What is “extinctive prescription” and why is it so important?

In legal proceedings, if a debtor successfully raises the defence of “extinctive prescription”, then the claim against him or her is made permanently unenforceable. This will be the case regardless of whether the claim is legally valid in all respects, or the creditor enforcing the claim has ample or even irrefutable evidence proving his or her claim.

The defence becomes available as a result of a period of time, set out in the law, having passed since the claim came into being. These periods of time are, largely, set out in the Prescription Act.

If a debtor satisfies a claim – for example, repays a debt – despite the fact that the defence of extinctive prescription was available to him or her because of the length of time that had passed since the debt became due, she or he cannot insist on repayment of the money paid. The debtor must raise the defence before satisfying the claim, or will have lost the opportunity. Where the claim is in court, the court is not allowed to raise the matter of prescription of its own accord, thereby potentially depriving a creditor of satisfaction of its claim.

These are the prescription periods set out in the Act:

  • Three years: debts not covered specifically elsewhere in the Act of other legislation;
  • Six years: debts arising from bills of exchange or negotiable instruments (such as cheques or promissory notes), or notarial contracts (with exceptions);
  • Fifteen years: debts to the state arising from sales, leases, loans or advances (with exceptions);
  • Thirty years: debts secured by mortgage bond, debts in respect of which a judgment has been issued, taxation debts (eg income tax, VAT), and debts to the state in respect of profits and royalties.

The prescription period starts to run as soon as the debt becomes legally due. A debt does not become due in law until the creditor is – or ought to be through the exercise of reasonable care – aware of the identity of the debtor and the facts giving rise to the debt. For example, where a person has suffered harm but has not been able to ascertain who caused the harm despite exercising reasonable care, the claim for damages for that harm will not prescribe at once.

Certain events delay the running of prescription, for example the creditor lacking legal competence (due to factors such as youth or a period of mental incapacity).

Prescription can be interrupted by the debtor acknowledging his or her liability, or the creditor serving upon the debtor legal process claiming the debt. If the creditor manages to serve summons on the debtor claiming payment of the debt one day shy of the three year period ending, then the claim will remain valid pending finalisation of the court case.

 

Disputes with Pension Funds

What can a member or former member of a pension fund do to resolve a dispute with the fund, or with their employer about their participation in the fund?

Four main types of disputes arise:
• The fund may exercise its powers improperly, or do something which it is not entitled to do;
• The fund can be poorly administered, causing you prejudice;
• You and the Fund may disagree on an important fact or matter of law;
• Your employer may not be fulfilling its duties where your membership of the Fund is concerned.

The Pension Funds Act sets out the procedure you may follow in order to have your dispute addressed.

First, you are required to send a written complaint to the Fund (or employer, if applicable). You must keep a copy of your complaint as well as your proof that it was sent. They have 30 days in which to respond to your complaint. If they do not respond, or if their response does not resolve the dispute to your satisfaction, you may take the matter to the Pension Funds Adjudicator (PFA).

The PFA has a simple online form which enables you to submit your complaint to them quickly and easily. It is found on their website at http://www.pfa.org.za. You can only submit a complaint to the PFA once you have first complained to the Fund (or employer) and 30 days have elapsed.

The online form helps ensure that you submit all necessary information. In brief, this includes your personal details, the Fund’s details (or employer’s), your dates of joining and leaving the Fund (or employer), your complaint in detail, the outcome you desire, as well as proof that you first complained to the Fund (or employer). Copies of all relevant documents must be supplied.

The PFA may require a written response from the Fund (or employer) and may also investigate the matter further by phoning the parties or engaging in correspondence. A decision will be made in writing and communicated to the parties, and this decision has the force of a judgment of a court. If the PFA rules that the Fund must make a payment to you of money, then this is enforceable via the sheriff of the Court in the same way as a court order.

Fixed term employment contracts – new law!

The Labour Relations Act will soon be amended to change the law on fixed term employment (meaning for example employment “for one month”, “until X returns from maternity leave”, or “until we complete project Y”).

 1. The amended Act will impose new requirements when an employer employs a person on a fixed term contract, and will restrict their right to do so for
 longer than six months in total.
2. An employer must make an offer of fixed term work in writing, and must state in writing the reason for the offer being for a fixed term only.
3. Fixed term employment may only exceed six months in total if the work itself is of a limited or definite duration, or if the employer can show any other good reason (the amended Act gives a number of examples which will be accepted as good reasons). Failing this, the employment will be deemed to be indefinite, regardless of what the contract might say, and the employer will have to retain the employee in employment or follow fair procedures to dismiss the employee for a fair reason.
4. Where fixed term employment beyond a total of 24 months is justified (instead of indefinite employment), the employee will be entitled to severance pay from the employer, similar to a retrenched employee, when the work comes to an end – unless the employer offers the employee another job, or secures one for him or her.5. The amended provisions will not apply where the employee’s annual salary is over R172 000,00, or where the employer is a small one with fewer than 10 employees, or where the employer is a new, sole business of less than two years’ standing with fewer than 50 employees. (The last provision is intended to prevent employers from circumventing the law by artificially slicing up businesses or reintroducing old businesses in new forms.)

The new provisions will hopefully put an end to abusive practices whereby employers have denied staff job security for no good reason, and avoided meeting their legal obligations to dismiss employees fairly. The legislature has sought to strike a balance, however, by allowing short-term flexibility and by making exceptions for small and new businesses and high-earning employees.

This is not the only major development on the cards in employment law – more updates still to come with deal with other changes in the pipeline affecting both employees and employers.