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[2015] ZAWCHC 7
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Latib v Bonitas Medical Fund (A314/2013, 6045/2008) [2015] ZAWCHC 7 (4 February 2015)
THE HIGH COURT OF SOUTH
AFRICA
(WESTERN CAPE DIVISION,
CAPE TOWN)
In the matter between
Appeal Case No: A314/2013
Trial Case No: 6045/2008
DATE: 04 FEBRUARY 2015
SHABEER
LATIB
...........................................................
APPELLANT
And
BONITAS MEDICAL
FUND
....................................
RESPONDENT
Coram
:
ALLIE, STEYN & ROGERS JJ
Heard:
26 JANUARY 2015
Delivered:
4 FEBRUARY 2015
JUDGMENT
ROGERS
J (ALLIE & STEYN JJ concurring):
[1]
I shall refer to the
appellant and respondent as they were in the court a quo, namely
plaintiff and defendant.
[1]
In terms of rule 33(4) the court quo ruled by agreement that a
special plea of prescription be determined first in accordance with
an agreed statement of facts. The special plea was upheld and the
plaintiff’s claim dismissed with costs including the costs
of
two counsel. The trial judge (Binns-Ward J) refused leave to appeal.
On petition the Supreme Court of Appeal granted the plaintiff
leave
to appeal to a full bench.
[2]
The factual background
as it appears from the pleadings and agreed statement is the
following. During 1999 and by way of two related
agreements the
defendant appointed the plaintiff to render benefit management
services and to develop and supply software in respect
of managed
care. For reasons that will become apparent, the precise terms of the
1999 agreements are not relevant to the prescription
defence.
[3]
The plaintiff rendered
services and supplied the software for several years. During August
2002 the defendant purported to terminate
the agreements. The
plaintiff disputed the defendant’s right to do so. August 2002
was the last month during which he actually
rendered services though
he tendered to continue rendering services. He issued invoices dated
30 June 2002 and 31 July 2002 for
the services actually rendered
during those months (R63 840 each). He also issued invoices for
subsequent months.
[4]
By the time of the
meeting of the defendant’s board of trustees on 13 December
2002 the plaintiff had made a claim for R4 248 000,
presumably being his view of his full contractual entitlement. The
defendant wrote to him on 17 January 2003 stating that it would
oppose any such claim.
[5]
During April 2003
Diamond Computer Systems (Pty) Ltd (‘Diamond’), of which
the plaintiff was once a director, issued
summons against the
defendant claiming license fees for computer equipment allegedly
supplied in respect of the defendant’s
managed care system and
for maintenance services. Diamond’s claim covered some of the
services for which the plaintiff was
claiming. It seems that Diamond
alleged that the contract for those services was concluded with it,
not the plaintiff.
[6]
Although the defendant
had disputed the plaintiff’s claim in January 2003, the minutes
of its meetings reflect a view that
the defendant would be obliged to
pay the plaintiff something. Matters came to a head at a meeting
between the defendant, the plaintiff
and the latter’s attorney
on 27 October 2004. The minutes reflect inter alia that the defendant
considered that it could
not responsibly pay the plaintiff in respect
of services for which it might subsequently be found liable to
Diamond.
[7]
The plaintiff alleged
in his particulars of claim
[2]
that an oral agreement was reached at the meeting of 27 October 2004
which was a novation of his earlier agreements with the defendant.
For purposes of the prescription defence only, the defendant accepted
that the novated agreement had been concluded as alleged.
In his
particulars of claim the plaintiff alleged that he was informed at
the meeting that the defendant had resolved to pay R5,5
million in
settlement of his claim. The defendant’s representative
proposed that payment be conditional upon the plaintiff
assisting the
defendant in its defence of Diamond’s claim and upon the
defendant being found not liable to Diamond. The particulars
of claim
continue thus:
’
53. Plaintiff
agreed that the debts due by Defendant would only become payable once
the claim instituted by Diamond had
been resolved, but rejected the
offer of R5,5 million in settlement of his claims.
54. At the conclusion
of the said meeting of 27 October 2004, it was agreed between the
parties that the indebtedness
of Defendant to Plaintiff was orally
novated as follows:
54.1 Defendant would
make payment to Plaintiff in an amount to be agreed upon between
Plaintiff and Defendant, or otherwise
determined by a Court, in
respect of Plaintiff’s claims against Defendant for the
services based on –
(a) the Defendant’s
liability to the Plaintiff in respect of consulting services at
R456,00 per hour for an average
of 140 hours per month from September
2002 with annual escalations in accordance with industry standards to
date of due termination
of this agreement, which has not yet
occurred;
(b) the Defendant’s
liability to the Plaintiff in respect of the managed care system at
the rate of R4,92 plus
VAT, per member per month, with annual
escalations in accordance with industry standards from 1 May 2001.
