Considering Prescription – The Construction Law Perspective

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Introduction

As in all legitimate disputes, extinctive prescription is an important variable to be regarded as when assessing the merits of a declare and formulating a protection. Building regulation situations, in many circumstances, involve not just advanced contractual associations, but will also challenging specialized features. Determining the date on which prescription begins to run requires very careful factual examination and if the steps from the sensible person are to be factored to the debate, points may get even more hard.

Prescription

The 1969 Prescription Act gives for 4 various essential prescription intervals. The intervals are 30, 15, 6 and 3 ages respectively. Much of the conditions I’ll be referring to relate to debts that happen to be issue to a three yr. prescription interval. I will also refer briefly into a scenario in direction of the conclusion of your presentation where by the thirty yr. interval finds application.

When does prescription start to operate?

Segment twelve in the Act provides as follows:

twelve. … (one) … prescription shall commence to run once the personal debt is owing. (two) … (three) A personal debt shall not be judged to become because of until eventually the creditor has know-how of the id from the debtor and on the information from which the debt arises: … a creditor shall be regarded to acquire such awareness if he might have acquired it by exercising sensible care.”

When could be the financial debt because of?

The decision in Martin Harris & Seuns OFS (Pty) Ltd v Qwa-Qwa Regeringsdiens 2000 (three) SA 339 (A) gives an excellent illustration of when a debt becomes because of for the purposes of Segment twelve(1) in the Act.

The information of this matter are briefly as follows:

* The building contract provided that the appellant would be paid after a progress certificate was issued by an architect (the principal agent) in respect of work already performed. This sort of certificates were issued and the appellant was duly paid.

* Within three ages after completion of the works as a whole, but more than three ages after uncertified sections of work was done, the appellant instituted action for an outstanding balance in respect of uncertified work.

* The respondent alleged that the declare had prescribed because the entitlement/debt arose when each area of work had been completed.

The Court held in the contractor’s favour and I summarise the position as follows:

* The issuing of progress certificates was only a contractual mechanism to place the contractor in a position to finance the continuation of your completion in the works.

* The completion of each specific segment from the work did not entitle the appellant to receive payment for the work.

* Only upon completion in the work as a whole would the appellant have these kinds of entitlement.

* The appellant’s claim would rest upon a certificate as a separate and self-supporting cause of action, exactly where a certificate had already been issued.

* The would then be for payment with the percentage with the value of your works for which the architect had certified.

* Prescription of the appellant’s claim (for payment for all sections which had not appeared in any certificate) began to run at the earliest if the work as a whole was completed.

The credit card debt had therefore not become owing and respondent accordingly failed in its prescription argument.

In LTA Development v The Minister of Public Works and Land Affairs 1992 (1) SA 837 (C) the court also shed more light on the same question.

The claimant claimed for losses sustained in consequence in the delay in the commencement in the works. The building contract provided for the completion in the works within 33 months from date of acceptance of your tender. A further term was that the employer would hand over the site within a certain interval. The progress on site and completion from the project were adversely affected by:

* The employer’s late handover on the site (7 working days delay).

* Completion delayed due to causes beyond the contractor’s control (320 working days). The defendant then raised a prescription argument and said that the plaintiff’s declare had become prescribed because the personal debt claimed for became because of 33 months and 10 days (7 working days and three non-working days) after acceptance from the tender.

* This argument resulted in 16 July 1986 being calculated as being the date on which the personal debt was to acquire become owing.

* Summons was served on 5 December 1989.

The defendant’s argument however did not take into proper consideration that a further term in the contract provided for the contract interval to generally be extended in the event of delays due to causes beyond the contractor’s control.

This provision extended the date on which the credit card debt became because of with a further 320 working days. The defendant was unsuccessful.

Understanding and regarded awareness

As we have seen Part 12(three) in the Act offers that a credit card debt is not judged to get due right up until the creditor has expertise or is considered to own expertise in the identification on the debtor, as well as of the specifics from which the personal debt arises.

In Minister of Public Works and Land Affairs v Group Five Building Limited 1999 (4) SA twelve (SCA) counsel for the contractor contended that the employer’s claim had become prescribed in terms of Area twelve(1) in the Prescription Act.

