South Africa: Western Cape High Court, Cape Town

[16] Plaintiff's counsel referred me to two judgments, namely Thrupp Investment Holdings (Pty) Ltd v Goldrick 2008 (2) SA 253 (W) and Nedcor Bank Limited v Sutherland [1998] 3 All SA 146 (N) in which a close corporation was regarded as a company for purposes of section 13(1 )(g) of the Prescription Act. The issue, however, does not appear to have been argued and no reasons were given to this assumption. As such these decisions have no binding or persuasive force.

[17] I revert to the interpretation of section 13(1 )(g) of the Prescription Act. In broad terms there are three approaches to the interpretation of statutes. The first is the so called golden rule of interpretation. In terms of this rule the plain meaning of the statute is given effect to unless it would give rise to an absurdity or a result contrary to the intention of the legislature. In the present case, however, it seems to me that an interpretation in accordance with the golden rule would not support the contention advanced by plaintiff. The plain meaning of the word company does not, as a matter of language, include close corporation.

[18] A second approach to the interpretation of statutes can be described as purposive. This means that a statute must be interpreted in the light of the purpose which it seeks to achieve. This method uses the language and the purpose to serve as the starting point of the enquiry. Closely related to this approach, is the rule that the language of a statute must be read in its context. This approach, however, also does not assist plaintiff in this case as it uses the actual language as part of the starting point of the enquiry.

[19] A third approach can be described as the reading in of a word or a phrase in order to attempt to make sense of the statute. In terms of this approach the court plays a creative role by actually inserting words into or changing words in the statute to arrive at the result sought to be achieved.

[20] At first sight this approach seems to offer more hope to plaintiff. In my view, however, a reading in of the words "or close corporation" into section 13(1 )(g) of the Prescription Act faces three problems in this case.

[21] The test for the implication of a word into a statute is quite stringent. In Masetlha v President of the Republic of South Africa and Another [2007] ZACC 20; 2008 (1) SA 566 (CC) the Constitutional Court, at para [192], formulated it as follows:

"...words cannot be read into a statute by implication unless the implication is a necessary one in the sense that without it effect cannot be given to the statute as it stands. In addition, such implication must be necessary in order to 'realise the ostensible legislative intention or to make the [legislation] workable."

[22] The proposed implied term is in my view not necessary in the sense that without it effect cannot be given to the principles and objects of the Prescription Act. Section 13 of the Prescription Act contains exceptions to the general rule that prescription is interrupted by way of the institution of legal proceedings for the enforcement of the debt. There is in principle no practical or legal reason why close corporations should be singled out for special treatment.

[23] A second problem facing the reading in approach is that a provision can only be implied into a statute if its language is clear. See The Firs Investments (Pty) Ltd v Johannesburg City Council 1967 (3) SA 549 (W) at 557E - G:

"Moreover, a strong factor militating against the implication of any such limitation is the difficulty of formulating it. In contract a term will not be implied where considerable uncertainty exists about its nature and scope, for it must be precise and obvious.... I think that the same must apply to implying a term in a statute, for the process is the same...."

How, one asks rhetorically, would the suggested implied provision be framed bearing in mind that close corporations did not exist when the Prescription Act was passed?

[24] A third problem is that there have always been entities which are separate legal personae but not companies. They include trading corporations. Such entities would normally be sequestrated and not liquidated. See Lawsa Vol 1 Associations paras 618 and 661. How would the legislature have known in 1969 that a similar type of entity, if and when it comes into being, would be liquidated and not be sequestrated.

[25] Some support for an argument that section 13(1 )(g) is amenable to an interpretation that the words "or corporate entity similar to" or similar words be implied into section, may be found in the judgment of Mahomed J in Vitamax (Pty) Ltd v Executive Catering Equipment CC and Others 1993 (2) SA 556 (W). He dealt with a situation where a person had bound himself as surety in respect of companies. The principal debtor was a close corporation and the contention was raised that the word companies did not apply to a close corporation. Mahomed J rejected this argument.

[26] It may be suggested that the Vitamix judgment appears to supports plaintiff's contentions. There are, however, significant differences between that case and the present one. Mahomed J said there was no reason why the parties would have intended to define company in such a manner. He said inter alia the following:

"Crucial to the essential characteristics of a company is its existence as an entity distinct from its members, its capacity to own property apart from its members and perpetual succession. (Dadoo Ltd and Others v Krugersdorp Municipal Council 1920 AD 530; Klerksdorp & District Muslim Merchants Association v Mahomed & Another 1948 (4) SA 731 (T) at 738; Morrison v Standard Building Society 1932 AD 229 at 238; Stellenbosch Farmers' Winery Ltd v Distillers Corporation (SA) Ltd and Another 1962 (1) SA 458 (A) . These are also all characteristics of a close corporation in terms of the Close Corporations Act 69 of 1984 (sees 2)."

[27] The reasoning in Vitamax can be distinguished in four material respects. The first is that the Close Corporation Act did not exist in 1969 when the Prescription Act was passed. An entity such as a close corporation had not yet come into being. It did exist, however, when the parties concluded the agreement in the Vitamax case. It is trite law that an agreement must be construed within its proper context. See KPMG Chartered Accountants (SA) v Securefin Ltd and Another 2009 (4) SA 399 (SCA) para [39]. The existence of the entity known a close corporation was manifestly part of the context which played a role in the court's reasoning in Vitamax.

[28] The second point of distinction is that it is more difficult to imply a term into a contract than into a statutory provision. I have already referred to the stringent test in the case of a statute. In the case of a contract the existence of an implied term depends on the intention of the parties which can be proved on no stricter test than a balance of probabilities. The court also has a wider discretion to look at surrounding circumstances.

[29] The third distinguishing feature is that the general approach of Mahomed J does not apply to statutory interpretation. He saddled the defendant with an onus to support a special interpretation of the word company. In the case of section 13(1 )(g) of the Prescription Act, however, the onus would rest on the party seeking to extend the meaning of company.

[30] The fourth point of distinction is that not all of the entities referred to in the passage quoted above are companies. In Klerksdorp & District Muslim Merchants Association v Mahomed & Another 1948 (4) SA 731 (T) it was an association formed for religious purposes which was regarded by the court as a universitas or legal persona. In Morrison v Standard Building

Society 1932 AD 229 it was a building society which was regarded as a universitas.

[31] I find therefore that the interpretation contended for by plaintiff is not supported by any of the accepted methods of interpretation. The Vitamax judgment can be distinguished in various significant respects and does not assist plaintiff to overcome its problems with the interpretation of section 13(1 )(g) of the Prescription Act.