Munnikhuis v Melamed NO

• Jurisdiction: South Africa

Munnikhuis v Melamed NO
1998 (3) SA 873 (W)

1998 (3) SA p873

Citation	1998 (3) SA 873 (W)
Case No	A5019/96
Court	Witwatersrand Local Division
Judge	Wunsh J, Cameron J, Fevrier A J
Heard	August 29, 1997
Judgment	October 6, 1997
Counsel	J J Gauntlett SC (with him J C Butler) for the appellant; N N Lazarus for the respondent

Flynote : Sleutelwoorde

Contract — Remedies on breach — Prescription of — General principles restated.

Prescription — Extinctive prescription — Debt — Prescription Act 68 of 1969, s 12(3) — Breach of contract occasioned by non- or inadequate performance — No new debt created if creditor not exercising right to cancel — Since s 12(3) C referring only to 'facts from which the debt arises', ignorance by creditor of non- or inadequate performance irrelevant if debt, and due date for performance, remaining same — Later refusal by debtor to rectify non- or inadequate performance not creating new debt.

Headnote : Kopnota

A right to claim performance under a contract ordinarily becomes due according to its terms or, if nothing is said, D within a reasonable time which, in appropriate circumstances, could be immediately. The right, and thus the time when the debt is due, may only arise after the occurrence of some event. (At 887E--F/G.) If a debtor fails to perform some time after the debt becomes due, the failure or refusal does not give rise to a fresh or different debt unless the creditor cancels the agreement. If the creditor does not cancel, it remains entitled to sue for E performance. While the breach of contract may well create a new cause of action for cancellation and even for damages, it does not, however, create a new cause of action for specific performance. (At 887I--I/J.) If the debtor repudiates its obligations before performance is due, its breach gives the creditor a right of election: if the F creditor accepts the repudiation, thereby electing to cancel the contract, it acquires in place of the previous debt the right to claim specific performance, a new debt, being the right to claim restitution and/or damages, which becomes due when the right to cancel is exercised; if, however, the creditor does not accept the repudiation, thereby maintaining the contract, it may await the date fixed by the contract for performance, in which case prescription of its right to sue for performance will commence running on the latter date. (At G 888B/C--E.)

If the debtor commits a negative breach by failing to perform, the creditor may either sue for performance (that is enforce the debt which became due at the time provided for in the contract) or cancel if the contract gives it the right to do so, or if time is of the essence to the contract, or if the creditor gives notice of rescission when the debtor is or has been placed in mora. On cancellation the creditor may enforce the new debt which then arises, H ie in certain cases restitution or the return of property and, sometimes, damages. Prescription of that debt will not run before the cancellation which gives rise to the new debt. (At 888E--F/G.) Where repudiation occurs after performance has fallen due the creditor may insist on performance, in which case it claims the discharge of the I same debt even if there are circumstances where the court may not order specific performance but grant surrogate damages instead. (At 888G--H.)

The appellant and her brother, N, were the beneficiaries of two trusts, the N Trust and the J Trust, which had been formed in Jersey in 1983 by their father. After his parents N was the primary beneficiary of the N Trust and the appellant a secondary beneficiary, while the appellant was the primary J

1998 (3) SA p874

beneficiary after her parents of the J trust and N a secondary beneficiary. A dispute between N and the appellant A was settled during December 1986. In terms of the settlement, which had been reduced to writing, N and the appellant undertook to take the necessary steps to ensure that the appellant would no longer be a beneficiary under the N Trust and that N would no longer be a beneficiary under the J Trust. Each acknowledged that he or B she would have no claims against the other's trusts or companies. In terms of clause 18 of the settlement, the appellant undertook 'to procure that the Haddon Fidelity Corporation will no longer be a trustee' of the N Trust. It was further recorded that it was the parties' intention that everything to be done to give effect to their agreement would be completed 'as far as possible' before 31 March 1987. The settlement bound the parties C contractually only, with the result that in terms of s 11(a) of the Prescription Act 68 of 1969 a three-year prescription period was applicable.

