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[2012] ZASCA 203
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Basson v Niemann and Others (150/2012) [2012] ZASCA 203 (30 November 2012)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No:
150/2012
Not
reportable
In
the matter between:
JOHAN GEORGE WILHELMUS BASSON
.....................................................
Appellant
and
BENITO HITLER NIEMANN
...............................................................
First
Respondent
JACOB JACOBUS DE KLERK
.....................................................
Second
Respondent
DEON STORM
...................................................................................
Third
Respondent
FRANCOIS CHARL LE ROUX
........................................................
Fourth
Respondent
Neutral
citation:
Basson v Niemann
(150/2012)
[2012] ZASCA 203
(30
November 2012)
Coram:
Mpati P, Nugent, Malan, Leach and Theron JJA
Heard:
19 November 2012
Delivered:
30 November 2012
Summary:
Prescription ─ knowledge of the facts ─ respondents
having acquired knowledge of all facts material to their claim more
than three years before the service of their summons ─
respondents’ claim prescribed.
___________________________________________________________________
O R D E R
___________________________________________________________________
On appeal from:
North Gauteng High Court,
Pretoria (Erasmus J sitting as court of first instance):
1. The appeal is upheld, with costs.
2. The order of the court a quo is set aside and
substituted with the following:
‘
(a) The special plea of
prescription is upheld.
(b) The plaintiffs’ claims are dismissed with
costs.’
___________________________________________________________________
J U D G M E N T
__________________________________________________________________
LEACH JA (MPATI P, NUGENT, MALAN AND THERON JJA
concurring).
[1] The parties to this appeal formerly practised
together in partnership as attorneys in Pretoria. As will be set out
in greater
detail in due course, after the dissolution of the
partnership the respondents instituted action in the North Gauteng
High Court,
seeking an order declaring the appellant to be liable to
them in respect of certain partnership debts and ordering him to pay
various
amounts they had paid to persons who had lodged claims
against the partnership. The appellant raised a special plea of
prescription.
This the high court ordered should be determined as a
separate issue, with the merits of the claim standing over for later
decision.
After hearing evidence on the issue of prescription, the
high court dismissed the special plea with costs. An application for
leave
to appeal was similarly unsuccessful. This appeal is brought
with the leave of this court.
[2] The firm of attorneys in which the parties practised
was one of long standing, its partners having changed from time to
time
over the years. At the beginning of 1999 there were six
partners, namely, the appellant, the four respondents and a Mr Louw
Erasmus.
When the latter left the firm on 28 May 1999, the
partnership was dissolved and replaced by a fresh partnership between
the parties.
The appellant was a senior partner, and headed the
firm’s litigation and commercial practice. The first
respondent, who had
been a partner in the firm since 1973, and the
other respondents were conveyancers.
[3] On 1 March 2000, the structure of the firm changed
once more when its practice was taken over by a company of which the
appellant
and the first to third respondents, together with Mr DS
Jacobs who until then had been employed by the firm as a professional
assistant,
became shareholders and directors. At the same time, the
fourth respondent left the firm and took up employment in the
commercial
sector. Although this new company has since conducted the
practice, apart from one issue that I shall mention in due course,
nothing
in the present dispute really turns on the nature of the
firm’s juristic personality and, for convenience, I intend for
the
most part to refer to both the partnership and the company which
replaced it simply as ‘the firm’.
[4] On 31 March 2008, the appellant resigned as a
director of the firm. He was later called to the bar and was
practising as an
advocate when the proceedings against him were
instituted in the high court. Before the appellant left the firm,
dissention between
he and his former partners had grown arising out
of his dealings with a client of the firm, Anglo-Euro Company (Pty)
Ltd, some
nine years earlier which subsequently led to the
respondents instituting action against him in the North Gauteng High
Court by
way of a summons served on 3 December 2009.
[5] Briefly put, in their particulars of claim the
respondents alleged the following:
(a) Anglo-Euro had to the
knowledge of the appellant marketed a scheme to the public holding
out that foreign financial loans could
be obtained from certain of
the world's leading banks at attractive interest rates.
