Case  CCT 117/22
[2023] ZACC 46

Hearing Date: 16 May 2023

Judgement Date:18 December 2023

Post Judgment Media Summary  

The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.

Introduction

Today, this Court handed down a judgment in an application for leave to appeal against the judgment and order of the Supreme Court of Appeal (SCA) dated 08 April 2022. The matter was heard by this Court on 16 May 2023.

Factual background

The facts are as follows: in July 2000, Mr Jan Harmse Steenkamp (Mr Steenkamp) and Mr Pieter le Roux and Johanna Catharina le Roux (applicants) entered into an option agreement (option) that granted the applicants the right to purchase a farm situated in the Northern Cape (the farm). Mr Steenkamp was the lawful owner of the farm. The option was required to be exercised within two months after the death of Mr Steenkamp. Mr Steenkamp died on 13 September 2003 and the applicants thereafter consulted with the second respondent, Mr Daniel Coetzee (Mr Coetzee) a legal practitioner practising as such (at the time) at, the first respondent, a law firm (respondents).

The second respondent informed the applicants that the option was valid. The applicants specifically enquired if there was any documentation that would need to be signed regarding the option. In response to this, the first respondent said no. The applicants then mandated the respondents to exercise the option on their behalf. On 26 September 2003, Mr Coetzee wrote to the executor of Mr Steenkamp’s estate purporting to exercise the option on behalf of the applicants. He was informed that the farm had been sold to a Mr Nel and the transfer of the farm had already taken place on 16 September 2003.

On 14 October 2004, the applicants instituted legal proceedings against the estate of the late Mr Steenkamp seeking the payment of damages. In 2005, the applicants terminated their mandate with the respondents and appointed new attorneys as their attorneys of record. In November 2007, in the trial of this first action and during the cross-examination of Mr le Roux, it was put to him that the purported exercise of the option was ineffectual due to non-compliance with section 2(1) of the Alienation of Land Act 68 of 1981 (Alienation of Land Act) as the applicants at no stage had given Mr Coetzee any authority in writing to exercise the option on their behalf. This was the first time that the applicants learnt of the non-compliance with the Alienation of Land Act. The High Court dismissed the first action, finding that the non-compliance with the Alienation Land Act rendered the purported exercise of the option ineffective.

The High Court dismissed the special plea. It granted judgment in favour of the applicants and found that knowledge of the respondent’s non-compliance with the Alienation of Land Act was not a legal conclusion, but a fact that the applicants were required to have knowledge of in terms of section 12(3) of the Prescription Act which knowledge was only acquired during the cross-examination of Mr le Roux. The respondents sought and were granted leave by the High Court to appeal to the Supreme Court of Appeal.

The Supreme Court of Appeal held that the applicants, claim against the respondents arising out of a breach of mandate claim had prescribed in terms of the Prescription Act. The Supreme Court of Appeal relied on Truter, Mtokonya and Yellow Star Properties in upholding the appeal, and found that, the failure to appreciate the legal consequences which flow from the facts does not delay the date when prescription starts to run. It found that, acquiring the knowledge of non-compliance with the Alienation of Land Act was a legal conclusion and not a fact and was thus unrelated to the commencement of the running of prescription.

Aggrieved by the order of the Supreme Court of Appeal, the applicants launched an application to this Court. They submitted that this matter engaged this Court’s jurisdiction as it involved the interpretation of the Prescription Act and certainty is required when prescription begins to run in professional negligence claims against legal practitioners. The applicants further submitted that the judgment of the Supreme Court of Appeal created an unfair hurdle for claimants seeking to claim against legal practitioners in that its effect was to require independent scrutiny of the advice received from a legal practitioner for its correctness in order to avoid any possible claim against such a legal practitioner prescribing.

The applicants submitted that the breach of mandate was a primary fact, and that prescription could only commence to run upon knowledge of that fact which they say was acquired in November 2007. The applicants also relied on Links and argued that a claimant must have knowledge of sufficient facts to indicate that the harm was caused by some fault on the part of the professional. As to constructive knowledge, the applicants also said that they could not, with the exercise of reasonable care, have acquired knowledge of the breach of mandate at any earlier time than November 2007.

