WHETHER
PLAINTIFF'S CLAIMS HAVE PRESCRIBED
Whether
or not I am wrong on locus standi and cause of action, the
plaintiff's claim must still satisfy the requirements for
prescription.
The
plaintiff alleged that payment was due to it as follows:
(a)
Claim 1: 11 December 2009;
(b)
Claim 2: 19 May 2010;
(c)
Claim 3: 15 January 2011; and
(d)
Claim 4: 31 January 2012 and ...
WHETHER
PLAINTIFF'S CLAIMS HAVE PRESCRIBED
Whether
or not I am wrong on locus standi and cause of action, the
plaintiff's claim must still satisfy the requirements for
prescription.
The
plaintiff alleged that payment was due to it as follows:
(a)
Claim 1: 11 December 2009;
(b)
Claim 2: 19 May 2010;
(c)
Claim 3: 15 January 2011; and
(d)
Claim 4: 31 January 2012 and 31 July 2012.
The
defendants argued that the plaintiff's claims, being for debts,
they were subject to extinction three years after they became due in
accordance with sections 14 and 15 of the Prescription Act [Chapter
8:11] (“the Act”).
The
third defendant therefore argued that, based on the allegation in the
summons, the plaintiff's Claims 1-3 were destroyed by reason of
prescription, as three years had elapsed from the date they became
due to the date of service of summons, in accordance with section
15(d) of the Prescription Act.
The
first and second defendants took the argument further to argue that
all four claims had prescribed as they became due from the dates the
loans were agreed on, that is on 30 April 2009, 19 May 2010, 27
October 2010 and 3 August 2011. For this assertion, they relied
primarily on Chiwawa v Mitzuris & Ors 2009 (1) ZLR 72, where
MAKARAU JP…, held that the date of the agreement from which
obligations arose is the date upon which the cause of action arises.
The
plaintiff, on the other hand, argued that its claims had not
prescribed because:
(i)
They were secured by mortgage bonds registered in favour of the
plaintiff by the first defendant and another judgment debtor, which
prescription period is thirty (30) years, in accordance with section
15(a) of the Prescription Act.
(ii)
Alternatively, the principal debtor was not in mora prior to
liquidation due to indulgencies the plaintiff granted to it, which
therefore precluded pursuance of the claims against guarantors, (per
Millmann and Another v Masterbond Participation Trust Managers (Pty)
Ltd (Under Curatorship) and Others 1997 (1) SA 113); or
(iii)
Alternatively, the principal debtor fell in mora upon entering into
liquidation, and such placement into liquidation of Stir Crazy
Investments (Pvt) Ltd, on 19 September 2012, interrupted prescription
as provided for in section 17(1)(d) of the Prescription Act; or
(iv)
Finally, the issuance and service of summons in HC589/13, though
withdrawn against some of the defendants, interrupted the running of
prescription. Reliance for this averment was put on Union Government
v Willemse 1922 OPD 14…,.
The
Law
It
is trite that the general prescription period for all debts is three
years, in accordance with section 15(d) of the Prescription Act
[Chapter 8:11], while that for debts secured by mortgage bonds is 30
years in terms of section 15(a) of the Prescription Act. It is also
trite that the completion of prescription is delayed where debts are
against a company which has entered into liquidation (see section
17(1)(d) of the Prescription Act). Finally, it is settled law that
prescription can also be interrupted by judicial process (see section
19 of the Prescription Act).
I
also agree with the plaintiff, with regard to sureties, that the
correct position is as summarised in Millmann & Anor v Masterbond
Participation Trust Managers (Pty) Ltd (under curatorship) & Ors
1997 (1) SA 113C when FRIEDMAN JP and FARLAM J said:
“In
our view, the legal position was correctly stated by Professor JG
Lots, in, Joubert (ed) The Law of South Africa Volume 26 paragraph
161 where the following statement appears:
'Unless
the parties have agreed otherwise, a surety's debt normally becomes
enforceable as soon as the principal debtor is in default, subject,
however, to the surety's right to claim that the principal debtor
first be excused. If the surety has bound himself as co-principal
debtor, his debt becomes enforceable at the same time as the
principal debt.'”
