Remember that your claim against a debtor can lapse after a certain period of time. This happens in terms of the legal rules on extinctive prescription.
What is Prescription?
The effect of prescription is that the debt owed to a creditor is extinguished and the creditor can no longer institute action to recover the debt, and therefore, in effect, no longer has a claim.
The purpose of prescription in our law is to promote certainty between debtor and creditor, so that long-forgotten claims cannot be resurrected after a certain period of time. Prescription in our law is regulated to a large extent, although not exclusively, by the Prescription Act, No. 68 of 1969 (‘the Act’). Some of the important provisions of the Act are set out below.
How long before a claim becomes prescribed?
Prescription begins to run as soon as a debt is due and payable. Different periods of prescription apply to different types of debt (section 11 of the Act).
A period of 30 (thirty) years applies in respect of:
• any debt secured by mortgage bond;
• any judgment debt (debt in terms of an order of court);
• any debt in respect of any taxation imposed or levied by or under any law; and
• 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.
A period of 15 (fifteen) 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.
A period of 6 (six) 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.
A period of 3 (three) years in respect of any other debt, except where an Act of Parliament provides otherwise.
When is the running of prescription delayed?
The running of prescription can be delayed under section 13 of the Act, if:
• the creditor is a minor or a mental patient or is a person under curatorship or is prevented by superior force including any law or any order of court from interrupting the running of prescription as contemplated in section 15(1);
• the debtor is outside of the Republic;
• the creditor and debtor are married to each other;
• the creditor and debtor are partners in a business partnership and the debt is a debt which arose out of the partnership relationship;
• the creditor is a juristic person and the debtor is a member of the governing body of such juristic person;
• the debt is the object of a dispute subjected to arbitration;
• the debt is the object of a claim filed against the estate of a debtor who is deceased or against the insolvent estate of the debtor or against a company in liquidation or against an applicant under the Agricultural Credit Act, No. 28 of 1966 (as amended);
• the creditor or the debtor is deceased and an executor of the estate in question has not yet been appointed; and
• the relevant period of prescription would, but for the provisions of this subsection, be completed before or on, or within 1 (one) year after, the day on which the relevant impediment referred to above has ceased to exist.
When is the running of prescription interrupted?
In terms of section 14 of the Act the running of the prescription period is interrupted by an express or tacit acknowledgement of liability by the debtor.
In terms of section 15 of the Act prescription is interrupted:
• by the service on the debtor of any process whereby the creditor claims payment of the debt; but
• the running of prescription will however not be deemed to be interrupted if the creditor does not successfully prosecute his claim under the process in question to final judgment or if he does so prosecute his claim but abandons the judgment or the judgment is set aside.
Interruption has the effect that prescription commences to run afresh from the day on which the interruption takes place.
Debts for the payment of litigation costs
The rules on prescription can be quite complex. For example, we have dealt recently with the prescription of a claim for litigation costs:
• A claim in respect of costs granted in terms of a court order becomes prescribed together with the judgment debt, after 30 (thirty) years. This is also the case where an agreement in respect of costs is made an order of court.
• A claim for costs agreed to unconditionally by parties, where such an agreement is not made an order of court, becomes prescribed after 3 (three) years.
• Prescription of a claim for costs agreed to conditionally, for example if the costs must still be taxed or final agreement must still be reached, begins to run once all the conditions are met for the claim to become due.
Do not delay the recovery of your debt. Contact our litigation department for advice in this regard.