Bid Financial Services v Close Trade 42 CC t/a Design Workshop and Others (2002/839) [2008] ZAGPHC 285 (12 September 2008)

IN THE HIGH COURT OF SOUTH AFRICA

(WITWATERSRAND LOCAL DIVISION)

CASE NO: 2002/839

In the matter between:

BID FINANCIAL SERVICES Plaintiff

and

CLOSE TRADE 42 CC

t/a DESIGN WORKSHOP First Defendant

CHRISTOS DASKALAROS Second Defendant

MICHAEL JONATHAN HART Third Defendant

ALLAN GEOFFREY RICHARDSON Fourth Defendant

J U D G M E N T

MASIPA, J:

INTRODUCTION

[1] The first and second defendants, by way of a special plea, pleaded that the plaintiff’s claim had become prescribed.

[2] The plaintiff sought a dismissal of the first and second defendants’ plea of prescription with costs on the attorney and client scale.

HISTORICAL BACKGROUND

[3] During or about January 2002, the plaintiff (purportedly as cessionary), served a summons on the first defendant (as principal debtor) and the second to fourth defendants (as sureties) for recovery of arrear rentals (Claim A) and pre-estimated liquidated damages (Claim B). This was pursuant to two rental agreements (Master Rental Agreements) for certain office equipment which the first defendant hired from a company known as ABS Finance. The two rental agreements were dated 14 December 1999 and 16 March 2000 respectively.

[4] The matter was enrolled for trial on 19 December 2005.

[5] At the trial hearing, the first and second defendants gave notice that they were taking exception to the Plaintiff’s

Particulars of Claim.

[6] The exception was aimed at paragraph 6 of the Plaintiff’s Particulars of Claim which read thus:

“On May 2000 and at Parktown and by means of a written Cession Agreement, ENSEMBLE TRADING 55 (PTY) LTD trading as ABFIN and/or ABS FINANCE (hereinafter referred to as ABS Finance) ceded its right, title and interest in and to certain agreements including the agreement entered into between itself and the 1st Defendant more fully referred to in paragraph 7 and 8 plus 18 and 19 below to the Plaintiff (A copy of a Cession Agreement is annexed

hereto marked Annexure “B” the terms and conditions of which should read as specifically incorporated herein.)”

[7] Paragraphs 7 and 8 refer to Claim A wherein the plaintiff claims an amount of R220 770,32. Paragraphs 18 and 19 refer to Claim B. In this claim the plaintiff sues for payment for an amount of R55 681,90.

[8] It is common cause the Annexure “B” is not a cession agreement. It is what is referred to as a Main Cession Agreement (MCA) entered into by the plaintiff as cessionary and an entity described in the MCA as Ensemble Trading 55 (Pty) Ltd trading as Abfin and/or ABS Finance. This agreement was entered into on May 2000.

[9] The court, per Bruinders AJ, upheld the exception, struck out paragraph 6, and granted the plaintiff leave to amend in order to comply with the court’s judgment within 10 days from date of judgment.

[10] After two failed attempts to amend its Particulars of Claim plaintiff finally filed a notice of amendment on or about February

2007. There was no objection to the amendment.

[11] The amended paragraph 6 reads as follows:

“6.1 CESSION

On or about 30 May 2000 and at Parktown, Plaintiff, duly represented, concluded a written agreement styled ‘Main Cession Agreement’ (‘the MCA’) with Ensemble Trading 55 (Pty) Ltd t/a ABFIN and/or ABS Finance (‘ABS Finance’), duly represented by one Dave Absil (‘Absil’), embodying the terms and conditions upon which cession transactions may be conducted between the Plaintiff and ABS Finance, a copy of which is annexed hereto marked ‘B’, the terms and conditions of which are incorporated herein as if specifically set forth.

Even though the MCA was only formally signed by the Plaintiff on 30 May 2000 and by ABS Finance on 25 January 2000, the parties thereto considered themselves bound by the terms thereof even prior thereto, in that both Plaintiff and ABS Finance concluded cession transactions in accordance with its terms and conditions being the standard terms and conditions upon which the Plaintiff transact cessions with cedent clients in general.

