KLD Residential CC v Empire Earth Investments 17 (Pty) Ltd

KLD Residential CC was appointed by Empire Earth Investments 17 (Pty) Ltd in November 2006 to market erven in a property development and earn commission upon transfer of properties sold. KLD alleged it was the effective cause of 99 sales and claimed commission of approximately R2.1 million, due between October 2008 and November 2009. Summons was issued in June 2013. Empire Earth raised a special plea of prescription, contending that the claims had prescribed. KLD relied on a letter dated 29 July 2011 written by Empire Earth's attorneys during without prejudice settlement negotiations, in which Empire Earth acknowledged that commission in the amount of R2 105 960 was due, subject to set-off. KLD contended that this acknowledgment interrupted prescription in terms of s 14 of the Prescription Act 68 of 1969. The High Court held that the without prejudice rule barred reliance on the letter for this purpose. KLD appealed to the Supreme Court of Appeal.

The appeal was upheld with costs, including the costs of two counsel. The High Court’s orders were set aside and replaced with an order determining the stated issue in favour of KLD Residential CC and dismissing Empire Earth’s special plea of prescription with costs.

This case is significant because it establishes a new, limited exception in South African law to the without prejudice rule. It clarifies that acknowledgments of indebtedness made during settlement negotiations may interrupt prescription, thereby strengthening creditor protection and preventing debtors from using settlement discussions tactically to allow claims to prescribe.