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1990
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[1990] ZASCA 16
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Protea International (Pty) Ltd v Peat Marwick Mitchell & Company (623/88) [1990] ZASCA 16; 1990 (2) SA 566 (AD); [1990] 2 All SA 199 (A) (16 March 1990)
Case No: 623/88 whn
PROTEA INTERNATIONAL (PTY) LTD
Appellant
and
PEAT MARWICK MITCHELL & COMPANY
Respondent
JOUBERT
JA
IN THE SUPREME COURT OF SOUTH AFRICA APPELLATE
DIVISION
In the matter between:
PROTEA INTERNATIONAL (PTY) LTD
Appellant
and
PEAT MARWICK
MITCHELL & COMPANY
Respondent
Coram
: JOUBERT, VIVIER, MILNE JJ A et
FRIEDMAN, NIENABER A JJ A
Hearing
: 23 February 1990
Delivered
: 16 March 1990
JUDGMENT JOUBERT
JA:
/The
2
The appellant in this matter sued the respondent in the
Witwatersrand Local Division for damages arising from breach of contract in
an
amount of R759 302-00. The respondent was engaged by the appellant to conduct
annual audits for its financial years ended 30 June
1982 and 30 June 1983 and to
furnish reports as envisaged in terms of section 301 of the Companies Act 61 of
1973. The annual audits
were completed on 10 August 1982 and 5 August 1983
respectively. The alleged breaches of contract consisted of the respondent's
negligent
failure to detect in each annual audit certain irregular transactions
which were brought to the knowledge of the appellant during
March 1984. It was
common cause that the alleged breaches of contract occurred at the latest on 10
August 1983. On 23 October 1986
the summons was served on the respondent.
In an alternative plea the respondent raised the defence that the appellant's
claim had become
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3
prescribed in terms of the provisions of the
Prescription
Act 68 of 1969 (the "main Act"). When the matter was
heard by
MORRIS A J the alternative plea was argued
in limine
as a special plea
which he upheld by granting absolution from
the instance in respect of the
appellant's claim. The
appeal is brought with leave of the Court
a quo
against the
judgment of MORRIS A J.
Inasmuch as the appellant's claim is for
the payment of a contractual debt the period of extinctive
prescription applicable to the debt is 3 years according to
the provisions of section 11(d) of the main Act. Section
12 of the main Act deals with the commencement of extinctive
prescription. In its original form as enacted the relevant
provisions of section 12 read as follows:
"(1) Subject to the provisions of subsections (2) and (3), prescription shall
commence to run as soon as the debt is due. (2) If the
debtor wilfully prevents
the creditor from coming to know of the existence of
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4
the debt, prescription shall not commence to run until the
creditor becomes aware of the existence of the debt. (3) A debt
which does
not arise from contract
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."
(My underlining).
Subject to certain exceptions a prescribed debt is in terms of section 10(1)
of the main Act extinguished-after the lapse of the relevant
prescriptive
period. Since a prescribed debt is the correlative of the creditor's contractual
right of action, the prescription of
the debt necessarily extinguishes the right
of action. The extinction of a contractual right of action by prescription is
accordingly
a matter of substantive law and not a procedural matter. See
Kuhne & Nagel A G Zurich v A P A Distributors
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5
(Pty) Ltd
, 1981(3) SA 536 (W) at p 538 F. This
constitutes
a radical departure from the position under the old Prescription
Act 18 of 1943. The effect of section 3(1) of the latter Act was
procedural in
character since the lapse of the prescriptive period rendered a contractual
right of action unenforceable, whereas
the prescribed debt became a natural
obligation until the effluxion of 30 years after the contractual right of action
had first come
into existence (section 3 (5)).
Let us now consider the
commencement of extinctive prescription in regard to contractual debts.
