F W A Lutzkie NO and Another v Zenith Concessions Limited

The respondent purchased shares from the appellants under a written agreement dated 25 September 1997. Part of the purchase price was payable immediately, with further tranches payable on the occurrence of future events. In reduction of the first tranche, the respondent issued a cheque for R2 million on 26 November 1997. The cheque was presented for payment and dishonoured. More than three years after the underlying contractual debt became due, but within six years of the dishonoured cheque, the appellants instituted action for provisional sentence on the cheque. The respondent raised several defences, including that the underlying debt had prescribed and therefore the debt arising from the cheque had also prescribed.

The appeal was upheld with costs. The order of the High Court was set aside and replaced with an order dismissing the defence of prescription with costs. The matter was remitted to the High Court for determination of the remaining issues.

The case clarifies that, under South African law, a cheque constitutes an independent source of a debt for purposes of prescription. It confirms that the prescription period applicable to negotiable instruments differs from that of the underlying obligation, reinforcing certainty in commercial transactions involving cheques.