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KWAZULU-NATAL HIGH COURT, PIETERMARITZBURG

REPUBLIC OF SOUTH AFRICA           

CASE NO. AR 40/10

In the matter between:

WILLIAM JAMES BRAITHWAITE                                          APPELLANT

and

DANIEL BRAITHWAITE                                          RESPONDENT

APPEAL JUDGMENT   Delivered on 20 May 2010

SWAIN J

[1]     The findings of the Magistrate in the Court a quo which are challenged on appeal are:

[1.1]            The Magistrate’s finding that the acknowledgment of debt furnished by the appellant to the respondent, is valid and enforceable and

[1.2]            The claim for payment by the respondent against the appellant, based upon the acknowledgment of debt, has not prescribed.

[2]     The issue of the enforceability of the acknowledgment of debt, was not raised by the appellant as a defence to the counterclaim of the respondent, in the Court a quo, the appellant being content to file a special plea, which only raised the issue of prescription as a defence.

[3]     However, when the respondent was being cross-examined by the appellant’s legal representative, on issues not relevant to the plea of prescription, the respondent’s legal representative objected, pointing out that the only defence raised by the appellant was that of prescription, which was accepted by the appellant’s legal representative.  However, when the appellant gave evidence, he stated that the respondent had never loaned him the amount of R15,000.00, which formed the subject of the acknowledgment of debt.  Appellant maintained that the respondent had paid the sum of

R15,000.00 to a legal representative of a company, in which the appellant and the respondent were shareholders.  The money had therefore been paid on behalf of the company and not as a direct loan to the appellant.

[4]     Appellant stated that he signed the acknowledgment of debt because the respondent was his son and he did not want the respondent to lose the money he had loaned to the company, to enable the company to pay its legal costs, in the event that the company lost the case, or something happened to the appellant.  In order to ensure that the respondent would be repaid if the appellant passed away, evidence was led of wills which the appellant had executed, in which he bequeathed his estate to the respondent, for this purpose.  Appellant said that the purpose of the acknowledgment of debt was to ensure that if the company lost the case in question, its creditors would not be able to claim against the appellant’s personal capital to the extent of the amount of R15,000.00.  Appellant maintained that it was never intended that the respondent could utilise the acknowledgment of debt to claim payment of the sum of R15,000.00 from the appellant, as it was purely meant to be security for the respondent, in the event that the company lost the case in question.

[5]     This evidence was elicited from the appellant under cross-examination by the respondent’s legal representative, although the respondent’s legal representative had previously successfully maintained that the only issue was whether the claim evidenced by the acknowledgment of debt had prescribed.  The Magistrate in his judgment found that both parties had hidden agendas in concluding the acknowledgment of debt, with the sole aim of preventing other parties from getting the R15,000.00, if the action of the company failed.  The Magistrate concluded however that although both parties had not come to Court with clean hands, the fact that the appellant had bequeathed his estate to the respondent for the purposes of repaying the debt indicated a clear intention on the part of the appellant to repay the debt at some future time, namely his death.

[6]     The Magistrate therefore decided this issue which was not strictly before him, as it was not raised in the pleadings.  However, because both parties, who appeared before us in person on appeal, have dealt with this issue, I will do so.

[7]     Assuming, without deciding the issue in favour of the appellant, that the object in concluding the acknowledgment of debt, was to protect the personal capital of the appellant from creditors, this can have no bearing upon any personal liability on the part of the appellant, to the respondent.  This is so for the simple reason that the professed need of the appellant to protect his personal capital, was to enable him to make payment of the amount of R15,000.00 to the respondent.  The object was not to fraudulently defeat the claims of creditors of the appellant, but to ensure that the respondent was paid the sum of R15,000.00 by the appellant.  That the proceeds of the loan were to be applied by the appellant for the benefit of the company matters not.  The fact remains that the conduct of the appellant in executing the acknowledgment of debt and bequeathing his estate to the respondent, clearly illustrates an acceptance of an obligation to pay the respondent, on the part of the appellant.  This is clearly illustrated by the letter of instruction, written by the appellant, to the attorney who drafted his will, in which he says “Daniel Braithwaite R15,000.00 loan given to me in 2001”.  This statement clearly contradicts the evidence of the appellant, that the loan was not made to him, but to the company in question. 