In terms of section 12(1) of the main Act prescrlption begins to run as soon
as the contractual debt becomes due i.e. as soon as the
creditor's contractual
right of action becomes enforceable. Under section 12(2) awareness on the part
of the creditor of the fact
that the contractual debt has become due is
irrelevant unless the debtor wilfully prevented him from becoming aware of the
existence
of the debt in which
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6
event prescription will not commence to run until he became
aware of such existence. See De Wet en Yeats,
Kontraktereg en Handelsreg
,
4th ed. at p263.
Section 12(3) of the main Act, as originally enacted,
expressly excluded from its operation debts arising from contracts. It was
intended
for other types of debts such as, for instance, delictual debts. It
introduced the requirement of knowledge on the part of the creditor
of both the
identity of the debtor and of the facts from which the debt arose, provided that
he would be deemed to have such knowledge
if he could have acquired it by
exercising reasonable care. This provision was obviously based on an equitable
principle. This section
was, however, amended by section 1(3) of the
Prescription Amendment Act 11 of 1984 (the "amending Act"), which came into
operation
on 7 March 1984, by the deletion of the phrase "which does not arise
from contract." The effect of this amendment
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7
to section 12(3) of the main Act is to place the commencement
of prescription concerning contractual debts on a par with that of other
debts
such as delictual debts.
The question to be decided is whether the
appellant's contractual claim against the respondent became prescribed before
service of
the summons on 23 October 1986. The answer to this question depends
on whether the amendment to section 12(3) is applicable to the
prescription of
contractual claims which commenced to run
before
such amendment had
become operative on 7 March 1984, or whether such amendment's application is to
be confined to the prescription
of contractual clalms which commenced to run
on or after
7 March 1984. It should be noted that the provisions of
section 12(2) have no bearing on the facts of the present matter. Likewise
the
proviso to section 12(3) has no application in this appeal.
Mr
Plewman
, on behalf of the appellant, contended that the amendment
to section 12(3) introduced on
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7 March 1984 an additional requisite of knowledge on the part
of the creditor in regard to the facts from which the contractual claim
arose.
The appellant acquired knowledge of such facts during March 1984 when
prescription of its contractual claim commenced to run.
Service of the summons
on 23 October 1986, however, interrupted the running of the prescription before
its completion during March
1987. Hence the appellant's claim had not become
prescribed.
The argument advanced by Mr
Browde
on behalf of the
respondent was that the prescriptive period commenced to run at the latest on 10
August 1983, i.e.
prior
to the coming into operation of the amendment to
section 12(3) on 7 'March 1984. The prescriptive period was completed on 9
August
1986. The appellant's claim had therefore already become prescribed when
the summons was served on 23 October 1986. The amendment
to section 12(3) was
inapplicable to prescription which had already commenced to run before
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the amendment became operative on 7 March 1984.
The
soundness or otherwise of these opposing contentions depends upon the
applicability, if any, of the amendment to section 12(3)
in regard to
prescription which had already commenced to run before its operative date on 7
March 1984.
As a general rule of construction, based on
Code
1.14.7,
the operation of a statute is prospective to apply only after its enactment
(
in futuro
), unless the legislator clearly expressed a contrary intention
that the operátion should be retrospective to apply prior to
its
enactment (
in praeterito
). See the 4th presumption mentioned in Steyn,
Uitleg van Wette
, 5th ed. p 82 and Maxwell on
Interpretation of
Statutes
, 12th ed. at p 215
sqq
. There are, however, exceptions to
this general rule of construction which favour retrospectivity. Under the
sub-heading: "As die
wet 'n eksepsie of vrystelling invoer of afskaf", Steyn,
op.cit
., p 94
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mentions one of the exceptions in favour of
retrospectivity
for which reliance is placed on Paul Voet, Johannes
Voet
and
Curtis v Johannesburg Municipality
,
1906 T.S. 312.
I shall deal with these authorities briefly.
