Group Five Construction (Pty) Limited (appellant) entered into a contract with the Minister of Water Affairs and Forestry (respondent) for the construction of the Injaka dam and appurtenant works for the Sabie River Government Water Scheme. The appellant instituted a claim for moneys allegedly due under the contract. Four of the claims arose from claims submitted in terms of clause 51 of the contract, which entitled the appellant to claim for additional payment or compensation in prescribed circumstances. The contract was amended twice, affecting clause 61 and providing for a new dispute resolution mechanism involving a dispute review board. Under this mechanism, the board would make recommendations that became final and binding if accepted by both parties in writing. If recommendations were not accepted, either party could refer the matter to court within 60 days by giving written notice. The respondent raised a special plea of prescription. The parties placed agreed facts before the court and led evidence.
The appeal was dismissed with costs, including costs of two counsel.
In a building contract with a dispute resolution mechanism requiring written notice within a specified period (in this case 60 days) to refer unresolved matters to court, a debt becomes 'due' for purposes of section 12(1) of the Prescription Act 68 of 1969 when the written notice is given, not upon completion of the works. At that point, the cause of action is ripe and complete, and prescription begins to run. Claims for additional payment or compensation under such contracts cannot be characterized as mere estimates or advances to avoid the running of prescription from the date of notice.
The Court noted that the appellant's counsel made a 'valiant attempt' to argue the contrary position but 'missed the point' by arguing that the claims were based on estimates and represented advances. The Court expressed satisfaction with Southwood J's detailed and thorough judgment and indicated that the argument did not warrant repeating the same reasoning in different words, suggesting the matter was relatively straightforward on proper analysis despite the complexity of the contractual arrangements.
This case is significant in South African construction law and the law of prescription as it clarifies when a debt becomes 'due' for prescription purposes in the context of building contracts with dispute resolution mechanisms. It establishes that where a contract provides for a dispute review board process and requires written notice within a specified period to refer unresolved matters to court, the debt becomes due when such notice is given, not upon completion of the works. The judgment emphasizes the importance of interpreting contractual dispute resolution mechanisms to determine when prescription begins to run, and demonstrates that contractors must be mindful of prescription periods running from when they give notice of their intention to litigate, not from the completion of works or final settlement.