THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT
Case No: 150/2012
Not reportable
In the matter between:
JOHAN GEORGE WILHELMUS BASSON

Appellant
and
BENITO HITLER NIEMANN

First Respondent
JACOB JACOBUS DE KLERK

Second Respondent
DEON STORM

Third Respondent
FRANCOIS CHARL LE ROUX

Fourth Respondent

Neutral citation:
Basson v Niemann (150/2012) [2012] ZASCA 203 (30
November 2012)
Coram:
Mpati P, Nugent, Malan, Leach and Theron JJA
Heard:
19 November 2012
Delivered:
30 November 2012
Summary:
Prescription ─ knowledge of the facts ─ respondents having acquired
knowledge of all facts material to their claim more than three years before the
service of their summons ─ respondents’ claim prescribed.

___________________________________________________________________
O R D E R
___________________________________________________________________

On appeal from:
North Gauteng High Court, Pretoria (Erasmus J sitting as court
of first instance):
1. The appeal is upheld, with costs.
2. The order of the court a quo is set aside and substituted with the following:
‘(a) The special plea of prescription is upheld.
(b) The plaintiffs’ claims are dismissed with costs.’
___________________________________________________________________
J U D G M E N T
__________________________________________________________________

LEACH JA (MPATI P, NUGENT, MALAN AND THERON JJA concurring).

[1]   The parties to this appeal formerly practised together in partnership as attorneys
in Pretoria. As will be set out in greater detail in due course, after the dissolution of
the partnership the respondents instituted action in the North Gauteng High Court,
seeking an order declaring the appellant to be liable to them in respect of certain
partnership debts and ordering him to pay various amounts they had paid to persons
who had lodged claims against the partnership. The appellant raised a special plea
of prescription. This the high court ordered should be determined as a separate
issue, with the merits of the claim standing over for later decision. After hearing
evidence on the issue of prescription, the high court dismissed the special plea with
costs. An application for leave to appeal was similarly unsuccessful. This appeal is
brought with the leave of this court.

[2]   The firm of attorneys in which the parties practised was one of long standing, its
partners having changed from time to time over the years. At the beginning of 1999
there were six partners, namely, the appellant, the four respondents and a Mr Louw

Erasmus. When the latter left the firm on 28 May 1999, the partnership was
dissolved and replaced by a fresh partnership between the parties. The appellant
was a senior partner, and headed the firm’s litigation and commercial practice. The
first respondent, who had been a partner in the firm since 1973, and the other
respondents were conveyancers.

[3]   On 1 March 2000, the structure of the firm changed once more when its practice
was taken over by a company of which the appellant and the first to third
respondents, together with Mr DS Jacobs who until then had been employed by the
firm as a professional assistant, became shareholders and directors. At the same
time, the fourth respondent left the firm and took up employment in the commercial
sector. Although this new company has since conducted the practice, apart from one
issue that I shall mention in due course, nothing in the present dispute really turns on
the nature of the firm’s juristic personality and, for convenience, I intend for the most
part to refer to both the partnership and the company which replaced it simply as ‘the
firm’.

[4]   On 31 March 2008, the appellant resigned as a director of the firm. He was later
called to the bar and was practising as an advocate when the proceedings against
him were instituted in the high court. Before the appellant left the firm, dissention
between he and his former partners had grown arising out of his dealings with a
client of the firm, Anglo-Euro Company (Pty) Ltd, some nine years earlier which
subsequently led to the respondents instituting action against him in the North
Gauteng High Court by way of a summons served on 3 December 2009.

[5]   Briefly put, in their particulars of claim the respondents alleged the following:
(a)
Anglo-Euro had to the knowledge of the appellant marketed a scheme to the
public holding out that foreign financial loans could be obtained from certain of the
world's leading banks at attractive interest rates.
(b)
As part of the scheme, various persons (whom for convenience I shall refer to
as ‘investors’) had applied to obtain foreign loans through Anglo-Euro and, in order