(b) As part of the
scheme, various persons (whom for convenience I shall refer to as
‘investors’) had applied to obtain
foreign loans through
Anglo-Euro and, in order to do so, had been obliged to pay
substantial deposits to the firm which had been
held on their behalf
in the firm’s trust account.
(c) From approximately
April to August 1999, the appellant had negligently, and in breach of
his obligations as a reasonable attorney
and the rules of the Law
Society of the Northern Provinces, paid certain of these deposits to
Anglo-Euro without having had the
necessary authority of the
investors to do so.
(d)
Consequently, as partners in the firm, the respondents had been
obliged to reimburse a number of these investors who had claimed
repayment of their deposits.
(e) In terms of their
partnership agreement, the parties had agreed that in the event of
the partnership suffering damage due to
negligence or unprofessional
conduct of a partner, the partner responsible would indemnify the
partnership or the innocent partners
against such damage and that, in
the event of the partnership, after its dissolution, being held
liable for damage suffered as
a result of a partner’s
negligence or unprofessional conduct during the existence of the
partnership, each individual partner
would be entitled to claim his
pro rata share of the damage from the responsible partner.
[6] On the strength of these allegations, the
respondents sought an order declaring the appellant to be liable to
them in respect
of any claim arising from the appellant having paid
investors’ deposits held by the firm to Anglo-Euro without the
necessary
authorisation to do so. In addition they claimed payment of
various amounts they had been obliged to pay a number of such
investors.
[7]
It was to these claims that the appellant filed his plea of
prescription.
1
It is common cause that
the prescriptive period for the respondents’ claim was three
years.
Section 12(1)
of the
Prescription Act 68 of 1969
provides that
prescription begins to run ‘as soon as the debt is due’.
However
s 12(3)
goes on to provide 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 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.’
The appellant alleged
that his conduct on which the respondents relied had occurred in 1999
and that the respondents had either
known, or could have known had
they exercised reasonable care, both of his identity as the alleged
‘debtor’ and of
the facts out of which his alleged ‘debt’
had arisen more than three years before service of the summons on 3
December
2009.
[8] The respondents sought to meet this by relying on
s
12(2)
of the
Prescription Act which
provides that should a debtor
wilfully prevent the creditor ‘from coming to know
of the existence of the debt, prescription shall not commence to run
until
the creditor becomes aware of the existence of the debt’.
They alleged that the appellant had assured them that he had in
fact
been authorised to pay the amounts that he had paid out of trust to
Anglo-Euro, that they had accepted his assurances in that
regard and
that they had learned only in May 2007 that the appellant had not in
fact been properly authorised to make such payments.
They therefore
averred that prescription had only commenced to run from that time
and that the three year period of prescription
had not elapsed before
summons was served on 3 December 2009.
[9] The high court
judgment, while not a model of clarity in respect of the facts it
found to have been proved, appears to have
been premised on a finding
that the respondents, through no lack of reasonable care on their
part, only learned of their claims
against the appellant and the
facts giving rise thereto in May 2007. As appears from what follows
this flies in the face of certain
of the basic undisputed facts which
clearly showed that the respondents had knowledge of the relevant
facts well before then and
had, indeed, paid many of the investors’
claims more than three years before they instituted action against
the appellant.
[10] It is common cause
that the deposits of various investors in the Anglo-Euro scheme were
paid into the firm’s trust account.
The appellant appears also
to concede that during the period April to August 1999 he paid
certain of these deposits to Anglo-Euro
(in his plea he disputed that
he had acted negligently or improperly in doing so but a decision on
that issue is irrelevant in
considering the plea of prescription).
Prescription of the respondents’ claims would therefore have
commenced to run once
they knew, or could reasonably to have known,
(a) of the appellant having paid the investors’ deposits to
Anglo-Euro and
(b) that such payments were improperly made without
the necessary authority to do so.
