Brief Summary

Prescription — Fraudulent transfer — Claim for damages arising from withdrawal of funds from deceased's bank account based on fraudulent letter of executorship — Plaintiff's knowledge of facts material to claim deemed to have arisen on 15 January 2010 — Claim against bank prescribed due to failure to act within four-year period — Claim against Minister of Justice not prescribed as knowledge of negligence and causation only acquired in September 2012, thus allowing for timely summons.

Comprehensive Summary

Summary of Judgment

1. Introduction

The judgment concerned the determination of a special plea of prescription raised by both defendants in delictual proceedings for damages. The parties agreed that the issue of prescription would be determined separately and first, before any consideration of the merits.

The plaintiff, Ms Zwane Fungile Aphilia, sued the Minister of Justice and Constitutional Development (cited as the political head responsible for the Master of the High Court) as first defendant, and First National Bank as second defendant. The claim related to an alleged loss suffered by the deceased estate of Mr Mthombeni after funds were withdrawn from the deceased’s bank account on the strength of an allegedly fraudulent letter of executorship.

The dispute was framed around when the plaintiff’s “debt” (claim) became “due” for purposes of the Prescription Act 68 of 1969, and specifically whether, on the agreed facts, the plaintiff had (or was deemed to have had) the requisite knowledge contemplated in section 12(3) more than three years before summons was served.

The underlying subject matter was the alleged fraudulent administration of a deceased estate, involving the issuing and use of letters of executorship and the consequent transfer of estate funds. The plaintiff alleged collusion between employees of the Master’s office and the bank, but the present judgment did not determine the truth of those allegations; it determined only whether the claims had prescribed.

2. Material Facts

The court decided the special plea on the basis of a stated case, relying primarily on the plaintiff’s affidavit dated 15 January 2010 and an internal departmental report of the first defendant received in September 2012. The parties’ agreement on the stated case meant that the court proceeded from the facts as recorded therein, focusing on what the plaintiff knew and when.

It was undisputed that the plaintiff was the lawful executor of the estate and that a sum of R760 570,89 was withdrawn from the deceased’s account held at the second defendant during or about 2 November 2009. It was also common cause that the withdrawal occurred after the bank was presented with a letter of executorship, and that there were multiple copies of letters of executorship in circulation, including copies presented to the plaintiff via the police investigation.

Chronologically, the plaintiff’s affidavit recorded that the deceased died on 30 June 2009 and that the plaintiff approached attorneys for assistance in being appointed executrix. A fraud case was opened on 29 December 2009 by the plaintiff’s mother-in-law, accusing the plaintiff of transferring the money from the FNB account to a Nedbank account. On 4 January 2010, the plaintiff received a call from someone who purported to be from the Master’s office, telling her that a letter of executorship had been issued in October 2009, which was inconsistent with what her attorneys had experienced (they had not received such a letter).

On 14 January 2010, the investigating officer produced letters of executorship obtained from the Master’s office, and the opposing party’s attorney also had a copy. Using a copy, the plaintiff obtained information indicating that the funds had been transferred to a Nedbank account on the instructions of the purported executor. At Nedbank she learned that an account had been opened in her name in Polokwane on 22 October 2009, but she was refused further information when her signature did not match the signature held by the bank. On 15 January 2010, she obtained information from FNB that the money had been transferred from the Goldreef Branch, and she showed FNB the copies of both letters of executorship she had received from the police.

The “crux” of the prescription issue, however, lay in an internal report of the first defendant received in September 2012. The report recorded that a letter of executorship was issued in favour of the plaintiff on 20 October 2009, but that other copies purportedly issued to other people bore signatures and date stamps that could not be identified as belonging to Master’s office personnel; after investigation, the first defendant concluded that the letter issued to the person purporting to be the plaintiff was fraudulent. The court noted that it was unclear how the plaintiff obtained the report, because it was not sent to her.

Summons was served on 24 November 2014. The only issue for decision was whether, on these facts, the claims against the respective defendants had prescribed.

3. Legal Issues

The central legal issue was the application of section 12(3) of the Prescription Act 68 of 1969 to the agreed facts, and in particular the question: when did the plaintiff’s delictual “debt” become due, either because she had actual knowledge of the identity of the debtor(s) and the material facts, or because she was deemed to have such knowledge through the exercise of reasonable care.

This required the court to determine, for each defendant separately, whether the plaintiff had knowledge of the identity of the debtor and the facts from which the debt arose, and whether those facts were sufficient to give her reasonable grounds to suspect fault so as to require further investigation. The dispute was therefore principally one of application of law to fact: the statutory test for prescription had to be applied to the chronology of what the plaintiff knew and what she could reasonably have discovered.