to do so, had been obliged to pay substantial deposits to the firm which had been
held on their behalf in the firm’s trust account.
(c)
From approximately April to August 1999, the appellant had negligently, and
in breach of his obligations as a reasonable attorney and the rules of the Law
Society of the Northern Provinces, paid certain of these deposits to Anglo-Euro
without having had the necessary authority of the investors to do so.
(d)
Consequently, as partners in the firm, the respondents had been obliged to
reimburse a number of these investors who had claimed repayment of their deposits.
(e)
In terms of their partnership agreement, the parties had agreed that in the
event of the partnership suffering damage due to negligence or unprofessional
conduct of a partner, the partner responsible would indemnify the partnership or the
innocent partners against such damage and that,  in the event of the partnership,
after its dissolution, being held liable for damage suffered as a result of a partner’s
negligence or unprofessional conduct during the existence of the partnership, each
individual partner would be entitled to claim his pro rata share of the damage from
the responsible partner.

[6]   On the strength of these allegations, the respondents sought an order declaring
the appellant to be liable to them in respect of any claim arising from the appellant
having paid investors’ deposits held by the firm to Anglo-Euro without the necessary
authorisation to do so. In addition they claimed payment of various amounts they had
been obliged to pay a number of such investors.

[7]   It was to these claims that the appellant filed his plea of prescription.1 It is
common cause that the prescriptive period for the respondents’ claim was three
years. Section 12(1) of the Prescription Act 68 of 1969 provides that prescription
begins to run ‘as soon as the debt is due’. However s 12(3) goes on to provide that a
debt

1 His initial plea of prescription related solely to the claims brought by two claimants against the former
partnership, but the special plea was later amended so as to relate to the respondents’ claim as a
whole.

‘… shall not be deemed to be due until the creditor has knowledge of the identity of the
debtor and of the facts from which the debt arises: Provided that a creditor shall be deemed
to have such knowledge if he could have acquired it by exercising reasonable care.’
The appellant alleged that his conduct on which the respondents relied had occurred
in 1999 and that the respondents had either known, or could have known had they
exercised reasonable care, both of his identity as the alleged ‘debtor’ and of the facts
out of which his alleged ‘debt’ had arisen more than three years before service of the
summons on 3 December 2009.

[8]   The respondents sought to meet this by relying on s 12(2) of the Prescription Act
which provides that should a debtor wilfully prevent the creditor ‘from coming to know
of the existence of the debt, prescription shall not commence to run until the creditor
becomes aware of the existence of the debt’. They alleged that the appellant had
assured them that he had in fact been authorised to pay the amounts that he had
paid out of trust to Anglo-Euro, that they had accepted his assurances in that regard
and that they had learned only in May 2007 that the appellant had not in fact been
properly authorised to make such payments. They therefore averred that prescription
had only commenced to run from that time and that the three year period of
prescription had not elapsed before summons was served on 3 December 2009.

[9]   The high court judgment, while not a model of clarity in respect of the facts it
found to have been proved, appears to have been premised on a finding that the
respondents, through no lack of reasonable care on their part, only learned of their
claims against the appellant and the facts giving rise thereto in May 2007. As
appears from what follows this flies in the face of certain of the basic undisputed
facts which clearly showed that the respondents had knowledge of the relevant facts
well before then and had, indeed, paid many of the investors’ claims more than three
years before they instituted action against the appellant.

[10]   It is common cause that the deposits of various investors in the Anglo-Euro
scheme were paid into the firm’s trust account. The appellant appears also to
concede that during the period April to August 1999 he paid certain of these deposits

to Anglo-Euro (in his plea he disputed that he had acted negligently or improperly in
doing so but a decision on that issue is irrelevant in considering the plea of
prescription). Prescription of the respondents’ claims would therefore have
commenced to run once they knew, or could reasonably to have known, (a) of the
appellant having paid the investors’ deposits to Anglo-Euro and (b) that such
payments were improperly made without the necessary authority to do so.

