McMillan v Bate Chubb & Dickson Incorporated

During November 1998, the appellant (McMillan) instructed the respondent law firm to prepare an antenuptial contract for his intended marriage to Rosemary Lois Jannaway. He instructed that the marriage be out of community of property with accrual, and that certain business assets valued at R810,105 be excluded from the accrual. The respondent prepared an antenuptial contract dated 1 December 1998. Years later, during divorce proceedings, McMillan's wife contended that the antenuptial contract was void ab initio due to contradictory and irreconcilable clauses (clauses 4 and 5). On 9 May 2014, the respondent firm advised McMillan orally (confirmed in writing on 12 May 2014) that there appeared to be a problem with the contract, that he might have a claim against the firm, and that he should consult another attorney due to a conflict of interest. The respondent withdrew as his attorney of record. McMillan instructed new attorneys who represented him in the divorce proceedings. On 18 October 2016, Plasket J declared the antenuptial contract void for vagueness, applying the principle established in B v B [2014] ZASCA 14. The marriage was held to be in community of property, resulting in McMillan having to pay his former wife R4,885,073 (50% of the net estate). McMillan issued summons against the respondent for breach of mandate on 13 October 2017. The respondent pleaded that the claim had prescribed, arguing prescription began running on 9 or 12 May 2014 (thus expiring on 12 May 2017), while McMillan contended it only began running on 18 October 2016 when Plasket J declared the contract invalid.

• When does prescription begin to run in respect of a claim for professional negligence against attorneys who drafted an invalid antenuptial contract?
• Whether prescription begins to run when the creditor is informed of the potential claim and the material facts, or only when a court declares the contract invalid?
• What constitutes knowledge of material facts sufficient for prescription to commence running under section 12(3) of the Prescription Act 68 of 1969?
• Whether knowledge of the legal consequences or legal status of an agreement is necessary for prescription to commence, or whether knowledge of factual circumstances suffices?
• Whether a debtor's failure to concede liability delays the commencement of prescription?
• Whether costs of two counsel should be awarded in the circumstances of the appeal?

The appeal was dismissed with costs, but only costs of one counsel (not two counsel as sought by the respondent) were awarded.

The binding legal principle established is that under section 12(3) of the Prescription Act 68 of 1969, prescription begins to run when the creditor acquires knowledge of the minimum material facts necessary to institute action, not when the creditor obtains knowledge of the legal consequences or legal conclusion flowing from those facts. Knowledge of the factual circumstances suffices; knowledge that those circumstances constitute a legal wrong or give rise to liability is not required. In professional negligence claims against attorneys, prescription commences when the client is informed of the factual error or problem with the legal work and its potential consequences, not when a court subsequently pronounces on the validity or legal effect of that work. A debtor's failure to concede liability does not delay the commencement of prescription. The creditor is deemed to have the requisite knowledge if it could have acquired such knowledge by exercising reasonable care.

The court made observations regarding the requirements for a successful claim for professional negligence against an attorney, listing the five elements that must be proved: (a) mandate given and accepted; (b) breach of mandate; (c) negligence (failure to exercise the degree of skill, knowledge and diligence expected of an average practising attorney); (d) damages; and (e) damages within contemplation of parties when mandate was given. The court also commented that there was no reason in logic or law why the appellant could not have joined the respondent as a third party in the divorce proceedings at the time he was informed of the problem in May 2014, claiming payment of any sum he might be ordered to pay his former wife. The court noted that the unfortunate comment in paragraph 67 of the High Court judgment (referring to Plasket J's judgment as possibly being "one piece of evidence which was lacking to prove" the case) was misplaced and should be understood in context of the overall finding that the claim had prescribed. On the issue of costs, the court observed that the matter did not deserve the services of two counsel as the issue was narrow and, despite its importance, not complex.

This case provides important guidance on the application of section 12(3) of the Prescription Act 68 of 1969 in professional negligence claims against attorneys. It clarifies that prescription begins to run when the creditor has knowledge of the minimum material facts necessary to institute action, not when a court pronounces on the legal validity or consequences of those facts. The judgment emphasizes the distinction between factual knowledge and legal knowledge, confirming that only the former is required for prescription to commence. This aligns with the Constitutional Court's decision in Links and the SCA's decisions in Gore NO, Fluxmans v Levenson, Yellow Star Properties, and Claasen v Bester. The case is particularly relevant in professional negligence contexts where the invalidity or defectiveness of legal work may only be confirmed by subsequent court proceedings. It establishes that a client cannot delay instituting a claim until a court has pronounced on the validity of the attorney's work, once the client has been informed of the potential problem and has sufficient facts to formulate a claim. The case also confirms that a debtor's failure to admit liability does not delay the commencement of prescription. From a practical perspective, it serves as a warning to clients to act promptly once informed of potential professional negligence, regardless of whether liability is disputed or whether subsequent court proceedings might provide additional confirmation of the negligence.