[11] In regard to the
first of these requirements, it is clear that shortly after the
payment of investors’ deposits had been
made by the appellant,
allegations surfaced that they had been improperly made and the
respondents were aware thereof. Indeed a
number of summons were
either threatened or issued against the partners of the firm in which
disgruntled investors claimed payment
of the deposits they alleged
had been irregularly paid out by the appellant. The respondents were
thus aware from the outset that
investors alleged that their deposits
had been improperly paid out of the firm’s trust account and
their defence to prescription
related simply to the second
requirement ie whether they knew or could reasonably have ascertained
that the appellant had lacked
the necessary authority to make the
disputed payments. The foundation of their case in that regard was
that the appellant was their
partner in whom they were entitled to
have the utmost faith, and he had reassured them that he had not
acted improperly and had
been duly authorised to act as he had done
[12] Of particular
significance in considering whether the relevant facts were within
the respondents’ knowledge is the
application
brought by
two such investors,
Mr C
Visscher and Mr F du Toit,
on 1 December 1999
in the Pretoria High Court. They cited the appellant
, the
firm, the individual respondents in the present appeal and Anglo-Euro
as respondents and claimed payment of various amounts
totalling R1,6m
allegedly improperly paid by the appellant out of trust to Anglo-Euro
(for ease of reference I intend to refer
to this simply as ‘the
Visscher claim’). The firm reported the matter to the insurance
brokers who handled its compulsory
professional insurance. This, in
turn, led to the firm’s insurers appointing an attorney, Mr
Michael Leinberger (at the time
a member of the Pretoria firm of
attorneys Savage, Jooste & Adams) to deal with the claim on
behalf of the firm.
[13] Precisely what
occurred immediately thereafter is not clear as the records of
Savage, Jooste & Adams relating to the Visscher
claim had fallen
into disarray in the period of almost 12 years that had intervened
before the special plea in the present matter
came to trial. Be that
as it may, it appears as if the affidavits filed by the opposing
sides gave rise to disputes which the parties
decided should best be
determined by way of arbitration. This led to senior counsel, Adv JJ
Gauntlett SC, being appointed as arbitrator
to determine whether an
obligation had arisen, in either contract or delict, between Visscher
and Du Toit on the one hand and the
firm and its partners on the
other.
[14] The arbitration was
a long and drawn out affair conducted between April 2004 and March
2005. In his award delivered on 14 March
2005, the arbitrator ruled
in favour of the claimants, and held that the appellant had been duty
bound not to make payments out
of trust except upon the investors’
explicit instructions.
[15] Unhappy with this
outcome, the appellant, the respondents and the firm appealed to an
arbitration appeal tribunal consisting
of a retired judge of this
court and two practising senior counsel. On 23 June 2005, it
dismissed the appeal, having concluded
that written instruction from
the investors had been a pre-condition for payment of their deposits
to Anglo-Euro.
[16] In the light of this
finding, it would have been an obvious step for the respondents to
have asked the appellant to produce
the written authority of each
investor whose deposit had been paid out to determine the validity of
the claims brought against
them, particularly as it would have been
obvious that the appellant’s stance, rejected on arbitration,
had been that no such
written authority had been required. The
respondents appear to have left their defence to the Visscher claim
up to the appellant
(their litigating partner) and their insurers,
but a reasonable person in their position, on learning of the
unsuccessful outcome
of the arbitration, would surely not have
continued to be listless and supine in regard to a case in which they
had been sued for
payment of an enormous sum of money but would have
demanded to be fully informed; to have insisted on seeing the
arbitrators’
rulings; and to have ascertained whether the
appellant had indeed had the necessary written authorisation to have
made the payments
he did. If not already running by then, after the
outcome of the arbitration appeal the prescription clock surely began
to tick.
[17]
In the meantime,
a
number of other investors had either claimed payment of their
deposits paid by the appellant to Anglo-Euro or had indeed already
instituted action for payment of such deposits. The appellant and the
respondents were therefore exposed to substantial claims
from
numerous investors. Consideration was given to seeking further relief
in another forum, but in the end it was decided that
there was no
realistic prospect of avoiding liability. The appellant testified
that in regard to the Visscher claim in particular,
their decision
was largely influenced by the judgment of this court in
Hirschowitz
Flionis
2
delivered on 22 March
2006 and the advice of counsel that, in the light thereof, the
decisions of the arbitrator and the appeal
tribunal could not be
assailed. This was not challenged by the respondents.
