The law reports

July 22nd, 2016
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June 2016 (3) South African Law Reports (pp 317 – 635); [2016] 2 All South African Law Reports May (pp 317 – 631); 2016 (2) Butterworths Constitutional Law Reports – February (pp 157 – 309); 2016 (5) Butterworths Constitutional Law Reports – May (pp 577 – 708); and 2016 (7) Butterworths Constitutional Law Reports – July (pp 839 – 986)

 

David Matlala BProc (University of the North) LLB (Wits) LLM (UCT) LLM (Harvard) LLD (Fort Hare)HDip Tax Law (Wits) is an adjunct professor of law at the University of Fort Hare.

This column discusses judgments as and when they are published in the South African Law Reports, the All South African Law Reports and the South African Criminal Law Reports. Readers should note that some reported judgments may have been overruled or overturned on appeal or have an appeal pending against them: Readers should not rely on a judgment discussed here without checking on that possibility – Editor.


Abbreviations

CC: Constitutional Court

FB: Free State Division, Bloemfontein

GP: Gauteng Division, Pretoria

LCC: Land Claims Court

SCA: Supreme Court of Appeal

TC: Tax Court

WCC: Western Cape Division, Cape Town

Constitutional law

Arrest and removal of members of Parliament during parliamentary sitting: Section 11 of the Powers, Privileges and Immunities of Parliament and Provincial Legislatures Act 4 of 2004 (the Act) provides, among others, that: ‘A person who creates or takes part in any disturbance in the precincts while Parliament or a House or committee is meeting, may be arrested and removed from the precincts, on the order of the Speaker or Chairperson or a person designated by the Speaker or chairperson, by a staff member or a member of the security services.’ In brief, the section makes it a crime for any person to create or take part in any disturbance in the precincts as defined. The constitutionality of the section was dealt with in Democratic Alliance v Speaker, National Assembly and Others 2016 (3) SA 487 (CC); 2016 (5) BCLR 577 (CC), where members of the Economic Freedom Fighters (EFF), a political party, had been forcibly removed from the joint session of the two houses of Parliament. That was after members of the EFF, one after another, interjected the President during the State of the Nation address, during which they asked him when he was going to pay back the money, which the Public Protector requested in her report, should be repaid. The attitude of the Speaker of the House of Assembly was that the State of the Nation address was not the right occasion for questions and as such could be done on a scheduled date. Members of the Democratic Alliance (DA), another political party, left the House voluntarily, obviously in solidarity with the EFF. Thereafter, the DA instituted High Court proceedings for an order declaring the section unconstitutional on the ground that, among others, it violated the freedom of speech right of members of the National Assembly as contained in s 58(1) of the Constitution, which granted them immunity from criminal or civil proceedings, arrest, imprisonment or damages for anything said, produced or submitted to the Assembly or any of its committees. The WCC declared the section inconsistent with the Constitution. As a result, the DA sought a CC order confirming the unconstitutionality of the section. The respondents, the Speaker of the House and others, appealed against the order, while the DA cross-appealed against certain aspects of the order.

The CC declined to confirm the order as granted. Instead, the court preferred the reading-in approach and added the words ‘other than member’ after the word ‘person’. The result was that the section remained valid but only authorised the arrest and removal from Parliamentary precincts, any person, other than a member of Parliament, who created or took part in any disturbance. The appeal and cross-appeal were dismissed, with the respondents ordered to pay costs.

Reading the majority judgment Madlanga J (Nugent AJ concurring in a separate judgment and Jafta J with Nkabinde J concurring in the dissenting judgment) held that s 11 limited the privileges and immunities contained in ss 58(1) (dealing with members of the National Assembly) and 71(1) (dealing with members of the National Council of Provinces) of the Constitution. The creation of or taking part in a disturbance by a member was made a criminal offence. With arrest would come everything associated therewith such as detention in police or prison cells, criminal charges and possibly conviction of an offence. That chilling effect alone constituted an infringement of parliamentary free speech. In addition, the section directly infringed the immunities from criminal proceedings, arrest and imprisonment enjoyed by members of Parliament in terms of ss 58(1)(b) and 71(1)(b) of the Constitution. As a consequence of the application of s 11, a member of Parliament, through removal from the chamber, would be deprived of further participation in the proceedings of Parliament for the duration of the removal. The language of ss 58(1)(a) and 71(1)(a) was plain. It made freedom of speech in the National Assembly and National Council of Provinces subject to the relevant House’s rules and orders, and nothing else. Limiting this freedom by an Act of Parliament was at variance with the constitutional stipulation. That was constitutionally impermissible. Therefore, s 11 was constitutionally invalid to the extent that it applied to members of Parliament.

