Authored By: Alusani Audrey Mbedzi
Stadio
Case title and citation
Full Case Name: Stratton Oakmont (Pty) Ltd v Oosthuizen Du Plooy Attorneys
Citation: Unknown
Also repoted as: 2023(4) SA 245 (SCA)
Court name and bench
Court: Supreme Court of Appeal of South Africa (SCA)
Judges: Ponnan JA (presiding), Molemela JA, and Gorven JA
Bench type: Full bench of the Supreme Court of Appeal.
Date of Judgement
Judgement delivered:27 April 2023
Parties involved
Appellant: Stratton Oakmont (Pty) Ltd
The appellant is known to be a private company that had sought legal services from the respondent law firm
Respondent: Oosthuizen Du Plooy Attorneys
The respondent is a law firm with Attorneys that offered legal services to the appellant with regard to a transaction pertaining a commercial property.
Facts of the case
The appellant (Stratton Oakmont) communicated with the respondent( Ooosthuizen Du Plooy Attorneys) regarding getting assistance with conveyancing and legal advice concerning the purchase of a commercial property. The assigned tasks that the respondent was responsible for conducting were drafting sales agreements, ensuring compliance with statutory requirements and conducting due diligence.
During the execution of these responsibilities the respondent allegedly failed to:
Protect the appellant by negotiating certain warranties in the sales agreement.
Identify and disclose restrictive title conditions that constrained the use of the property for Stratton Oakmont’s intended business purpose.
Advice adequately on the zoning law implications and building law regulations that affected the property.
The property transfer took place in early 2015, by Stratton Oakmont when attempting to develop the intended property. After which, in 2017, when the appellant attempted to develop the property, the appellant then came across defects in the title and zoning restrictions. The issue being that these restrictions and proposed developments would substantially diminish the property’s value and usability.
Thereafter, in 2018, Stratton Oakmont pursued a claim against the respondent( Oosthuizen Du Plooy Attorneys) for malpractice and professional negligence that resulted in damages.
The respondent however argued that the claim had been prescribed in terms of the Prescription Act 68 of 1969 within the special plea of prescription that they raised.
Issue Raised
The main legal questions raised before the Supreme Court of Appeals are as follows:
Whether the appellant’s claim against the respondent had become prescribed.
In particular, at what instance did the debt fall due for the purpose of the prescription?
Was the appellant made a way of the requisite knowledge of the debt, as stipulated in the Prescription Act within section 12(3), around the time of the transfer that occurred in 2015 or instead rather only in 20171?
Whether the respondent’s negligence resulted in an ongoing reach that later on delayed the commencement of prescription.
Whether the appellant’s absence of actual or constructive knowledge of negligence prevented the prescription from commencing until 2017 rather.
Arguments of the Parties
Appellant’s arguments
The commencement of the prescription only began in 2017 when the appellant became cognisent of the negligent omissions.
As relied on to Truter v Deysel [2006] ZASCA 16, It was held that a debt is due in the event that the creditor is knowledgeable of the identity of the debtor and the facts highlighting the debt.
It was argued that the attorneys’ responsibilities and duties were supposed to be ongoing and that the breach only formally existed.
It was asserted that the discovery of the defects could not have been reasonably discovered even in the event that there was due diligence.
Respondents Arguments:
It is argued that the debt became due when the transfer was registered in 2015. This being due to the fact that that was the period wherein the appellant suffered actual financial loss. Before the summons were issued, the initial 3-year period had already expired in 2018, therefore.
Cited that Makate v Vodacom [2016] ZACC 13, states that prescription starts on the day that damage is suffered and not on the date it was discovered.
Mentioned that any continuing duty delaying the prescription would be denied.
Judgement
The Supreme Court of Appeal dismissed the plea and enforced a special plea of prescription.
The court that established
The appellant’s claim was in fact prescribed.
The appellant suffered patrimonial loss upon registration of transfer, when the prescription began to run in early 2015.
The appellant could not and did not prove that it could not have reasonably discovered negligence before 2017.
The establishment of grounds for interruption or delay of prescription were invalid.
Court Order
Appeal dismissed
The appellant had to pay the respondents’ costs.
Ratio Decidendi
The court centered its reasoning around the Prescription Acts interpretation of ‘debt due’ 1
At what point does debt become due?
The principle from Truter v Deysel was re-established whereby it is stated that a debt is due in the event that the creditor has complete cause of action.
In the event of professional negligence, damage is considered to be a reasonable element for the cause of action. In this case the damage occurred when the appellant paid for and took transfer of the property that was later on considered to be defective.
Knowledge under section 12(3)
It was held by the court that constructive knowledge is more than enough to start prescription.
It is expected for a creditor to practice reasonable care to discover the debt. And since the appellant is a commercial entity, it should’ve been aware of and intentional with conducting its own inspections or rather looked for independent advice sooner.
No continuing breach
The court held that the breach was completed once the transfer was finalized and registered, therefore the court rejected the argument that the attorney’s duty was supposed to continue even after the transfer.
For prescription purposes, the ongoing effects of the negligence do not equate to a continuing breach.
Ratio Decendi
When it comes to claims pertaining to the negligence of attorneys, prescription begins as soon as the client starts suffering actual patrimonial losses as a result of the negligent act of the attorney and not on the date that the client becomes aware of the act or negligence. This occurs as such unless the client can prove that the discovery of the debt could not have been reasonably discovered earlier. 2
Conclusion
Significance:
This judgment reaffirms the application and strict nature of the prescription laws enforced in South Africa, specifically in the professional negligence case instance. It enforces a significant onus on clients, commercial ones at that, to do research and investigate potential negligence in a timely manner. The ruling highlights that prescription is enforced with the idea of providing certainty and finality. This occurring even in the event that a claimant experiences harsh outcomes as a result of the late discovery of the harm.
While it is evident that the decision is in line with pre-existing precedents, it can be seen as a bit concerning as far as access to legal justice is concerned for clients that may not have the expertise or knowledge to identify latent legal defects. This judgement may evoke a more thorough work ethic amongst law firms. Enabling thorough communication of risks and highlighting the need for clients to seek their own kind of verification in a high-stake transaction. In the future, as far as legislative intervention is concerned, it’d be more advisable to bring forth a discoverability rule for certain professional aspects to evoke fairness for both parties involved in a transaction of services.