Application
of the law to the facts
From
the above legal principles, I am of the view that, as a general
principle, in a matter involving a loan or debt with agreed payment
terms, as long as the principal debtor is not in mora prescription
does not begin to run, as the debtor will be complying with the terms
of the agreement and there is no cause to bring suit against it.
However, where a debt is due to be paid on or from a particular date,
and/or instalment payments are not made accordingly, then the
principal debtor is in mora as at that date and prescription begins
to run therefrom as that is the date the cause of action arose.
For
instance, where a party enters into a five year loan agreement and
makes the required repayments faithfully for the first four years,
prescription does not begin to run. But, once the party defaults,
then the cause of action arises and prescription then runs from that
date.
I
do not understand the provisions of the Prescription Act to mean that
prescription runs from the date of the agreement where a party is not
in mora as that would mean issuance and service of court process to
interrupt prescription where there is no cause, thus creating a bane
to commerce. For that reason, it is my view that the position in
Chiwawa v Mitzuris & Ors 2009 (1) ZLR 72 is distinguishable.
There, the judge was dealing with a situation where a party's right
to transfer was at issue. She correctly held that the plaintiff was
entitled to transfer of property from the date the agreement was
concluded and prescription therefore began to run from that date.
In
the present case, we are concerned with the issue of loan repayments,
where a debtor can only be in mora from the date he defaults on his
repayments.
In
casu, it has not been established, on the record, exactly when the
principal debtor went into mora by dint of defaulting in repayments.
The plaintiff claims it was at the time Stir Crazy Investments (Pvt)
Ltd went into liquidation, while the defendants claim that it was at
the time the loan agreements were entered into.
Now,
if the principal debtor is Stir Crazy Group of Companies, as appears
on the loan agreements, then, of course, it went into mora as at the
date of the loan agreements, as that non-existent company never made
any payment to the plaintiff; and since there are no security
mortgage bonds to secure its indebtedness, the plaintiff's claim
had prescribed by the time summons were issued. Chiwawa v Mitzuris &
Ors 2009 (1) ZLR 72 being the case in point.
It
is another matter if the principal debtor was Stir Crazy Investments
(Pvt) Ltd. If the parties agreed various indulgencies in its favour
(which I assume to be debt rescheduling agreements), as alleged by
the plaintiff, then it only went into mora upon entering into
liquidation in 2012. Therefore, regardless of the existence of
security mortgage bonds, the plaintiff's claim would still have
been live as at the date of summons - Chiwawa v Mitzuris & Ors
2009 (1) ZLR 72 being inapplicable.
However,
the plaintiff has not produced or proven the existence of these debt
rescheduling agreements, leaving it unproven that Stir Crazy
Investments (Pvt) Ltd was not in mora until it went under
liquidation.
Therefore,
assuming that the principal debtor is Stir Crazy Investments (Pvt)
Ltd, the surety's liability in this case did not arise at the
inception of the loans, but at the undetermined time that the
principal debtor defaulted in meeting the repayment terms, which
obviously is after the dates of 30 April 2009, 19 May 2010, 27
October 2010 and 3 August 2011 for claims 1-4, as it is standard
practice that loan repayments cannot be due on the dates of the loan
advances but subsequently. And from the plaintiff's own assertions
that indulgencies were granted to Stir Crazy Investments (Pvt) Ltd
prior to liquidation, then the dates of defaults were certainly
before the date the company entered into liquidation. Consequently,
with regard to Stir Crazy Investments (Pvt) Ltd, I am unable to
accept both parties' assertions that prescription began to run from
the date of the loan agreements or from the date of liquidation.
Regarding
the plaintiff's averment that the running of prescription was
judicially interrupted, I take note that the plaintiff instituted
legal proceedings in HC589/13. However, such process was withdrawn
with respect to the defendants herein after summons had been served.