[18]
Accordingly, the parties accepted being liable to the various
investors whose deposits had improperly been paid out of trust
by the
appellant. Unfortunately for the parties, their insurers were not
prepared to meet the full amount of all the claims and,
consequently,
during the period 19 January 2006 to 26 September 2006 they were
called upon to and did make a number of payments
to various
investors,
including
Visscher and Du Toit, to settle their claims. Details of these
payments, which the third respondent required for income
tax
purposes, are set out in a letter Mr Leinberger addressed to him on 3
November 2006 which reads:
‘
1.
Re:
Adriaan Hendrik Van Wyk NO plus two other Plaintiffs
.
R75 600.00,
ie R18 900.00 each paid on 19 January 2006 and 28 February 2006.
2.
Re: G Visscher, FH Du Toit and Finansiële Advies Dienste
2.1
R194 400.00 ie R48 600.00 each on 3 April 2006;
2.2
R2 880.18 ie R720.05 each in respect of interest on the
abovementioned amount on 6 June 2006.
3.
Re: GB du Plessis
R60 480.00
ie R15 120.00 each paid on 26 September 2006.’
[19] Interestingly, the
first payment mentioned (to AH Van Wyk NO and two other claimants
which resulted in each former partner
having to pay R18 900) was
made seven months after the arbitration appeal tribunal had dismissed
the appeal and before the
appeal in
Hirschowitz Flionis
was
heard in this court. The judgment in the latter case could therefore
have played no part in the decision taken to make this
initial
payment, and the inference is irresistible that the payments made by
the appellant out of trust had been improper had already
sunk in by
then (which is understandable given the findings of the various
arbitrators) and was later confirmed by the decision
in
Hirschowitz
Flionis
a few months later (before the parties made their payment
in respect of what had not been paid by their insurers in respect of
the
Visscher claim).
[20] Of the respondents,
only the first respondent testified in the court below. According to
him, despite their having made these
payments, the appellant
continued to assure them that he had been authorised to make the
payments. The first respondent averred
that it was only in May 2007
that they came to realise that the appellant had not been so
authorised. This occurred when the respondents
met with Mr Leinberger
who explained that the appellant had not had the necessary written
authority to make the payments he had
made to Anglo-Euro and
explained the extent of their potential liability due to their
insurers refusing to make further payments
on their behalf.
[21]
However,
the respondents’
argument that prescription only commenced to run at this point in
time cannot be accepted. Indeed the first
respondent conceded that if
he had exercised care he would have learned everything necessary to
institute action against the appellant
by
2006. This in itself is fatal to the respondents’ case.
[22]
But in any event, it is clear from the
first respondent’s own evidence that he in fact had knowledge
of the material facts
by then. Crucial to this is a directors’
meeting of the firm held on 16 January 2006 and attended by the
appellant and the
first to third respondents, the minutes of which
recorded that the appellant would contact an attorney, Thys Cronje,
who was acting
on behalf of the majority of the investors who had
instituted action, to discuss the Anglo-Euro matter with him after
which a decision
would be taken in regard to the way ahead in regard
to settlement.
[23]
The first respondent testified that by that stage the respondents
knew that the arbitration and the arbitration appeal had
gone against
them,
the appellant's claim
that he had been authorised to make the payments notwithstanding. He
also conceded that they had realised
by then that the appellant’s
allegation that he had not acted improperly was without merit, that
many investors had instituted
action against them personally for
repayment of their deposits,
and
that they were liable in respect of those claims (as is borne out by
the payments they made to investors).
Indeed
the first respondent conceded that nothing prevented the respondents
from instituting their action against the appellant
at that stage,
save for the fact that he was their
partner and as he told them he was negotiating both with their
insurers and Mr Toerin of Anglo-Euro
to reimburse them the amounts
they were obliged to pay out to the investors.