54.2 Payment of the
said amount to be determined was conditional upon –
(a) Plaintiff
agreeing to assist Defendant in its defence of Diamond’s claim;
(b) Plaintiff’s
claim being adjusted by any amount which the Court may determine that
defendant was liable to pay
to Diamond in respect of amounts claimed
by Plaintiff.
55. In the premises, the amount
of Plaintiff’s claim in terms of the novated agreement, as
aforesaid, would not become due
and payable to Plaintiff until
Diamond’s claim against Defendant, as aforesaid, had been
resolved.’
[8]
On 3 November 2004 the
plaintiff’s attorney (‘Nacerodien’) wrote to the
defendant’s attorney (‘Dawson’)
with a settlement
proposal. The proposal was that the defendant immediately pay the
plaintiff R9 271 721,78 in respect
of capital and interest
on his claim on the basis that Nacerodien would hold R3 million
thereof in trust pending the outcome of
the Diamond case.
Alternatively, the defendant could hold back R3 million.
[9]
This proposal was
considered by the defendant’s trustees at a meeting on 19
November 2004. They decided that nothing would
be paid to the
plaintiff until the Diamond case had been finalised, after which ‘the
quantum will be decided upon by the
[trustees] and [the plaintiff’s]
claim will be looked at to see if he is entitled to it’.
However, the principal officer
would investigate whether funds should
be released to the plaintiff in respect of the services actually
rendered by him in June
and July 2002.
[10]
The outcome of the
meeting was not initially communicated to the plaintiff. On 22
November 2004 Nacerodien wrote to Dawson, stating
that the
plaintiff’s offer of settlement in the letter of 3 November
2004 had lapsed. He made enquiries regarding preparations
for the
Diamond case, urging Dawson to ensure there were no postponements. He
said the plaintiff would be prejudiced by a postponement
‘due
to the fact that it is now patently clear that your client is not
willing to negotiate a settlement until the [Diamond]
matter has been
finally disposed of.’
[11]
The plaintiff and his
attorney met with Dawson and representatives of the defendant on 14
April 2005. At that meeting the defendant’s
principal officer
delivered a letter dated 5 April 2005, notifying the plaintiff of the
decision taken at the meeting of 19 November
2004. Pursuant to the
meeting of 14 April 2005, Nacerodien wrote to Dawson on 20 April 2005
regarding the defendant’s letter,
expressing his amazement at
this development, given that the plaintiff and he had understood the
purpose of the meeting as being
to discuss the quantum of the
plaintiff’s claim. Nacerodien withdrew an earlier offer of
settlement and made a new proposal.
[12]
On 16 September 2005
the defendant paid the plaintiff’s June 2002 invoice under
cover of a letter recording that the July
2002 invoice had not yet
been approved for payment. On 20 October 2005 the defendant wrote to
the plaintiff stating that the board
had now investigated the July
2002 invoice and agreed to pay it in full settlement of the services
rendered by him during that
period. Payment was made at about that
time.
[13]
Nacerodien wrote to
Dawson on 12 December 2005 regarding the two recent payments, stating
that the plaintiff was uncertain what
debts were being reduced
thereby and setting out the plaintiff’s version as to his
current claim as fully quantified.
[14]
On 30 January 2006 the
plaintiff wrote to the defendant, reiterating that his position was
set out as in his attorney’s letter
of 12 December 2005.
[15]
On 31 March 2006 the
defendant’s new attorneys, Mallinicks, wrote to Nacerodien,
stating that during October 2005 the defendant
had paid the plaintiff
all outstanding amounts which might have been owing to him.
[16]
The plaintiff’s
summons, issued on 9 April 2008, was served on 21 April 2008. If this
was the relevant date for interrupting
prescription, the plaintiff’s
claim would have prescribed if it fell due on or before 21 April
2005. The plaintiff amended
his particulars of claim during June
2008. The defendant excepted to the amended particulars of claim
during July 2008. In terms
of an agreed order the plaintiff was
afforded an opportunity to amend his particulars again. The further
amended particulars of
claim were delivered on 16 September 2009. If
the latter particulars of claim sought to enforce a different debt
from the debt
which was the subject of the original particulars of
claim, the plaintiff’s claim as amended would have prescribed
if it
fell due on or before 16 September 2006.