The respondents submitted that the dispute before this Court was factual, it did not raise an arguable point of law of general public importance and that in, any event, it was not in the interest of justice to grant leave. On the merits, the respondents submitted that knowledge of the non-compliance with the Alienation of Land Act was a legal conclusion of which knowledge was not required to constitute the essential facts to institute action. Therefore, prescription began to run in September 2003 when the purported exercise of the option took place, alternatively in November 2003 when the option expired or in January 2005 when the plea in the first action was filed.

The First Judgment

The first judgment penned by Justice Kollapen (Maya DCJ, Madlanga J, Majiedt J, Theron J and Rogers J concurring) found that, a consequence of extinctive prescription is that it extinguishes a right to institute action proceedings which a claimant would be entitled to in terms of section 34 of the Constitution. To that extent, the interpretation of section 12(3) of the Prescription Act raises a constitutional issue that engages this Court’s constitutional jurisdiction. Further, the point of law as to what constitutes the relevant ‘facts’ contemplated in section 12(3) of the Prescription Act in matters of professional negligence against legal practitioners engages this Court’s general jurisdiction which is an arguable point of law of general public importance.

The first judgment found the proposition that a claim valid in law, and one that is unassailable, may be extinguished if not asserted within the time period provided by the law is unsettling. This is because, its effect is to negate the substance of the right conferred by section 34 of the Constitution. According to Barkhuizen and Chief Lesapo section 34 gives expression to this foundational value by guaranteeing to everyone the right to access Court in order to resolve a justiciable dispute. The first judgment said that the law of extinctive prescription must carefully be examined in order to do justice to both, the right to access to courts and, the need for legal certainty. This is because extinctive prescription permanently extinguishes the right of access to court while the consequence of a delay for the debtor may not be as far reaching, as the debtor still retains the opportunity to contest the claim. In the one instance, the effect is permanent and dispositive of the right, while in the other instance, it is relative and not as far-reaching.

The Supreme Court Appeal in Coboza set out how section 12(3) of the Prescription Act should be applied. It said the Court must establish: (a) what are the facts from which the debt arises (the primary facts); and (b) when were the primary facts known, or when should they reasonably have been known, to the creditor? The knowledge that section 12(3) refers to could either be actual, which relates to the subjective knowledge the creditor acquires of a fact or deemed knowledge, which is what a creditor could have acquired by exercising reasonable care.

The first judgment identified that a general rule emerges from our jurisprudence that the primary facts which must be known to the creditor need not include the legal consequences that flow from those facts. This general rule was confirmed in Truter – where the Supreme Court of Appeal said, “in a delictual claim, the requirements of fault and unlawfulness do not constitute factual ingredients of the cause of action, but are legal conclusions to be drawn from facts”. Further, this Court in Links and Mtokonya has distinguished between primary facts and legal conclusions for the purpose of what constitutes knowledge of the facts in terms of section 12(3) and a general rule is that legal conclusions do not constitute facts.

The first judgment stated that in matters concerning professional negligence a creditor may have knowledge of the facts but still not be able to discern that something wrong has occurred. The facts may objectively be sufficient to institute a cause of action, however a creditor that lacks the expertise will not know this. Therefore, it would be harsh to say that the creditor had knowledge of all the facts.

The first judgment found that professional negligence cases against legal practitioners differs in law from other professional negligence matters such as Links (medicine) and WK Construction (auditing) because a claim for damages based on the professional negligence of a legal practitioner, the fact vs legal conclusion distinction arises sharply and raises a conceptual difficulty in maintaining the separation between facts and legal conclusions that Truter and Mtokonya speak to. An expert opinion in other professions will apply the rules of that discipline to the facts and the resultant conclusion will be a conclusion of fact and not a legal conclusion.

However, when the professional is a legal practitioner, the application of the legal rules to the facts would result in a legal conclusion. Further, at the time the mandate is purportedly discharged, the client will not have knowledge that the mandate was not lawfully discharged. This may emerge later as a legal conclusion by way of an opinion, an order of court or a proposition to that effect. Therefore, in professional negligence matters involving legal practitioners, if the absence of a legal conclusion prevents the creditor from having knowledge, or deemed knowledge, of the facts from which a debt arises; then that legal conclusion may be essential to completing knowledge of the minimum facts from which the debt arises. Further, knowledge that the advice received was incorrect or knowledge that a mandate was not properly discharged, where it may depend on legal conclusions, must be regarded as facts for the purposes of section 12(3). To hold otherwise will cause an injustice to many creditors in that position. Claims against the legal practitioner will run the risk of prescribing even in the absence of knowledge that there was a breach of the mandate. This is counter to the objective of section 12(3) of the Prescription Act.