[11]   In regard to the first of these requirements, it is clear that shortly after the
payment of investors’ deposits had been made by the appellant, allegations surfaced
that they had been improperly made and the respondents were aware thereof.
Indeed a number of summons were either threatened or issued against the partners
of the firm in which disgruntled investors claimed payment of the deposits they
alleged had been irregularly paid out by the appellant. The respondents were thus
aware from the outset that investors alleged that their deposits had been improperly
paid out of the firm’s trust account and their defence to prescription related simply to
the second requirement ie whether they knew or could reasonably have ascertained
that the appellant had lacked the necessary authority to make the disputed
payments. The foundation of their case in that regard was that the appellant was
their partner in whom they were entitled to have the utmost faith, and he had
reassured them that he had not acted improperly and had been duly authorised to
act as he had done

[12]   Of particular significance in considering whether the relevant facts were within
the respondents’ knowledge is the application brought by two such investors, Mr C
Visscher and Mr F du Toit, on 1 December 1999 in the Pretoria High Court. They
cited the appellant, the firm, the individual respondents in the present appeal and
Anglo-Euro as respondents and claimed payment of various amounts totalling R1,6m
allegedly improperly paid by the appellant out of trust to Anglo-Euro (for ease of
reference I intend to refer to this simply as ‘the Visscher claim’). The firm reported
the matter to the insurance brokers who handled its compulsory professional
insurance. This, in turn, led to the firm’s insurers appointing an attorney, Mr Michael

Leinberger (at the time a member of the Pretoria firm of attorneys Savage, Jooste &
Adams) to deal with the claim on behalf of the firm.

[13]   Precisely what occurred immediately thereafter is not clear as the records of
Savage, Jooste & Adams relating to the Visscher claim had fallen into disarray in the
period of almost 12 years that had intervened before the special plea in the present
matter came to trial. Be that as it may, it appears as if the affidavits filed by the
opposing sides gave rise to disputes which the parties decided should best be
determined by way of arbitration. This led to senior counsel, Adv JJ Gauntlett SC,
being appointed as arbitrator to determine whether an obligation had arisen, in either
contract or delict, between Visscher and Du Toit on the one hand and the firm and its
partners on the other.

[14] The arbitration was a long and drawn out affair conducted between April 2004
and March 2005. In his award delivered on 14 March 2005, the arbitrator ruled in
favour of the claimants, and held that the appellant had been duty bound not to make
payments out of trust except upon the investors’ explicit instructions.

[15]  Unhappy with this outcome, the appellant, the respondents and the firm
appealed to an arbitration appeal tribunal consisting of a retired judge of this court
and two practising senior counsel. On 23 June 2005, it dismissed the appeal, having
concluded that written instruction from the investors had been a pre-condition for
payment of their deposits to Anglo-Euro.

[16]   In the light of this finding, it would have been an obvious step for the
respondents to have asked the appellant to produce the written authority of each
investor whose deposit had been paid out to determine the validity of the claims
brought against them, particularly as it would have been obvious that the appellant’s
stance, rejected on arbitration, had been that no such written authority had been
required. The respondents appear to have left their defence to the Visscher claim up
to the appellant (their litigating partner) and their insurers, but a reasonable person in
their position, on learning of the unsuccessful outcome of the arbitration, would

surely not have continued to be listless and supine in regard to a case in which they
had been sued for payment of an enormous sum of money but would have
demanded to be fully informed; to have insisted on seeing the arbitrators’ rulings;
and to have ascertained whether the appellant had indeed had the necessary written
authorisation to have made the payments he did. If not already running by then, after
the outcome of the arbitration appeal the prescription clock surely began to tick.

[17]   In the meantime, a number of other investors had either claimed payment of
their deposits paid by the appellant to Anglo-Euro or had indeed already instituted
action for payment of such deposits. The appellant and the respondents were
therefore exposed to substantial claims from numerous investors. Consideration was
given to seeking further relief in another forum, but in the end it was decided that
there was no realistic prospect of avoiding liability. The appellant testified that in
regard to the Visscher claim in particular, their decision was largely influenced by the
judgment of this court in Hirschowitz Flionis2 delivered on 22 March 2006 and the
advice of counsel that, in the light thereof, the decisions of the arbitrator and the
appeal tribunal could not be assailed. This was not challenged by the respondents.