In the alternative and in the event of the above Honourable Court finding, for whatever reason, that the cessions pleaded in the following

paragraphs could not have taken place pursuant to the MCA, Plaintiff alleges that cession of ABS Finance’s rights in

terms of the said rental agreements in any event took place by means of an oral cession on the respective dates, the Plaintiff and ABS Finance represented as alleged, the rental contracts having been offered and delivered by ABS Finance, which offers were in each of the two instances of cession accepted by the Plaintiff and communicated to ABS Finance by payment for such rental contracts.

On or about 12 January 2000 and at Parktown, ABS Finance, duly represented by Absil, in terms of the MCA, alternatively orally offered to cede the rental contracts more fully referred to in paragraphs 7 and 8, to the Plaintiff.

The Plaintiff was at all material times duly represented by Lisa Allsop (‘Allsop’) and ABS Finance by Absil.

ABS Finance complied with the formalities of offer under clause 3 of the MCA, alternatively complied with the oral offer by delivery of the said rental contracts and ancillary documents to the Plaintiff on or about 11 January 2000.

The Plaintiff communicated acceptance of the offer in terms of the MCA (clause 4.1), alternatively the oral offer to ABS Finance by cheque payment to ABS Finance dated 12 January 2000, a copy of the front and reverse sides of said paid cheque is annexed hereto marked ‘B1’ and ‘B2’.

On or about 12 April 2000 and at Parktown, ABS Finance, duly represented by Absil, in terms of the MCA, alternatively orally offered to cede the rental contracts more fully referred to in paragraphs 18 and 19, to the Plaintiff.

ABS Finance complied with the formalities of offer under clause 3 of the MCA, alternatively complied with the oral offer by delivery of the said rental contracts and ancillary documents to the Plaintiff on or about 12 April 2000.

The Plaintiff communicated acceptance of the offer in terms of the MCA (clause 4.1), alternatively the oral offer to ABS Finance by cheque payment to ABS Finance dated 12 April 2000, a copy of the front and reverse sides of said paid cheque is annexed hereto marked ‘B3’ and ‘B2’.”

[12] In summary in the amended paragraph 6 of the Particulars of Claim (Declaration) the plaintiff alleges that there was an offer by ABS Finance to cede rental contracts referred to in paragraphs 7, 8, 18 and 19 to the plaintiff; that there was an acceptance by the plaintiff which the plaintiff communicated to ABS Finance and that all this was done in terms of the MCA agreement. In the alternative the plaintiff alleges that an oral cession of the rental agreements took place.

The Special Plea

[13] In the special plea the first and the second defendants plead, inter alia, that the plaintiff’s cause of action arose no later than 19 November 2001 and that the plaintiff’s claim had become

prescribed in accordance with the provisions of section 11(d) of the Prescription Act 68 of 1969.

Plaintiff’s Replication to the Special Plea

[14] Plaintiff filed a replication to the aforesaid special plea denying that a new cause of action was introduced. It alleged that the amendment effected to the Plaintiff’s Declaration entailed the addition of allegations pertaining to locus standi to the Plaintiff’s Declaration and not the introduction of a new cause of action.

THE ISSUE

[15] The question is whether the plaintiff’s claim has prescribed by virtue of the effluxion of time.

SUBMISSIONS

[16] Counsel for the first and second defendants submitted that the plaintiff’s claim had prescribed as the amendment introduced a new cause of action. This occurred on a date more than three years after the purported arising of the debt concerned.

[17] In the alternative counsel for the first and the second defendants submitted that by amending its particulars of claim the plaintiff was introduced as the new creditor. This was impermissible as the plaintiff had only become apparent as a creditor after the expiry of the prescriptive period.

[18] To address the issue it is necessary to analyse section 15(1) of the Prescription Act.

“The running of prescription shall subject to the provisions of ss (2), be interrupted by the service on the creditor of any process whereby the creditor claims payment of the debt.”

[20] In CGU Insurance Ltd v Rumdel Construction (Pty) Ltd [2003] 2 All SA 597 (SCA), para [6], at 601c-d, in the context of s 15(1), “debt” was noted to bear “a wide and general meaning”; and not the technical meaning given to “cause of action”, being the phrase ordinarily used to describe the set of material facts relied upon to establish the right of action.

[21] In that matter the defendant (appellant on appeal) insured the plaintiff (respondent on appeal) in respect of storm damage in terms of contracts of insurance, which were in force during separate periods in 1996 and 1997. The plaintiff had suffered loss alleged to have been caused by storm damage. Summons was issued against the defendant for reimbursement of such loss. In terms of the particulars of claim the amount was due and payable in terms of a single insurance contract. Subsequently, the plaintiff gave notice of their intention to amend the particulars of claim by including an allegation that the defendant was liable to indemnify it by reason of two contracts of insurance and not one as was originally pleaded. The court a quo allowed this amendment.

