In the recent matter of Natal Rubber Compunders (Pty) Ltd v Bernard Fisher (13172/2010) [2014] KZD in which Eversheds acted, the court was asked to decide on the effects of cession in relation to claims that are the subject of litigation.

In the matter, X instituted action against Y within the prescription period of three years after the debt being relied on became due. After the close of pleadings and after the prescription period, X entered into an agreement with Z in terms of which Z purchased and took cession of the claims of X against Y, including the claim arising out of the action which X had instituted against Y.

In accordance with the agreement, Z was substituted as plaintiff in the action between X and Y. The substitution was effected by way of a notice of intention to amend and a subsequent notice of amendment. Y did not object to the substitution but raised a special plea of prescription upon perfection of the substitution.

At the hearing of the special plea it was argued by Y that the claim, had prescribed: (i) upon the cession of the claim to Z at the date of such cession; (ii) upon the issue of the relevant notice of intention to amend or (iii) by the amendment substituting Z in the place of X.

Relying on the provisions of Section 15(6) of the Prescription Act No. 68 of 1969, Y submitted that the notice of intention to amend constitutes a “process” within the meaning of that word in that Act. The case of Mias De Klerk Boerdery (Edms) Bpk v Cole 1986 (2) SA 284 (N) was used in support of this submission, wherein it was held that a notice of intention to amend in terms of Rule 28 of the Uniform Rules of Court was a “process” in terms of section 15(1) of the Prescription Act, which interrupted the running of prescription.

Y submitted that accordingly, if Z were to obtain final judgment in its favour in this case, the process under which it would obtain such judgment would be the notice of intention to amend read together with the notice of amendment. Since the notice was affected after the three year prescription period, so Y concluded, Z’s claim had become prescribed.

It was further argued that:

  • without such notice of amendment, Z would not have been able to claim payment of the debt and that the notice of amendment and substitution of Z as plaintiff constituted a process whereby Z commenced its proceedings;
  • the process commenced by X, embodied in the combined summons, had lapsed upon X’s cession of the right of action to Z and/or the filing of the notice of intention to amend and/or the resultant substitutions of X for Z;
  • in order to preserve the interruption of prescription constituted by the service of the combined summons on Y, X was required in terms of the provisions of Section 15(2) of the Prescription Act, to prosecute its claim to completion and to obtain judgment against Y;
  • due to X’s failure to prosecute its claim to completion, the interruption of the running of prescription by the service of the combined summons fell away, and the debt had accordingly prescribed.

Reliance was placed by Y on the decisions of the Supreme Court of Appeal in the matter of Silhouette Investments Limited v Virgin Hotels Group Ltd 2009 (4) SA 617 (SCA) and the decision of the Supreme Court of Appeal in Tecmed (Pty) Ltd and Others vs Nissho Iwai Corporation and Another 2011 (1) SA 35 (SCA) 20.

In opposing the special plea, Z placed strong emphasis on the case of Van Rensburg v Condoprops 42 (Pty) Ltd 2009 (6) SA 539 E in which the importance of distinguishing between a “cause of action” on one hand and a “debt” as envisaged by the Prescription Act on the other was highlighted. According to the judgment in that case:

“The Prescription Act prescribes periods of prescription in respect of “debts” and not periods of prescription relating to causes of action, the debt remains the same.”

Z argued further that the effect of a cession of a claim which is the subject of litigation, which takes place after the close of pleadings, is that the cessionary cedes its interest not in the claim, but in the result of the litigation.

As the subject matter of the cession was the subject of litigation, the cession itself does not transfer the right to prosecute the action to the

cessionary, as that right only accrues to it when the Court substitutes it as the plaintiff. As Y did not object to the substitution of X by Z, Y was deemed to have consented to the substitution.

The Court agreed with Z that the substitution of X by Z did not result in the original interruption of prescription being extinguished in very much the same way as when an executor, or a curator, is substituted as plaintiff in the place of a deceased, or insolvent, or disabled person. He steps into the shoes of that person in respect of any claim already instituted by that person prior to his death, insolvency or disability and the prior appointment of the executor or curator. Once Z had been properly substituted in place of X, Z inherited all rights and obligations invested in X at the time of the substitution, including the right acquired by the proper and timeous service of the original summons interrupting prescription.

The special plea was accordingly dismissed.