WHEN DOES PRESCRIPTION OF A DEBT START?

Wed, 27 Jun 2018 09:32:27 +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 promised to make a payment to the outstanding debt amount.
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 because 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.

Conclusion

If you are uncertain about a debt amount or require assistance in this regard, then please contact your financial advisor, who will assist you with taking the next steps.

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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THE A, B AND C OF SERVICE OF LEGAL DOCUMENTS

Wed, 27 Jun 2018 09:27:56 +0000

How are legal documents supposed to be served, and what is regarded as invalid service?

Purpose of service of legal documents:

The fundamental rule with regards to service is that the court must be satisfied that the defendant or respondent has received these documents and is therefore aware that legal proceedings are being brought against him/her. Erasmus stated in his book, Superior Court Practice: “It is a cornerstone of our legal system that a person is entitled to notice of legal proceedings against him”.

Service on person’s residence or place of business:

The ideal would be that the service of all legal documents should be effected via personal service. However, due to the fact that people on the wrong side of the law are often very evasive, service can be effected on any person above the age of 16 years, who is apparently resident at the residence of the person to be served/employed at the place of business of the person to be served.[1]

Service on a domicilium address:

A domicilium address is a regular term of the most modern contracts and means that the contracting party chooses an address where all legal notices and documents may be served, by delivering or leaving the document to be served at such address.[2] This could be a potentially dangerous term, especially with regards to contracts which are being renewed annually, but of which the content is not necessarily updated as regularly as it should be. It often leads to documents being served at an address where a person is no longer resident or carrying on business, and where the person has neglected to update such information in the contracts which he/she concluded.

Service of legal documents on a company/closed corporation:

Service of legal documents in which a company or closed corporation are to be served, are effected by serving such documentation at the company/closed corporation’s registered address or principle place of business.[3] Because a company/closed corporation’s principle place of business often differs from their registered address, this could also lead to a company/closed corporation changing the place at which it conducts business, but neglecting to change their registered address, causing legal documents served at the registered address not coming under its attention.

Invalid Service

Rule 9(3) of the Magistrate’s Court Rules determines that a court may, if there is reason to doubt whether the process served has come to the actual knowledge of the person to be served, treat such service as invalid. Thus if a judgment was granted against a defendant on whom there did not occur proper service of the summons as explained above, it would be a ground for rescission of such judgment.

Preferable method of service:

Personal service should be used whenever possible, and the other methods of service provided for in the rules should only be used where the Defendant is elusive or untraceable. In O’Donoghue v Human[4] the following is stated: “what the Court requires in regard to service of a summons is that it be served in the best possible manner likely to bring the summons to the attention of the defendant. Rule 4 appears to contemplate that, if possible, service should be personal, and that only if the defendant or respondent cannot after diligent search be found may some other authorised form of service be adopted. The whole purpose is to take the most effective steps possible to ensure that the summons comes to the Defendant’s notice.”

Reference List:

Magistrate’s Court Rules
O’Donoghue v Human 1969 (4) SA 35 (E)

[1] Rule 9(a) – (c) of the Magistrate’s Courts Rules

[2] Rule 9(d) of the Magistrate’s Court Rules

[3] Rule 9(e) of the Magistrate’s Court Rules

[4] 1969 (4) SA 35 (E) par. 4

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WHEN DOES PRESCRIPTION OF A DEBT START?

THE A, B AND C OF SERVICE OF LEGAL DOCUMENTS