Duet and Magnum Financial Services CC (In Liquidation) v Koster

• Jurisdiction: South Africa
• Judge: Nugent JA, Heher JA, Van Heerden JA, Theron AJA and Seriti AJA
• Judgment Date: 29 March 2010
• Citation: 2010 (4) SA 499 (SCA)
• Docket Number: 168/09
• Hearing Date: 15 March 2010
• Counsel: G Wickins for appellant. No appearance for respondent.
• Court: Supreme Court of Appeal

Nugent JA: A

[1] The question in this appeal is whether a claim by a liquidator under s 32 of the Insolvency Act 24 of 1936 to have a court set aside an impeachable transaction, and to make a declaration that the liquidator is entitled to recover the alienated property, prescribes under the Prescription Act 68 of 1969, and if so, when prescription starts to run against the B claim.

[2] Duet and Magnum Financial Services CC carried on business as a microlender. An order for its winding-up [1] was made on 17 May 2001 and the liquidators, the present appellants, were appointed on 18 July 2001. C

[3] On 12 July 2005 the liquidators caused a summons to be served on Mr Koster, the respondent, in which they alleged that certain dispositions had been made by the close corporation that fell within the ambit of either s 26(1)(b) or s 30(1) or s 29(1) of the Insolvency Act. They claimed an order setting aside the dispositions, and an order declaring D Mr Koster obliged to pay to them certain moneys that were alleged to have been alienated under the dispositions from September 2000 until the date of the winding-up order. (Different amounts were claimed in the alternative, but that is not material for present purposes.)

[4] Mr Koster filed a special plea of prescription and pleaded over on the E merits. Only the plea of prescription is relevant here. Mr Koster pleaded that, in respect of each of the dispositions relied on by the liquidators, prescription commenced to run from a date before 12 July 2002 (which was three years before the summons was issued) and averred that the liquidators had knowledge of the relevant facts before that date, or could have acquired such knowledge by exercising reasonable care. In the F premises, so the plea ran, the claim has expired.

[5] In a replication the liquidators raised two answers to the special plea. They pleaded that, because the liquidators were not entitled to recover the disposition until the court made the order sought by them, there was G no present 'debt' as contemplated by s 11(d) of the Prescription Act, and thus prescription has not commenced to run. In the alternative the liquidators pleaded that they obtained knowledge of the facts upon which the claim was based at an enquiry held in terms of s 152 of the Insolvency Act on 4 August 2003, having acted reasonably and with due care, and that the running of prescription was thus delayed until that H date under s 12(3) of the Prescription Act.

[6] The matter came to trial before Preller J in the Pretoria High Court. The court ordered, under rule 33(4), that the only question to be tried initially was whether 'the plaintiff's claims as formulated in the particulars of claim constitute a debt as contemplated in ss 10, 11 and 12 of I [the Prescription Act]', in which event the parties agreed that the claims had become prescribed.

Nugent JA

A [7] After hearing argument, the learned judge upheld the special plea with costs. In doing so he declined to follow Barnard and Lynn NNO v Schoeman and Another, [2] which concerned a similar claim, and adopted the contrary conclusion reached by Nel J (Potgieter AJ concurring) in Burley Appliances Ltd v Grobbelaar NO and Others[3] and by Goodey AJ in B Barnard NO v Bezuidenhout en Andere, [4] in relation to analogous claims. In view of the conflict between those decisions, Preller J granted the appellant leave to appeal to this court. During April Mr Koster's attorneys of record withdrew. We were advised by Mr Koster in a letter received by the registrar of this court on 12 March 2010 that he would C not be represented at the appeal, citing lack of funds to employ counsel.

[8] In support of their contention that their claim has not prescribed, counsel for the liquidators submitted that because Mr Koster is not yet liable to repay the moneys that are now claimed, no 'debt' as envisaged by the Prescription Act is in existence. A similar submission [5] was made D in Burley and rejected. Upon being asked during argument in this case when the cause of action that has been pleaded will arise, counsel for the liquidators said that it will arise only once judgment setting aside the effective dispositions is entered in favour of the liquidators. The notion that a claim can be founded upon a cause of action that arises only once a court has given judgment on the claim is not one that appeals to me.

E [9] It seems to me that the liquidators misunderstand their own claim. Prescription is about rights that have come into existence but have ceased to exist by the passage of time. If a right has not come into existence then there is nothing that is capable of expiring. That is why prescription is raised in a plea. If no existing right has been alleged in the F particulars of claim, then the particulars of claim are excipiable and will not attract a plea. It is only once facts have been alleged that establish the existence of a right that the question whether that right has expired, is capable of arising.

[10] It is perfectly correct, as counsel for the liquidators submitted, that G Mr Koster has no present obligation to pay the moneys that are claimed. It is also perfectly correct that Mr Koster will become obliged to pay the money only once a court has made a declaration to that effect. But the claim of the liquidators is not founded upon a present right to be paid by Mr Koster.

H [11] Orders that are made by courts generally declare that a debt then exists and allow for its enforcement by the ordinary process of execution. But the declarations that are sought in this case are declarations of an altogether different kind. They are declarations that have the effect of bringing into existence a debt that did not exist before. The liquidators I become entitled to obtain such a declaration once certain events have

Nugent JA

occurred and that is the right that they now seek to enforce. They do not A ask the court to declare Mr Koster to be an existing debtor. They ask the court to make Mr Koster into a debtor when he was not a debtor before. If they were to show that the events alleged in the particulars of claim have occurred, then they are entitled to a declaration of that kind and that is the existing right upon which they rely. B

[12] The sections of the Insolvency Act with which we are...