Johannes Voet (1647-1713) 1.3.17 describes
the exception in favour of retrospectivity as follows:
'Vel denique introduceretur nova lege exceptio aut liberatio quaedam; nam et
tunc in praeteritis quoque negotiis, quorum obligatio
hactenus duravit, habere
locum, aequum est; non ad id, ut in praeteritum, sed ut in futurum obligatio
exceptione recenter inducta
resolvatur. Sic diminuto per legem novam usurarum
modo, minores annis sequentibus solvendae sunt, earum quoque sortium intuitu,
pro
quibus ex juris prioris concessione graviores, ac vi novae legis modum
excedentes, fuerant in conventionem deductae. Cod. 4.32.27
pr. Eoque fundamento
Ultrajectinis quoque placuit, ut biennii praescriptio in exactione salariorum
aut pretii rerum minutim distractarum,
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similiumque, ad debita etiam praeterita vim exsereret; sic ut tempore
quocunque anteriore contracta, praescriptione biennii, a die
novae legis latae
computandi, tollerentur,
novella decis
.
Ultraiectina 14 Aprilis 1659
art 21
, Paulus Voet,
de statutis sect. 8 cap 1 numero 3 except 6 pag.
292
.'
(
Gane
's translation: 'The last case of retrospectivity is when some
exception or exemption is brought in by the new law. It is fair that
then too
the law should have place in past affairs also, the obligation arising from
which has lasted up to the present, the effect
of the newly introduced exception
being to modify the obligation not as to the past but as to the future. Thus if
the rate of interest
has been cut down by a new law, the lesser rate will have
to be paid in following years, and this even in respect of those capital
sums on
which in accordance with the scope given by the former law a heavier rate in
excess of the new law had been agreed
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upon (Code 4. 32.27). On this basis also the people of Utrecht
decided that the two years' prescription in regard to the recovery
of wages or
of the price of things sold by retail or like matters should have effect even as
to past debts, so that liabilities contracted
at any previous time whatever
would be wiped out by a prescription of two years, to be reckoned from the date
of the passing of the
new law. (
New Decision of Utrecht
, 14th April,
1659, art 21; Paul Voet,
On Statutes
, sec 8, ch 1, n 3 exc 6, p
292).'
In this passage Voet mentions two instances
in which a new statute (
nova lex
) by introducing an exception
or
exemption (
exceptio aut liberatio
) has retroactive operation.
The
first instance is where the new statute modifies an existing
obligation not
in the past but in the future. For this
proposition he relies on
Code
4.32.27 pr which embodies an
imperial decree of Justinian, issued in 529 AD, to Menna,
the Praetorian Prefect. This decree reads as follows:
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'De usuris, quarum modum iam statuimus, pravam quorundam interpretationem
penitus removentes iubemus etiam eos, qui
ante eandem sanctionem
ampliores quam statutae sunt usuras stipulati sunt, ad modum eadem sanctione
taxatum
ex tempore lationis eius
suas moderari actiones,
illius
scilicet temporis
,
quod ante eandem fluxit legem
,
pro tenore
stipulationis usuras exacturos
.'
(
Scott
's translation: 'For the purpose
of disposing of the improper
interpretation
which certain persons have applied to
the law by which we
have established
the rate of interest, we order that
those who have stipulated for a higher
rate
before the promulgation of
the law
shall reduce their claims in accordance
with the one prescribed by it,
from the
time when the law was published
;
but
up to that date they
shall have the right
to collect interest in accordance with
the tenor of the stipulation
.'
(My underlining both in the Latin text
and the translation).
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According to this decree the contractual rate of interest
stipulated by parties in a
stipulatio
is recoverable until the coming
into operation of the new statute's reduced statutory rate of interest. As from
the promulgation
of the new statute only its reduced statutory rate of interest
is recoverable. The new statute operates
in futuro
and not
in
praeterito
. There is no question of retrospectivity by virtue of the
introduction of an
exceptio aut liberatio
. Compare BUCKLEY L. J. in
West v Gwynne
,
[1911] 2 Ch 1
(C A) at p 12: "If an Act provides that as
at a past date the law shall be taken to have been that which it was not, that
Act I understand
to be retrospective."
The second instance mentioned by Voet relates to a Statute enacted by the
legislator of the Province of Utrecht on 14 April 1659.