I
do not find favour with the plaintiff's argument that the fact of
serving the summons was enough to interrupt prescription in terms of
section 19 of the Prescription Act. This is because this provision
requires that the creditor must successfully prosecute his claim to a
final judgment of the court [see section 19(3)(a) of the Prescription
Act], otherwise prescription shall be deemed not to have been
interrupted. I have not been referred to nor have I found any
authority for the position that if a plaintiff successfully
prosecutes his claim against one debtor prescription is interrupted
from running as against another. In fact, such a principle would
render ineffectual the entire purport of the Prescription Act.
Likewise, while it is true that prescription is delayed as against
the principal debtor once it is placed under provisional liquidation
before any of the plaintiffs' claims prescribed, I do not believe
that it necessarily follows that section17(1)(d) of the Prescription
Act is always applicable to claims against sureties (see Professor JG
Lots, in, Joubert (ed) The Law of South Africa Volume 26). On the
face of it, section 17(1)(d) of the Prescription Act is unambiguous:
it provides for delay in completion of prescription where “the
debt…, is the subject matter of a claim filed…, against a company
in liquidation”…,.
In
casu, prescription would certainly have been delayed as against the
principal debtor, but the defendants are not companies which had
entered into liquidation for which prescription could have been
delayed. Therefore, had the principal debtor defaulted long before it
went into liquidation, prescription for the defendants would have
started to run as soon as the principal debtor went into default. I
do not hold that subsequent liquidation of the principal debtor would
have been a factor for the prescriptive period of the defendants.
In
so far as the security mortgage bonds are concerned, and assuming the
validity thereof, there is no doubt that the first defendant provided
a surety mortgage bond to the plaintiff on behalf of the principal
debtor to secure its indebtedness to the plaintiff. This is clear on
the face of the bond at pp 39-42 of the plaintiff's bundle of
documents. Consequently, the prescription period for the debts
secured by this bond (if valid) is 30 years and thus would not have
prescribed at the time that summons was served.
However,
it is also clear from the record that the first defendant did not
provide any unlimited guarantee. Therefore, it seems to me that the
first defendant's exposure to the principal debtor's liability is
limited to its obligations under the security mortgage bond. At the
time that summons were issued, the first defendant was liable to the
plaintiff in the amount of $1,050,000= secured by mortgage bond
number 8776/03 dated 31 October 2003 over Stand 9064 of Salisbury
Township. This is therefore the debt I would have found not to have
prescribed had I ruled otherwise on cause of action. There is no
evidence on the record that the second defendant ever provided any
security mortgage bond. It however did provide an unlimited
guarantee, in favour of Stir Crazy Investments (Pvt) Ltd, which, of
course, had no effect on the running of prescription. I am, however,
unable to find that all claims against the second defendant had
prescribed or not, as neither party was able to prove, to my
satisfaction, the exact date when prescription started to run.
It
is another matter with regard to the third defendant.
She
gave an unlimited guarantee in favour of Stir Crazy Group of
Companies and provided a surety mortgage bond in favour of Stir Crazy
Investments (Pvt) Ltd valued at $300,000=. However, I accepted her
argument, on determining the question of cause of action, that the
unlimited guarantee which she provided was in favour of a
non-existent company, and was consequently a nullity. By extension
therefore, I am unable to fault the logic that nothing can stand on
nothing: once the unlimited guarantee is a nullity, then it cannot
validly ground the mortgage bond. And since I was not inclined to
amend the loan agreements between the plaintiff and Stir Crazy Group
of Companies to refer to Stir Crazy Investments (Pvt) Ltd, there is
no causal connection between the loan agreements and the security
mortgage bond that the third defendant provided. Therefore, I cannot
find that the prescription period ought to be 30 years. Consequently,
I cannot hold that the plaintiff's claim against the third
defendant had not prescribed.
In
the event, I cannot agree with the plaintiff that the defence of
prescription was wrongly taken….,.
1….,.
2….,.
3.
The defendants defence of prescription is upheld;