The constitutional court’s recent decision in Rademeyer v Ferreira sheds a clarifying light on the very point at which a debt relating to a purchaser’s obligations stemming from a sale of property agreement gone wrong, is formed and the time limit within which a seller must enforce those rights before they expire completely. Interestingly, the particular factual matrix of the matter required the highest court in the land to adjudicate whether a judgment debt as well as – rather than as opposed to – the parties’ respective contractual obligations, had prescribed.
Read the judgment here:
https://www.saflii.org/za/cases/ZACC/2024/24.html
The sale agreement
This case began with a sale of immovable property between two businessmen, Mr Ferreira and Mr Rademeyer, in August 2008. Rademeyer agreed to purchase a subdivision of Ferreira’s property within a residential estate. The sale agreement (“the agreement”) included, inter alia, the following important terms and conditions:
“The purchase price of the property was R950 000.00; Mr Rademeyer would pay the deposit of R190 000.00 within 7 (seven) days of signing the agreement; The balance of the purchase price would be paid on the date of registration of transfer; Mr Rademeyer would be liable for all transfer costs and related duties including signature of all documents required to give effect to transfer of the property and, in the event that Mr Rademeyer failed to fulfil his obligations under the agreement and failed to rectify such failure after being given 5 (five) days’ written notice to do so, Mr Ferreira would be entitled to sue for specific performance.”
During September 2008, Rademeyer paid the deposit of R190 000.00 to Ferreira’s attorneys which they invested in an interest-bearing account. Rademeyer did not however fulfill any of the other terms and conditions and, particularly, did not pay the transfer costs, the balance of the purchase price nor did he sign all the transfer documents. This was the genesis of the legal dispute.
The 2012 High Court application
Ferreira approached the high court to compel Rademeyer to fulfill his obligations under the agreement (“the 2012 application”), and on 7 August 2012 Pickering J ordered Rademeyer to do so within 5 (five) days thereof failing which Ferreira would be entitled to cancel the agreement and claim damages (“the Pickering order”) – often referred to as the “double-barreled approach”.
The Pickering order was served on Rademeyer on 15 August 2012, yet he failed to comply within the 5 (five) day period. Ferreira however only formally canceled the agreement and notified Rademeyer thereof in July 2015 (“the cancellation date”).
The 2016 claim for damages
In 2016 Ferreira instituted action against Rademeyer for damages following the cancellation of the agreement (“the damages claim”) under the same case number as the 2012 application. In response, Rademeyer filed a notice alleging irregular proceedings as the Pickering order had already been granted under that case number and that the damages claim ought to have been brought under a new case number. Ferreria withdrew the damages summons and instituted it under a new case number on 18 April 2016.
Rademeyer defended and raised a special plea of prescription in terms of section 11(d) of the Prescription Act 68 of 1969 (“the Act”) which, he argued, required Ferreira to have initiated the damages claim within 3 years of Rademeyer not complying with the Pickering order. He argued that, as the Pickering order was only served on him on 15 August 2012, the 5 (five) day period within which he was to perform expired on 22 August 2012 and, consequently, prescription should have commenced on 23 August 2012. He argued that Ferreira should therefore have instituted the damages claim by no later than 23 August 2015.
Rademeyer further argued that Ferreira ought to have cancelled the agreement on 23 August 2012 as required by the Pickering order. Ferreira’s reliance on the cancellation date was therefore an incorrect interpretation of the Pickering order. Consequently, the institution of the damages claim on 18 April 2016 was more than 3 years after the Pickering order and had therefore prescribed.
In response to the special plea of prescription, Ferreira argued that the service of the 2012 application on Rademeyer – which culminated in the Pickering order – had interrupted prescription alternatively, his right to claim damages arose from a court order – the Pickering order – which constituted a “judgment debt” under section 11(a)(ii) of the Act. This, he argued, extending the prescription period to 30 years.
The high court dismissed Rademeyer’s prescription plea and ordered that “the action instituted is to proceed in respect of the computation of the [Mr Ferreira’s] damages.”
The Supreme Court of Appeal ruling
Aggrieved by the ruling, Rademeyer approached the Supreme Court of Appeal (SCA). Ferreira decided to abandon his argument that the Pickering order constituted a judgment debt. Instead, he argued that the SCA should determine only whether, firstly, the service of the 2012 application on Rademeyer constituted a “process by which the creditor claimed payment of the debt” as stipulated in section 15(4) of the Act and, secondly, whether issuing the damages claim under a different case number amounted to the continuation of that process, as envisaged by that section.