[22] The issue on appeal was whether the amendment to the particulars of claim had the effect of introducing a new claim which

had prescribed.

[23] It was the defendant’s contention that the second contract of insurance, introduced by the plaintiff to the particulars of claim, formed the basis of a new cause of action that arose almost three years ago. The argument was that the claim had prescribed in terms of Act 68 of 1969. Although agreeing with that contention the court stated that it was permissible to amend particulars of claim where the debt claimed was the same or substantially the same as the originally claimed debt. However, the defendant was found to have wrongly equated the meaning of “debt” in the Act, to the plaintiff’s “cause of action”. The court also emphasised that when the plaintiff cured a defective cause of action by introducing the contract upon which it really relied, the summons did not necessarily claim a different debt. The court held, after comparing the original particulars of claim and the amended version, that although part of the cause of action was now a different contract, the debt was the same in terms of the broad sense of the meaning of the word “debt”. Further the loss suffered remained the same even though it became payable by reason of an earlier contract of insurance and not the one originally pleaded. The appeal was dismissed.

[24] In Evins v Shield Insurance Co Ltd 1980 (2) SA 814 (A) at 825F-G Trollip JA made a distinction between “debt” and “cause of action” and describes the latter thus:

“’Cause of action’ is ordinarily used to describe the factual basis, the set of material facts , that begets the plaintiff’s legal right of action and, complementarily, the defendant’s “debt”, the word used in the Prescription Act.”

[25] In the same matter Corbett JA, (as he then was), cited the matter of McKenzie v Farmer’s Co-operative Meat Industries Ltd 1922, AD 16 where the court was dealing with a statutory provision relating to the jurisdiction of a magistrate’s court. There “cause of action” was said to mean –

“… every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to judgment of the court. It does not comprise every piece of evidence which is necessary to prove each fact, but every fact which is necessary to be proved.”

Having dealt with the meaning of “cause of action” the learned judge concluded (in a majority judgment) that the claims there in issue arose from separate and distinct causes of action.

[26] In Drennan Maud & Partners v Pennington Town Board 1998 (3) SA 200 (SCA) at 212G-I Harms JA reiterated that “debt” does not mean cause of “action”, and indicated that the kind of scrutiny to which a cause of action is subjected to in an exception is unjustified when dealing with the alleged debt in the context of prescription.

[27] The above case law, therefore, show, without a doubt, the importance of bearing in mind the distinction between the debt and the cause of action.

[28] In fact Olivier JA in Provinsie van die Vrystaat v Williams NO 2000 (3) SA 65 (SCA) at 74E went so far as to warn of the danger of being misled by cases which fail to make a proper distinction between the debt and the cause of action upon which it is based.

[29] Counsel for the first and the second defendants argued that because the entire paragraph 6 was struck out there remained no cause of action at all. When paragraph 6 was amended and the cession was set out properly a new cause of action was introduced. This was impermissible since it was introduced after the expiry of the prescription period, it was argued.

[30] It is so that an exception goes to the root of the entire claim. However, the fact that an exception is upheld does not necessarily mean that what remains is a nullity. (See Group Five Building Ltd v Government of the Republic of South Africa 1991 (3) SA 787 (T)) where Levison J stated:

“When an exception is upheld, it is the pleading to which exception is taken which is destroyed. The remainder of the edifice does not crumble.”

[31] In casu, therefore, what was destroyed when the exception was upheld was paragraph 6 only and nothing more. Of significance is that it does not necessarily follow that by amending a flaw in the pleadings the plaintiff is claiming a different debt. In fact in casu in the amended particulars of claim the debt remains identical to the debt in the original particulars of claim.

[32] In any event it is trite that a summons which sets out an excipiable cause of action can interrupt the running of prescription provided that the debt is cognisable in the summons and is identifiable as substantially the same debt as the debt in the subsequent amendment. (See CGU Insurance (supra) at 600 para 5e. See also Sentrachem Ltd v Prinsloo 1997 (2) SA 1 (SCA) at 15A-16D and Churchill v Standard General Insurance Company Ltd 1977 (1) SA 506 (A) at 517B-C.) Sentrachem (supra) makes it clear that it is not necessary for purposes of prescription that summons disclose a cause of action as long as it is not a nullity incapable of amendment.