[17]
I have already quoted
the key allegations in the particulars of claim regarding the novated
agreement. On the strength of the novated
agreement, the plaintiff in
his further amended particulars claimed the following relief:
‘
(a)
[An order that] Defendant is bound to comply with the terms of the
agreement concluded on 27 October 2004 between Plaintiff
and
Defendant;
(b) An order that the
Defendant is liable to make payment to the Plaintiff for services,
being –
(i) consulting
services at R456,00 per hour for an average of 140 hours per month
from September 2002, with annual escalations,
to date of due
termination of this agreement, which has not yet occurred;
(ii) the managed care
system at the rate of R4,92 plus VAT, per month per member, with
annual escalations from 1 May
2001;
(iii) interest on the
said amounts at the rate of 15,5% per annum from due dates subject to
the following deductions:
(aa) the amount of
R130 507,20 paid to the Plaintiff by the Defendant in or about
September/October 2005 in part
payment of the Plaintiff’s
claims in respect of the novated agreement;
(bb) any amount which
the Court may determine that the Defendant is liable to pay to
Diamond in respect of amounts claimed
by the Plaintiff.
(c) Costs of suit.’
The court a
quo’s judgment
[18]
In its plea the
defendant alleged that prescription started to run against the
plaintiff on 27 October 2004, alternatively 22 November
2004,
alternatively 14 April 2005. The court a quo found that prescription
had started to run on 27 October 2004 or, if that was
wrong, on 15
April 2005.
[19]
As to the earlier
prescription date, Binns-Ward J’s reasoning can be summarised
thus. Compliance with the novated agreement
required that the
plaintiff should either agree with the defendant the quantification
of the amount the defendant was to pay him
(subject to adjustment in
the light of the outcome of the Diamond litigation) or submit the
quantification to judicial determination.
The plaintiff could choose
either route. Prayer (a) was in the circumstances meaningless. Prayer
(b) reflected the plaintiff’s
choice to submit the
quantification to judicial determination. An agreed quantification or
a judicial quantification were necessary
prerequisites before the
plaintiff would have an exigible claim against the defendant. The
word ‘debt’ in the
Prescription Act 68 of 1969
was not
limited to monetary claims. The novated agreement’s requirement
for a judicial determination of quantum was analogous
to a
declaration in terms of
s 64
of the
Close Corporations Act 69 of
1984
that a person was personally liable for the corporation’s
debts because of fraudulent or reckless trading. Upon the conclusion
of the agreement of 27 October 2004 the plaintiff had an immediate
right to approach the court for a judicial determination of
quantum.
The correlative of this right was an obligation by the defendant to
submit to the judicial determination, such obligation
being a ‘debt’
for purposes of the
Prescription Act.
[20
]
As to the alternative
date of 14 April 2005, it will be recalled that on this date the
plaintiff received the defendant’s
letter of 5 April 2005 which
in turn communicated the trustees’ decision of 19 November
2004. This included a decision that
once the Diamond litigation had
been finalised the quantum would be ‘decided upon by the [board
of trustees]’ and that
the plaintiff’s claim would then
be examined ‘to see if he is entitled to it’. Binns-Ward
J, after recording
a concession by the plaintiff’s
counsel that prescription would start to run against the plaintiff
from the date of a repudiation
by the defendant of the novated
agreement, examined whether the letter of 5 April 2005 was a
repudiation. He regarded the words
I have quoted from the letter as
being inconsistent with the novated agreement, because the defendant
was (i) asserting a
unilateral right to determine the quantum;
(ii) stating that the plaintiff might not be entitled to anything at
all (ie quite apart
from the Diamond litigation).
[21]
The plaintiff’s
primary contention before the trial judge was that prescription in
respect of his claim against the defendant
had not even started to
run by the time summons was issued because the claim was conditional
upon finalisation of the Diamond litigation,
something which had not
occurred by the time summons was issued. The trial judge, as will be
apparent, rejected that contention
and a further contention that the
earliest date of repudiation was Mallinick’s letter of 31 March
2006. He also rejected
an alternative contention by the plaintiff
that the payments of September and October 2005 had been admissions
of liability which
interrupted prescription. The payments, so the
court held, reflected no more than an acceptance of the defendant’s
indebtedness
to pay those two invoices for the services actually
rendered in June and July 2002.
The
appeal
[22]
The parties maintained
their respective positions in arguing the appeal.
[23]
The critical question,
so it seems to me, is the true import of the novated agreement
pleaded by the plaintiff and the true nature
of the relief he claims.
