PRESCRIPTION OF DEBTS OWED TO THE STATE.

The issue as to the circumstances under which and the time within which claims prescribe by Law, has not only given legal practitioners many anxious moments, but has been a topic which has often been brought to the attention of our Courts, for determination.

For the most part the circumstances under which and the time limit within which claims prescribe are set out in the Prescription Act 18 of 1969 as amended. The topic of this article is a consideration as to the determination as to what constitutes the State against whom a Claim arises.

Section 11 of the Prescription Act reads as follows:-

"11Periods of prescription of debts

The periods of prescription of debts shall be the following:

(a) thirty years in respect of -

(i) any debt secured by mortgage bond;

(ii) any judgment debt;

(iii) any debt in respect of any taxation imposed or levied by or under any law;

(iv) any debt owed to the State in respect of any share of the profits, royalties or any similar consideration payable in respect of the right to mine minerals or other substances;

(b) fifteen years in respect of any debt owed to the State and arising out of an advance or loan of money or a sale or lease of land by the State to the debtor, unless a longer period applies in respect of the debt in question in terms of paragraph (a);

(c) six years in respect of a debt arising from a bill of exchange or other negotiable instrument or from a notarial contract, unless a longer period applies in respect of the debt in question in terms of paragraph (a) or (b);

(d) save where an Act of Parliament provides otherwise, three years in respect of any other debt.”

The question as to whether an entity known as the “The Isibaya Fund” is a State owned Entity was considered by the Supreme Court of Appeal in the case of

The Isibaya Fund v Visser & another (20278/14) [2015] ZASCA 183 (27 November 2015)

The Isibaya Private Equity Fund (the Fund), a fund governed by the provisions and in accordance with the Public Investment Corporation Act 23 of 2004 (“PIC Act”).

The Fund instituted an Action against individual directors of a Company for a debt owed to it by the Company but which the Find wanted to hold such directors jointly and severally liable for the debt of the Company on account of the Directors’ reckless trading of the Company.

The Directors filed a Special Plea to the effect that as the debit arose more than three years before the action was instituted it the claim of the Fund prescribed in accordance with the provisions of Section 11(d) of the Prescription Act quoted above. The Trial Court upheld the Special Plea as a result of which an Appeal by the Fund was brought before the Supreme Court of Appeal.

In the judgment written by Shongwe JA with whom the remainder of the Bench comprising of Tshiqi, Majiedt, Willis and Swain JJA concurred, the Learned Judge of Appeal found that:-

1. The main object of the PIC Act as stated in Section 4 thereof, is to be a financial service provider in terms of the Financial Advisory and Intermediary Services Act 37 of 2000;

2. The Fund is a juristic person;

3. The Fund is an institution falling outside the public service. In this context that it is controlled by the board appointed by the Minister responsible for finance;

4. The board may establish such committees, consisting of directors, as it considers necessary in terms of Section 7 of the PIC Act);

5. The board controls the business of the corporation in terms of Section 8 of the PIC Act);

6. The Board may obtain authorisation as a financial services provider in terms of Section 9 of the PIC Act;

7. The Board may (as the Court found it did in this case) invest a deposit in the Fund (in terms of Section 10 of the PIC Act).

Shongwe JA then had regard to the Supreme Court Appeal Judgment of

Holeni v Land and Agricultural Development Bank of South Africa 2009 (4) SA 437 (SCA)


In this case at paragraph 11 of the Judgment Navsa JA said:

"… [the Land and Agricultural Development Bank Act 15 of 2002] makes it clear that the bank is a separate juristic person acting in its own name and right … distinct from, although not entirely independent of, Government."

Applying the above stated principle Shongwe JA held that the Fund could not be regarded as being the State and was thus unable to succeed in its contention that the prescription period of its claim against the Directors was fifteen years in terms of Section 11(b) of the Prescription Act and as the Action was not brought within three years from the time it arose in terms of Section 11(d) of the Prescription Act it had prescribed and the Directors’ Special Plea was upheld.

I wish to conclude this Article by remarking that the provisions of the Prescription Act ae not exhaustive of all the provisions in our law governing Prescription of Claims. Consequently it is manifestly plain that a prudent legal practitioner, whenever he or she contemplates instituting an Action on behalf of a Client, or whenever he or she contemplates defending an Action instituted against a Client, will consider and advise the Client on the issue as to whether the Claim has, or is likely to, become prescribed and in the case when he or she is contemplating instituting an action on behalf of his Client takes appropriate steps to ensure that the claim does not become prescribed whilst under his stewardship.


DATED AT JOHANNES BURG ON THIS 2ND JANUARY 2015

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LESLIE KOBRIN
ASSOCIATE ATTORNEY AT
BOVE ATTORNEYS

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