July 17 2012
'Extinctive prescription' refers to the extinction of a right or claim due to a time lapse. The notion of extinctive prescription encourages claimants to pursue claims with due expedition and in a manner that does not unduly prejudice a defendant in its defence.
In South Africa, extinctive prescription is governed by the Prescription Act (68/1969), which came into force on December 1 1970. As a general proposition, the act provides that claims expire after a period of three years, calculated from the date on which the debt became 'due'. It is an established principle of South African common law that a debt is said to become due when every fact necessary to sustain a cause of action is apparent.
Of course, parties must look to the contractual arrangement between them as a first port of call in assessing when exactly a cause of action may arise and when a claim or debt may consequently become 'due'. However, in a construction context, where a contractor may have a series of claims proceeding through the contractually contemplated dispute resolution procedure (which, in the ordinary course, is the submission of a claim to an engineer and thereafter a mediator, adjudicator or dispute board before arbitration), the stage at which a claim or debt may become due has been the subject of much conflicting case law.
While perhaps an oversimplification, the courts have traditionally adopted one of two approaches to this issue:
The Supreme Court of Appeal recently issued guidance on this issue. In Group Five Construction (Pty) Ltd v Minister of Water Affairs & Forestry the court alluded to the following prerequisites in determining whether a claim is due:
The court in Group Five required not only the existence of a legal entitlement in the narrow sense (ie, the existence of a claim event for which the employer is responsible and a causal link between the claim event and the loss or expense suffered), but also compliance with the contractually contemplated dispute resolution machinery, which the court held constituted a contractual prerequisite for the enforcement of the claim and formed part of the claimant's cause of action.
The effect of this judgment and of the introduction of the notion of enforceability in assessing when a debt may become due has the effect of delaying the running of prescription until such time as the parties have exhausted the contractually contemplated dispute resolution mechanisms and are free to pursue their claims in court or by way of arbitration (as may have been elected).
Although entirely dependent on the terms of the applicable agreement, prescription would, as a general proposition, commence running from the date of the notice of dissatisfaction with the outcome of the procedural step one prior to court or arbitration, as the case may be, at which stage the parties would be free to pursue court or arbitration proceedings. While soundly reasoned, this judgment makes it difficult for employers to raise the defence of prescription successfully in a construction context, and certainly favours the contractor.
ILO provides online commentaries as specialist Legal Newsletters. Written in collaboration with over 500 of the world's leading experts and covering more than 100 jurisdictions, it delivers individually requested information via email to an influential global audience of law firm partners and international corporate counsel. Please click here to register for the service.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription. Register at www.iloinfo.com.