When does a claim prescribe?

CM_06_04The issue of the legal nature of a vindicatory claim and whether it gives rise to a debt that is subject to the three year extinctive prescription period has been decided differently by different divisions of the High Court. On 28 May 2015 the Supreme Court of Appeal came to a final decision in Absa Bank v Keet[1] as to whether claims under the actio rei vindicatio prescribe after 3 years or not.

One of the first questions that your attorney will ask you when you consult him is when your cause of action arose so that they can ascertain whether your claim has prescribed. If your claim is prescribed, it means that you no longer have any legal remedies available to you. Claims arising from a debt prescribe after three years and the rules of prescription are set out in the Prescription Act, 1969.

There is one specific claim where the application of the 3 year prescription period was uncertain and this was in regard to claims under the actio rei vindicatio. This is a legal action by which the plaintiff demands that the defendant return a thing that belongs to the plaintiff, and it may only be used when the plaintiff owns the thing and the defendant is impeding the plaintiff’s possession of the thing.

A rei vindicatio action is often used in disputes surrounding instalment sales where ownership only passes on the payment of a last instalment or where instalments are not duly paid. This is mostly coupled with a claim for cancellation. In other words, the seller cancels the sale agreement and claims return of the thing sold.

In the case of Absa Bank v Keet[2] the seller of a motor vehicle attempted to cancel the sale agreement and to claim the return of the vehicle sold. The purchaser of the vehicle responded to this claim with a special plea stating that the claim for the return of the vehicle had prescribed.

The reason for stating that the claim had prescribed was that the agreement on which the seller sued would have come to an end on the date on which he contended the amount outstanding became due and payable, and that it was more than 3 years since that amount became due.

In the case of Staegemann v Langenhoven[3] it was held that a vindicatory claim does not prescribe after three years. The High Court in the Keet case held that this case was wrongly decided because if Staegemann were correct, ‘the Bank could withhold its demand for the tractor for another decade or even longer, and then demand return of the vehicle so that it could calculate its damages’.

The Supreme Court of Appeal (SCA) in the Keet case had to decide whether the High Court was correct in holding that the seller’s claim for the repossession of its vehicle is a ‘debt’, which for the purposes of the Prescription Act prescribes after three years.

The SCA made an important distinction between extinctive prescription and acquisitive prescription to come to its final decision. Extinctive prescription deals with a creditor’s right of action against a debtor, which is a personal right. On the other hand, acquisitive prescription deals with acquiring real rights to property (in terms of the Prescription Act a person can acquire ownership of property after 30 years of uninterrupted possession). Real rights are primarily concerned with the relationship between a person and a thing and personal rights are concerned with a relationship between two persons.

The person who is entitled to a real right over a thing can, by way of vindicatory action, claim that thing from any individual who interferes with his right. Such a right is the right of ownership. If, however, the right is not an absolute, but a relative right to a thing, so that it can only be enforced against a determined individual or a class of individuals, then it is a personal right.[4]

The Supreme Court of Appeal is therefore of the opinion that to consider a vindicatory action as a ‘debt’ which prescribes after three years is contrary to the scheme of the Act and that this would undermine the significance of the distinction which the Prescription Act draws between extinctive prescription and acquisitive prescription. In other words, what the creditor loses as a result of operation of extinctive prescription is his right of action against the debtor, which is a personal right. The creditor does not lose a right to a thing.

The SCA has therefore made it clear that to equate the vindicatory action with a ‘debt’ has the unintended and absurd consequence in that by way of extinctive prescription the debtor acquires ownership of a creditor’s property after three years instead of 30 years. The vindicatory action therefore does not prescribe after three years.

[1] (817/13) [2015]  ZASCA 81 (28 May 2015)

[2] (817/13) [2015] ZASCA 81 (28 May 2015)

[3] Staegemann v Langenhoven & others 2011 (5) SA 648 (WCC).

[4] Wessels Law of Contract in South Africa 2 ed vol 1 p 3-4.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

The advantages and disadvantages of trusts

CM_06_03Trusts have various advantages, but unfortunately there are also disadvantages. Although this is not a complete synopsis of all the pros and cons, it gives a general overview of what’s involved.

Advantages:

  1. Growth taking place in the Trust assets settles in the Trust and not in your personal estate.
  2. By selling the assets to the Trust, the amount owed to you by the Trust will remain outstanding on the loan account and shall be regarded as an asset to your estate.
  3. A Trust offers protection against problems should you become mentally incompetent.
  4. A Trust remains confidential as opposed to documents like wills and records of deceased estates which are public documents and therefore open for inspection.
  5. A Trust can offer financial protection to disabled dependents, children or beneficiaries with special needs.
  6. A Trust can evade the administrative costs of consecutive estates by making provision for consecutive beneficiaries.
  7. A Trust can lighten the emotional stress on your family when you die because the Trust will continue without any of the formalities that are required from a deceased estate.
  8. By choosing your Trustees well you can ensure professional asset and investment management.
  9. The Trust will enable you to have a degree of control over the assets in the Trust after your death, via the Trustees.
  10. After your death and before the estate has been settled the Trust can provide a source of income for your dependent(s).
  11. You will prevent your minor child’s inheritance from being transferred to the Guardian’s Fund.
  12. You will avoid the problem of trying to distribute assets equally among the heirs.
  13. Levels of income may be varied according to the changing needs of the beneficiaries at the discretion of the Trustees.
  14. Due to the assets remaining the property of the Trust and not the beneficiaries it need not be included in people’s estates as part of their assets when they die, which effects a saving in Estate duty.
  15. The Trust assets will be protected from creditors for the same reason.