[8]     The acknowledgment of debt is accordingly not a contract which was executed by the appellant without animus contrahendi and for the ulterior purpose of misleading creditors.  The appellant and the respondent both intended that it should have effect between them in accordance with its terms precisely for the purpose of ensuring, that respondent received payment of the sum of R15,000.00 loaned by the respondent to the appellant.  There is accordingly no basis for finding that the acknowledgment of debt was a sham and consequently unenforceable, or that it evidences a collusion between the appellant and the respondent to frustrate the legitimate claims of creditors of the appellant and is unenforceable.

[9]     As regards the issue of prescription the acknowledgment of debt provides as follows:

“I undertake to repay the capital amount together with the interest and costs upon demand”

[10]   In terms of Section 12 (1) of the Prescription Act No. 68 of 69 prescription commences to run as soon as the debt is due.  This is not necessarily the date when the debt arises.

List v Jungers 1979 (3) SA 106 (A) at 121 C

A debt normally becomes due and prescription begins to run when it is recoverable, owing and payable

Pohl v Prinsloo 1980 (3) SA 365 (T) at 371 C

[11]   In the present case the debt only became due on demand by the respondent.  The appellant admitted that he received an E-mail from the respondent on 08 July 2008 in which the respondent said he wanted payment of the sum of R15,000.00, in terms of the acknowledgment of debt.

[12]   In this regard the Magistrate held that the E-mail in question was not a valid demand, because in terms of Section 15 (1) of the Act, a demand had to take the form of a legal process.  In this the Magistrate was clearly wrong, because the Section in question applies to the interruption of the running of prescription and not its commencement.  No form of demand is specified in the acknowledgement of debt and consequently the E-mail constituted proper demand, with the result that prescription only commenced running on this date.  The respondent claimed payment of the sum of R15,000.00 by way of his counterclaim on 13 January 2009.  Consequently, the plea of prescription must fail.  In the result the appeal must accordingly fail.

[13]   As regards the order to be made on appeal, the respondent conceded in the Court a quo liability to the appellant in the sum of R12,128.54 on the appellant’s claim.  The Magistrate as a result had the following to say:

“So the Court finds, and respondents have conceded, in the main claim, the claim of Mr. William James Braithwaith, that’s upheld, that’s in the amount of R12 128.54 and the counter claim in respect of Daniel Braithwaith is upheld to be an amount of R15,000.00”.

The Magistrate then ordered that each party pay their own legal costs because as he put it “both claims have technically succeeded” and expressed a view that it was up to the parties to decide whether to apply set-off, to their respective claims, with the result that the appellant would be obliged to pay the sum of R2,871.46 to the respondent.

[14]   The correct form of order that should have been granted by the Magistrate will find expression in the order I make.  As regards the costs of the appeal, as I have said both parties appeared in person, but I do not know whether the respondent incurred any legal costs in opposing the appeal.  As the respondent has been successful on appeal, he is entitled to be compensated for any such legal costs.

The order I make is the following:

1. The appeal is dismissed.

2. The order of the Magistrate is altered to read as follows:

1. Judgment is granted in favour of the plaintiff in the sum of R12,128.54.

2. Judgment is granted in favour of the defendant in the sum of R15,000.00.

3. The plaintiff and the defendant are each ordered to pay their own legal costs.

2. The appellant is ordered to pay the respondent’s legal costs of the appeal.

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SWAIN J

I agree                

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SISHI J

                                                                               Appearances /

Appearances:

The Appellant appeared In Person

The Respondent appeared In Person

Date of Hearing                    :         10 May 2010

Date of Filing of Judgment         :         20 May 2010

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