As in all legitimate disputes, extinctive prescription is a crucial component to get viewed as when evaluating the merits of the declare and formulating a defense. Construction law circumstances, in lots of situations, include not merely advanced contractual associations, but in addition tough specialized aspects. Deciding the date on which prescription starts to run involves watchful factual evaluation and in the event the steps in the fair man or woman are to be factored to the discussion, factors can get a lot more tricky.
The 1969 Prescription Act gives for 4 different fundamental prescription durations. The durations are 30, fifteen, six and 3 years respectively. The majority of the circumstances I’ll be referring to relate to debts that are subject matter into a 3 calendar year prescription period of time. I’ll also refer briefly to some situation in the direction of the stop on the presentation where the 30 calendar year period of time finds software.
When does prescription begin to run?
Section twelve of the Act delivers as follows:
twelve. … (one) … prescription shall begin to run the minute the personal debt is because of. (two) … (3) A debt shall not be regarded to become due till the creditor has knowledge with the id with the debtor and of the information from which the credit card debt arises: … a creditor shall be considered to own this kind of understanding if he might have acquired it by doing exercises affordable care.”
When could be the debt due?
The decision in Martin Harris & Seuns OFS (Pty) Ltd v Qwa-Qwa Regeringsdiens 2000 (three) SA 339 (A) provides an excellent illustration of when a financial debt becomes because of for the purposes of Part 12(one) on the Act.
The specifics of this matter are briefly as follows:
* The building contract provided that the appellant would be paid after a progress certificate was issued by an architect (the principal agent) in respect of work already performed. Such certificates were issued and the appellant was duly paid.
* Within three years after completion of the works as a whole, but much more than three several years after uncertified sections of work was done, the appellant instituted action for an outstanding balance in respect of uncertified work.
* The respondent alleged that the declare had prescribed because the entitlement/debt arose when each portion of work had been completed.
The Court held in the contractor’s favour and I summarise the position as follows:
* The issuing of progress certificates was only a contractual mechanism to place the contractor in a position to finance the continuation of your completion from the works.
* The completion of each specific segment of the work did not entitle the appellant to receive payment for the work.
* Only upon completion of your work as a whole would the appellant have these types of entitlement.
* The appellant’s claim would rest upon a certificate as a separate and self-supporting cause of action, wherever a certificate had already been issued.
* The would then be for payment in the percentage with the value of the works for which the architect had certified.
* Prescription on the appellant’s declare (for payment for all sections which had not appeared in any certificate) began to run at the earliest once the work as a whole was completed.
The financial debt had therefore not become due and respondent accordingly failed in its prescription argument.
In LTA Development v The Minister of Public Works and Land Affairs 1992 (one) SA 837 (C) the court also shed additional light on the same question.
The claimant claimed for losses sustained in consequence on the delay in the commencement of your works. The building contract provided for the completion with the works within 33 months from date of acceptance with the tender. A further term was that the employer would hand over the site within a certain interval. The progress on site and completion with the project were adversely affected by:
* The employer’s late handover with the site (7 working days delay).
* Completion delayed due to causes beyond the contractor’s control (320 working days). The defendant then raised a prescription argument and said that the plaintiff’s claim had become prescribed because the financial debt claimed for became due 33 months and 10 days (7 working days and three non-working days) after acceptance with the tender.
* This argument resulted in 16 July 1986 being calculated as being the date on which the credit card debt was to have become because of.
* Summons was served on 5 December 1989.
The defendant’s argument however did not take into proper consideration that a further term with the contract provided for the contract time period to generally be extended in the event of delays owing to causes beyond the contractor’s control.
This provision extended the date on which the personal debt became due with a further 320 working days. The defendant was unsuccessful.
Know-how and regarded knowledge
As we have seen Section 12(3) of your Act provides that a personal debt is not regarded to generally be because of till the creditor has awareness or is considered to acquire knowledge with the identification of the debtor, as well as with the info from which the credit card debt arises.
In Minister of Public Works and Land Affairs v Group Five Building Limited 1999 (4) SA twelve (SCA) counsel for the contractor contended that the employer’s claim had become prescribed in terms of Area twelve(1) of the Prescription Act.