In a country such as ours people rely on legal practitioners regarding legal decisions they must make, how to conform with the law and how to live their life as constitutional subjects. Therefore, it is fair and reasonable to assume that legal advice received is correct and that a legal practitioner will carry out the given mandate professionally and diligently. This is because, the large majority of people who consult legal practitioners do not have any independent basis to test the correctness of the advice received or to interrogate an assurance that a mandate has been professionally discharged. They should in any event not have the need to do so.

The first judgment identified that it may be impossible to have knowledge that the advice given was incorrect or that the mandate was not professionally discharged without obtaining professional advice to that effect. In such instances, a limited exception to the general rule is necessary and appropriate. The exception being: for the purposes of section 12(3) of the Prescription Act, in professional negligence claims against legal practitioners, the facts from which the debt arises may include a legal conclusion, where that legal conclusion forms part of the cause of action or the minimum facts in order to pursue the claim.

The first judgment advanced three reasons why a limited exception to the general rule is necessary. First, the application of the general rule may result in an injustice; second, an exception for negligence claims against legal practitioners would accord with our jurisprudence relating to other professionals; and third, the exception is limited in scope.

The first judgment found that, if the general rule is applied in a matter such as this, it would result in an injustice in a number of respects in negligence claims against legal practitioners where the basis of the claim is the negligent provision of incorrect advice. This is because, (a) Prescription would start to run when the incorrect advice is given notwithstanding the client would not have knowledge that the advice is incorrect; (b) prescription would penalise innocent inaction instead of negligent inaction; (c) a legal practitioner that acted negligently will be entitled to rely on that negligence from the date it objectively occurred to defeat a claim arising out of that negligence. Thus, in appropriate matters of professional negligence involving legal practitioners, a legal conclusion may be essential to complete knowledge of the facts from which the debt arises. However, the exception is not to be applied in all matters of professional negligence involving legal practitioners but only in instances where that legal conclusion forms part of the cause of action or the minimum facts required to pursue a claim.

A second ground for an exception arises where the current state of our law in cases involving professionals other than legal practitioners recognises when it would be unrealistic for a layperson to have knowledge of for example what caused their medical condition. It must be similarly arguable that it would be unrealistic for a layperson who has no knowledge of the law to know or reasonably suspect that the advice given by a legal practitioner or the manner in which a mandate was discharged was legally correct. An exception would ensure that there is no arbitrary distinction between professional negligence claims against legal practitioners as compared to other professionals and would be consistent with the guarantee that all are equal before the law.

The first judgment found that the third and final ground for the exception is that it would have a limited application only in professional negligence cases against legal practitioners; and where a legal conclusion is necessary as part of the minimum facts required in terms of section 12(3) of the Prescription Act.

In terms of section 39(2) of the Constitution, the first judgment examines how other jurisdictions approach the fact vs law distinction as there are beneficial insights to be drawn. England and Canada hold that prescription should not begin to run unless a client has knowledge or may reasonably suspect, that the advice given by their legal practitioner was incorrect. This means, prescription does not begin to run until the claimant knows, actually or constructively, that the professional made a mistake. Further, in India, the Limitations Act allows a court to extend the period of limitation on sufficient cause. The mistake of counsel or incorrect legal advice have been accepted, in some instances as constituting sufficient cause. In Kenya, the Kenyan Limitations Act provides that the prescription period of three years for an action founded on torts may be extended by a year if it is proven that the material facts relating to the cause of action included facts of a decisive character which were outside the knowledge of the claimant. While these are different legal frameworks, the first judgment identifies that in cases that involve legal practitioners and the giving of incorrect advice, the strong view from these foreign jurisdictions is that a client should not be prejudiced by the giving of incorrect advice until the client becomes aware of the incorrectness of that advice.

