Prescription: Absa Bank v Keet (817/13) [2015] ZASCA 81

In common parlance, the prescription seems to be the first line of defense when a debt is in issue. In context, the word has a sacrosanct meaning and is not easily understood or applied. Confusion and vexed judgments have arisen in recent times due to the intricacies of prescription, the scope of which is beyond this article which will confine itself to the concept of ownership in relation to prescription. The latter, as in colloquial language, means ownership as we know it to make matters easier. This article is thus premised on an example and facts of the aforesaid case to make the matter easier to grasp.

Suppose, for all intents and purposes, you have seen that shiny motor vehicle on the dealership floor. Your inner urge gets the better of you, enough to propel you towards a salesperson and strike up a conversation. You don’t stop there, you go further and apply for finance and your loan application is approved by a bank to buy the car with all its bells and whistles. You are thus invited a few days later to come sign the “paperwork” and drive away (insurance etc. is in place) and you oblige. You drive away in your spanking new wheels, you are even greeting neighbors with their first names and surname, long enough to be seen. Legally speaking, what just happened?

Legally, the following transactions have taken place:

  1. the dealership has agreed to sell their vehicle to the financier (your bank) and the dealership will receive full value for the car;
  2. the financier has agreed to the price of purchase and the dealer is generally paid out in full a few days later after you have driven out with your new vehicle. The contract in point 1 and 2 disappear on full payment of the contract value and features no more after that. So, ownership passes to the financier upon registration of the vehicle;
  3. the financier has therefore simultaneously agreed to assign a right of use of the vehicle to you for 60 (sixty) months, that you must pay a specified amount every month thereafter at a certain interest rate for this unrestricted use of their car. They are NOT telling you where to go and where not to go, you have the freedom to use the vehicle as you wish, as long as you keep to the scheduled payments every month. Point 3 is synonymous with Hire Purchase Agreements, if you do not pay, they repossess the goods;
  4. you have simultaneously agreed to the terms and conditions in point 3, remember those many papers you signed?
  5. lastly, the fnancier agrees to transfer ownership to you once you have kept to the scheduled payments and have settled your debt towards them.

Prescription is one of the oldest methods of acquiring ownership, with other words a method of acquiring or extinguishing rights through the inaction of the legal owner. For example, if you settled on a piece of land openly and without interruption for protracted periods of time, you own the piece of land. The latter must have evolved through the passage of time, it is now codified at 30 years according to the Prescription Act 68 of 1969. For debts, the inaction of the legal owner will vests their rights onto the possessor after 3 years.

The true owner has a remedy called a rei vindicatio which they may used to claim back their possessions. This remedy is still in use. The legislature has codified prescription in the Prescription Act of 68 of 1969 and divided the act in two: firstly it deals with immovable property in section 1 and secondly it deals with debt in section 2. In terms of section 2, if I owed money for protracted periods of time; the debt falls away due to prescription – the usual period being 3 years after the debt became due and payable.

Suppose that you did not keep to the schedule and failed to pay for a while, what would happen? As we know, the financier would send the repo-man, as commonly known, to collect the car to sell in order to recover their debt. Suppose, through drunken driving you collided with a tree and the insurer refused to replace the vehicle or repair it, what happens then? You are held liable to pay for the vehicle you do no longer derive a benefit from. At the heart of it, if you are an owner, you possess certain rights like a right to dispose of the asset etc. In our example, you possess ONLY a right of use (usus), you do not possess such rights as those of an owner.  Correctly so, but in Absa Bank v Keet (817/13) [2015] ZASCA 81 something interesting happened.

Briefly, Andre Keet bought a tractor that he failed to pay for after some time. Absa Bank took about 7 years to claim the tractor back and when that happened, Mr. Keet opposed the proceedings citing that the debt had prescribed. The initial court judge agreed that Absa Bank took too long to claim their tractor and that their claim against Keet in fact prescribed. Absa sought to claim the tractor not the debt repayment. (If you convoluted the issues, you would merge ownership into debt and prescribe the matter.) Absa appealed the decision and the Supreme Court of Appeal correctly held that there were two issues involved, a debt and a tractor. Ownership towards the tractor cannot prescribe to Mr. Keet and that it must be returned. The court did not venture into whether a debt had prescribed, it was immaterial since a debt was not in issue.

Imagine if after 3 years, ownership vested in different hand every time if the owner did not make a claim, would that not leave a legal uncertainty? What about commercial deals, imagine the chaos. Perhaps we would be forced to buy things cash and not on higher purchase, even if things were to be bought cash; the economy of South Africa hinges a great deal on debt, what would happen there? It is quiet important to have these matters settled, despite the noise and confusion; legal certainty is key in any society and I am glad in the aforementioned case, the matter seems to be settled.

By Phelan Selibi
phelan@dyason.co.za