[24] The respondents
therefore paid investors the large amounts mentioned in para 18 in
2006 at a time when they were well aware
that they had no defence to
the investors’ claims. If prescription had not begun to run
before then, that was no longer the
case by April 2006.
[25] The truth of the
matter lies in the first respondent’s concession under
cross-examination that he could have investigated
the merits at a far
earlier stage than he said he did. However his (and presumably the
other respondents’) indifference to
the various investor’s
claims against them, appears to have been due to them having left the
litigation in the hands of the
appellant and their insurers. It was
only in April 2007 that they realised that they were not going to be
reimbursed by Anglo-Euro
or their insurers. But of course this did
not mean that they didn't already know that they were liable to the
investors. That they
had known for some time is evidenced by them
paying those investors. All they came to realise is that they were
not going to be
reimbursed, but that was irrelevant to the existence
of their claim against the appellant, the material facts relevant
thereto
having been known to them long before.
[26] It is clear from
this that on the respondents’ own case, prescription commenced
to run against them by early 2006 at
the very latest. That being so,
the respondents’ claims had prescribed before they instituted
their action against the appellant
more than three years later.
[27] Recognising this
difficulty, counsel for the respondents sought in this court to raise
for the first time an argument inconsistent
with the respondents’
pleadings (which were to the effect that prescription commenced to
run in May 2007) by contending that
although the firm’s
practice was incorporated on 1 March 2000, its directors effectively
practised in partnership until 2008
when the appellant resigned.
Accordingly, so the argument went, the partnership between the
parties should be regarded as having
continued until 2008 and, as the
respondents were seeking to enforce a right of recourse against their
former partner, their claim
only arose in 2008, less than three years
before they instituted action in December 2009.
[28]
This argument, novel as it is in certain respects, cannot be
accepted. In support of the argument the respondents relied on
the
decision of this court in
Louw
v Nel
2011
(2) SA 172
(SCA). At first blush, such reliance was misplaced. All
that the court observed in that matter was that where a private
company
was formed at the instance of a partnership, ‘there
ought to exist between the members in regard to the company’s
affairs
a particular personal relationship of confidence and trust
similar to that existing between partners in regard to a partnership
business’.
3
That is no authority for
a proposition that the partnership that existed before the company
was incorporated continues to exist.
[29]
But in any event, in the present case the so-called ‘partners’
in the firm after its incorporation were not the
same as those who
had been partners immediately before incorporation took place. As
pointed out above,
4
the fourth respondent
left the firm immediately before its incorporation whereafter Mr
Jacobs, who had not been a partner, became
a director. The
partnership between the parties was thus necessarily dissolved when
the fourth respondent left, and the members
of the firm after its
incorporation were not the same as the persons who had been partners
at the time of the events giving rise
to the respondents’
claims (as is borne out by Mr Jacobs not being a party to this
litigation).That partnership thus cannot
be regarded as only having
been dissolved when the appellant left the firm in 2008.
[30] The court a quo
therefore erred in not upholding the appellant’s plea of
prescription. The appeal must therefore succeed
and the respondents’
claims be dismissed as having prescribed.
[31] It is therefore
ordered:
1. The appeal is upheld,
with costs.
2. The order of the court
a quo is set aside and substituted with the following:
‘
(a)
The special plea of prescription is upheld.
(b) The plaintiffs’
claims are dismissed with costs.’
______________________
L E Leach
Judge of Appeal
APPEARANCES:
For Appellant: S D WAGENER SC
Instructed by:
Pieterse & Curlewis Inc, c/o A L Maree Inc, Pretoria
Martins Attorneys, Bloemfontein
For Respondent: C J VAN DER WESTHUIZEN SC
Instructed by:
J F Jordaan Inc, Pretoria
McIntyre & Van der Post, Bloemfontein
1
His
initial plea of prescription related solely to the claims brought by
two claimants against the former partnership, but the
special plea
was later amended so as to relate to the respondents’ claim as
a whole.
2
Hirschowitz
Flionis v Bartlett
[2006] ZASCA 23
;
2006 (3) SA 575
(SCA).
3
Louw
v Nel
para 18.
4
In
para 3 above.