Trinity Asset Management (Pty) Limited v Grindstone Investments 132 (Pty) Limited

In September 2007 the parties concluded a written loan agreement in terms of which Trinity Asset Management (Pty) Ltd lent Grindstone Investments 132 (Pty) Ltd R3 050 000. The loan amounts were advanced in February 2008 in three tranches. The agreement contained a clause dealing with repayment that became central to the dispute. No repayment was made for several years. In September 2013 Trinity demanded repayment, which Grindstone acknowledged but did not honour. A statutory demand in terms of section 345 of the Companies Act 61 of 1973 followed. Trinity then applied for the provisional liquidation of Grindstone on the basis of its alleged indebtedness. Grindstone raised prescription as a preliminary defence, contending that the debt prescribed three years after the advances were made. The High Court upheld the prescription defence and dismissed the liquidation application. The Supreme Court of Appeal dismissed Trinity’s appeal. Trinity sought leave to appeal to the Constitutional Court.

Leave to appeal was granted, but the appeal was dismissed. The applicant was ordered to pay the respondent’s taxed costs.

The case is a leading Constitutional Court authority on when prescription begins to run in respect of debts described as payable on demand. It clarifies that, unless parties clearly and unequivocally stipulate that demand is a condition precedent to enforceability, prescription is not delayed. The judgment balances contractual freedom against the policy underlying prescription and has significant implications for commercial loan agreements and credit transactions.