  • See law reports ‘Parliament’ 2015 (Oct) DR 46.

 

Duty of the President to uphold, defend and respect the Constitution: It is the duty of the state to provide security for the President of the Republic. In Economic Freedom Fighters v Speaker, National Assembly and Others 2016 (3) SA 580 (CC); 2016 (5) BCLR 618 (CC), in compliance with this obligation the Department of Public Works (DPW), on advice of the South African Police Service (SAPS) effected certain upgrades at the President’s private residence in KwaZulu-Natal, commonly known as Nkandla homestead. However, the upgrades were fairly extensive and went further than just effecting security features. Due to complaints by members of the public, the Public Protector launched an investigation as a result which she requested the President to take certain remedial action, including:

  • Taking steps, with the assistance of the National Treasury and the SAPS, to determine the reasonable cost of the measures implemented by the DPW that did not relate to security such as a visitors’ centre, an amphitheatre, the cattle kraal (cowshed), chicken run and a swimming pool.
  • Pay a reasonable percentage of the cost of the measures as determined with the assistance of the National Treasury.
  • Reprimand the ministers involved in the upgrade project.
  • Report to the National Assembly (NA) on his comments and actions on the Public Protector’s report within 14 days.

The President duly reported to the NA but did not respond to the other requests. Far from requesting the President pay the reasonable cost of non-security features of the upgrades, the NA absolved him from liability. As a result the applicant, EFF, approached the CC directly for a number of remedies including an order –

  • affirming the legally binding effect of the Public Protector’s remedial action;
  • directing the President to comply with the Public Protector’s remedial action; and
  • declaring that both the President and the NA acted in breach of their constitutional obligations.

The EFF was joined by another political party, the Democratic Alliance, which initially launched a similar application in the WCC. The application was granted with costs.

Reading a unanimous judgment of the court Mogoeng CJ held that consistent with s 167(4)(e) of the Constitution, which provided that only the CC could decide that Parliament or the President had failed to fulfil a constitutional obligation and, considering the magnitude and vital importance of his responsibilities, the CC enjoyed the exclusive jurisdiction to decide such an issue. Similarly, the NA was the watchdog of state resources and enforcer of fiscal discipline, as well as cost-effectiveness for the common good of the country. It bore the responsibility to play an oversight role over the executive and state organs and ensure that constitutional and statutory obligations were properly executed. For that reason it fulfilled a pre-eminently unique role of holding the executive accountable for fulfilment of the promises made. The CC, being the highest court in the land and ultimate guardian of the Constitution and its values, had exclusive jurisdiction also insofar as the NA was concerned. The NA was duty-bound to hold the President accountable by facilitating and ensuring compliance with the decision of the Public Protector. The exception would be where the findings and remedial action were challenged and set aside by a court, something that had not been done in the instant case. Neither the President nor the NA was entitled to respond to the binding remedial action taken by the Public Protector as if it were of no force or effect or had been set aside through a proper judicial process. Therefore, the NA’s resolution exonerating the President from liability was inconsistent with the Constitution and unlawful.

It was inconsistent with the language, context and purpose of ss 181 (creating the office of the Public Protector) and 182 (giving the Public Protector the power to investigate irregularities, conduct or practices, report on investigations and take appropriate remedial action) of the Constitution to conclude that the Public Protector enjoyed power to make only recommendations that could be disregarded, provided there was a rational basis for doing so. When remedial action was binding, compliance with it was not optional, whatever reservations the affected party could have about its fairness, appropriateness or lawfulness. For that reason the remedial action taken against those under investigation could not be ignored without legal consequences. The remedial action that was taken by the Public Protector against the President had a binding effect.

