The Supreme Court of Appeal (SCA) in Investec Bank Limited v Erf 436 Elandspoort (Pty) Ltd and Others gave useful examples of what constitutes a tacit acknowledgement of liability (which interrupts the running of prescription of a debt in terms of section 14 of the Prescription Act 1969). The case involved a debt related to a notarial lease. The SCA pointed out various instances where the debtor had tacitly acknowledged its debt, interrupting prescription including:
- providing various proposals about how it would discharge the debt;
- making periodic payments
- allocating sub-rentals which the debtor collected to the discharge of the debt;
- allowing the allocation of sub-rentals which the creditor bank (Investec) collected to discharge the debt; and
- querying the VAT component of its payments (which constituted an acknowledgement as it did not dispute that the payments were due).
The debtor leased commercial property from South African Rail Commuter Corporation (SARCC). The bank loaned money to the debtor against a notarial lease, which included an agreement with SARCC allowing the bank to take over the lease if the debtor defaulted on its obligations The debtor defaulted and the bank became the new lessee.
For a few years, the debtor continued to manage the property and allocate the sub-rentals it collected to discharging its debt. Eventually the bank took over the management of the property and continued to allocate the sub-rentals to discharge the debtor’s liability – with the debtor’s knowledge. There was also a payment to the bank arranged by the debtor to discharge part of the debt by allocating surplus money from the sale of another property. When the bank issued summons for the outstanding amount, the debtor claimed that the debt had prescribed. However, the court found, based on the above facts, that the debtor had tacitly acknowledged the debt, which interrupted the running of prescription. The debtor’s argument on prescription therefore failed.