Having considered the general rule and the creation of an exception in professional negligence claims against legal practitioners, the first judgment applied the position to the facts of this appeal. On 26 September 2003, the applicants sought legal advice from the respondents. The respondents breached their mandate in providing erroneous legal advice. On 13 November 2003 the option expired. The Supreme Court of Appeal found that prescription ought to have run on either of these two dates. However, the first judgment found that the applicants could not, with the exercise of reasonable care have known that the option had expired without it being validly exercised. Further, there is no knowledge that they would have acquired either when the breach of the mandate occurred or when they suffered loss that would have alerted them to the breach or the loss. If the general rule is applied in this matter, prescription would treat the fact that the applicants were kept in ignorance of the legal position by the negligent advice of the respondents as irrelevant. Further, the first judgment found that, the applicants could not by the exercise of reasonable care have acquired deemed knowledge of the breach of mandate by the second respondent in January 2005. Therefore, the first judgement agreed with the conclusion reached by the High Court in dismissing the special plea of prescription. However, it differed with the reasoning of the High Court. It is also for the reasons given that the first judgment differs with the reasoning and conclusion of the Supreme Court of Appeal.

Therefore, an exception to the general rule is necessary, appropriate and warranted. In the circumstances, the appeal must succeed with costs

The Second Judgment

The second judgment, concurring with the result reached in the first judgment was penned by Justice Van Zyl AJ (Makgoka AJ and Potterill AJ concurring). The second judgment concurred with the first judgment in granting leave to appeal and consequently upholding the appeal with costs. However, the second judgment agrees with the order in the first judgment for reasons distinct from those in that judgment. At the core of the second judgment's disagreement is the assertion that there is no need to depart from the general rule established in Truter by introducing an exception, as posited by the first judgment.

In arriving at this conclusion, the second judgment dealt with the posited legal conclusion differently from the first judgment. It was not persuaded that the postulated legal conclusion —specifically, that when the first applicant was informed during his cross-examination in the first trial that the respondents’ purported exercise of the option was ineffective due to a failure to comply with section 2(1) of the Alienation of Land Act – constituted knowledge not of a fact but a legal conclusion. The judgment maintained the view that the legal conclusion contemplated by the court in Truter and in accordance with the plain wording of section 12(3), is one that is relevant and material to the pleaded cause of action and the constituent elements of the said cause of action.

As a point of departure, the second judgment accepted the definition of a fact, as an “actual or alleged event or circumstance, as distinguished from its legal effect, consequence or interpretation”. In turn, it then accepted the definition of a legal conclusion as a “statement that expresses a legal duty or result but omits the facts creating or supporting the duty or result”.

The second judgment first outlined the framework of section 12(3) of the Prescription Act and reaffirmed the general principle that extinctive prescription commences “as soon as the debt is due.” It clarified that a debt becomes due when the creditor’s legal right to claim is complete – when the entire set of facts which the creditor must prove in order to succeed with his or her 7 claim against the debtor is established or, in other words, when everything has happened which would entitle the creditor to institute action and to pursue their claim. Secondly, the judgment dealt with the nature of the knowledge required by a creditor (actual or deemed knowledge), emphasising that the knowledge required in terms of section 12(3) pertains to the facts constituting the essence of the creditor’s pleaded cause of action, with emphasis on the minimum facts necessary to institute an action. It held that these essential or material facts are those without which a court could not find the creditor succeeded in proving a constituent element of their claim.,

In the first leg of its analysis, the second judgment held that in order to establish their claim, it was important for the respondents to prove the applicants’ knowledge of the facts that support the conclusion that Mr Coetzee breached the contract of mandate. The judgment emphasised that implicit in Mr Coetzee’s role was the obligation to provide accurate advice and exercise the option on the applicants' behalf, resulting in a valid and binding sale agreement. However, Mr Coetzee’s erroneous advice, indicative of a breach of mandate, became the factual cause of subsequent events and an indispensable primary fact in relation to the applicants’ pleaded cause of action.

Thus, the debt became due and recoverable when the respondent failed to exercise the option by the date agreed to in the option agreement. It was then that the applicants suffered a loss, completing their cause of action for damages.

The second judgment rejected the respondents’ assertion that the applicants’ knowledge of Mr Coetzee’s erroneous advice was a legal conclusion. Instead, it found that this knowledge was indeed a fact, crucial to their cause of action. The judgment emphasised that the postulated legal conclusion is not a legal conclusion in respect of the constituent elements of the applicants’ claim and elucidates that the legal conclusion that the applicants seek to draw from the pleaded facts, is that the respondents acted in breach of their contract of mandate. Citing Truter, the judgment maintained that a legal conclusion that bears no relation to the elements that constitute a creditor’s pleaded cause of action, or which is based on facts that are not material to the creditor’s pleaded claim, is irrelevant for purposes of deciding when prescription started running. Consequently, the second judgment found that what the respondents asserted to be a legal conclusion was irrelevant to the elements that constituted the applicants’ cause of action. The judgment emphasised that a legal conclusion that has no bearing on the pleaded case merely hovers unsubstantiated and is therefore irrelevant.