By not adhering to the Public Protector’s remedial action the President failed to uphold, defend and respect the Constitution. The President was also duty-bound to, but did not, assist and protect the Public Protector so as to ensure her independence, impartiality, dignity and effectiveness by complying with her remedial action. The President might have been following wrong legal advice and, therefore, acted in good faith. However, that did not detract from the illegality of his conduct, regard being had to its inconsistency with his constitutional obligations in terms of ss 182(1)(e) and 181(3) read with s 83(b) of the Constitution.

Consumer credit agreements

Reckless credit – meaning and remedies: Section 81(3) of the National Credit Act 34 of 2005 (the NCA) prohibits a reckless credit agreement by providing that: ‘A credit provider must not enter into a reckless credit agreement with a prospective consumer’. In terms of s 80 a credit agreement is reckless if, at the time that it was entered into, ‘the credit provider failed to conduct an assessment as required by section 81(2)’. The latter section requires the credit provider to take reasonable steps to assess among others the existing financial means, prospects and obligations of the consumer, as well as whether there is a reasonable basis to conclude that any commercial purpose to be undertaken may prove to be successful.

In Absa Bank Ltd v De Beer and Others 2016 (3) SA 432 (GP) the credit provider and plaintiff, Absa Bank, entered into a total of four credit agreements with the first and second defendants, De Beer and his wife, all of which violated the NCA in every respect. The first defendant was a pensioner who used all his pension benefits to buy an undeveloped smallholding to build a residential unit and start small scale farming. As the money was not sufficient for that purpose his wife, the second defendant, retired from her employment and collected pension benefits. Even with her pension fund benefits contribution, the money was not sufficient for farming operations. The two started borrowing from the plaintiff, using the smallholding, which was their primary and only residence, as security. Apart from the first defendant’s annuity of some R 647 per month the couple did not have any other source of income. The third defendant, their daughter, stood surety for their indebtedness to the plaintiff. The financial position of all three was never verified by the bank and no financial statements were requested, especially in the case of the third defendant who was self-employed. An employee of the plaintiff indicated that the first two defendants had a monthly income of some R 27 000. However, that was misleading as their only income was the first defendant’s monthly annuity of R 647, while the rest of the money belonged to the third defendant, the surety. Eventually, and after a further loan, all the existing loan agreements were consolidated into one agreement, which amounted to a debt of some R 1,7 million, which the plaintiff sought to recover.

Louw J held that the plaintiff’s claim against all the defendants amounted to a reckless credit agreement and accordingly dismissed the claim with costs. The court set aside the rights and obligations of the first and second defendants arising from the loan agreement as consolidated and also ordered cancellation of the mortgage bonds registered to cover the debt. It was held that to take ‘reasonable steps’ to assess the proposed consumer’s existing means, prospects and obligations meant that the assessment had to be done reasonably and not irrationally. Only a reasonable assessment would comply with the preamble to the NCA which stood to promote responsible credit granting and use. It was clearly irrational to have taken the surety’s income into account in coming to the conclusion that the first two defendants had financial means to pay the instalments. A surety did not fall within the definition of a consumer in terms of s 1 of the NCA. Furthermore, the surety remained totally out of the picture until the principal debtors had failed to comply with their obligations.              

Consumer protection

Duty to exhaust all other available remedies before approaching the court: Section 69(d) of the Consumer Protection Act 68 of 2008 (the CPA) provides that a consumer seeking to enforce any right in terms of the CPA or in terms of a transaction or agreement or otherwise to resolve any dispute with a supplier, may approach a court having jurisdiction over the matter if ‘all other remedies available to that person in terms of national legislation have been exhausted’. In other words, the section makes the court a forum of last, and not first, resort. However, in Joroy 4440 CC v Potgieter and Another NNO 2016 (3) SA 465 (FB) the applicant close corporation, Joroy, did the opposite of what the section stipulates. Having bought a motor vehicle from a trust, which was under the trusteeship of the respondents Potgieter and another, it approached the High Court for a refund of the full purchase price of the vehicle. The court did not have to deal with the merits of the case but simply disposed of it on a preliminary point of law of lack of jurisdiction. The court did not make a finding on the merits of the application, this leaving the applicant free to utilise any of the dispute resolution mechanisms available in terms of the CPA. The application for refund of the purchase price was refused and each party ordered to pay own costs.

