THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

In the matter:

Case No: 648/09

No Precedential Significance

ATB CHARTERED ACCOUNTANTS (SA)
Appellant

and

EDNA BONFIGLIO
Respondent

Neutral citation:
ATB Chartered Accountants (SA) v Edna Bonfiglio
(648/09) [2010] ZASCA 124 (30 September 2010)

Coram:
NUGENT, CLOETE JJA, R PILLAY, BERTELSMANN AND
EBRAHIM AJJA

Heard:
27 AUGUST 2010

Delivered:
30 SEPTEMBER 2010

Summary:
Extinctive Prescription – Prescription Act 68 of 1969 –
subsections 12(1) and 12(3) – prescription begins to run
from the time the debt becomes due – subsection 12(3) –
from time creditor acquires knowledge of facts from which
debt arises – claim based on contract to render professional
advice in relation to agreement of sale of business to third
party – default by purchaser – regard to circumstances –
debt prescribed.

ORDER

On appeal from: Gauteng North High Court (Pretoria) (Pretorius J sitting as
court of first instance)

1.
(a)
The appeal is upheld with costs.
(b)
The order of the North Gauteng High Court is set aside in its
entirety and substituted with the following order:
'The special plea of prescription is upheld and the plaintiff's action is
dismissed with costs.'

JUDGMENT

R PILLAY AJA (Nugent, Cloete JJA and Bertelsmann and Ebrahim AJJA
concurring)

[1] The issue in this appeal is whether the court below, which granted
leave to appeal, was correct in dismissing the appellant's special plea of
prescription.

[2] The respondent sued the appellant (ATB), a firm of Chartered
Accountants, for damages. The summons was served on 30 June 2006 .Her
claim was based on the alleged failure of ATB to properly carry out a
contractual mandate with adequate knowledge and diligence that could
reasonably be expected of chartered accountants, alternatively, negligence in
that it breached a duty of care towards the respondent in advising and
negotiating the sale of her business.

[3] The respondent was the sole member of a close corporation, M Klisser
CC (the corporation), a stationery retailer. ATB was its auditor. The

respondent requested ATB to find a buyer for the corporation, which was
experiencing financial hardship. On 5 April 2002 ATB and the respondent
concluded an oral agreement in terms of which ATB undertook to procure a
buyer for her interest and loan account in the corporation and to render
professional advice in regard thereto. ATB was represented by Mr Martin
Venter (Venter).

[4] On the same day Venter introduced her to Jacobus Wilhelm Raath
(Raath) another of ATB's clients, as a prospective buyer. Thereafter, Venter
drafted a document headed 'Offer to Purchase' and presented it to the
respondent after Raath had already signed it. The respondent signed it and
accepted the offer, thereby selling her interest and loan account in the
corporation for R825 000-00. Payment was to take place in terms of a
stipulated schedule of monthly instalments, the first of which was to be paid
on 30 April 2002, in an amount of R10 000-00 'plus interest'. All concerned,
including the respondent, knew that Raath intended to finance payment of the
purchase price for the respondent's interests in the corporation out of the
profits of its retail operations. After the conclusion of the written agreement,
Raath took over the running of the stationery business. It turned out that he
later converted the corporation into a company, namely, C Klisser Co (Pty)
Ltd.

[5] Raath failed to make the first payment. Thereafter respondent, legally
represented, entered into correspondence with Raath and ATB. It is not
necessary to deal with all the correspondence, save for a few material letters.
Early in May 2002, respondent's attorneys wrote a letter to ATB expressing
concern about Raath's failure to pay. They also wrote a subsequent letter
dated 7 August 2002 to ATB, the relevant portion of which reads as follows:
'We also have instructions to inform you at this early stage, that our client will hold
you liable for all damages and losses she may suffer as a result of the transaction
she entered into with Mr J W D Raath on your advice, and particularly as a result of
the 'offer to purchase' you drew up and assisted our client in signing.'

[6] Further communication between the legal representatives of the
respondent and Raath resulted in a new short term schedule for the payment
of the purchase price being negotiated and finally agreed upon by the
respondent and Raath. ATB was informed of the new arrangements by letter
dated 11 November. Raath's financial position did not improve to any great
extent and he made infrequent payments to the respondent, in breach of the
new schedule.

