Debt – Schnetler's Inc

When does prescription of a debt start?

SRA — Mon, 11 Nov 2019 14:44:52 +0000

Debt does not last forever, after a period of time it prescribes and becomes invalid. Prescribed debt can be explained as old debt that has not been acknowledged over a period of three years. This means that a debt prescribes if:

You have not acknowledged the debt in the past three consecutive years, either in writing or verbally.
You have not made a payment or promised to make a payment toward the outstanding debt.
You have not been summoned to make a payment by a creditor for the debt within the past three consecutive years.

Trinity Asset Management (Pty) Limited v Grindstone Investments 132 (Pty) Limited

On 5 September 2017, the Constitutional Court handed down a judgment in an appeal against the judgment and order of the Supreme Court of Appeal (SCA) against Trinity Asset Management (Pty) Ltd (Trinity). The SCA ruled that Trinity’s claim for repayment of a debt of some R4.55 million against Grindstone Investments 132 (Pty) Ltd (Grindstone) was unenforceable as it had prescribed.

The parties entered into a written loan agreement, effective from 1 September 2007, in terms of which Grindstone borrowed a capital amount of R3 050 000 (loan capital) from Trinity. Clause 2.3 of the loan agreement provided that the loan capital was due and repayable to the applicant within 30 days from the date of delivery of Trinity’s written demand.

The majority judgment found that, on a holistic reading of the loan agreement, the parties did not intend to delay when the debt would become due or when prescription would begin to run. The parties’ language in the contract did not signify an intention to delay. The parties simply meant to allow Grindstone 30 days to repay the debt once Trinity had issued demand, not to postpone the due date of the debt to an indeterminate future date. The debt thus became due, and prescription began to run, immediately on conclusion of the contract.

Grindstone therefore raised a valid prescription defence, and the appeal was dismissed.

References:

Trinity Asset Management (Pty) Limited v Grindstone Investments 132 (Pty) Limited (CCCT248/16) [2017] ZACC 32 (5 September 2017)
http://www.debtbusters.co.za/what-is-prescribed-debt/

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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DEALING WITH A DIFFICULT DEBTOR

SRA — Tue, 25 Sep 2018 09:42:11 +0000

Going about collecting debt can be a stressful and confusing business. It only gets more frustrating when someone who owes you money doesn’t pay it back. If someone does owe you money (a debtor), then there are certain legal steps that can be taken to ensure you get your money back.

Taking legal action against a debtor can be an expensive and time-consuming process, hence the importance of having sound legal advice or the help of an attorney who specialises in debt collection.

An important point to remember is that you should have a legal agreement with the debtor in place before you seek legal action. If not, the process may be far more difficult than you’d have imagined or worse, it could backfire in your direction.

Where can debts be claimed?

Debts can be claimed in the High Court, for debts that are above R300 000. Amounts between R100 000 and R300 000 must be claimed in the Regional Court and amounts under R100 000 must be claimed in the Magistrate’s Court.

What must I do to get my money back?

When claiming a debt, the first thing to do is send a letter of demand to the debtor. The letter should include all the necessary information of the debt such as the details of the transaction, the amount outstanding and the due date for payment. This letter can also contain a threat of legal action should the debtor not pay by the due date.

If the debtor decides to ignore the letter and the threat, then you can institute legal action to recover the money. If you believe it’s not worth it or not possible to recover the full amount, then you can write the debt off, making sure you remember never to give that person money again.

An attorney can help with the process of collecting a debt. It’s important to always consult an attorney about an outstanding debt before taking any action. If you don’t enlist the help of professional attorneys, especially when you are owed a lot of money, you may end up not getting your money back at all from a lack of legal expertise. Furthermore, if you lose a court case, you may also end up paying the other person’s legal fees.

After a letter of demand is sent to the debtor, and they do not pay by the due date, then a summons will be served to them by the Sheriff of the Court. Ten days after the summons has been served, an attorney will take judgement in court against the debtor.

The following process for claiming a debt only applies to those who do not adhere to the National Credit Act (NCA). Businesses that sell credit, for example, will have other requirements to fulfil according to the NCA. All claims must be instituted within three years if you want to get your money back.

Reference:

Anderson, AM. Dodd, A. Roos, MC. 2012. “Everyone’s Guide to South African Law. Third Edition”. Zebra Press.