Disadvantages:

  1. You don’t have full control of your assets, as the other Trustees also have a say in the matter.
  2. A Trust is registered and the authorities can gain access to it.
  3. You could possible choose the wrong Trustees. You could expect problems if the Trustees are vying heirs. This shows how important it is to have at least one independent Trustee.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Pay your levies, or else…

CM_06_02Dear Mr Lawyer

I am the owner of a sectional title, and I have paid my levies every month as required, until the water started seeping through the ceiling of my enclosed balcony into my section when it rains. The leak was clearly emanating from a defect in the common property. I asked the body corporate on numerous occasions to repair the defect, yet after four months of writing letters and sending emails the body corporate still has not done anything to honour this simple request. As a frustrated owner I resorted to desperate measures and employed a contractor to repair the property defect. I settled the bill myself.

May I withhold my levies for a period to set off the money that is owed to me by the body corporate?

Dear Mr Owner

Although this action may sound reasonable, the right to stop paying or to set off a debt against levies is not legally justified and owners are not, under any circumstances, entitled to simply withhold levies.

There is no provision in the Sectional Titles Act 95 of 1986 or the rules that gives an owner the right to withhold levy payments. Even if an owner incurs expense in performing an emergency repair to the common property, and believes that the body corporate owes him money, the owner may only set off the debt against the levies once it becomes liquid.

An amount can only be liquid once it has been agreed upon. An owner cannot set off the amount he believes he is entitled to deduct. The trustees, judge or arbitrator must have confirmed the amount.

If Mr Owner does withhold his levies without the amount being liquid, he is subject to the following sanctions in terms of the prescribed rules:

  • Firstly, the trustees are entitled to charge interest on arrear amounts at a rate determined by them, and so the defaulting owner may receive a larger account, due to the interest on his arrears, than if he had paid his levies.
  • What is more, The Sectional Titles Act imposes a positive obligation on trustees to recover levies from defaulting owners. Not only does the Act empower them to charge interest, the scheme attorneys will most likely issue summons against the defaulter for all costs that the Body Corporate may incur in recovering any arrears.
  • Secondly, the prescribed management rules provide that, except in the case of special and unanimous resolutions, an owner is not entitled to vote if any contributions payable by him in respect of his section have not been duly paid. Therefore, an owner who withholds his levies is unable to vote for ordinary resolutions in respect of the section that he is withholding levies on.

Mr Lawyer, how does an owner deal with a situation where he believes the body corporate is liable for payment?

A dispute must be declared with the Body Corporate by written notice of the dispute or query to the trustees. The trustees or Body Corporate then have 14 days from receipt to resolve the dispute. During this period, the parties should meet to try and resolve the dispute. If there is no resolution after the 14-day period, either party may demand that the dispute be referred to arbitration. The arbitrator must make his/her recommendations in settlement of the dispute within 7 days from the date of commencement of the dispute. The decision of the arbitrator shall be final and binding and may be made an order of the High Court.

It is clear that prescribed processes are in place according to which disputes and related issues can be settled. Not only will this ensure that you act within the legal guidelines, but it will also eliminate unnecessary frustration.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

I bought something that doesn’t work

CM_06_01Sarah buys furniture from Mark who promised her that the furniture is of good quality. However, he doesn’t notify her about problems with the furniture. Later, Sarah discovers that some of the chairs she bought have faulty joints, meaning they can’t be used properly. This is what’s called a latent defect and Sarah will be able to claim from Mark for the furniture not fulfilling its purpose.

A patent defect or a latent defect?

A patent defect is when there’s a problem with a purchased item but it was clearly visible and obvious to the buyer when the contract was signed. If the furniture that Sarah bought had a patent defect, such as a chair leg missing, it would be assumed that she knew about it and the law would not protect her.

NOTE: A defect is something that makes the product less useful or completely useless. A product not looking as good as you thought is not a defect. A piece of furniture with a stain on it can still be used normally. If the product has broken or missing parts, meaning it can’t be used properly, it’s a defect.

If the product you bought has a defect affecting its usability and purpose, then the seller is liable and you as the buyer can claim from them. You should also take into account if the contract had a “voetstoots” clause, meaning that you are buying a product based on its appearance or “as is”. If this is the case the seller would not be held accountable for any defects with the product, latent or patent.

What can I get back from the seller?

If the product you bought has a latent defect you can get a price reduction or a refund for the price you paid. A price reduction is the difference between the price you paid and the true value of the product. A full refund includes the price you paid, interest, maintenance costs and the cost of receiving the product. A full refund would also mean that you need to return the product that you got under the contract.

If a defect has caused you harm or damaged your property, for instance, you could possibly also claim this amount as compensation from the seller.

Who is a trader and who is a seller?

It’s important to keep in mind that there’s a difference between someone who is a trader and a seller. A trader is someone who makes a living from selling products, whereas a seller is an ordinary person like Mark in the example above. A trader who specialises in particular products and boasts having a specialized knowledge is held to a higher standard than an ordinary seller.

Sales talk or latent defect

It’s normal for sellers or traders to do the best to sell their product. This usually means “sales talk” or boasting about the products value and usefulness. They are allowed to do this, however, if they make statements about the product that turn out to be false, such as claiming the product can do something that it actually can’t, the law will be in your favour and protect you in the same way as a latent defect.

Before you agree to buy anything from a seller or a trader make sure you inspect the product first and make note of any defects there might be. If you neglect to inspect the product it could be more difficult for you to get compensation from the seller if there is a problem in the future.

Reference

“What you should know about Contracts”. 2009. The Western Cape Office of the Consumer Protector. Department of Economic Development and Tourism. Accessed from: https://www.westerncape.gov.za/ on 13/05/2016.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)