[18] Accordingly, the parties accepted being liable to the various investors whose
deposits had improperly been paid out of trust by the appellant. Unfortunately for the
parties, their insurers were not prepared to meet the full amount of all the claims and,
consequently, during the period 19 January 2006 to 26 September 2006 they were
called upon to and did make a number of payments to various investors, including
Visscher and Du Toit, to settle their claims. Details of these payments, which the
third respondent required for income tax purposes,  are set out in a letter Mr
Leinberger addressed to him on 3 November 2006 which reads:
‘1.
Re: Adriaan Hendrik Van Wyk NO plus two other Plaintiffs.

R75 600.00, ie R18 900.00 each paid on 19 January 2006 and 28 February 2006.
2.
Re: G Visscher, FH Du Toit and Finansiële Advies Dienste

2.1
R194 400.00 ie R48 600.00 each on 3 April 2006;

2 Hirschowitz Flionis v Bartlett 2006 (3) SA 575 (SCA).

2.2
R2 880.18 ie R720.05 each in respect of interest on the abovementioned
amount on 6 June 2006.
3.
Re: GB du Plessis

R60 480.00 ie R15 120.00 each paid on 26 September 2006.’

[19] Interestingly, the first payment mentioned (to AH Van Wyk NO and two other
claimants which resulted in each former partner having to pay R18 900) was made
seven months after the arbitration appeal tribunal had dismissed the appeal and
before the appeal in Hirschowitz Flionis was heard in this court.  The judgment in the
latter case could therefore have played no part in the decision taken to make this
initial payment, and the inference is irresistible that the payments made by the
appellant out of trust had been improper had already sunk in by then (which is
understandable given the findings of the various arbitrators) and was later confirmed
by the decision in Hirschowitz Flionis a few months later (before the parties made
their payment in respect of what had not been paid by their insurers in respect of the
Visscher claim).

[20] Of the respondents, only the first respondent testified in the court below.
According to him, despite their having made these payments, the appellant
continued to assure them that he had been authorised to make the payments. The
first respondent averred that it was only in May 2007 that they came to realise that
the appellant had not been so authorised. This occurred when the respondents met
with Mr Leinberger who explained that the appellant had not had the necessary
written authority to make the payments he had made to Anglo-Euro and explained
the extent of their potential liability due to their insurers refusing to make further
payments on their behalf.

[21]   However, the respondents’ argument that prescription only commenced to run
at this point in time cannot be accepted. Indeed the first respondent conceded that if
he had exercised care he would have learned everything necessary to institute
action against the appellant by 2006. This in itself is fatal to the respondents’ case.

[22]  But in any event, it is clear from the first respondent’s own evidence that he in
fact had knowledge of the material facts by then. Crucial to this is a directors’
meeting of the firm held on 16 January 2006 and attended by the appellant and the
first to third respondents, the minutes of which recorded that the appellant would
contact an attorney, Thys Cronje, who was acting on behalf of the majority of the
investors who had instituted action, to discuss the Anglo-Euro matter with him after
which a decision would be taken in regard to the way ahead in regard to settlement.

[23]   The first respondent testified that by that stage the respondents knew that the
arbitration and the arbitration appeal had gone against them, the appellant's claim
that he had been authorised to make the payments notwithstanding. He also
conceded that they had realised by then that the appellant’s allegation that he had
not acted improperly was without merit, that many investors had instituted action
against them personally for repayment of their deposits, and that they were liable in
respect of those claims (as is borne out by the payments they made to investors).
Indeed the first respondent conceded that nothing prevented the respondents from
instituting their action against the appellant at that stage, save for the fact that he
was their partner and as he told them he was negotiating both with their insurers and
Mr Toerin of Anglo-Euro to reimburse them the amounts they were obliged to pay out
to the investors.

[24]   The respondents therefore paid investors the large amounts mentioned in para
18 in 2006 at a time when they were well aware that they had no defence to the
investors’ claims. If prescription had not begun to run before then, that was no longer
the case by April 2006.

[25]   The truth of the matter lies in the first respondent’s concession under cross-
examination that he could have investigated the merits at a far earlier stage than he
said he did. However his (and presumably the other respondents’) indifference to the
various investor’s claims against them, appears to have been due to them having left
the litigation in the hands of the appellant and their insurers. It was only in April 2007
that they realised that they were not going to be reimbursed by Anglo-Euro or their

insurers. But of course this did not mean that they didn't already know that they were
liable to the investors. That they had known for some time is evidenced by them
paying those investors. All they came to realise is that they were not going to be
reimbursed, but that was irrelevant to the existence of their claim against the
appellant, the material facts relevant thereto having been known to them long before.