The Statute is
reproduced in a truncated form by Van Wesel (1635-1680) in his
Commentarius
ad Novellas Constitutiones Ultraiectinas
, 1666, art. 21 at
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p 285-286. It reads as follows:
'Dat alle Salarisen van Advocaten, Procureurs, Medicijns, Chirurgijns,
betalinghen van Coopmanschap ter slete ghelevert, oock van
ghenees kruyden, of
waren, inde Apotheque, of ter winckel vercoft, huer van Dienst-boden, loon van
Notarisen, Landtmeters, Clercquen,
of andere Arbeyders sullen moeten
judicielijck geyscht worden, binnen twee jaren, nae dat den dienst is uyt
gegaen, of de Coopmanschap
ghelevert, nae't verloop van welcken tijdt, de voorsz
schulden ghehouden sullen worden voor gequeten: Ten ware daer van een obligatie
of schriftelijck bescheyd ware gemaect, in welcken gevalle men sich sal
reguleren, als na rechten, dan dat de betalinge van drinck-gelagen
binnen den
tijdt van ses maenden in rechten geeijscht sal moeten worden, 't zy daer van
schriftelijcke obligatie zy, ofte niet, op
poene als voren.
Ende in regard
van diergeliicke schulden
,
al gereeds gemaect
,
dat de selve sullen
moeten worden geeiischt binnen
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den tijdt van twee jaaren
,
ende binnen ses maenden
respective te reeckenen nae de publicatie deses
, op poene als vooren.' (My
underlining).
(I may add in parentheses that this Statute was probably influenced by the
provisions of article 16 of the Eewich Edict of 4 October
1540 in 1
Groot
Placaet - Boeck
p 319).
The object of the Utrecht statute was to alter,
in regard to certain debts, the common law prescription period of 30 years. It
provided
that the fees of certain professional men, the salaries of labourers,
servants and clerks as well as the price of goods sold and
delivered by retail
merchants had to be claimed judicially within 2 years after they became due. The
prescriptive period in regard
to debts due to public houses was 6 months.
Failure to claim payment of the debts before the expiry of the prescription
periods of
2 years or 6 months, respectively, would have, by way of a penalty,
the same effect as payment
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of the debts, i.e. extinction of the debts themselves (leaving
no
naturalis obligatio
). The statutory prescription introduced by the
Utrecht statute was therefore a matter of substantive law and not a procedural
matter.
I shall refer to the underlined words (
supra
) of the Utrecht
statute as the
exceptio
which according to Voet had retroactive
operation. The
exceptio expressly
provided that the debts already
incurred ("
al gereeds gemaect
") at the date of its promulgation on 14
April 1659 had to be claimed within 2 years or 6 months, respectively, from that
date ("
te reeckenen nae de publicatie deses
") subject to the same penalty
in the event of failure to claim accordingly. The Utrecht statute did not
purport to make its period
of prescription operative prior to the date of its
promulgation. Its entire operation, including its express
exceptio
was
prospective (
in futuro
) and not retrospective (
in praeterito
). The
mere fact that the
exceptio
applied to
debita praeterita
which had
been incurred before
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its promulgation but had not become prescribed according to
the common law period of prescription does not render the
exceptio
retrospective. The Utrecht statute expressly provided (as I have already stated)
that the statutory prescription of the
debita praeterita
would commence
to run
after
its promulgation.
It is clear from the aforegoing that
neither
Code
4.32.27 pr nor the
exceptio
of the Utrecht statute
supports the exception mentioned by Voet 1.3.17. Inasmuch as the comments on the
exceptio
of the Utrecht statute by Van Wesel,
op.cit
., nr 53 and
Paul Voet (1619-1667),
De statutis eorumque concursu
, sect 8 cap 1 nr 6,
are purely factual I do not propose to quote them.
