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[2010] ZAWCHC 652
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Shackleton Credit Management (Pty) Ltd v Scholtz (12611/2010) [2010] ZAWCHC 652 (10 December 2010)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE HIGH COURT, CAPE TOWN)
CASE
NO: 12611/2010
In
the matter between:
SHACKLETON
CREDIT MANAGEMENT
(PTY)
LIMITED
…...............................................................................
Plaintiff
and
FREDERICK
JOHANNES SCHOLTZ
…....................................
Defendant
JUDGMENT
DELIVERED ON 10 DECEMBER 2010
BLIGNAULT
J
:
[1]
This is an opposed application for summary judgment.
[2]
Plaintiff, Shackleton Credit Management (Pty) Ltd, sued the
defendant, Mr Frederick Johannes Scholtz, for payment of certain
amounts alleged to be due to it in terms of agreements concluded
between Absa Bank Limited and Cloud Nine Apple Farm CC ("the
principal debtor").
[3]
Plaintiff claimed that the debts in question had been ceded to it by
Absa Bank Limited. Defendant is alleged to be liable to
plaintiff in
terms of a deed of suretyship in terms of which he bound himself as
surety for all debts then owing by the principal
debtor to Absa Bank
Limited.
[4]
Plaintiff's action was instituted on 28 June 2010. Its particulars of
claim follow the same format in respect of each claim.
They contain
in each case the following allegations:
(i)
That
a specific agreement was concluded between
Absa Bank Limited and
the principal debtor;
(ii)
That
the principal debtor breached its obligations in
terms of the
agreement;
(iii)
That
the principal debtor was wound up on 11 August
2005;
(iv)
That
Absa Bank Limited cancelled the agreement;
(v)
That
Absa Bank Limited proved a claim against the
principal debtor in
liquidation in the amount of RX;
(vi)
That
Absa Bank Limited received a secured award in a
certain amount.
(vii)
That
there is a shortfall in the amount due by the
principal to
plaintiff.
[5]
Para 78 of the Particulars of Claim reads as follows:
"78.
The final liquidation and distribution account in the Principal
Debtor has not been confirmed. A copy of the most recent
Master's
query sheet, dated 5
th
November
2009, is annexed hereto, marked "PPOC24"."
[6]
The Master's query sheet dated 5 November 2009 bears plaintiff's
allegation out. It shows that the first liquidation and distribution
account had not been confirmed at that time.
[7]
Para 79 of the Particulars of Claim reads as follows;
"79.
The impediment contemplated by
Sections 13(1)(g)
and (i) of the
Prescription Act No 68 of 1969
has not yet ceased to exist."
[8]
Defendant gave notice of his intention to defend the action and
plaintiff applied for summary judgment.
[9]
Defendant filed an opposing affidavit. He raised a defence of
prescription in the following terms:
"5.
Plaintiff's claims as set out in it's particulars of claim all became
due before, or at the latest on the date of liquidation
of the
principle debtor being the 11
th
August
2005 and prescription thus run in favour of me from such date.
1.
All
seven of Plaintiffs claims would therefore have become prescribed on
the 11
th
August
2008.
2.
The filing of the seven relevant claims against the principle debtor
in liquidation however meant that the completion of prescription
could only occur one year after the ceasing of this impediment.
3.
The impediment interrupting the completion prescription ceased to
exist from the 22 February 2006, being the date on which Absa
Bank
received its final dividends from the liquidator of the principal
debtor's estate.
4.
In terms of both the first and second final liquidation and
distribution account it is clear that no further dividends would
be
paid to Absa Bank or the Plaintiff and as such I deny the Plaintiff's
allegation in paragraph 79 of its particulars of claim
that the
impediment has not yet ceased to exist.
5.
Because the completion of prescription would thus not have occurred
within a period of one year after the cessation of the impediment,
Plaintiffs claims against the Defendant based on the surety
prescribed on the 11
th
August
2008 whilst summons was issued on the 2
nd
June
2010."
[10]
The application for summary judgment was heard by me on 27 July 2010.
Counsel for plaintiff relied on the provisions of section
13 (1) (g)
of the Prescription Act 68 of 1969 ("the
Prescription Act"
;).
They read as follows:-
"(1)
If
…
..............
(g)
the debt is the object of a claim filed against the estate of a
debtor who is deceased or against the insolvent estate of the
debtor
or against a company in liquidation or against an applicant under the
Agricultural Credit Act, 1966;
…
........
