Van Reenen v Santam Limited

The appellant, Mr Van Reenen, conducted a cattle feedlot business and purchased tallow from Abakor Ltd between 1993 and 1997. He alleged that between February and August 1997 Abakor supplied defective tallow, causing him damages exceeding R1.9 million. Abakor was insured by Santam Limited against third-party claims arising from defective tallow. Abakor was provisionally liquidated on 10 October 2000 and finally wound up on 31 October 2000, of which the appellant became aware by 27 November 2000. The appellant sued Abakor for damages, but due to the liquidation he later instituted action directly against Santam on 13 January 2004 under section 156 of the Insolvency Act. Santam raised a special plea that the claim had prescribed.

The appeal was dismissed with costs, confirming that the appellant’s claim against Santam had prescribed.

The case clarifies when prescription begins to run for third-party claims against insurers under section 156 of the Insolvency Act. It confirms that such claims become due upon sequestration or winding-up of the insured and that the section creates a new statutory right rather than a cession. The judgment also affirms that an acknowledgement of liability must be made to the creditor for purposes of interrupting prescription.