Steyn,
loc.cit
.,
also refers to
Curtis v Johannesburg Municipality
,
1906 T S 312
, where
the effect of section 14 of Ordinance 4 (Private) of 1904 (T), which provided
that all actions against the Johannesburg Municipality
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were to be brought within 6 months after the causes of such
actions arose, had to be considered upon the action of Curtis. It should
be
noted that section 14 did not comprise an
exceptio aut liberatio
as
mentioned in Voet 1.13.17. The Ordinance was promulgated on 17 August 1904. The
cause of action of Curtis arose on 23 January
1904 while he instituted his
action on 27 July 1905. On appeal from the judgment of WESSELS J (reported in
1905 T H 362)
the majority of the Court held that the action of Curtis which
arose before the promulgation of the Ordinance was prescribed because
it was not
commenced within 6 months after such promulgation. SMITH J dissented, holding
that section 14 was not applicable to causes
of action which arose before it
came into operation. The
ratio decidendi
of the majority judgments by
INNES C J and MASON J was twofold, viz. :
(1) Section 14 was in effect a statute of limitations and as such portion of the
law of procedure which
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gave it retrospective operation; and (2) The application of a
principle of Roman-Dutch law worded somewhat differently by INNES C
J (p 316)
and MASON J (p 327). The substance of this principle was that whenever a
statutory period of prescription was introduced
without reference to causes of
action which arose prior to its promulgation it was also to be applied to such
causes of action but
the period of prescription was to run from the date of
promulgation. Whether there is such a principle of Roman-Dutch law would seem,
with respect, in the light of references to Paul Voet and Van Wesel to be
extremely doubtful. It is moreover a matter which does
not fall to be decided in
this appeal.
In the light of the aforegoing observations the editors of
Steyn's
Uitleg van Wette
in editing a new edition thereof would perhaps
be well-advised to consider
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re-drafting the existing page 94 thereof.
To revert to the
proper construction of the amendment to section 12(3). No other provision of the
main Act sheds any light on its
construction. The wording of section 12(1) of
the main Act is clear and unambiguous. The ordinary meaning of its words
involves no
manifest absurdity, inconsistency or hardship. The clear intention
of the legislator is that it should operate prospectively (
in futuro
)
from the date of its commencement on 1 December 1970, subject to the provisions
of sub-sections (2) and (3). I have already stressed
the inapplicability of
sub-section (2) to the facts of the present case. Sub-section (3) prior to its
amendment expressly excluded
contractual debts. Since the appellant's
contractual debt became due at the latest on 10 August 1983, it follows that
extinctive
prescription then commenced to run in respect of it. Such
prescription would have been completed on 9 August 1986. When the amendment
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to section 12(3) was introduced on 7 March 1984 the
prescription was in the course of running against the appellant's contractual
debt. Was it the intention of the legislator that such amendment should apply to
contractual debts which had become due before 7
March 1984 and in respect of
which prescription was already in the course of running ? If so, was the
commencement of such prescription
before 7 March 1984 to be entirely ignored and
was the prescription to run
de novo
from March 1984 when the appellant
acguired knowledge of the facts from which his contractual claim arose, as
contended for by Mr
Plewman
? Apart from the illogicality of such an
approach without any legal foundation for ignoring prescription which had
already commenced
to run before 7 March 1984, the intention of the legislator,
in my judgment, is in accordance with the general rule of construction
that the
amendment to section
12(3) is to operate only prospectively (
in futuro
) since a contrary
intention is not indicated by any express words.
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The amendment is intended to operate only prospectively in
respect of prescription which commences to run
on or after
7 March 1984.
It was not intended to operate retrospectively (
in praeterito
) in respect
of prescription which commenced to run
prior
to 7 March 1984. Such a
construction obviates the illogicality of having two commencement dates for
prescription. I accordingly uphold
the contention of Mr
Browde
that the
appellant's claim had already become prescribed on 9 August 1986 prior to the
service of his summons on 23 October 1986.
In the result the appeal is
dismissed with costs, including the costs of two counsel.
C P JOUBERT JA. VIVIER JA
MILNE JA Concur. FRIEDMAN AJA NIENABER AJA