(i)
the relevant period of prescription would, but for the provisions of
this subsection, be completed before or on, or within one
year after,
the day on which the relevant impediment referred to in paragraph
(a), (b), (c), (d), (e), (f), (g) or (h) has ceased
to exist,
the
period of prescription shall not be completed before a year has
elapsed after the day referred to in paragraph (i).
[11]
Plaintiff's particulars of claim and defendant's opposing affidavit
were both drawn on the assumption that the principal debtor,
although
a close corporation is to be regarded as a company within the meaning
of section 13(1 )(g) of the
Prescription Act. I
will revert to that
assumption hereunder.
[12]
The first question that was argued before me is when, if at all, did
the impediment referred to in paragraph 13(1 )(g) of the
Prescription
Act cease
to exist ie when, if at all, did the principal debt in each
case cease to be the object of a claim filed against the principal
debtor. The summons was served on defendant on 11 June 2010. If the
debts in question had ceased to be objects of a claim filed
against
the principal debtor on or before 10 June 2009, they would have
become prescribed.
[13]
Counsel for plaintiff referred to a strong line of authorities,
culminating in
Nedcor
Bank Ltd v Rundle
2008
(1) SA 415
(SCA) for the proposition that in the case of company the
impediment referred to in
section 13(1
)(g) of the
Prescription Act,
ceases
to exist upon the confirmation by the Master of the final
liquidation and distribution account.
[14]
I am bound by these authorities. It follows that if the provisions of
section 13(1)(g)
of the
Prescription Act do
apply to close
corporations, defendant would have no defence to plaintiff's claims.
The question, however, is whether they do.
This is a legal question
which depends upon the proper interpretation of
section 13(1
)(g) of
the
Prescription Act.
>
[15]
There is authority to the effect that a court should not decide legal
issues in summary judgment proceedings. See
Hollandia
Reinsurance Co Ltd v Nedcor Bank Ltd
1993
(3) SA 574 (W. It seems to me however, that it would be convenient
and less expensive to the parties if this issue is decided
at this
stage. I propose to do so.
[16]
Plaintiff's counsel referred me to two judgments, namely
Thrupp
Investment Holdings (Pty) Ltd v Goldrick
2008
(2) SA 253 (W) and
Nedcor
Bank Limited v Sutherland
[1998]
3 All SA 146 (N) in which a close corporation was regarded as a
company
for
purposes of
section 13(1
)(g) of the
Prescription Act. The
issue,
however, does not appear to have been argued and no reasons were
given to this assumption. As such these decisions have
no binding or
persuasive force.
[17]
I revert to the interpretation of
section 13(1
)(g) of the
Prescription Act. In
broad terms there are three approaches to the
interpretation of statutes. The first is the so called
golden
rule
of
interpretation. In terms of this rule the plain meaning of the
statute is given effect to unless it would give rise to an absurdity
or a result contrary to the intention of the legislature. In the
present case, however, it seems to me that an interpretation in
accordance with the
golden
rule
would
not support the contention advanced by plaintiff. The plain meaning
of the word
company
does
not, as a matter of language, include
close
corporation.
[18]
A second approach to the interpretation of statutes can be described
as purposive. This means that a statute must be interpreted
in the
light of the purpose which it seeks to achieve. This method uses the
language and the purpose to serve as the starting point
of the
enquiry. Closely related to this approach, is the rule that the
language of a statute must be read in its context. This
approach,
however, also does not assist plaintiff in this case as it uses the
actual language as part of the starting point of
the enquiry.
[19]
A third approach can be described as the
reading
in
of
a word or a phrase in order to attempt to make sense of the statute.
In terms of this approach the court plays a creative role
by actually
inserting words into or changing words in the statute to arrive at
the result sought to be achieved.
[20]
At first sight this approach seems to offer more hope to plaintiff.
In my view, however, a
reading
in
of
the words
"or
close corporation"
into
section 13(1
)(g) of the
Prescription Act faces
three problems in
this case.
[21]
The test for the implication of a word into a statute is quite
stringent. In
Masetlha
v President of the Republic of South Africa and Another
[2007] ZACC 20
;
2008
(1) SA 566
(CC) the Constitutional Court, at para [192], formulated
it as follows:
"...words
cannot be read into a statute by implication unless the implication
is a necessary one in the sense that without
it effect cannot be
given to the statute as it stands. In addition, such implication must
be necessary in order to 'realise the
ostensible legislative
intention or to make the [legislation] workable."
[22]
The proposed implied term is in my view not necessary in the sense
that without it effect cannot be given to the principles
and objects
of the
Prescription Act. Section
13 of the
Prescription Act contains
exceptions to the general rule that prescription is interrupted by
way of the institution of legal proceedings for the enforcement
of
the debt. There is in principle no practical or legal reason why
close corporations should be singled out for special treatment.
