07 Dec 2016

Litigation - How Time Flies: Your Claim Might be Time Barred

Practice Area(s): Litigation |

In the recent Supreme Court of Appeal judgment in the matter of Trinity Asset Management v Grindstone Investments, the SCA found that the date upon which a debt becomes due must not be conflated with when repayment thereof was demanded:

A debt, which is repayable on demand, becomes due the moment the money is lent to the debtor.  The court found Trinity Asset Management’s claim had prescribed after it lent the funds on 1 September 2007 in terms of a loan agreement which provided that “the loan shall be due and payable to the Lender within 30 days from the date of the delivery of the lender’s written demand”.

In and during December 2013, Trinity Asset Management delivered a letter of demand requesting it to repay the debt.

In terms of the Prescription Act, prescription of a debt will have been completed three years after it becomes “due”, unless, of course, prescription had been interrupted by, for example, an acknowledgement of debt or judicial interruption.  Interruption of prescription, by acknowledging liability is one thing, attempting to revive an extinguished debt by acknowledgement is another.  The Prescription Act unlike its 1943 predecessor creates a strong prescription, i.e. once there has been a necessary effluxion of time, the debt is extinguished.

The court noted that it is easy for confusion to arise.  A debt can be immediately claimable even though a demand may be necessary for it to be payable.

In a minority judgment the court found that calling up the loan by way of demand, as contemplated in the loan agreement, was an essential requirement for Trinity Asset Management’s cause of action.  Accordingly the running of prescription did not commence until 30 days after the making of written demand.

MM Loubser Extinctive Prescription (1996), at 62, contends that prescription serves to protect the debtor from liability in a case where he is justified in assuming that a creditor no longer intends to enforce his right.  At 63, Loubser concluded as follows:  “On account of the policy consideration that a creditor should not be able to rely on his own failure to demand performance from the debtor in order to delay the running prescription, the courts will require clear indication that the parties intended demand to be a condition precedent for the debt to become due, in which case prescription will only begin to run from date of demand.