The SCA found that the basis for the damages claim was the same as the 2012 application because they stemmed from the same facts. It held further that the service of the 2012 application on Rademeyer constituted a crucial step in enforcing Ferreira’s claim for payment of a debt and that “the service of the 2012 application for [specific performance] alternatively damages, … had the effect of interrupting the running of prescription as provided for in section 15(1) of the Act. On these bases, the SCA dismissed Rademeyer’s appeal with costs.
The Constitutional Court judgment
Having been unsuccessful in his 2 previous efforts to convince the courts, Rademeyer resorted to the constitutional court. The court held that, at the time the matter was before Pickering J, Ferreira had not yet suffered any damages and thus no valid claim for damages existed at that time. Consequently, he could not have obtained an order, at that point, for damages that had not yet occurred as such a claim would have been premature.
The court further emphasized that enforcement of contractual performance as opposed to cancellation of a contract are mutually exclusive remedies available to an innocent party – such as Ferreira – who must make an election between them and each remedy gives rise to separate, distinguishable claims that are enforced via different causes of action. The court held that prescription of a damages claim based on a breach of contract commences at the time of the breach. A claim for specific performance, on the other hand, can prescribe independently from damages claim as its purpose is to restore the innocent party to the position they would have been in had the breach not occurred. This is so because the right to specific performance arises upon the conclusion of the contract and prescription commences when that debt becomes due. In contrast, prescription of a damages claim following cancellation of the contract commences when the breach, itself, occurs.
The Pickering order, the court reasoned, sought to enforce specific performance whereas the damages suffered by Ferreria would only have come into existence in the event that Rademeyer failed to perform within 5 days thereof viz 23 August 2012. Had Rademeyer performed, the cancellation would not have occurred, and Ferreira would not have had a claim for damages pursuant thereto. Rademeyer’s failure to perform constituted, instead, a breach of the agreement which formed the causa of the subsequent cancellation by Ferreira and which, at that point, not only created Rademeyer’s debt but also triggered Ferreira’s concomitant right to claim payment thereof. Prescription in respect of the damages claim therefore, the court held, commenced on 23 August 2012.
Consequently, the service of the 2012 application could not have interrupted prescription of the debt underpinning the damages claim, as that debt did not exist at that time, nor at the time of the Pickering order. The service did, however, interrupt prescription of the debt for specific performance. This was the critical distinction in the reasoning of the constitutional court.
On those grounds, 6 of the 8 justices of the apex court ruled, in a majority decision, that Ferreira’s damages claim had prescribed as more than 3 years had passed between the date on which the debt relating to that claim became due – being 23 August 2012 – and the date on which he issued summons for recovery of that debt on 18 April 2016.
“Debt” vs “Judgment debt”
This matter highlights the intricacies of the creatura no legal practitioner wants to be confronted with – “prescription”. It is nonetheless crucially important to understand claims in order to correctly identify the prescription period to ensure they are enforced timeously. This judgment plays a pivotal role in clarifying the application of the defence of prescription, especially concerning the definition, timeline(s) and events that constitute interruption thereof. By addressing these core components, the judgment enhances consistency and predictability, with the following key takeaways: the court provided a more refined interpretation of critical statutory terms such as clarifying the distinction between a “debt” and a “judgment debt” and what would interrupt prescription for each, thus ensuring that litigants and courts have a clearer framework for assessing prescription and, importantly, clarifying instances in which specific legal steps or actions may prevent a claim from prescribing. This clarity is crucial when determining the enforceability of debts and other contractual obligations and should enhance appreciation of the timely initiation of legal action. This is particularly valuable for creditors seeking to preserve their claims as well as for debtors who find themselves being served with summons out of the blue by opportunistic creditors many years down the line.
Conclusion
At its core, Rademeyer v Ferreira reminds us that when it comes to legal rights, time does not just tick, it is decisive. The constitutional court made it clear that allowing the clock to run out is not an option if you want to protect your claim. The judgment illustrates that navigating prescription is not unlike walking a tight rope: one misstep or delay could result in losing out entirely and for good. For anyone seeking justice, ensure you approach a legal practitioner to lodge your claims timeously.
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