Suppose on a fine Saturday afternoon you receive a call from a creditor, with regards to repayment of a loan you were beginning to forget about. Frustrating isn’t it, especially when you thought they too had forgotten about you or taken you off their debtors’ books? What if you learn that there is a way actually, whereby a forgetful creditor will have no choice but to forget about you and the debt?
Prescription can be defined as the extinction of obligations due to lapse of time, alternatively the extinguishing of a claim if within the prescriptive period the claimant does not bring the claim. It is regulated mainly by the Prescription Act 68 of 1969, though other pieces of legislation may make provisions that deal with prescription e.g Institution of Legal Proceedings Against Certain Organs of State, Act 40 of 2002. The extinction of obligations with regards to a debt means one no longer has to pay that debt anymore. Depending on the kind of debt, Section 11 of the Act provides different prescription periods applicable to different types of debts e.g three years for ordinary debts, six years for debts arising out of negotiable instruments, and thirty years for judgment debts. In Boundary Financing Ltd v Protea Property Holdings (Pty) Ltd 2009 (3) SA 447 (SCA) it was held that the rectification of a contract by an aggrieved party cannot prescribe, and can be brought many years after the conclusion of the contract.
For purposes of certainty, prescription begins to run on the day and date the debt becomes due and enforceable and, the creditor must have knowledge of the existence of the debt or the creditor ought to have known of the debt had he/she/it exercised due diligence and reasonable care (Section 12 (3). It follows then, that prescription does not run when the debtor deliberately prevents the creditor from knowing about the debt. The running of the period is consecutive, and not cumulative.
Further, prescription is delayed by a year should any of the circumstances hereunder result in the creditor having less than a year, from date when the circumstance ceases, until the normal date of prescription to claim;
- The creditor is a minor, insane, or under curatorship;
- The debtor is outside the country (see example below)
- The creditor and the debtor are married to each other;
- The creditor and the debtor are partners and the debt arose from a partnership agreement;
- The debtor is a member of the creditor, being a governing body an organisation or business;
- The debt is the object of a dispute in an arbitration; or
- The executor of a deceased estate has not yet been appointed.
B borrows money from A on 1 June 2020, and B undertakes to return the money on 30 June 2020. B however fails to return the money and goes to Zambia on 16 December 2020 only to return on 2 February 2023. When does the debt prescribe in this case?
The debt became due and enforceable on 30 June 2020 which is the day B undertook to pay it back. Normal prescription date will be three years from 30 June 2020, which is 29 June 2023. Due to B’s travel to Zambia, A could not institute recovery action for the debt. When B returns on 2 February 2023, it is only 5 months before the normal prescription date; therefore a delay of 1 year is applicable from date when B returned from Zambia. This means A will have 1 year from 2 February 2023 to claim. The debt will therefore prescribe on 1 February 2024.
If B returns on 23 July 2021, which is about 23 months before the normal date of prescription on 29 June 2023, there won’t be a delay and the normal prescription date will apply.
In conclusion, interruption of the running of prescription happens when the debtor acknowledges liability, or when the creditor serves on the debtor, process to claim payment of the debt.
As straight forward as these principles sound, as exciting as the extinction of prescribed huge amounts of debt sounds, dealing with aspects of prescription without legal assistance is risky usually because the stakes are high. One may actually acknowledge debt without knowing it, thereby interrupting prescription. We strongly recommend legal assistance as the right advice can make a simple ‘calendar date untie you from that kapenta debt.’