A further issue was interpretive and constitutional in character. The court approached the interpretation of section 12(3) as a matter of statutory interpretation informed by section 39(2) of the Constitution, and considered the interaction between prescription and the section 34 right of access to courts. The court treated this as informing the selection among plausible interpretations of when a debt should be regarded as due.

4. Court’s Reasoning

The court began from the premise that, because prescription is governed by statute, the analysis required statutory interpretation. It held that section 12(3) must be interpreted in a manner consistent with the Constitution, invoking section 39(2) and the Constitutional Court’s direction in Makate v Vodacom (Pty) Ltd [2016] ZACC 13 that courts are obliged to apply section 39(2) even if parties do not request it.

The court identified section 34 of the Constitution (access to courts) as relevant because the Prescription Act limits that right. Relying on Makate, the court accepted that, where interpretive choices exist, the court should prefer the interpretation of “debt” and related concepts that is least intrusive on access to courts, while still respecting the statutory purpose of prescription.

Turning to the language of section 12(3), the court emphasised that a debt is not deemed due until the creditor has knowledge of the identity of the debtor and the facts from which the debt arises, with a proviso deeming such knowledge if it could have been acquired by exercising reasonable care. The court described the purpose of section 12(3), as articulated in Constitutional Court authority, as striking a balance between legal certainty and finality and the need to avoid injustice where strict application would compel premature litigation or penalise a creditor who could not reasonably act sooner.

The court then engaged with the case law on what constitutes “knowledge of the facts,” particularly in delict where elements such as wrongfulness, fault (negligence), and causation have factual and legal aspects. It drew on Truter v Deysel [2006] ZASCA 16 for the proposition that a debt becomes due when the creditor has a complete cause of action, meaning the set of facts that must be proved to succeed, and that wrongfulness and negligence are characteristically legal conclusions drawn from facts rather than “facts” themselves; it also noted Truter’s statement that an expert opinion indicating negligence is not itself a fact but rather evidence.

The court contrasted this with Links v MEC for Health, Northern Cape [2016] ZACC 10, where the Constitutional Court held that until there are reasonable grounds for suspecting fault sufficient to cause a claimant to seek advice, the claimant cannot be said to have knowledge of the facts from which the debt arises. The court treated Links as recognising that negligence and causation may require certain factual building blocks to be known before prescription can begin running.

The court further considered Mtokonya v Minister of Police [2017] ZACC 33, where the Constitutional Court distinguished between knowledge of facts and knowledge that conduct is wrongful and actionable, treating the latter as knowledge of law that is not required for prescription to commence. The court also relied on Kruger v National Director of Public Prosecutions [2018] ZACC 13, where the Constitutional Court framed the inquiry as whether the known facts were sufficient to ground a likely inference supporting the essential elements (the facta probanda) of the cause of action, even if additional evidentiary facts (facta probantia) might later strengthen the case.

On constructive knowledge, the court accepted that section 12(3) also requires inquiry into whether the creditor could have acquired the requisite knowledge through reasonable care. It referred to Macleod v Kweyiya 2013 (6) SA 1 (SCA) as supporting an objective standard of what a reasonable person in the creditor’s position would do, and referred to Loni v Member of the Executive Council, Department of Health, Eastern Cape, Bhisho [2018] ZACC 2 in relation to assessing what a reasonable person would have realised on the available facts.

Applying these principles, the court analysed prescription separately in respect of each defendant because the factual requirements for knowledge of the debtor and the material facts differed.

In relation to the second defendant (the bank), the court held that by 14 January 2010 the plaintiff knew material facts pointing to wrongdoing and fault by the bank: she knew the deceased had an account with the bank; she knew the funds had been transferred out on the instructions of a purported executor; and she knew (from the Nedbank interaction and the signature mismatch) that the transfer could not have been authorised by her. The court reasoned that this was sufficient to plead wrongfulness and fault against the bank on the basis of failure to verify authenticity and authority, and that the plaintiff therefore had, or was at least deemed to have had, the facts material to unlawfulness and fault against the bank by that date. On this approach, the court treated the facts available in January 2010 as sufficient to ground the probable inference that the bank’s conduct caused the loss, such that the debt against the bank became due then.

In relation to the first defendant (the Minister/Master’s office), the court took a different view, focusing particularly on the statutory requirement of knowledge of the identity of the debtor and on whether the plaintiff had enough material facts to infer that the fraudulent letters of executorship emanated from the Master’s office (as opposed to being forged externally). The court accepted that, on the facts, it was not certain that the plaintiff knew where the fraudulent letters originated from in January 2010. The plaintiff’s subsequent description of repeated visits to the Master’s office, being told that no such letters existed, the file being missing, and the Master’s refusal to provide information while an internal investigation continued, supported the conclusion that she lacked confirmation linking the wrong to the Master’s office.