[33] So the real question should be whether the debt is cognisable in the summons and is identifiable as substantially the same debt as the debt in the subsequent amendment. That would give an indication whether the original summons has interrupted prescription.

[34] To decide whether a summons interrupts prescription it is necessary to compare the allegations and the relief claimed therein with the averments and the relief claimed in the amendment (see Wavecrest Sea Enterprises (Pty) Ltd v Elliot 1995 (4) SA 596 (SELD) at 600H).

[35] What has to be decided in this case, therefore, is whether there are substantial differences between the cause of action originally pleaded and that which is now before me, that is, paragraph 6 as amended.

[36] A comparison between the original paragraph 6 and the amended paragraph 6 shows that a common thread in both paragraphs is that the plaintiff claims as a cessionary. The amended paragraph 6 expands on the cession agreement while the nature of the debts and the amounts owed has been left intact. The main difference is that in the original summons the plaintiff refers to Annexure “B” as the cession agreement. Annexure “B” is not a cession agreement but an umbrella agreement that contemplates discrete cessions to plaintiff by the cedent of contracts the latter has with various debtors.

[37] From the outset paragraph 6 referred to a cession although the cession was inadequately pleaded. It was clear from the pleadings that the debt arose from rental agreements between the defendants and ABS Finance and that the plaintiff was claiming as a purported cessionary.

[38] Counsel for the first and second defendants placed reliance on the matter of Park Finance Corporation (Pty) Ltd v Van Niekerk 1956 (1) SA 669 (TPD).

[39] In that case a company issued summons claiming that certain amounts were due to it in terms of a written agreement. Defendants pleaded that such amounts were due to a partnership and not to the company. Plaintiff then applied to amend the declaration. The defendant opposed the amendment. It held that the effect of the amendment was to enforce a different right between different parties. The court refused the amendment in respect of certain claims which had in the meanwhile become prescribed.

[40] It was held, inter alia, that the right which the plaintiff now wished to enforce was a right arising out of a contract between different parties and was a different right from that which the action was brought to enforce; accordingly that the service of the summons did not interrupt the prescription of the different right which the plaintiff now wished to enforce.

[41] Counsel for the first and the second defendants referred also to the matter of Blaawberg Meat Wholesalers CC v Anglo Dutch Meats (Exports) Ltd 2004 (3) SA 160 (SCA). In this matter an action was mistakenly instituted in the name of A as a creditor. It was held that service

of summons in such a case did not serve to interrupt prescription in terms of 15(1) of the Prescription Act 1969 where, it appeared, after the prescriptive period, that B was the true creditor and the summons was duly amended.

[42] The facts of both the matter of Parks Finance (supra) and that of Blaawberg (supra) are clearly distinguishable from the facts of the present case.

[43] In the present case there was no substitution of the correct plaintiff for the wrong one. The plaintiff in the amended particulars

of claim is the same entity who was the plaintiff in the original summons. It is for this reason that the alternative argument must also fail.

[44] I find that the proceedings instituted by service of the original summons in January 2002, that is, before the exception was upheld, was for the enforcement of the same or substantially the same debt or right of action as that sought to be enforced in the amended paragraph 6. In the amended version the allegations pertaining to cession are more detailed and properly set out in accordance with the order and judgment of Bruinders AJ. However, the basic contentions in both the original paragraph 6 and the amended version are the same. What also stands out is that there has not been any amendment to the relief claimed. The debt relied upon was failure to pay rental in terms of Master Rental Agreements. That has not changed. The amendment as set out in paragraph 6 amounts to no more than clarification of a defective pleading.

[45] In the circumstances I find that the plaintiff’s claim has not prescribed.

[46] In the premises I grant the following order:

The amendment sought to be introduced by the plaintiff is granted.

The first and second defendants’ special plea dated 8 August 2008 is dismissed with costs.

_________________________

T M MASIPA

JUDGE OF THE HIGH COURT

COUNSEL FOR PLAINTIFF J M VAN ROOYEN

INSTRUCTED BY JAY MOTHOBI INCORPORATED

COUNEL FOR FIRST AND

SECOND DEFENDANTS A JACOBS

INSTRUCTED BY HARRISONS ATTORNEYS

DATE OF HEARING 8 AUGUST 2008

DATE OF JUDGMENT 12 SEPTEMBER 2008