What are your options when debt prescribes?

2016-07-20 06:00
JAPIE KRUGER

JAPIE KRUGER

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Question:

I LENT money to a business partner nearly three years ago when he had been in financial trouble. It was not a massive amount, so I did not press him. I know things are now going better. When I asked him to pay back my loan, he refused and said that my claim had prescribed, so there was nothing I could do. Surely this cannot be the case?

Answer:

Before determining when a debt prescribes, one must first understand “extinction of debts by prescription”.

The Prescription Act 68 of 1969 states that “a debt shall be extinguished by prescription after the lapse of the period which in terms of the relevant law applies in respect of the prescription of such debt”.

In simple terms, it means that a debt is completely extinguished after the lapse of the relevant period for the recovery of that debt. The general period for most civil claims to take action and enforce a debt is usually three years. If no action is taken within the allowed three years, a debt is seen as prescribed.

The next question that needs to be answered is, when does the three year period for prescription start running? The following scenario can be used:

Peter lends R1 000 to Paul on 1 March 2012. They agree that Paul will pay back the R1 000 on 1 April 2012. The moment that Peter lends the R1 000 to Paul, the debt came into existence, but the debt is not yet due. The debt will only become due on 1 April 2012.

If Paul fails to pay back the R1 000 on 1 April 2012, prescription will start running as from the 2nd of April 2012. This means that Peter has three years starting on 2 April 2012 to take action to recover the debt.

If Peter does not take any action, the debt will prescribe three years later on 2 April 2015.

The distinction between when a debt arises and when it becomes due is of the utmost importance to ensure that action is taken within the allowed time frame of three years. Our courts have taken the approach that the prescriptive period will start running the moment that the identity of the debtor and the facts from which the debt arises are known to the claimant.

The claimant does not need to have knowledge of the relevant legal conclusion. The prescriptive running is also not postponed until the person becomes aware of his full legal rights. If the approach of our courts are applied to the scenario of Peter and Paul, even if Peter was not aware of the fact that he would be able to recover the money, the prescriptive period would still start running on 2 April 2012.

The reasoning behind this is that Peter was aware that Paul owed him, which is sufficient for prescription to start running.

It is advisable that you consult with an attorney soon.

Japie Kruger, Candidate Attorney, Phatshoane Henney Attorneys

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