On the merits, the defendant in its plea denied the conclusion of a
novated agreement. If and when the
merits come to be tried, questions
may arise whether and to what extent the correspondence which
followed the meeting of 27 October
2004 is or is not consistent with
the alleged novated agreement. But that is not a question into which
we can enter. The parties
agreed for purposes of determining
prescription that the novated agreement was concluded as alleged.
[24]
In determining the true
import of the novated agreement, one only has the allegations I have
quoted from the particulars of claim,
together with such surrounding
circumstances as one can glean from the documentation furnished as
part of the agreed statement.
[25]
The trial judge’s
premise was that the consensual or judicial determination
contemplated by the novated agreement was something
which was to
happen immediately and did not need to await the outcome of the
Diamond litigation. While that is one possible construction,
I do not
regard it as the only or the most likely one. Another view, the one I
regard as more likely, is that the plaintiff could
not enforce any
part of the novated agreement until the Diamond litigation had been
finalised.
[26]
By way of the novated
agreement, the parties agreed (i) the rates in accordance with which
the plaintiff’s entitlement would
be quantified; (ii) that
the claim so quantified would be adjusted downwards in the light of
the Diamond litigation (meaning
that the claim could not finally be
quantified or enforced until the Diamond litigation was finalised);
and (iii) that the plaintiff’s
entitlement to the adjusted
amount was conditional upon his assisting the defendant in its
defence of Diamond’s claim.
For convenience, I shall refer to
element (i) as the first quantification step and element (ii) as the
second quantification step.
Although the reference to a consensual or
judicial determination was pleaded as a term only in relation to the
first quantification
step, the reference to consensual or judicial
determination is superfluous because parties with rights can always
settle the content
of those rights by agreement and can always turn
to the courts if they are unable to agree. The second quantification
step was
also something which the parties could agree or which the
plaintiff could ask the court to determine.
[27]
Mr van Eeden, who
appeared with Ms van Huyssteen for the defendant, submitted, if I
understood him correctly, that the first quantification
step did not
simply involve a decision by the court (if they were disputed) on the
annual escalation rates in accordance with industry
standards and
regarding membership numbers per month. The court, he said, might
have to determine the starting rates per hour and
per member. He said
that para 54.1 alleged only that the first quantification step was to
be ‘based on’ (ie but might
differ from) the specified
rates per hour and per member. I do not regard that as a plausible
reading of the particulars of claim.
The plaintiff does not allege in
his particulars that the court was required to determine starting
rates in accordance with a contractual
standard. Unless the starting
rates alleged by the plaintiff in para 54.1 are understood as the
starting rates agreed upon by the
parties in terms of the novated
agreement, there would be no basis for the court to make a
determination at all. The court cannot
make a contract for the
parties. The contract would be void for vagueness. The ordinary
meaning of para 54.1, in relation to the
first quantification step,
is that the parties agreed upon the starting rates and agreed upon an
objective standard for escalations.
The court’s role would thus
be the conventional one of quantifying the claim by reference to the
terms of the contract.
[28]
The novated agreement
was one which was expected to result in payment of a single sum to
the plaintiff. Any part of the agreement
might become contentious. In
regard to the first quantification step, there might be a dispute as
to the annual escalation rates,
requiring expert evidence about
industry standards, as to the number of members at any given time and
as to when the plaintiff’s
appointment was terminated. As to
the second quantification step, there might be a dispute as to the
extent of the overlap between
the plaintiff’s claim and any
part of Diamond’s claim which succeeded. There might be a
dispute as to whether the plaintiff
had properly assisted the
defendant in its defence of Diamond’s claim. The defendant’s
approach, which the trial judge
accepted, requires one to find that
the parties intended, by way of the novated agreement, that various
aspects of their agreement,
if contentious, would have to be dealt
with in stages by way of different proceedings. Since the novated
agreement envisaged a
single net payment to the plaintiff, the more
natural understanding of the novated agreement as pleaded is that the
agreement had
no exigible content until the conditions (finalisation
of the Diamond litigation and the plaintiff’s rendering of
assistance
in such litigation) were fulfilled. At that point each
side could take their own view as to the amount, if any, payable to
the
plaintiff and the plaintiff would be able to sue for payment if
the defendant did not agree with his view of the claim.
[29]
It would not only be
inconvenient to have multiple cases about different parts of the
novated agreement. A judicial determination
of the first
quantification step might even turn out to have been altogether
unnecessary. This might be the case if, once the Diamond
litigation
was finalised, it transpired that the plaintiff had not properly
assisted the defendant in defending Diamond’s
claim. And at
least theoretically, there might be a complete overlap between
Diamond’s entitlement and the amount determined
pursuant to the
first quantification step, reducing the plaintiff’s claim to
nil. Furthermore, the parties’ attitude
to the first
quantification step and the resources they would be willing to commit
to litigation on that issue might well be affected
by whether the
Diamond deduction was large or small.
