The recent case of WK Construction (Pty) Ltd v Moores Rowland  ZASCA 44 (6 April 2022) has illustrated important principles with regard to the running of prescription. Despite being a concept entrenched in our law for a long time, it is evident that in some quarters there is still uncertainty as to how prescription works in practice, specifically in relation to when it actually starts to run.
In this case the Financial Manager of WK Construction uncovered that one of its directors had embezzled millions of Rands over the years, whilst covering his tracks. The company then moved to recover some of the funds, which it did successfully. On 23 August 2016 WK Construction lodged a claim against its auditors (Mazaars) to the effect that it had been negligent in not discovering about the embezzlement that had been ongoing for years. In its defence, Mazaars argued that the claim had prescribed as WK Construction had discovered about the fraud on 22 August 2013.
WK Construction argued that the liability of Mazaars only arose upon the failure of the director to pay more of the embezzled money. The Court however disagreed on this aspect, citing that the failure of one debtor (director) to pay has nothing to do with the running of prescription of the claim against the other debtor (Mazaars). WK construction further argued that it cannot be concluded that it knew of Mazaars’ negligence when Mazaars provided clean audit reports, despite actually knowing that the fraud had taken place, and that at the time (22 August 2013) it did not have adequate evidence to prove the negligence of Mazaars.
The Court rejected this argument once more, citing that for purposes of prescription and the issue at hand, it was enough for WK Construction to only prove its case (prima facie) not to have all the complete evidence. In other words, it was enough for WK Construction to only know that negligence (as it was linked to the fraud) had taken place, and thereon prescription had started to run.
The decision of the High Court was upheld, to the effect that the claim of WK Construction had prescribed.
Some important notes may be picked from this case, that prescription does not start running when the claimant has gathered all the evidence to prove it case, but that as soon as the claimant knows or ought to have reasonably known that they have a claim, prescription starts to run.
In conclusion, when it comes to prescription, merely knowing of the existence of a claim is enough, proving it is another. In fact, Section 12 (3) of the Prescription Act 68 of 1969 provides that “A debt 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.”
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