Lancelot Stellenbosch Mountain Retreat (Pty) Ltd v Gore NO and Others

The respondents, as liquidators of Queensgate Wealth Manager (Pty) Ltd (in liquidation), applied for the liquidation of the appellant on 14 May 2012. Queensgate Wealth was placed under final winding-up on 30 November 2009. Queensgate Wealth had been the funding arm of the Queensgate Group of Companies. On 15 April 2008, Queensgate Wealth obtained a loan of €2,350,000 from AIK Credit PLC (the AIK loan), payable after 6 months. Queensgate Wealth on-lent R6,480,000 to Black River Development (Pty) Ltd. Black River assigned and delegated its obligations under this loan to the appellant on 23 September 2008, effective from 6 January 2009 (the assignment agreement). AIK's loan became due on 17 October 2008, and AIK issued a demand on 20 October 2008. The liquidators sent a section 345(1)(a) demand to the appellant on 26 April 2010, served on 3 and 5 May 2010. The appellant opposed liquidation, raising prescription as a defence, contending the debt became due on 17 October 2008 and prescribed on 16 October 2011.

• Whether the debt on which the liquidators' locus standi was based had prescribed
• Whether the onus of proof was discharged by the appellant to establish the date from which prescription commenced to run
• Whether the running of prescription was interrupted by tacit acknowledgement of liability by the debtor in terms of section 14(1) of the Prescription Act 68 of 1969
• When the debt became due and payable for purposes of prescription

The appeal was dismissed with costs including costs of two counsel. The final liquidation order granted by the Western Cape High Court was upheld.

The binding legal principle is that when a debtor raises the defence of prescription, the debtor bears the full evidentiary burden to prove when the debt became due for purposes of establishing the commencement date of the prescription period. This burden shifts to the creditor to prove interruption of prescription only if the debtor first establishes a prima facie case that the debt has prescribed. A party relying on an oral agreement must provide sufficient factual particulars to substantiate its existence and terms. Where a debt is payable on demand, prescription commences to run from the date the demand is served, not from an earlier date based on unsubstantiated assertions about the terms of the agreement. Vague and broad allegations without proper factual foundation will not discharge the onus of proof in motion proceedings.

The Court assumed in favour of the appellant (as the high court had done) that the prescription period commenced to run more than three years before the application was launched. However, the Court found it unnecessary to determine whether the appellant's failure to respond to the section 345(1)(a) letter of demand constituted a tacit acknowledgement of liability that would have interrupted the running of prescription under section 14(1) of the Prescription Act. The Court noted that affidavits in motion proceedings must contain factual averments sufficient to support the relief sought, and that the more complex the dispute, the greater the precision required in formulating the issues. The Court observed that the date when a debt arises may differ from the date when it becomes due, the former relating to the coming into existence of the debt and the latter to its recoverability.

This case clarifies the onus of proof in prescription defences in South African insolvency proceedings. It establishes that a debtor raising prescription bears the full evidentiary burden to prove the date from which prescription commenced to run. The burden only shifts to the creditor if the debtor establishes a prima facie case. The judgment emphasizes the requirement for precision in motion proceedings, particularly where complex disputes involve establishing the terms of oral agreements. It demonstrates that vague and unsubstantiated allegations will not discharge the onus of proof. The case also clarifies that when a debt becomes due and payable on demand, prescription begins to run from the date of such demand, not from some earlier date based on speculative or unproven connections to other agreements.