The employer had allegedly become aware in the relevant info by thirty May 1991. The contract was terminated on 3 December 1991 and the employer’s counter-claim was delivered on one December 1994. The contractor had therefore to prove that prescription had begun to run.

In the instant case, the date on which the employer gained knowledge from the specifics from which the financial debt arose (30 May 1991) was irrelevant as this particular contract contained a clause which entitled the employer’s engineer to require the contractor to remedy defective work. The very earliest stage if the employer’s damages could conceivably have become due was when the contractor, who had the duty to remedy the defective work, had the last chance to do so. This was the date on which the contract was cancelled (3 December 1991).

The employer’s counter-claim was delivered on one December 1994 and therefore fell within the three 12 months prescriptive interval. The contractor had accordingly failed to prove that prescription had run.

The acceptable individual

In Drennan Maud & Partners v Pennington Town Board 1998 (3) SA 200 (SCA), the appellant was a civil engineering consultancy. It designed and recommended the development of the reinforced concrete retaining wall for the reason that Town Board wished to protect certain properties which became threatened by the Umzinto River in Kwa-Zulu Natal. The Town Board accepted design and proceeded to engage a contractor to build the wall.

During September and November 1989 heavy rains fell and the river came into flood. Sinkholes formed in the backfill material behind the wall during this interval. These developed progressively and eventually became very substantial. By January 1990 the river was flowing freely under the whole length from the wall and the Town Board were back to exactly where they had been before the appellant was consulted and claimed was for the wasted costs of building the wall.

It was alleged by the engineers that by no later than 13 November 1989 the Town Board had know-how in the information from which the alleged claim arose. It was later alleged that the Town Board acquired considered knowledge in the light from the facts known to it by the above date. The Town Board should have exercised sensible care.

In his judgement the Honourable Mr Justice Olivier made the following statement: “… a creditor shall be considered to have the required know-how if he could have acquired it by training acceptable care. In my view, the requirement exercising realistic care required diligence not simply in the information underlying the debt, but will also in relation to the evaluation and significance of those specifics. This means that the creditor is deemed to acquire the requisite know-how if a acceptable human being in his position would have adduced the specifics from which the personal debt arises.”

It was clear from the subsidence of the backfill material behind the wall that the design had failed and could not withstand the scouring effect on the passing flood. As being the Town Board’s claim was for the wasted costs of building the wall, the loss claimed for had already occurred once the Town Board acquired judged know-how that the wall did not serve the purpose for which it was designed and built and that the related costs were wasted.

The consultant’s prescription argument was therefore well founded as being the respondent’s summons was issued outside from the three calendar year prescription period of time.

Prescription and arbitrations

Arbitration plays a major role in the construction industry as alternative dispute mechanism. I would like briefly, and in closing, to discuss one or two important factors of prescription pertaining to arbitrations.

Part 13(one)(f) from the Act states that the completion of prescription will probably be delayed if the credit card debt would be the object of a dispute subjected to arbitration.

What is Arbitration?

In Murray & Roberts Building (Cape) (Pty) Ltd v Upington Municipality 1982 3 SA 385 (NC) it was held that the referral to an engineer (in terms of a written agreement between the plaintiff and the defendant) was also a dispute subjected to arbitration for purposes of Segment 13(1)(f) in the Act. This choice was upheld in the Appellant Division. It therefore followed that the completion of prescription was delayed right up until one year after the arbitration proceedings had come to an finish.

Proceeding with the Arbitration

It should also be noted that the mere existence of an agreement between parties for disputes between them for being referred to and decided by arbitration does not suffice for the purposes of delaying the running of prescription and that the words subjected to arbitration means that the parties are required to refer disputes to arbitration and to actually proceed with the arbitration proceedings.

Judgement Personal debt

In Primavera Development SA v Government of Northwest Province & another 2003 (three) SA 579 (BPD) the settlement agreement and the resultant Court Order provided, inter alia, that the award by the arbitrator would operate as an Order of Court.

The arbitrator’s award therefore acquired the status of the judgment financial debt for purposes of Segment 11(a)(two) from the Prescription Act, which meant that a 30 12 months prescriptive period of time would be applicable to the award.

Dirk is an experienced lawyer in managing construction law disputes using the full range of dispute settlement processes including litigation, arbitration, adjudication, mediation and negotiation. He also specialises in engineering law, insurance law, property law, medical law and product liability law.

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