[30]
There is another
consideration in favour of my interpretation. In terms of the novated
agreement, the parties agreed the starting
rates at which the
plaintiff’s claim would be calculated. The novated agreement
recorded that there had as yet been no termination
of the plaintiff’s
right to remuneration for rendering benefit management services. The
escalation rates would change from
year to year. The escalation rates
applicable, for example, in 2005 or 2006 could not have been
judicially determined on 27 October
2004. And unless one knew the
period of the calculation (the terminal date of which, as at 27
October 2004, lay in the future),
one could not determine the amount
contemplated in the first quantification step.
[31]
In para 54.2(b) of the
particulars of claim the novated agreement was said to be conditional
upon the plaintiff’s claim being
adjusted ‘by any amount
which the Court may determine that Defendant was liable to pay to
Diamond in respect of amount claimed
by Plaintiff’. Up to now I
have assumed that the contemplated judicial determination was only
specifically pleaded in relation
to the first quantification step.
However, if the word ‘Court’ in para 54.2(b) of the
particulars of claim refers to
the court hearing the plaintiff’s
claim against the defendant rather than the court hearing Diamond’s
claim against
the defendant, it would strengthen the conclusion that,
in the absence of agreement, a single judicial determination of all
disputed
aspects of the plaintiff’s claim under the novated
agreement was envisaged. In any event, and regardless of what ‘Court’
the plaintiff was referring to in para 54.2(b), the fact is that even
though the defendant’s liability to Diamond would be
determined
by another court in separate proceedings, only the court hearing the
present action could determine how much of the
sum awarded to Diamond
overlapped with the plaintiff’s claim against the defendant (ie
how much thereof was ‘in respect
of amounts claimed by
Plaintiff’ – see para 54.2(b) of the particulars of
claim). So inevitably (in the absence of
agreement thereon) the court
hearing the plaintiff’s claim would have to determine the
second quantification step as well
as the first.
[32]
The assumption made by
the trial judge as to the true import of the novated agreement may
have been influenced by his view of the
relief the plaintiff was
claiming. He regarded prayer (a) as meaningless and said that prayer
(b) was a claim for the judicial
determination of what I have called
the first quantification step. If that was a correct understanding of
the relief, it might
have been a legitimate consideration in
construing the true import of the novated agreement as pleaded. A
pleading, like any other
document, must be read as a whole. I see the
force of the view that if a plaintiff claims particular relief one
should if possible
construe his allegations regarding the
foundational agreement as entitling him to that relief.
[33]
However, I do not share
the trial judge’s view of the relief claimed. If the plaintiff
had been claiming a judicial determination
of the first
quantification step, I would have expected him to allege the
quantified amount. To do so, he would have needed to
make allegations
regarding the period of the calculation, the annual escalation rates
and membership numbers and then applied those
escalation rates and
membership numbers to the starting rates specified in the novated
agreement for the full period of the calculation,
thereby arriving at
a lump sum from which, in due course, the Diamond adjustment would be
deducted. But this is not what the plaintiff
pleaded in the amended
particulars of claim. He made no allegations regarding the period for
which the calculation was to be made
or the escalation rates or
membership numbers nor did he state what the result of the first
quantification step was. In essence,
prayer (b) simply repeats the
terms of the novated agreement pleaded in para 54, adding that the
defendant will also be entitled
to a further deduction arising from
the payments of September and October 2005 but omitting the condition
as to his assisting the
defendant in the Diamond case. (The latter
omission must have been an oversight because the particulars of claim
expressly aver
this condition.)
[34]
In my view, prayers (a)
and (b) are in truth prayers for declaratory orders directed at
establishing the existence and terms of
the novated agreement. This
conclusion flows not only from the particulars of claim as a whole
but also from the circumstances
in which the summons was issued. The
problem was not that the parties had failed to reach agreement on
escalation rates or membership
numbers (the only aspects which, apart
from the period of the calculation, could have affected the first
quantification step).
The problem was more fundamental. Mallinicks
had stated in their letter of 31 March 2006 that the defendant had
finally settled
any liability it might have had to the plaintiff. If
there was no repudiation prior to that date, this letter certainly
was a repudiation.
It was irreconcilable with the existence of the
novated agreement. And so the plaintiff issued summons to establish
the existence
and terms of the novated agreement.