[26]   It is clear from this that on the respondents’ own case, prescription commenced
to run against them by early 2006 at the very latest. That being so, the respondents’
claims had prescribed before they instituted their action against the appellant more
than three years later.

[27]   Recognising this difficulty, counsel for the respondents sought in this court to
raise for the first time an argument inconsistent with the respondents’ pleadings
(which were to the effect that prescription commenced to run in May 2007) by
contending that although the firm’s practice was incorporated on 1 March 2000, its
directors effectively practised in partnership until 2008 when the appellant resigned.
Accordingly, so the argument went, the partnership between the parties should be
regarded as having continued until 2008 and, as the respondents were seeking to
enforce a right of recourse against their former partner, their claim only arose in
2008, less than three years before they instituted action in December 2009.

[28]   This argument, novel as it is in certain respects, cannot be accepted. In
support of the argument the respondents relied on the decision of this court in Louw
v Nel 2011 (2) SA 172 (SCA). At first blush, such reliance was misplaced. All that the
court observed in that matter was that where a private company was formed at the
instance of a partnership, ‘there ought to exist between the members in regard to the
company’s affairs a particular personal relationship of confidence and trust similar to
that existing between partners in regard to a partnership business’.3 That is no
authority for a proposition that the partnership that existed before the company was
incorporated continues to exist.

3 Louw v Nel para 18.

[29]  But in any event, in the present case the so-called ‘partners’ in the firm after its
incorporation were not the same as those who had been partners immediately before
incorporation took place. As pointed out above,4 the fourth respondent left the firm
immediately before its incorporation whereafter Mr Jacobs, who had not been a
partner, became a director. The partnership between the parties was thus
necessarily dissolved when the fourth respondent left, and the members of the firm
after its incorporation were not the same as the persons who had been partners at
the time of the events giving rise to the respondents’ claims (as is borne out by Mr
Jacobs not being a party to this litigation).That partnership thus cannot be regarded
as only having been dissolved when the appellant left the firm in 2008.

[30]   The court a quo therefore erred in not upholding the appellant’s plea of
prescription. The appeal must therefore succeed and the respondents’ claims be
dismissed as having prescribed.

[31]   It is therefore ordered:
1. The appeal is upheld, with costs.
2. The order of the court a quo is set aside and substituted with the following:
‘(a) The special plea of prescription is upheld.
(b) The plaintiffs’ claims are dismissed with costs.’

______________________
L E Leach
Judge of Appeal

4 In para 3 above.

APPEARANCES:

For Appellant:

S D WAGENER SC

Instructed by:
Pieterse & Curlewis Inc, c/o A L Maree Inc,
Pretoria

Martins Attorneys, Bloemfontein

For Respondent:

C J VAN DER WESTHUIZEN SC
Instructed by:
J F Jordaan Inc, Pretoria

McIntyre & Van der Post, Bloemfontein

THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF
APPEAL

From:  The Registrar, Supreme Court of Appeal
Date:  30 November 2012
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

Neutral citation:  Basson v Niemann (150/2012) [2012] ZASCA 203 (30 November 2012)

The parties to this appeal formerly practised together as partners in a firm of attorneys in
Pretoria. After the dissolution of their partnership, the respondents sued the defendant for
payment of certain partnership debts which they alleged he was obliged to pay by reason of
the terms of their partnership agreement. The appellant pleaded that the respondents’ claims
had prescribed. His special plea of prescription, which was set down for adjudication as a
separate issue, was dismissed by the high court, Pretoria. The appellant appealed against that
decision to the Supreme Court of Appeal.

The Supreme Court of Appeal today held that all the material facts relevant to the
respondents’ claims had been within their knowledge more than three years before they
instituted their action against the appellant. It therefore concluded that the high court had
erred in deciding that the claim had not prescribed. The appeal was allowed and the high
court’s order replaced with an order upholding the special plea of prescription and dismissing
the respondents’ claims.

---ends---