
mutatis mutandis
in
respect of any matter not specially provided for by this Act.’
See
Supermarket Leaseback (Elsburg) (Pty) Ltd v Santam Insurance
Ltd
[1990] ZASCA 131
;
1991 (1) SA 410
(A) at 411H.
5
Coetzee
v Attorneys’ Insurance Indemnity Fund
2003 (1) SA 1
(SCA)
paras 19-20.
6
See
also
Unitrans Freight (Pty) Ltd v Santam Ltd
2004 (6) SA 21
(SCA) paras 7 and 8;
Le Roux v Standard General
Versekeringsmaatskappy Bpk
2000 (4) SA 1035
(SCA) at
1046J-1047G;
Canadian Superior Oil Ltd v Concord Insurance Co Ltd
(formerly INA Insurance Co Ltd
1992 (4) SA 263
(W) at 273H-274B;
Woodley v Guardian Assurance Co of SA Ltd
1976 (1) SA 758
(W)
at 759E-H.
7
Gypsum
Industries Ltd v Standard General Insurance Co Ltd
1991 (1) SA
718
(W) at 722D.
8
David
Trust and others v Aegis Insurance Co Ltd
and others
[2000] ZASCA 108
;
2000
(3) SA 289
(SCA) para 2.
9
Deloitte
Haskins & Sells Consultants (Pty) Ltd v Bowthorpe Hellerman
Deutsch (Pty) Ltd
[1990] ZASCA 136
;
1991 (1) SA 525
(A) at 532G-I.
10
Markham
v South African Finance & Industrial Co. Ltd
1962 (3) SA 669
(A) atb676F;
Pentz v Government of the RSA
1983 (3) SA 584
(A) at 594A-D.
11
The
relevant part of the clause, loosely translated from Afrikaans,
provides:
‘
(a)
If any event takes place in respect of which a claim in terms of
this policy was or is being instituted, the company and every
person
authorised by it may, without incurring any liability and without
prejudice to the company’s right to rely on any
condition of
this policy
. . .
Take over and
conduct in the name of the insured the defence or settlement of any
claim and conduct for own benefit in the name
of the insured any
claim for indemnity or damages or otherwise and has full authority
over the conduct of any legal proceedings
and over the settlement
of any claim. No admission, statement, offer, promise, payment or
indemnity may be made by the insured
without the written consent of
the company.’