[35]
The defendant’s
counsel referred in argument to the form the particulars of claim
took prior to the exception. He submitted
that the amendments made
pursuant to the exception indicated that prayer (b) was a claim for
the judicial determination of the
first quantification step. He drew
our attention, in particular, to the fact that in the earlier version
(the first amended particulars
of claim) the plaintiff had pleaded
that the debts due by the defendant to the plaintiff would only
become ‘due and payable’
once Diamond’s claim had
been resolved whereas in the further amended version the words ‘due
and’ were omitted.
The reason for this alteration is to
me obscure. The word ‘due’ usually has the same meaning
as ‘payable’.
If the plaintiff used the word ‘due’
not in this sense but as meaning ‘owing though not yet payable’
(as
to which, see
Nel
No v Body Corporate of the Seaways Building & Another
[1995] ZASCA 83
;
1996
(1) SA 131
(A) at 136G-137E), the deletion of the words ‘due
and’ might suggest that the plaintiff viewed the money as owing
though
not yet due. That, however, would make no sense in the context
of a pleading which specifically alleged that the final amount could
only be determined after the finalisation of the Diamond litigation
and was only payable if the plaintiff assisted the defendant
in its
defence of Diamond’s claim.
[36]
In any event, the words
‘due and payable’ and later ‘payable’ were
not used by the plaintiff in respect
of the determination of the
first quantification step but with reference to the net sum which the
defendant in due course would
or might have to pay the plaintiff. The
amendments do not seem to have been made with a view to justifying an
immediate judicial
determination of the first quantification step. On
the contrary, whereas the plaintiff in his original and first amended
particulars
of claim indeed quantified his claim, this quantification
was deleted pursuant to the exception. In para 68 of the earlier
versions
of the particulars of claim the plaintiff alleged an
entitlement to consulting fees of R5 288 472,97, managed
care system
fees of R23 380 268,21 and interest of
R24 948 273,83. In prayer (b) he sought an order that the
defendant
was ‘bound to make payment’ to him of those
amounts. In the further amended particulars of claim he deleted this
quantification
and instead made the claim reflected in the amended
prayer (b) I quoted earlier.
[37]
This explanation (ie
the declaratory nature of the relief sought) also provides the answer
to another point which might be raised.
At first blush, there might
appear to be an inconsistency between (i) a conclusion that the
plaintiff was not entitled to
sue on any part of the agreement until
finalisation of the Diamond litigation, something which had not
occurred by the time summons
was issued and (ii) the recognition
of the plaintiff’s action as being properly before the court.
The short answer is
that the plaintiff’s claim is not one for
specific performance of the novated agreement but for a declaratory
order as to
the existence and terms of the novated agreement. In
terms of s 19(1)(a)(iii) of the Supreme Court Act 59 of 1959,
which was
the legislation in force when the summons was issued, and
in terms of
s 21(1)(c)
of the
Superior Courts Act 10 of 2013
,
the High Court has the discretion, at the instance of an interested
person, to enquire into and determine any existing, future
or
contingent right or obligation, notwithstanding that such person
cannot claim any relief consequential upon the determination.
[38]
Where the existence of
a contract is in dispute, a party to the alleged contract may thus
approach the court to declare the existence
and terms of the contract
even though the contract is subject to a suspensive condition or the
date for performance has not yet
arrived. In such a case prescription
will not yet have started to run in respect of the debt created by
the contract, because the
debt will not yet be ‘due’
within the meaning of
s 12(1)
of the
Prescription Act.
[39
]
The procedural right to
seek declaratory relief in respect of disputed future or contingent
rights does not have a debt as its correlative
and is not subject to
prescription. A party to a disputed contract is not obliged to seek
declaratory relief and the court has
a discretion whether or not to
grant it. The party may prefer to wait until (on his view of the
matter) the debt created by the
contract is due and then sue for
specific performance. Furthermore, a party will generally not be
entitled to approach a court
for declaratory relief unless the future
or contingent right is disputed. In the present case, for example,
the plaintiff could
not have been expected to seek declaratory relief
on 27 October 2004, the very date on which the novated agreement was
concluded,
because at that stage (on the facts we must assume for
purposes of prescription) the existence and terms of the novated
agreement
were not in dispute. A dispute in respect of future or
contingent rights may, in contracts with a long-term horizon, only
come
into existence more than three years after the contract was
concluded.
