Prescription in South Africa is regulated by the Prescription Act No. 68 of 1968, as amended.
Prescription refers to the role that the passage of time plays in the creating and ending of certain rights.
For debtors, the operation of prescription provides legal certainty, but for the creditor it poses a substantial risk. Particularly where the creditor does not have processes in place ensuring that debts are collected timeously.
For this reason, many creditors search for mechanisms through which they can limit their risk. Moreover, many textbooks conclude that the waiver of prescription (in the form of an undertaking or term of an agreement not to raise the defence of prescription) is enforceable.
Waiving prescription
Importantly, at the time of the creation of a debt, no party to such agreement can legally commit oneself not to rely on prescription. An agreement of this nature can be regarded as contra bonos mores, and is, therefore invalid [JC de Wet en AH van Wyk De Wet en Yeats Kontrak]. This is the common law position.
“many textbooks conclude that the waiver of prescription…. is enforceable”
This position has been confirmed in the Western Cape High Court in the matter between Absa Bank h/a Bankfin v Louw en Andere[1997 (3) SA 1085] and later, in the Supreme Court of Appeal [Representative of Lloyds and Others v Classic Sailing Adventures (Pty) Ltd 2010 (5) SA 90 (SCA)]. It is important to note, however, that the abovementioned ABSA matter, however, contradicted an earlier decision from the then Transvaal Bench in Nedfin Bank matter[Nedfin Bank Bpk v Meisienheimer en Andere 1989 (4) SA 701 (T)].
According to Van der Merwe [De Rebus January / February 2017: 32 – 33.], the SCA held that a renunciation must be distinguished from a waiver. A renunciation is effectively a new agreement and, therefore, has the effect to renew the debt after it has become prescribed.
This is an important distinction, because renunciation of a prescribed debt is permissible, but the SCA held that the waiver of prescription is not.
The common law status quo was confirmed:
“Rather than asking whether statutory provisions are prohibitory or dispositive, a better approach to determining whether parties may exclude to operation of statutory provisions by choice of another system of law might be to question whether they can waive the application of the provisions. …..held that they may renounced by a party (in that case the State) for whose benefit they are enacted. But where public policy and interest would be prejudiced by a waiver, such provisions cannot be escaped.
Waiver is not possible, said this court, if it affects public policy or interest or a right. … the application of the provisions of the Prescription Act 68 of 1969 may be waived by a debtor under a contract after the prescriptive period has run because renunciation did not substantially or materially impact on the public interest.”
In Links v Department of Health, Northern [Cape] Province [2016 (4) SA 414 (CC)]:
“The provisions of s 12 seek to strike a fair balance between, on the one hand, the need for a cut-off point beyond which a person who has a claim to pursue against another may not do so after the lapse of a certain period of time if he or she has failed to act diligently and on the other the need to ensure fairness in those cases in which a rigid application of prescription legislation would result in injustice.”
Conclusion
The Links judgment resulted in the court now having to determine whether it will be fair, just, and equitable to allow a claim to become prescribed or not.
In addition, the common law prevails when it comes to waiver of prescription and, therefore, that any undertaking or term of an agreement not to raise the defence of prescription is not enforceable and is contrary to public policy.
We therefore recommend that clients consult with their specialist attorney to ensure that all agreements align to the latest best practices and that all internal debt collection processes are exercised timeously.
Nicolene Schoeman-Louw | Managing Director | Schoeman Law | nf.schoeman@schoemanlaw.co.za | www.schoemanlaw.co.za |