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DEALING WITH A DIFFICULT DEBTOR

SRA — Fri, 25 May 2018 05:54:44 +0000

Taking legal action against a debtor can be an expensive and time-consuming process, hence the importance of having sound legal advice or the help of an attorney who specialises in debt collection.

Where can debts be claimed?

What must I do to get my money back?

References:

Anderson, AM. Dodd, A. Roos, MC. 2012. “Everyone’s Guide to South African Law. Third Edition”. Zebra Press.

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MUNICIPAL DEBT INVALID, THE CONSTITUTIONAL COURT HAS RULED

SRA — Fri, 09 Feb 2018 09:56:27 +0000

On 23 May 2017, the Constitutional Court heard an application for confirmation of an order of the High Court of South Africa, that declared section 118(3) of the Local Government: Municipal Systems Act, 2000, constitutionally invalid.

On 29 August, in a ruling majority written by Justice Edwin Cameron, the court found that upon transfer of a property, a new owner is not liable for old municipal debt.

Section 118 of the Municipal Systems Act

Section 118(3) explains that municipal debt on any property is a charge upon that property and enjoys preference over any mortgage bond registered against the property. However, the question was whether this means that, when a new owner buys the property, the property remains with the debts of a previous owner.

What did the court say?

The court ruled that section 118 (3) is “well capable of being interpreted”, so that the historical debt is not transferred to a new owner of the property.

“What is notable about section 118(3) is that the legislature did not require that the charge (historical debt) be either registered or noted on the register of deeds. Textually, there is no indication that the right given to municipalities has a third-party effect (to a new owner)… It (historical debt) stands alone, isolated and unsupported, without foundation or undergirding and with no express words carrying any suggestion that it is transmissible,” the court said in the judgement.

References:

The Constitutional Court of South Africa

“Concourt rules new homeowners not liable for debts of previous owners”, Ray Mahlaka, The Citizen, 29 August 2017. https://citizen.co.za/news/south-africa/1631149/concourt-rules-new-homeowners-not-liable-for-debts-of-previous-owners/

Jordaan and Another v City of Tshwane Metropolitan Municipality and Others; New Ventures Consulting & Services (Pty) Ltd and Others v City of Tshwane Metropolitan Municipality and Another; Livanos and Others v Ekurhuleni Metropolitan Municipality and Another; Oak Plant Rentals (Pty) Ltd and Others v Ekurhuleni Metropolitan Municipality (74195/2013; 13039/2014; 13040/2014; 19552/2015; 23826/2014) [2016] ZAGPPHC 941; [2017] 1 All SA 585 (GP); 2017 (2) SA 295 (GP) (7 November 2016)

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DO DEBTS LAST FOREVER?

SRA — Mon, 22 May 2017 06:39:12 +0000

Prescription was introduced as means of protecting South African consumers from dishonest credit providers, who are responsible for recklessly lending credit and have contributed to the detrimental debt crisis many South Africans face today.

What does prescription mean?

The Prescription Act 68 of 1969 (PA) says that a debt (payment of money) is extinguished/expired after the lapse (passing) of a specific time period.
South Africa has different laws which specify time periods, for example, the PA says contractual and delictual debts extinguish after 3 years from when prescription starts.
Prescription may be delayed or interrupted.

It is important to bear in mind that not all debt prescribes after a period of three years. Debt related to a cheque, for example, only prescribes after 6 years. The purpose of prescription in South Africa is to compel creditors and collections agents to collect money owed to them within a specified period and not delay collection so that it accumulates massive amounts of interest and costs.

What are the consequences of an extinguished debt?

The debtor is not liable to the creditor for a debt after the time period has lapsed.
The creditor may not institute legal action against the debtor for a debt.

When does prescription start?

As soon as the debt is due (a debt is due once the creditor can identify the debtor and the facts from which the debt arises).

If the debtor prevents the creditor from gaining knowledge of the debt (excluding debts arising from agreements) prescription runs from when the creditor has knowledge of the existence of the debt.

An important point to remember is that it’s perfectly legal for a debt collector or attorney to demand payment for a prescribed debt. It is up to a debtor to raise prescription as a defence.

References:

https://www.legalwise.co.za/help-yourself/quicklaw-guides/prescription

http://www.debtbusters.co.za/faq/what-is-prescription/

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