The N Trust was a discretionary trust in conventional form for Jersey. The trust deed provided that it was to be subject to the exclusive jurisdiction of and construed and regulated only according to the laws of the Island of Jersey. A nominator, whose consent to a number of acts of the trustees was required and who had the power to D appoint and remove trustees, was appointed. After his father's death, N was the nominator of the N Trust. Provision was also made for the resignation of a trustee on 14 days' notice to the nominator or to the other trustees (if any). In terms of art 15(3) of the Trusts (Jersey) Law of 1984 a resignation by a trustee resulting in there being no trustee would have no effect.

The Haddon Fidelity Corporation ('Haddon'), a Panamanian company, was a trustee of the N Trust. In E pursuance of the December 1986 settlement N transferred his shares in Haddon to the appellant, as a result of which she appeared to be the only shareholder. In purported compliance with her obligations in terms of clause 18 of the December 1986 settlement the appellant procured a letter of resignation (dated '1990') as trustee of F the N Trust from Haddon. Since the respondent knew of this letter by 21 February 1990, it must have been received before then. Yet on 7 March 1990 one of the directors of Haddon sent written instructions, on behalf of Haddon 'acting in its capacity as trustee' of the N Trust, to the corporate body nominated to take Haddon's place as trustee concerning the transfer of assets in the N Trust. The nominated successor had, however, G declined to accept the appointment because of its dissatisfaction with the documentation submitted to it. In terms of art 15(3) of the Jersey Trust Law Haddon's resignation thus had no effect because its designated successor's refusal to accept the appointment would have resulted in there being no trustee of the N Trust. N died in August 1992. The respondent was appointed as executor testamentary of the estate. N's testamentary heirs were his former wife, from whom he had been divorced, as to 75% and a further named beneficiary as to 25%. It H appeared that the parties, or at least the respondent, only became aware in 1994 that, because of art 15(3) of the Jersey Trust Law, Haddon's resignation had not taken effect. The appellant instituted proceedings in the Courts of Jersey during 1994 in which she claimed to be the sole surviving beneficiary of the N Trust and demanded that I assets which had been transferred to another of her brother's trusts from the N Trust be re-transferred because such transfer had not been authorised by Haddon, as trustee. The respondent obtained an order in a Local Division requiring the appellant 'to do all the things as may be necessary to procure the resignation of Haddon' as trustee of the N Trust. Although the appellant had raised the defence of prescription in a fourth set of affidavits filed in that matter, the issue was not dealt with. In an appeal to a Full Bench it was the appellant's case that the obligation she had undertaken in terms of the 1986 J

1998 (3) SA p875

settlement constituted a 'debt' within the meaning of the Prescription Act and that that debt had prescribed A because more than three years had elapsed since the debt had become due. Section 12(3) of the Prescription Act provides that a 'debt shall not be deemed to be due until the creditor has knowledge of the identity of the debtor and the facts from which the debt arises'.

Held, that where a debtor breached a contract because of a failure or refusal to deliver, if the creditor did not B exercise the right to cancel on grounds of breach of the debtor's obligation to deliver, the prestation provided for in the contract would remain intact and no new debt would be created. (At 889A--A/B.)

Held, further, that, since s 12(3) referred only to facts 'from which the debt arises', ignorance of non-performance or of inadequate performance by the debtor was irrelevant if the debt, and hence the due date for its performance, remained the same. (At 890F--F/G.) C

Held, further, given that the performance demanded by the respondent was of the appellant's obligations in terms of clause 18 of the 1986 settlement, his and N's ignorance of the fact that the appellant's performance in 1990 had been defective had had no effect on the running of prescription. (At 890J--891A/B.)

Held, further, that although the result might seem inequitable given that both N and the appellant believed that the D appellant had discharged her 'debt', the Act neither provided for prescription being suspended for so long as the creditor incorrectly believed that the debt had been discharged, nor did it vest the Court with an equitable discretion. (At 891B/C--D.)

Held, further, as to the respondent's contention that a new debt had been created when the appellant had refused to rectify her ineffective procurement of Haddon's resignation as trustee, that this was not a case where N and the E respondent had accepted a repudiation of the agreement and elected to claim damages. A later denial of a debt did not...