[7] On 19 March 2003, respondent instituted action against Raath for the
balance of the purchase price. On 3 April 2003 she received a letter, dated 1
April 2003, from Raath's attorney, the effect of which was that Raath was
unable to make payment to her and that C Klisser Co (Pty) Ltd had been
liquidated.1 On 22 May 2003 respondent nonetheless obtained summary
judgment against him. On 26 June 2003 a warrant of execution was issued
against the property of Raath and pursuant thereto, the sheriff filed a nulla
bona return on 7 July 2003.

[8] The respondent then turned her attention to ATB. She instituted action
against ATB in the High Court, Pretoria claiming damages in an amount of
R856 400-10 on the basis that it had failed to comply with the terms of the
contract it had entered into with her. She alleged that in advising and
negotiating the transaction referred to above, ATB expressly, tacitly or
impliedly undertook: (i) to take reasonable steps to ensure that the purchaser
was in a sound financial position in order to comply with his financial
obligations; (ii) to ensure that proper security was furnished and (iii) that it
would exercise the care, knowledge and diligence reasonably expected of
chartered accountants in rendering professional services and would execute
its duty in a proper professional manner and without negligence. The
alternative claim is based on negligence for breaching a duty of care and was
couched in similar terms.

1 'Dit spyt ons om u mee te deel dat ons kliënt nie in staat was om finansieël die mas op te
kom nie. Alle gelde wat oor die afgelope ses (6) maande gein is, moes aangewend word om
betalings aan uitstaande skuldeisers te maak.

Ons bevestig dan dat M Klisser & Co (Pty) Ltd dan gelaas gelikwideer is.'

[9] ATB entered a special plea of prescription, the validity of which, as
indicated above, is the issue in this appeal. It asserted that prescription in
relation to the respondent's claim commenced to run, in terms of section 12(1)
of the Prescription Act 68 of 1969 on 5 April 2002 when she entered into the
agreement of sale (upon the advice of ATB). Alternatively, at best for the
respondent, so ATB contended, the debt became due when her attorney
informed it by letter dated 7 August 2002, that she intended to hold it liable for
any losses that she may have suffered as a result of entering into the
agreement of sale on its advice.

[10] In her replication to the special plea, the respondent denied that
prescription commenced to run on 5 April 2002 or at any time before 7 July
2003 when a nulla bona return was filed. She contended that she only then
became aware that the debt as against ATB had become due.

[11] At the hearing of this appeal, ATB applied to amend its special plea.
The application was not opposed and this court granted the amendments. The
effect thereof is that the alternative date from which it contended prescription
had begun to run, namely, 7 August 2002 was amended to 1 April 2003, being
the date of the letter informing the respondent that Raath was unable to pay
her and that C Klisser Co (Pty) Ltd had been liquidated. It was alleged that the
claim was therefore extinguished on 31 March 2006.

[12] It is common cause that the respondent's claim falls within the
parameters of subsection 11(d) of the Act which provides a prescription period
of three years.

[13] Section 12 of the Act sets out when prescription starts to run. The
relevant subsections provide:
'(1)
Subject to the provisions of subsections (2), (3) and (4), prescription shall
commence to run as soon as a debt is due.
(2)
. . .

(3)
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: Provided that a
creditor shall be deemed to have such knowledge is he could have acquired it
by exercising reasonable care.
(4)
. . .'

[14] In Truter & another v Deysel 2 at para 16 the following was said:
'For the purposes of the Act, the term 'debt due' means a debt including a delictual
debt, which is owing and payable. A debt is due in this sense when the creditor
acquires a complete cause of action for the recovery of the debt, that is, when the
entire set of facts which the creditor must prove in order to succeed with his or her
claim against the debtor is in place or, in other words, when everything has
happened which would entitle the creditor to institute action and to pursue his or her
claim.'

[15] It was submitted on behalf of the appellant that the respondent's debt
became due when ATB breached the contract with the respondent when the
latter concluded the sale agreement on the alleged negligent advice of ATB. It
was submitted further that it was then that the wrong occurred and that the
respondent sustained the loss although it was not yet apparent.