[40]
The defendant’s
counsel referred us to
Cape
Town Municipality & Another v Allianz Insurance Co Ltd
1990
(1) SA 311
(C). In that case Howie J (as he then was) held that an
action for a declaratory order that the defendant insurer was liable
to
indemnify the plaintiff for its loss was a process whereby the
creditor claimed payment of the debt, even though the plaintiff did
not quantify its loss and claim a monetary amount and even though
subsequent proceedings would be needed to do so. In that case
the
debt was already due for purposes of prescription by the time the
plaintiff issued summons for declaratory relief. The three-year
period expired while the claim for declaratory relief was pending.
Nothing decided in that case militates against my conclusions
in the
present case. In particular, there was no suggestion that the
procedural right to claim declaratory relief was itself a
right which
could prescribe. The question was whether the right to an indemnity
under the insurance contract, and the correlative
debt owed by the
insurer, had or had not prescribed. (It is unnecessary to decide
whether the decision in
Cape
Town Municipality
would
also apply in the present case, given that here the action for
declaratory relief was instituted before any debt owed by the
defendant to the plaintiff fell due.)
[41]
As I have mentioned,
the trial judge considered that the judicial determination which the
plaintiff was seeking in prayer (b) was
akin to a declaration of
liability for reckless trading in terms of
s 64(1)
of the
Close
Corporations Act. On
the question of prescription in relation to the
latter type of claim, he cited
Burley
Appliances Ltd v Grobbelaar NO & Others
2004
(1) SA 602
(C). For the proposition that a ‘debt’ did not
necessarily entail positive performance by a debtor but could include
a liability to submit to a judicial determination, he referred to
Duet and Magnum
Financial Services CC v Koster
2010
(4) SA 499
(SCA).
Burley
and
Duet
concerned statutory
remedies relating to liability for reckless trading and voidable
dispositions. In both cases the point was made
that in terms of the
relevant statutory provisions a debt in the form of liability to make
positive performance (to pay the debts
of the company/corporation, to
restore property received pursuant to voidable disposition and so
forth) only comes into existence
upon the making by the court of a
declaration that the person is liable for the debts of the
company/corporation or of an order
setting aside the disposition.
Nevertheless, so these cases held, the liquidator/trustee has a claim
to seek such a declaration
as soon as the circumstances entitling the
liquidator or trustee to assert the statutory remedy are in place,
the correlative of
which claim is the liability of the defendant to
have such a declaration made against him. This latter ‘passive’
liability,
which in itself calls for no performance by the defendant,
is distinct from, and pre-dates, any debt created by the court’s
declaration and is a ‘debt’ itself capable of
prescribing.
[42]
On the view I take of
the novated agreement as pleaded, the plaintiff was not seeking a
determination of the first quantification
step but a declaration of
the existence and terms of his conditional contract. Even by analogy,
therefore,
Burley
and
Duet
are not relevant. I
should add, though, that I do not in any event regard the analogy as
sound. In terms of the novated agreement,
the first quantification
step does not involve the exercise of a judicial power by which a new
debt is created. The novated agreement
itself created a conditional
debt (the liability to pay the final net amount). The first
quantification step is simply one stage
in determining the net amount
of that debt. If, for example, the Diamond litigation had been
finalised by the end of 2004, the
plaintiff could have issued summons
at the beginning of 2005 for the net amount allegedly due to him. In
his particulars he would
have needed to make allegations regarding
the first and second quantification steps and regarding the
fulfilment of the condition
of providing assistance to the defendant
in the Diamond case. The court at the end of the trial would have
decided all the issues
and ordered a net amount to be paid. It is not
an uncommon occurrence in contractual or delictual claims for money
that a court
will need to decide various steps in the computation
process.
[43]
In
Bester
NO & Others v Schmidt Bou Ontwikkelings CC
2013
(1) SA 83
(SCA) Brand JA doubted (para 14) whether Nugent JA in
Duet
had really intended
to extend the meaning of the word ‘debt’ beyond that
which was attributed to the term in cases like
Oertel
en Andere NNO v Direkteur van Plaaslike Bestuur & Andere
1983 (1) SA 354
(A) and
Desai
NO v Desai & Others
[1995] ZASCA 113
;
1996
(1) SA 141
(A), namely ‘an obligation to do something or to
refrain from doing something’. At any rate, so he held (para
14),
the liability of a person to submit to a judicial determination
regarding the rectification of a contract or of a title deed or
of a
company’s register of members was not a liability within the
extended meaning given in
Duet
.
This shows that not every circumstance in which a person is required
to submit to a judicial determination is accompanied by a
‘debt’
owed by such person within the meaning of the
Prescription Act.