Reinders J held that the wording of the section was clear and unambiguous. It specifically stated that the consumer could approach the court if all the other avenues or redress therein indicated have been exhausted. The legislature was very specific in prescribing the redress that a consumer had in terms of the section, namely, the National Consumer Tribunal, the applicable ombud with jurisdiction, an accredited industry ombud, a consumer court of the province having jurisdiction, an alternative dispute resolution agent or the National Consumer Commission. In the instant case, as the dispute related to a motor vehicle, there was an accredited motor industry ombud, namely, the Motor Industry Ombudsman of South Africa, which dealt specifically with dispute resolutions between consumers and the motor industry.

Delict

Duty to ensure closure of doors for safety: In Mashongwa v Passenger Rail Agency of South Africa 2016 (3) SA 528 (CC); 2016 (2) BCLR 204 (CC) the appellant, Mashongwa, boarded a train at a station in Pretoria. He was the sole passenger in the coach when the train started moving with doors open. A few minutes thereafter a group of three unarmed men entered his coach from an adjacent one and attacked him, dispossessing him of his valuables, kicking him and eventually throwing him out of the moving train through the open doors. He suffered serious leg injuries, which resulted in amputation. As a result of the injuries suffered he instituted a claim against the operator of the train service, the respondent Passenger Rail Agency of South Africa, on the ground that it failed to provide reasonable safety measures to protect him, it failed to provide security guards and further that it allowed the train to move with doors open. The trial proceeded on the merits only. The GP held that the respondent was liable to compensate the appellant for such loss as would be proved. An appeal against that order was upheld by the SCA, which held that the appellant had not shown wrongfulness and negligence on the part of the respondent. Likewise, causation had not been proved.

The CC granted leave to appeal and upheld the appeal with costs, setting aside the decision of the SCA. Reading a unanimous decision of the court Mogoeng CJ held that public carriers like the respondent had always been regarded as owing a legal duty to their passengers to protect them from suffering physical harm while making use of their transport services. That duty arose from the existence of the relationship between carrier and passenger, usually but not always, based on a contract. That duty also stemmed from the carrier’s public law obligations. That strengthened the contention that a breach of those duties was wrongful in the delictual sense and could attract liability for damages. Safeguarding the physical wellbeing of passengers had to be a central obligation of the respondent. That reflected the ordinary duty resting on public carriers and was reinforced by the specific constitutional obligations to protect passengers’ bodily integrity that rested on the respondent, an organ of state. The norms and values derived from the Constitution demanded that a negligent breach of those duties, even by omission, should, absent a suitable non-judicial remedy, attract liability to compensate injured persons in damages. The breach of public duty by the respondent had to be transposed into a private law breach in delict. Therefore, the breach that occurred in the instant case amounted to wrongfulness.

Harm was reasonably foreseeable and the respondent had an actionable legal duty to keep the doors closed while the train was in motion. Keeping the doors of a moving train closed was an essential safety procedure. The appellant would probably not have sustained the injuries that culminated in the amputation of his leg had the respondent ensured that the doors of the coach in which he was were closed while the train was in motion. It was thus negligent of the respondent not to observe a basic safety-critical practice of keeping the coach doors closed while the train was in motion and, therefore, reasonable to impose liability for damages on it, if the other elements were proved.

In all likelihood, the appellant would not have been thrown out of the train had strict safety regime of closing coach doors, when the train was in motion, been observed. On a preponderance of probabilities the appellant would not have sustained the injuries that led to the amputation of his leg, had the respondent kept the doors closed. The respondent’s failure to keep the doors closed while the train was in motion was the kind of conduct that ought to attract liability. More importantly, that preventative step could have been carried out at no extra cost.

Income tax

Tax benefit use of company motor vehicle: In Anglo Platinum Management Services (Pty) Ltd v Commissioner, South African Revenue Service 2016 (3) SA 406 (SCA), the appellant taxpayer, Anglo Platinum, had a scheme in terms of which its participating employees were each assisted to acquire a motor vehicle of their choice. The appellant would pay the purchase price in cash, register the vehicle in the employees name but the taxpayer owned the vehicle and thereafter paid insurance premiums and other expenses arising from time to time. A participating employee would make a fixed monthly payment into a notional account, which was credited, while monthly payments made by the appellant were debited to the account. The result was that if at the end of the month there was a credit in favour of the employee the money would be withdrawn at the end of each quarter, failing which at the end of the financial year and the tax paid at the full scale. However, if there was a shortfall, the employee would pay it.

