Be wary of prescription – don’t drag your feet to collect your debt

Prescription is a term used to indicate that the time period to institute legal proceedings against a debtor has lapsed. It is thus not a legal term that should be easily ignored, as having your claim prescribe might mean the end of the road for any legal proceedings against a debtor.

‘Debt’ for purposes of prescription can be broadly interpreted as arising from and being due or owing under a contract, but also includes delictual debts. Prescription will usually start to run as soon as the debt becomes due. Should the debtor intentionally prevent the creditor to gain knowledge of the debt, the debt will start to run once the creditor becomes aware of the existence of the debt. A debt shall also not be deemed to be due until the creditor is aware firstly of the identity of the debtor and secondly of the facts from which the debt arises. It is however expected of the creditor to obtain the identity and the facts by exercising reasonable care. Our courts have confirmed that prescription starts to run as soon as all the facts necessary to support a claim in law have arisen. 

A debt will be extinguished by prescription after the lapse of the period of prescription which applies to such debt. There are different periods of prescription of debts. Should you have a claim for debt arising from a mortgage bond, judgment debt, taxation imposed or levied by or under any law, or any debt owed to the state for share of profits, royalties or any similar consideration payable in respect of the right to mine minerals or other substances, then your claim will prescribe after a period of thirty years. 

With debt owed to the state arising out of an advance or loan of money or for the sale or lease of land by the State to the debtor, a shorter period applies, namely 15 years. When debt arises from a bill of exchange or other negotiable instrument or from a notarial contract, a debt will prescribe after six years. In most other cases, a debt will prescribe after three years unless an Act of Parliament provides otherwise. 

It is possible for the period of prescription to be delayed or interrupted. Prescription will be deemed to have been delayed where: 

  1. The creditor is a minor, insane or a person under curatorship.
  2. The debtor is outside the Republic.
  3. The debtor and creditor are married to each other.
  4. The debtor and creditor are partners and the debt arose from their partnership.
  5. The creditor is a juristic person and the debtor is a member of the governing body of that juristic person.
  6. The debt is the object of a dispute which is being arbitrated.
  7. The debt is the object of a claim filed against the estate of a debtor who is deceased, or against the debtor’s insolvent estate, or against a company in liquidation.
  8. The creditor or debtor is deceased and the executor of the estate has not yet been appointed. 

If one of these circumstances is present, the period of prescription will not expire before a year has lapsed since the day on which any of the above impediments ceased to exist. 

The running of prescription can also be interrupted in two ways. Firstly, when the debtor acknowledges his liability, and secondly, by the service of a process on the debtor wherein the creditor claims payment of the debt, for example by serving a summons on the debtor. 

Where a debt is owed by an organ of state, one should note that despite the various prescription periods applying, it remains necessary for the creditor to inform the organ of the state of his intention to institute legal proceedings against the organ of state within six months from the date on which the debt became due. This should be done by giving the state organ a formal written notice. Should one fail to inform the organ of state of your intention to institute legal proceedings or your written notice is faulty, one may still proceed with legal action against the state organ if the state organ consents to this in writing. Should the state organ refuse to provide consent to institute legal proceedings the creditor may apply to court for condonation for the failure to notify the state organ of his intention to institute legal proceedings. The court will condone the failure to notify the state organ if the court is satisfied that the debt has not been extinguished by prescription, good cause exists for the failure by the creditor and there exist no unreasonable prejudice towards the state organ for this failure. 

The important consequences of prescription is that the creditor may no longer institute legal action against the debtor for the debt and the debtor will no longer be liable to the creditor for debt after the prescribed time period has lapsed. It is therefore of paramount importance to ensure that you institute legal proceedings within the stated timeframes for prescription and consult your lawyer timeously in this regard.

April 14, 2015

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