The court considered and rejected the contention that because only the Master issues genuine letters, the existence of unfamiliar letters necessarily meant they originated from the Master’s office. It accepted that forgery by persons unconnected to the office was a reasonable possibility, and treated the internal report (received in September 2012) as the point at which it became known “for certain” that the letter issued to the purported plaintiff was fraudulent in a manner implicating the Master’s processes. The court aligned this conclusion with the approach in Links, holding that before September 2012 the plaintiff did not have knowledge of all material facts (particularly regarding the identity of the debtor in the sense relevant to her case against the first defendant) needed to institute proceedings.

On deemed knowledge, the court held the plaintiff could not be expected, by reasonable care, to have acquired the missing information earlier. It placed weight on the fact that even the Master’s office, on the report’s contents, had itself been uncertain about provenance until investigation, and that the office was not forthcoming with information. In its assessment, the plaintiff acted reasonably by appointing attorneys, cooperating with the investigating officer, engaging with the Master’s office repeatedly, and pursuing information; the court considered that requiring her to sue earlier would have forced premature litigation without adequate factual basis.

In that context, the court expressly relied on the Makate approach that interpretation should be least intrusive on access to courts, and reiterated the need to balance finality with fairness to avoid injustice from overly rigid application.

5. Outcome and Relief

The court upheld the special plea of prescription only in respect of the second defendant, finding that the plaintiff’s claim against the bank had prescribed under section 11(d) read with section 10 of the Prescription Act because the debt became due by January 2010 and summons was served only on 24 November 2014.

The court dismissed the special plea in respect of the first defendant, holding that the claim against the Minister (as cited) had not prescribed because the debt became due only when the plaintiff obtained the September 2012 internal report, and because she was not deemed to have had that knowledge earlier through reasonable care.

As to costs, the court ordered that the first defendant’s special plea was dismissed with costs, and the second defendant’s special plea was upheld with costs.

Cases Cited

Makate v Vodacom (Pty) Ltd [2016] ZACC 13.

Truter v Deysel [2006] ZASCA 16.

Links v MEC for Health, Northern Cape [2016] ZACC 10.

Mtokonya v Minister of Police [2017] ZACC 33.

Kruger v National Director of Public Prosecutions [2018] ZACC 13.

Macleod v Kweyiya 2013 (6) SA 1 (SCA).

Loni v Member of the Executive Council, Department of Health, Eastern Cape, Bhisho [2018] ZACC 2.

Legislation Cited

Constitution of the Republic of South Africa, 1996, section 34.

Constitution of the Republic of South Africa, 1996, section 39(2).

Prescription Act 68 of 1969, section 10.

Prescription Act 68 of 1969, section 11(d).

Prescription Act 68 of 1969, section 12(3).

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The court held that the plaintiff’s delictual claim against First National Bank had prescribed because, by January 2010, the plaintiff had knowledge (or at least deemed knowledge under section 12(3)) of the material facts necessary to institute action against the bank, including facts supporting wrongfulness and fault in relation to the transfer of funds on unauthorised instructions.

The court held that the plaintiff’s delictual claim against the Minister of Justice and Constitutional Development (in relation to the Master’s office) had not prescribed because, until the September 2012 internal report, the plaintiff did not have knowledge of material facts establishing the identity of the debtor in the relevant sense and could not reasonably have been expected to acquire such knowledge earlier, particularly given the lack of cooperation and uncertainty within the Master’s office itself.

The court consequently dismissed the first defendant’s special plea with costs, and upheld the second defendant’s special plea with costs.

LEGAL PRINCIPLES

Section 12(3) of the Prescription Act 68 of 1969 requires knowledge of the identity of the debtor and the facts from which the debt arises before a debt is deemed due; however, a creditor is deemed to have such knowledge if it could have been acquired by the exercise of reasonable care. The onus rests on a defendant raising prescription to show that prescription commenced running by the relevant date.

In delict, a “debt” is due when the creditor has a complete cause of action, meaning the facts that must be proved (facta probanda) are in place. Knowledge that conduct is legally wrongful or actionable is generally treated as knowledge of law, not a “fact” required for section 12(3), but the creditor must know enough factual material to draw a likely inference supporting the claim.

The inquiry into when prescription begins may differ between multiple defendants because the creditor’s knowledge of the identity of the debtor and of material facts may be adequate in relation to one alleged wrongdoer but not another. Constructive knowledge under section 12(3) is assessed against what a reasonable person in the creditor’s position would have done to acquire the relevant facts, taking into account the creditor’s circumstances and the availability of information.

Statutory interpretation of prescription provisions must be undertaken consistently with section 39(2) of the Constitution, and with sensitivity to the section 34 right of access to courts; where interpretive choices arise, a court should prefer an interpretation that is least intrusive on access to courts while still achieving the balance between legal certainty and fairness reflected in section 12(3).

Zwane v Minister of Justice and Constitutional Development and Another [2023] ZAGPPHC 214; 74773/2014 (13 March 2023)