The question was whether the scheme amounted to a valid and binding salary sacrifice agreement in terms of which participating employees had forgone (divested) their entitlement to that part of the salary, and which was taxable as part of gross income at the reduced rate or was a benefit or advantage granted in respect of employment, which was taxable on full scale. (It may be mentioned in passing that the amount involved was substantial, being some R 11,5 million). The Tax Court, Johannesburg held, per Mavundla J, that the scheme used was a sham, which was disguised to conceal its true nature and accordingly held that the amount involved was fully taxable.  An appeal against that decision was upheld with costs by the SCA, meaning that tax had to be paid at a reduced scale.

Cachalia JA (Leach, Tshiqi, Pillay and Mbha JJA concurring) held that salary sacrifice arrangements, whereby employees sacrifice or forgo a portion of their cash salaries in return for some quid pro quo or fringe benefit from the employer that reduced their tax liability, were perfectly lawful. It was a question of fact in each case whether a salary sacrifice agreement was achieved. In this regard, a court was not concerned with the subjective belief of the parties to the agreement, no matter how genuine that belief could be, but with whether facts, objectively viewed, established that such a result was achieved.

To succeed in the appeal the appellant taxpayer had to establish that a genuine salary sacrifice was concluded as a matter of fact. It would have to show that the employees’ remuneration packages were structured in a manner that they received their remuneration partly by way of cash and the balance by way of a fringe benefit, that the taxpayer unconditionally assumed liability for payments and contributions for the motor vehicles that were part of the scheme, thereby releasing its employees from any such obligation. In other words, by forgoing part of their remuneration package in return for the use of a motor vehicle, employees divested themselves of their right to that amount of money. The implication of such divestment was that the amount would not have been received or accrued for services to be rendered by the employees as contemplated in para (c) of the definition of gross income in s 1 of the Income Tax Act 58 of 1962 (the Act).

In the instant case the parties sought to fund a taxable benefit from a salary sacrifice. They were entitled to do so in accordance with the relevant provisions of the Act. That was achieved through the scheme the parties agreed on and implemented. The following features of the scheme indicated that it was properly designed and implemented, namely:

  • The taxpayer purchased the motor vehicles, owned and claimed depreciation on them.
  • The recovery of their total cost, including their running expenses, was obtained from the salary sacrifice, not from the employees.
  • In return for the amount they had forgone, the employees received a taxable benefit, being the use of the vehicles.

Insolvency

Voluntary surrender of insolvent estate should be made in good faith and in the best interest of the creditors: The case of Ex Parte Concato and Similar Cases 2016 (3) SA 549 (WCC); [2016] 2 All SA 519 (WCC) dealt with applications for voluntary surrender of five estates, all coming from the same law practice and moved by the same counsel. Because of striking similarities with previous applications coming from the same law practice, which had been presented as a ‘batch’, the court postponed the hearing and requested the attorney involved to provide certain information concerning past applications, covering a specified period. When the report was filed it transpired that in the past by and large the same template, same allegations and valuator had been used and that more or less the same dividend of 16 or 17 cents in the rand had been offered, as was the case in the present applications. Moreover, in the vast majority of the cases (90%) the final result was a ‘buy-back’ arrangement in terms of which the insolvent debtor would buy back his assets in terms of an instalment sale agreement, paying paltry instalments over a long period. In short, such voluntary applications were used for the benefit of insolvent debtors rather than the creditors. The court took the view that given the similarities between previous and current applications where the usual dividend of 16 or 17 cents in a rand had been offered, the same outcome, namely a ‘buy-back’ arrangement was a probable result. For that reason each of the applications for voluntary surrender was refused.

Bozalek J held that it did not appear that the applications were bona fide or that the orders of voluntary surrender would be to the advantage of creditors. Having regard to the evidence concerning the outcome of similar applications brought by the same attorney in the past, there was very little reason to doubt that the most likely outcome, should orders of voluntary surrender be granted, would be that the applicants would purchase back their assets at a forced-sale valuation. In all likelihood the result would be for the insolvent to continue to enjoy the possession and use of their assets but they would divest themselves of their creditors. It was most unlikely that such outcome would serve the interests of the creditors.