Caution
should thus be shown in applying
Burley
and
Duet
beyond the type of
case with which they specifically dealt, namely a statutory remedy
available upon the occurrence of certain events
but which would not
call for positive performance by the person targeted by the remedy in
the absence of a court order.
[44]
In a general sense,
parties to contracts always have a liability to submit to the
judicial determination of the issues arising from
the contract (I
leave aside cases of arbitration and expert determination which
displace usual recourse to the courts). However,
the fact that some
issue relevant to a conditional claim is capable of immediate
determination does not mean that there is a presently
subsisting and
unconditional debt in the form of a passive liability of the parties
to submit to an immediate judicial determination
of that particular
issue. One does not divide up a determination of the various issues
which arise in respect of a single claim
in this way. No issue which
needs to be decided in relation to a single claim can ‘prescribe’
separately from the single
claim and its correlative debt.
[45]
Accordingly, even if
the novated agreement in the present case
entitled
the plaintiff to seek a judicial determination of the first
quantification step prior to the right to payment becoming
unconditional,
he was not
obliged
to seek such a determination separately from seeking payment of the
net amount. His right to have the first quantification step
determined as part of the process of ultimately claiming the net
amount could not prescribe prior to the claim for the net amount
itself.
[46]
If the above
conclusions are right, the defendant’s debt to the plaintiff
arising from the novated agreement was not due for
purposes of
prescription when the summons was issued or when the particulars of
claim were further amended in September 2009. (In
para 56 of the
amended particulars of claim the plaintiff pleaded that Diamond’s
action against the defendant had not yet
come to trial or been
settled or resolved ‘and, accordingly Plaintiff’s claim
has not yet become payable’.) The
defence of prescription
should thus have been dismissed.
[47]
The question of
repudiation was a red herring. In particular, the concession which
the plaintiff’s counsel made in the court
quo, that
prescription started to run on the date of repudiation (which the
plaintiff said was on 31 March 2006), was incorrect.
Since it was a
concession on a legal question, the plaintiff and this court are not
bound by it. An unaccepted repudiation has
been said to be ‘a
thing writ in water’, having no effect on the rights and
obligations of the parties (
Culverwell
& Another v Brown
1990
(1) SA 7
(A) at 28D-F; see also
Comwezi
Security Services (Pty) Ltd & Another v Cape Empowerment Trust
Ltd
[2014] ZASCA 22
para 11). If a repudiation is accepted and the contract cancelled,
the repudiation is part of the aggrieved party’s cause
of
action in respect of rights flowing from the cancellation, though
even then prescription runs not from the date of repudiation
but from
the date of the aggrieved party’s election to cancel the
contract (
HMBMP
Properties Pty Ltd v King
1981
(1) SA 906
(N); Christie
The
Law of Contract in South Africa
6
th
Ed at 506).
[48]
In the present case,
the plaintiff did not accept the repudiation and terminate the
novated agreement. He evidently intends to seek
specific performance
thereof in due course. In the meanwhile, he seeks a declaratory order
as to the existence and terms of the
novated agreement. The
defendant’s repudiation has no bearing on the question of
prescription. There is thus no need to determine
whether the
defendant’s letter of 5 April 2004 amounted to a repudiation.
[49]
In the light of my
conclusion, it is likewise unnecessary to decide whether the payments
made in September and October 2005 interrupted
prescription though I
would not have differed from the trial judge on that question.
[50]
The following order is
thus made:
(a) The appeal succeeds with costs.
(b) The order made in the court quo is set aside and
replaced with the following order: ‘The special plea of
prescription
is dismissed with costs.’
ALLIE
J
STEYN
J
ROGERS
J
APPEARANCES
For Appellant: Mr Gary Oliver
Instructed by:
MS Nacerodien
6 Osborne Road
Claremont
For Respondent: Mr PA van Heerden
& Ms EF van Huyssteen
Instructed
by: Gildenhuys Malatji Inc GLMI House, Harlequins Office Park
164
Totius Street
Groenkloof
Pretoria
[1]
The defendant as initially was Pro Sano Medical
Aid Scheme. Its business was amalgamated into Bonitas Medical Fund
with effect
from 1 February 2013 and the latter was substituted as
the defendant/respondent. Reference to the defendant should thus be
read
as referring to Pro Sano Medical Aid Scheme in respect of the
period prior to 1 February 2013.
[2]
As amended on 16 September 2009. The original
particulars of claim of April 2008 are not in the record. The
original particulars
were amended in June 2008. The latter version
attracted an exception which gave rise to the particulars of 16
September 2008.