In the last leg of its analysis, the second judgment held that the Supreme Court of Appeal’s finding fails to acknowledge that a legal conclusion is an outcome that is premised on facts. It found that in the present matter, the factual basis indicating that that no legally enforceable contract of sale came into being arises from the legal requirement stipulated in the Alienation of Land Act. It maintained that section 2(1) as a legal is a legislative requirement that reflects a statement of what the law is, in that it is a representation of a factual assertion regarding what the law is in relation to the sale of land, as opposed to the legal consequences which flow from a failure to comply therewith. Therefore, it is a legal fact that is a fact that triggers a legal consequence. Although it is a legal fact, it is still distinguishable from its legal consequences or effects. The judgment maintained that the Alienation of Land Act stipulates a legal requirement, objectively determinable from non-compliance with the said requirement. and the ensuing legal consequences of the said non-compliance with the Alienation of Land Act. The second judgment found that when the applicants were informed that the exercise of the option did not result in a valid sale due to legal non-compliance, they acquired knowledge of the fact that underlies the conclusion invalidity, thus the applicant’s learning that Mr Coetzee provided erroneous advice and thus failing to assist them in enforcing their contractual rights in the option agreement. The judgment held that, by virtue of a fact encompassing legal components, that does not change it from being a fact. Therefore, the clarity of the said erroneous advice is apparent through a cursory reading of the Alienation of Land Act, thus making it a fact. The second judgment emphasised that not every statement with some legal component to it must necessarily be a legal conclusion or a matter of law for the purposes of Truter.

Finally, the second judgment turned to the duty to act in good faith. The second judgment held that attorneys bear a contractual duty of the utmost good faith, illustrated by the concept of uberrima fides. It further found that this duty manifests in fiduciary obligations in the attorney-client relationship. Consequently, for laypersons such as the applicants who entrusted their affairs to a legal professional, the resulting fiduciary relationship and the duty of good faith entitled them to place reasonable reliance on advice provided by Mr Coetzee. Until they were informed that the exercise of the option did not result in a valid contract of sale, the applicants had no reason, given their position, to investigate Mr Coetzee’s compliance with his mandate. This underscores their entitlement to trust the advice provided by him.

The Third Judgment

In Rogers J’s judgment concurring in the first judgment penned by Kollapen J, he explained why he supports the first judgment’s approach in preference to the second judgment’s approach. The third judgment considered that the second judgment’s distinction between “legal facts” and “legal conclusions” constitutes a radical departure from existing law and opens the door to all sorts of claims that would otherwise have been treated as shut by prescription. The third judgment held that such an approach is contrary to the decision of Truter where it was held that the parties are not required to plead the content of the law in order to succeed in a claim. The third judgment relied upon the cases of Van Staden, Claasen, Fluxmans and Links to emphasise the point that although non-compliance with an Act may be part of a creditor’s cause of action, it is not among the facts which the creditor needs to prove or of which a creditor needs to be aware before prescription starts to run. Further, the third judgment referred to this Court’s decision in Mtokonya which held that prescription would be rendered ineffective if a creditor needed to be aware of a statutory duty or of the wrongfulness and actionability of a defendant’s conduct in the context of a wrongful arrest and detention case.

The third judgment held that the content of the formality and the legal consequences of non-compliance with section 2(1) of the Alienation of Land Act are expressly provided for in the Act. However, regardless of whether the consequences are express, implied or a matter of construction, it is as much part of the objective content of the law as the legal provision itself. The validity of a contract is determined by a proper interpretation of the Act and, as a result, a distinction between legal matters which laypeople could find out and those which only lawyers could know is wholly impractical. For these reasons, the third judgment concurred with the first judgment and found that there needs to be special treatment of a case where a client, having been brought under a misapprehension as to the law by his or her attorney, later sues the attorney for loss caused by the wrong advice.

The following order was made:

  • 1. Leave to appeal is granted.
  • 2. The appeal is upheld.
  • 3. The order of the Supreme Court of Appeal is set aside and substituted with the following: “The appeal is dismissed with costs.”
  • 4. The respondents are to pay the applicant’s costs, including the costs of two counsel.

 

The Full judgment  here