One of the primary requirements for a voluntary-surrender application to be successful was that it should be made bona fide. It was, however, open to any debtor to seek escape from financial difficulties via the route of voluntary surrender, provided he or she was able to make a proper and bona fide case in compliance with the Insolvency Act 24 of 1936. The courts have, over the decades, been wary of potential abuse in so-called ‘friendly’ sequestrations. However, it was increasingly recognised that there was a great, or even greater, risk of abuse and the undermining of the interests of creditors in voluntary-surrender applications. In such applications the need for full and frank disclosure and well-founded evidence was even more pronounced. Voluntary-surrender applications required an even higher level of disclosure than ‘friendly’ sequestrations, the need for full and frank disclosure being accentuated by the fact that, despite the practice of such applications being brought on an ex parte basis, they did not fulfil the criteria for true ex parte applications in that creditors had a very real interest in the outcome of such applications.

As a general rule in the WCC no voluntary-sequestration order would be granted where the projected dividend was less than ten cents in the rand. Nevertheless, even where the dividend was projected to be 16 or 17 cents in the rand, particularly where no fixed property or a major movable asset was involved and achieving the dividend relied solely on the sale of household items, equipment and furniture, considerable doubt often remained as to whether even that level of dividend would be reached.

Land reform

Eviction of occupiers must be just and equitable: In Molusi and Others v Voges NO and Others 2016 (3) SA 370 (CC); 2016 (7) BCLR 839 (CC) six applicants, being Molusi and five others, each had a contract of lease with the respondents, Voges and others, who were trustees of a trust, which owned a farm. The leases allowed the applicants to live on the farm subject to payment of monthly rental. Alleging that the applicants were in default regarding payment of rental the respondents gave each a notice of termination of the lease in terms of s 9(2) of the Extension of Security of Tenure Act 62 of 1997 (ESTA). The respondent stated in the notices that the reason for termination of the leases was failure to pay the agreed rental. When the matter was taken to the LCC the respondents initially argued that the reason for termination was non-payment of rental but during argument the reason for termination was changed to the need to develop the property but ultimately relied on the common-law ground of termination on giving reasonable notice, it being argued that the notice of two months thus given was reasonable. The LCC held that the requirements of ESTA regarding eviction had been met and accordingly granted the eviction order. An appeal against that order was dismissed by the SCA, which held that the respondents’ cause of action was the owner of property’s common-law right to cancel for non-payment of rent, alternatively on reasonable notice. Failure to pay rent was an adequate ground for termination of a lease. As a result in the present case the termination was just and equitable. On further appeal to the CC leave to appeal was granted and the appeal upheld. The orders of the LCC and the SCA were set aside. As the applicants did not ask for costs, no costs order was made.

Reading a unanimous decision of the court Nkabinde J held that the respondents were not entitled to rely, as they did, on the common-law principles as basis for eviction when those grounds were not set out in the termination notice and properly pleaded. The SCA was correct to hold that at common law the landowner would be entitled to the relief sought. However, that common-law claim was subject to the provisions of ESTA whose ss 8, 9, 10 and 11 had the result that the common-law action based merely on ownership and possession was no longer applicable. Reliance on the common law did not exonerate owners from compliance with the provisions of ESTA. The fairness of the eviction would still have to be considered, having regard to all relevant factors. All such relevant factors were not considered in the instant case. As a result reliance on the common-law grounds was, in the circumstances of the case, unfair to the appellants and impermissible.

ESTA required that the two opposing interests of the landowner and the occupier should be taken into account before an order for eviction was granted. On the one hand there was a traditional real right inherent in ownership reserving exclusive use and protection of property by the landowner. On the other hand there was the genuine despair of people who were in dire need of accommodation. Courts were obliged to balance those competing interests. A court making an order for eviction was required to ensure that justice and equity prevailed in relation to all concerned. In the instant case the SCA did not give sufficient weight to the hardship that would eventuate from the termination of the rights of residence and eviction since the applicants would be rendered homeless as there was no suitable alternative accommodation. Nevertheless, that did not mean that where the terms of ESTA have been properly complied with the owner was not entitled to an eviction order.