[16] There is support for that submission in various cases cited in R H
Christie: The Law of Contract in South Africa.3 Thus in Burger v Gouws &
Gouws (Pty) Ltd4, for example, in which the defendant breached a contract by
delivering to the plaintiff the wrong variety of onion seed, Franklin J said the
following at 588 A:
‘The plaintiff has claimed damages as a result of the defendant’s breach of contract
in failing to deliver the “Caledon Globe:” variety of seed. That was the single
completed wrongful act by the defendant; and the fact that the nature and extent of
the damages ultimately sustained by the plaintiff may only manifest themselves after
the seed has been planted is in my view irrelevant, provided that it is proved at the
trial that the plaintiff suffered damages as a result of that single completed wrongful
act.’

2 2006 (4) SA 168 (SCA).
3 R H Christie assisted by Victoria McFarlane 5ed p 487.
4 1980 (4) SA 583 (W)

[17] The respondent's counsel, on the other hand, submitted that the right
of action was complete only when the writ of execution resulted in a nulla
bona return. It was not before that event, so it was submitted, that it could be
said that Raath was unable to pay the purchase price. I do not think that can
be correct. On that approach it might just as well be said it would not be
known that Raath was unable to discharge his debt to the respondent until the
judgment debt had expired after the period of thirty years because at any time
before then he may have acquired the necessary funds to do so.

[18] But I do not think it is necessary to decide in this case precisely when
the right of action arose. I have pointed out that s 12(3) of the Act delays the
running of prescription until the creditor has knowledge of the identity of the
debtor and the facts from which the debt arises (a creditor is deemed to have
such knowledge if he or she could have acquired it by exercising reasonable
care). The purchase price of the corporation (company) was to be paid from
the profits that it made but on 3 April 2003, the respondent was advised not
only that Raath had been unable to make payment, but also that the company
had been placed in liquidation. There can be no doubt that at least by that
time the prospect of receiving the purchase price was minimal, if it existed at
all. Had a court been called upon to determine at that date, as a matter of
probability, whether the respondent had suffered loss, it is plain what its
finding would have been. I think it must follow that by no later than that date
the respondent's right of action had indeed accrued, and that she had
knowledge of all the facts which gave rise to that right of action.

[19] Thus in my view prescription had commenced to run from no later than
3 April 2003 and the claim prescribed no later than three years thereafter ie
on 2 April 2006. The summons was issued only thereafter – on 30 June 2006
– and the special plea ought to have been upheld.

[20] In the result, the following order is made:
(a)
The appeal is upheld with costs.
(b)
The order of the North Gauteng High Court is set aside in its  entirety

and substituted with the following order:
'The special plea of prescription is upheld and the plaintiff's action is
dismissed with costs.'

___________________
R PILLAY
ACTING JUDGE OF APPEAL

APPEARANCES:

For appellant:
H H STEYN

Instructed by:
Couzyn Hertzog & Horak, Pretoria

Naudes Inc, Bloemfontein

For respondent:
T W G BESTER

Instructed by:
Corrie Nel Attorneys
c/o Jacques Roets Attorneys,
Pretoria

Christo Dippenaar Attorneys,

Bloemfontein
SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN SUPREME COURT OF
APPEAL

FROM:
The Registrar, Supreme Court of Appeal
DATE:
30 SEPTEMBER 2010
STATUS:
Immediate

Please note that the media summary is intended for the benefit of the media
and does not form part of the judgment of the Supreme Court of Appeal.

ATB CHARTERED ACCOUNTANTS (SA) v EDNA BONFIGLIO

The Supreme Court of Appeal (SCA) today upheld the appeal by the
appellants, a firm of chartered accountants (ATB) against the decision of the
Pretoria High Court, dismissing its special plea of prescription.

The appellant and respondent entered into an agreement. The appellant was
to advise her on the sale of her business to a third party. She duly sold it on
the advice of ATB but was not paid the purchase price.

She sued the accountants for damages.

The court found that the claim had arisen more than three years before the
summons was issued and the claim had therefore prescribed.