PRESCRIPTION – The Basics
Prescription is regulated by the Prescription Act 68 of 1969 (“the Act”) and refers to the role that a specific time plays in the making and ending of certain rights.
Furthermore, it entails the time limits that an individual has after a specific incident has occurred, and resulted in certain damages being caused, to institute legal action. A debt, which is described as the payment of money or delivery of goods or services, will prescribe after the lapse of a certain time period. This means that the claimant will not be able to issue a claim once the time period have lapsed.
The purpose of prescription is to protect debtors from old claims against which they cannot defend themselves because of the loss of records or witnesses caused by the lapse of time. It is also to ensure legal certainty and to ensure finality is brought to disputes.
PRESCRIPTION OF DEBTS
A debt, which is described as the payment of money or delivery of goods or services, will prescribe after the lapse of a certain time period. Payment by the debtor of a debt after it has been extinguished by prescription, shall be regarded as payment of the debt however it will not revive the prescribed debt.
PERIODS OF PRESCRIPTION OF DEBTS
In terms of section 11 of the Prescription Act the periods of prescription of debts shall be the following:
(a) 30 years in respect of – any debt secured by a mortgage bond; any judgement debt; any debt in respect of any taxation imposed or levied by or under any law as well as any debt owed to the state in respect of any share of the profits, royalties or any similar consideration payable in respect of the right to mine minerals or other substances.
(b) 15 years in respect of any debt owed to the State and arising out of an advance or loan of money or a sale or lease of land by the State to the debtor, unless a longer period applies in respect of the debt in question in terms of paragraph (a);
(c) 6 years in respect of a debt arising from a bill of exchange or other negotiable instrument or from a notarial contract, unless a longer period applies in respect of the debt in question in terms of paragraph (a) or (b);
(d) save where an Act of Parliament provides otherwise, three years in respect of any other debt.
In short the following is important to note:
- With regards to secured debt, such as a mortgage loan, or home loan, the debt will prescribed within 30 years after the debt has become due.
- With regards to unsecured debt, such as a term loan, cheque account, overdraft facility, etc the debt will prescribe within 3 years after the debt has become due.
WHEN PRESCRIPTION BEGINS TO RUN
In terms of section 12 of the Prescription Act prescription starts “running” as follows:
(1) Subject to the provisions of subsections (2) and (3), prescription shall commence to run as soon as the debt is due.
(2) If the debtor willfully prevents the creditor from coming to know of the existence of the debt, prescription shall not commence to run until the creditor becomes aware of the existence of the debt.
(3) A debt shall not be deemed to be due until the creditor has knowledge of the identity of the debtor and of the facts from which the debt arises: Provided that a creditor shall be deemed to have such knowledge if he could have acquired it by exercising reasonable care.
INTERRUPTION OF PRESCRIPTION
Prescription can be interrupted in two ways:
- Prescription will be interrupted by the debtor’s express or tacit acknowledgment of his or her liability (Section 14 of the Act). By way of example if a debtor acknowledgement of debt to settle the account he/she is admitting to owing the monies due and prescription would then start running once more from the date of making the acknowledgment;
- Prescription may be interrupted by means of judicial interruption. (Section 15 of the Act). In terms of the Act, the running of prescription will be interrupted by the service on the debtor of any process whereby the creditor claims payment of the debt.
WHAT ARE THE CONSEQUENCES OF PRESCRIPTION?
- The debtor will not be liable to the creditor for a debt; or
- The creditor may not institute legal action against the debtor for a debt.
- The creditor cannot collect prescribed debt.
Article prepared by Dylon Fisher & Jacolene Lourens