Section 14(1) of the 1969 Prescription Act states that the running of extinctive prescription is interrupted by the debtor’s express or tacit acknowledgement of liability. The question that arose for consideration in Viljoen v Centlec (SOC) Ltd and others 2024 JDT 0217 (FB) (https://app.jutastatevolve.co.za/preview/1___y2024JDRn0217) is whether such interruption can occur after the prescription period has lapsed.

The applicant, a farmer, was indebted the first respondent, an electricity distributor wholly owned by the second respondent, the municipality. The disputed debt arose in September 2016. The distributor did not institute any action against the applicant for the recovery of the debt within the prescribed three-year period.

In August 2020, the applicant concluded a written memorandum of understanding with the municipality and agreed to pay the outstanding account to the distributor, as per a clearance certificate issued on 10 December 2020.

The applicant sought an order declaring that the debt, which arose on 1 September 2016, had prescribed and that he was therefore no longer indebted to the distributor for the outstanding electricity fees. The distributor, on the other hand, relied on the 2020 agreement between the applicant and the municipality as proof of acknowledgment of the debt that arose in 2016.

The applicant argued that, since the distributor was not a party to the 2020 agreement, Section 14(1) of the Prescription Act was not applicable. The question that the court set out to answer was therefore whether the 2020 agreement between the applicant and the municipality amounted to an acknowledgement of debt to the distributor.

The court found that s 14(1) does not state to whom an acknowledgment must be made to interrupt prescription – simply that such an acknowledgment must be made by the debtor. The court found no binding authority to state that an acknowledgment must be made to the creditor directly and held that the person to whom an acknowledgment is made is not a determining factor for the validity of such an acknowledgement.

The court therefore found that, despite the distributor not being a party to the 2020 agreement, said agreement amounted to acknowledgment of the applicant’s indebtedness to the distributor in terms of s 14(1). The court subsequently dismissed the application for a declaratory order of prescription with costs.

The judgment gives rise to more questions than answers.

As discussed above, the court’s primary concern was whether the distributor could rely on s 14(1) despite not being party to the 2020 agreement. What the court failed to address, however, is why s 14(1) is applicable at all.

It is common cause that the prescription period for the electricity debt had passed in 2019, before the 2020 agreement was entered into. The prescription period for electricity bills is three years.

Here, however, the court applied s 14(1) of the Prescription Act without considering whether prescription can be interrupted after a matter has already prescribed.

In Miracle Mile Investments 67 (Pty) Ltd and Another v Standard Bank of SA Ltd
2016 (2) SA 153 (GJ), the facts were similar to the dispute at hand. Here, the applicant claimed that their debt to the bank had prescribed by 2011. The applicant entered sequestration proceedings with another bank in 2012, wherein it acknowledged liability for that same debt. The respondent argued that this acknowledgment amounted to an interruption of the running of prescription under s 14(1) of the Prescription Act.

That court held that an acknowledgement of debt must pertain to an existing liability, not a liability which existed in the past. In other words, since the acknowledgment of debt was made after the prescription period lapsed, the acknowledgment could not interrupt the running of prescription in terms of s 14(1). The appeal court did not criticise the high court’s reasoning as it pertains to the ineffective acknowledgment of debt after prescription.

The role of the 2020 agreement was also not fully examined by the Viljoen v Centlec judgment.

The better view would be that the acknowledgement of the existence of a debt to a third party may trigger section 14(1), but not if the debt has already prescribed.

This blog post was authored by Brigitte Geyer, Candidate Attorney.