The employer had allegedly become aware on the relevant details by thirty May 1991. The contract was terminated on three December 1991 and the employer’s counter-claim was delivered on 1 December 1994. The contractor had therefore to prove that prescription had begun to operate.
In the instant case, the date on which the employer gained know-how with the info from which the personal debt arose (thirty May 1991) was irrelevant as this particular contract contained a clause which entitled the employer’s engineer to require the contractor to remedy defective work. The very earliest stage once the employer’s damages could conceivably have become owing was when the contractor, who had the duty to remedy the defective work, had the last chance to do so. This was the date on which the contract was cancelled (three December 1991).
The employer’s counter-claim was delivered on one December 1994 and therefore fell within the three yr. prescriptive interval. The contractor had accordingly failed to prove that prescription had operate.
The acceptable person
In Drennan Maud & Partners v Pennington Town Board 1998 (three) SA 200 (SCA), the appellant was a civil engineering consultancy. It designed and recommended the building of a reinforced concrete retaining wall as being the Town Board wished to protect certain properties which became threatened by the Umzinto River in Kwa-Zulu Natal. The Town Board accepted design and proceeded to engage a contractor to build the wall.
During September and November 1989 heavy rains fell and the river came into flood. Sinkholes formed in the backfill material behind the wall during this period. These developed progressively and eventually became very substantial. By January 1990 the river was flowing freely under the whole length in the wall and the Town Board were back to the place they had been before the appellant was consulted and claimed was for the wasted costs of building the wall.
It was alleged by the engineers that by no later than 13 November 1989 the Town Board had awareness of your info from which the alleged declare arose. It was later alleged that the Town Board acquired deemed know-how in the light in the information known to it by the above date. The Town Board should have exercised fair care.
In his judgement the Honourable Mr Justice Olivier made the following statement: “… a creditor shall be judged to own the required knowledge if he might have acquired it by exercising acceptable care. In my view, the requirement exercising fair care required diligence not simply in the information underlying the debt, but will also in relation to the evaluation and significance of those details. This means that the creditor is deemed to obtain the requisite knowledge if a fair human being in his position would have adduced the information from which the personal debt arises.”
It was clear from the subsidence from the backfill material behind the wall that the design had failed and could not withstand the scouring effect from the passing flood. Because Town Board’s claim was for the wasted costs of building the wall, the loss claimed for had already occurred when the Town Board acquired regarded knowledge that the wall did not serve the purpose for which it was designed and built and that the related costs were wasted.
The consultant’s prescription argument was therefore well founded for the reason that respondent’s summons was issued outside on the three 12 months prescription period.
Prescription and arbitrations
Arbitration plays a major role in the building industry as alternative dispute mechanism. I would like briefly, and in closing, to discuss one or two essential aspects of prescription pertaining to arbitrations.
Section 13(1)(f) on the Act states that the completion of prescription might be delayed if the debt may be the object of a dispute subjected to arbitration.
What is Arbitration?
In Murray & Roberts Development (Cape) (Pty) Ltd v Upington Municipality 1982 three SA 385 (NC) it was held that the referral to an engineer (in terms of a written agreement between the plaintiff and the defendant) was also a dispute subjected to arbitration for purposes of Segment 13(one)(f) on the Act. This selection was upheld in the Appellant Division. It therefore followed that the completion of prescription was delayed till one 12 months after the arbitration proceedings had come to an conclude.
Proceeding with the Arbitration
It should also be noted that the mere existence of an agreement between parties for disputes between them to get referred to and decided by arbitration does not suffice for the purposes of delaying the running of prescription and that the words subjected to arbitration means that the parties are required to refer disputes to arbitration and to actually proceed with the arbitration proceedings.
Judgement Financial debt
In Primavera Development SA v Government of Northwest Province & another 2003 (three) SA 579 (BPD) the settlement agreement and the resultant Court Order provided, inter alia, that the award by the arbitrator would operate as an Order of Court.
The arbitrator’s award therefore acquired the status of the judgment personal debt for purposes of Part 11(a)(two) in the Prescription Act, which meant that a 30 calendar year prescriptive interval would be applicable to the award.
Dirk is a specialist lawyer in managing construction law disputes using the full range of dispute settlement processes including litigation, arbitration, adjudication, mediation and negotiation. He also specialises in engineering law, insurance law, property law, medical law and product liability law.