Prescription

Completion of running of extinctive prescription: Section 13(1)(g) of the Prescription Act 68 of 1969 (the Act) provides, among others, that if a debt is the object of a claim filed against a company in liquidation and the relevant period of prescription would be completed before or within one year after the relevant impediment has ceased to exist, the period of prescription shall be extended for a year. The essence of the section is that in the case of a claim against a company in liquidation, among others, the period of prescription is extended by a year, during which legal proceedings may be instituted against it.

In Van Deventer and Another v Nedbank Ltd 2016 (3) SA 622 (WCC) the appellants, Van Deventer and his wife, stood surety for the debts of a close corporation, and not a company, which owed the respondent, Nedbank, certain moneys. After liquidation of the corporation the respondent lodged and proved its claim against it, after which it proceeded to institute a claim against the appellants. The appellants having changed their address in the meantime did not receive the summons and could not therefore respond to it.  As a result default judgment was granted against them. When they became aware of the judgment, they applied for its rescission, citing as a ground therefore the defence of prescription of the claim against them. The magistrate dismissed the rescission application, holding that the claims against the corporation had not prescribed. Nothing was said about the fact that the section dealt with a company and not a close corporation. The High Court dismissed with costs an appeal against the decision of the magistrate.

Rogers J (Nuku AJ concurring) held that it was for the appellants to allege and prove when prescription began to run, something they had not done. The impediment contemplated in s 13(1)(g) concerning a company in liquidation ceased to exist when the filed claim was rejected or, if it was accepted, when the final liquidation and distribution account was confirmed by the Master. In the present case the respondent’s claims were duly proved and not rejected. When a summons was served on 13 July 2012, prescription was interrupted prior to its completion. It was settled law that the timeous interruption of prescription of the principal debt, or a delay in the completion of prescription of the principal debt, also interrupted or delayed prescription in respect of a surety’s obligation.

On the question whether the section also applied to close corporations it was held that if close corporations had existed when the Prescription Act was enacted in 1969 (close corporations only came into existence in 1985 in terms of the Close Corporations Act 69 of 1984) there would have been no conceivable reason to treat them differently from sole proprietorships, partnerships, trusts and companies. The policy considerations and purposes underlying s 13(1)(g) would have applied as much to close corporations as to the other forms of organisation. There was no practical or legal reason why close corporations should be treated differently from unincorporated insolvent estates and liquidated companies. If the section did not apply to close corporations in liquidation but applied to insolvent estates, which could be sequestrated under the Insolvency Act 24 of 1936 and to liquidated entities incorporated under the Companies Acts as they have existed from time to time, the differentiation would be utterly irrational and unrelated to any legitimate government purpose.

The legislature could not rationally have intended to exclude corporate entities such as close corporations from the scope of the section. Therefore, such entities were within the parliamentary intent of s 13(1)(g). The word ‘company’ as used in the section was capable of being interpreted liberally so as to include a ‘close corporation’. There could be no question of intentional omission of a close corporation from the section, or inadvertence, since close corporations did not exist at the time.

Other cases

Apart from the cases and material dealt with or referred to above the material under review also contained cases dealing with: Agreement to pay facilitation fee, Anton Piller orders, concurrent and exclusive jurisdiction of the Labour Court and the High Court, consumer credit agreements, contemporaneous motion proceedings pending divorce action, determination whether accused was in his sound and sober senses when pleading guilty, effect of plea bargain, failure to publish Acts of Parliament in all 11 official languages, invalidity of Local Government Municipal Systems Amendment Act 7 of 2011 due to procedure followed, legality of steps taken by Judicial Services Commission following complaint against a judge, minimum sentence for possession of automatic or semi-automatic firearm, obligations of state to arrest and surrender persons against whom the International Criminal Court has issued an arrest warrant, possession of child pornography, power of Local Division of High Court, proof of existence of contract, review of decision of minister, taxation of person conducting farming operations, unlawful interference with contractual rights of another person and voidable dispositions and preferences.

This article was first published in De Rebus in 2016 (Aug) DR 36.