Briefly, X sued Y within the three year prescription period after X’s claim arose. After close of pleadings, X ceded to Z its right to recover the debt and Z was substituted as the plaintiff.
By the time Z was substituted as plaintiff, more than three years had elapsed since the claim arose. Accordingly, Y raised the defence that the claim was extinguished by prescription in terms of s15(2) and s15(6) of the Prescription Act, No 68 of 1969 (Act). Y’s argument was as follows: the substitution of the plaintiff meant that X’s interruption of prescription lapsed and the claim was extinguished. Y also argued that the substitution amounted to a “process whereby legal proceedings are commenced” and by this time more than three years had elapsed since the claim arose. The claim had, according to Y’s reasoning, prescribed.
Central to the court’s rejection of Y’s argument that the claim had prescribed was the finding that there was an essential continuity in pursuing the claim. Essential continuity requires a creditor to prosecute the same claim under the same process to final judgment. In the event that the same claim is pursued under the same process, the substitution would not be considered the commencement of new proceedings.
This means that, upon substitution, X and Z would have to be considered one and the same creditor and there must not have been a break in the legal process from the time X sued Y until Z was substituted.
It was held that there are two requirements for essential continuity:
the substitution must not amount to a document or “process whereby legal proceedings are commenced” (otherwise this will cause a break in the legal process); and
the claim must relate to the same debt.
On the facts of this case, the court held that there was essential continuity in the legal process. Underlying the court’s reasoning was the fact that a valid cession had taken place, causing the substitution not to cause the commencement of new proceedings. Z simply stepped into the shoes of X.
Notably, the court held that upon cession of the rights, the debt remained the same because the cession caused only the identity of the plaintiff to change. Z was therefore pursuing the same claim. A defence of prescription was therefore not created and Z was able to pursue its claim.
The case of Silhouette Investments Ltd v Virgin Hotels Group Ltd 2009 (4) SA 617 (SCA), had similar facts to the Fisher case. Here, A sued B and A then attempted to cede its rights to the claim to C, amending the particulars of claim to reflect the change in plaintiff. However, the contract between A and B precluded such cession. Trying to rectify this, A amended the particulars of claim, substituting itself as plaintiff again. The court found that by substituting C as the plaintiff, A ceased to pursue the claim - there was no continuity because there was no valid cession. By the time A commenced proceedings for a second time, the claim had prescribed.
It is therefore essential, on the substitution of a plaintiff, to ensure that the requirements for essential continuity have been met in order to avoid a defence of prescription.
Written by Rishaban Moodley and Jamie Lee Fong