[23]
A second problem facing the
reading
in
approach
is that a provision can only be implied into a statute if its
language is clear. See
The
Firs Investments (Pty) Ltd v Johannesburg City Council
1967
(3) SA 549
(W) at 557E - G:
"Moreover,
a strong factor militating against the implication of any such
limitation is the difficulty of formulating it. In
contract a term
will not be implied where considerable uncertainty exists about its
nature and scope, for it must be precise and
obvious.... I think that
the same must apply to implying a term in a statute, for the process
is the same...."
How,
one asks rhetorically, would the suggested implied provision be
framed bearing in mind that close corporations did not exist
when the
Prescription Act was
passed?
[24]
A third problem is that there have always been entities which are
separate legal
personae
but
not companies. They include trading corporations. Such entities would
normally be sequestrated and not liquidated. See
Lawsa
Vol 1 Associations
paras
618 and 661. How would the legislature have known in 1969 that a
similar type of entity, if and when it comes into being,
would be
liquidated and not be sequestrated.
[25]
Some support for an argument that
section 13(1
)(g) is amenable to an
interpretation that the words "or corporate entity similar to"
or similar words be implied into
section, may be found in the
judgment of Mahomed J in
Vitamax
(Pty) Ltd v Executive Catering Equipment CC and Others
1993
(2) SA 556
(W). He dealt with a situation where a person had bound
himself as surety
in
respect of companies.
The
principal debtor was a close corporation and the contention was
raised that the word
companies
did
not apply to a close corporation. Mahomed J rejected this argument.
[26]
It may be suggested that the
Vitamix
judgment
appears to supports plaintiff's contentions. There are, however,
significant differences between that case and the present
one.
Mahomed J said there was no reason why the parties would have
intended to define
company
in
such a manner. He said
inter
alia
the
following:
"Crucial
to the essential characteristics of a company is its existence as an
entity distinct from its members, its capacity
to own property apart
from its members and perpetual succession. (Dadoo Ltd and Others v
Krugersdorp Municipal Council
1920 AD 530
; Klerksdorp & District
Muslim Merchants Association v Mahomed & Another
1948 (4) SA 731
(T) at 738; Morrison v Standard Building Society
1932 AD 229
at 238;
Stellenbosch Farmers' Winery Ltd v Distillers Corporation (SA) Ltd
and Another
1962 (1) SA 458
(A) . These are also all characteristics
of a close corporation in terms of the Close Corporations Act 69 of
1984 (sees 2)."
[27]
The
reasoning in
Vitamax
can
be distinguished in four material respects. The first is that the
Close Corporation Act did not exist in 1969 when the
Prescription Act
was
passed. An entity such as a close corporation had not yet come
into being. It did exist, however, when the parties concluded the
agreement in the
Vitamax
case.
It is trite law that an agreement must be construed within its proper
context. See
KPMG
Chartered Accountants (SA) v Securefin Ltd and Another
2009
(4) SA 399
(SCA) para [39]. The existence of the entity known a close
corporation was manifestly part of the context which played a role in
the court's reasoning in
Vitamax.
[28]
The second point of distinction is that it is more difficult to imply
a term into a contract than into a statutory provision.
I have
already referred to the stringent test in the case of a statute. In
the case of a contract the existence of an implied term
depends on
the intention of the parties which can be proved on no stricter test
than a balance of probabilities. The court also
has a wider
discretion to look at surrounding circumstances.
[29]
The third distinguishing feature is that the general approach of
Mahomed J does not apply to statutory interpretation. He saddled
the
defendant with an onus to support a special interpretation of the
word
company.
In
the case of
section 13(1
)(g) of the
Prescription Act, however
, the
onus would rest on the party seeking to extend the meaning of
company.
[30]
The fourth point of distinction is that not all of the entities
referred to in the passage quoted above are companies. In
Klerksdorp
& District Muslim Merchants Association v Mahomed & Another
1948
(4) SA 731
(T) it was an association formed for religious purposes
which was regarded by the court as a
universitas
or
legal
persona.
In
Morrison
v Standard Building
Society
1932
AD 229
it
was a building society which was regarded as a universitas.
[31]
I find therefore that the interpretation contended for by plaintiff
is not supported by any of the accepted methods of interpretation.
The
Vitamax
judgment
can be distinguished in various significant respects and does not
assist plaintiff to overcome its problems with the interpretation
of
section 13(1
)(g) of the
Prescription Act.
[32]
In the result, the application for summary judgment is refused with
costs.
A.P. BLIGNAULT