The Free State High Court confirms in J.H.V v Centlec (SOC) Ltd and Others that an acknowledgement of liability by the debtor interrupts prescription, even if the acknowledgement is not made directly to the creditor.

The applicant approached the High Court for a declaratory order that he was not indebted to Centlec SOC Ltd, the municipal electricity provider for various areas in the Free State. The applicant argued that the debt had prescribed under the Prescription Act, 1969, as he had not made payments nor acknowledged liability since the supply was disconnected in 2016. Centlec countered this by pointing to an agreement made in 2020 between the applicant and third parties which included a clause that Centlec argued amounted to an acknowledgement of the debt.

As part of the settlement of a broader dispute, the facts of which are not relevant to the matter at hand, the applicant had entered a memorandum of understanding with third parties, which stated:

6.7      [the applicant] hereby irrevocably confirm and agree that they shall, before close of business on 31 December 2020, fix, alternatively resolve issues in respect of, in the further alternative pay the following damages and/or accounts in respect of the property:

6.7.1.    Outstanding account of Centlec, with account number 500[…]”

The court determined that this clause did amount to an acknowledgement of debt as it explicitly mentioned the intention to pay the outstanding account to Centlec. This, the court held, was sufficient to interrupt prescription according to section 14(1) of the Prescription Act, which states that prescription is “interrupted by an express or tacit acknowledgement of liability by the debtor”.

The court rejected the applicant’s argument that the acknowledgement needed to be made directly to Centlec to be valid, noting that the Prescription Act does not specify to whom the acknowledgement must be made. The court referred to Lieberman v Santam Ltd, where it was held that an agreement can create a new contractual obligation that acknowledges debt and thereby interrupts prescription. The court elaborated that an agreement creating a new obligation for the debtor can serve as an acknowledgement of an existing debt, thereby interrupting prescription, highlighting the flexibility within contract law to recognise new agreements as continuations or acknowledgements of previous obligations, if they clearly articulate the debtor’s intention to fulfil those obligations.

Accordingly, the court found that the debt was still enforceable against the applicant. The application was dismissed, and the counterclaim by Centlec was upheld.