20 October 2011

Prescribed debt: The clock is ticking

In terms of the Prescription Act, 68 of 1969 (the Act), a debt is extinguished (prescribes) after the relevant period provided for by law for that debt, lapses.

Debts secured by mortgage bonds, judgment debts and tax-related debts take 30 years to prescribe. Debts owed to the state prescribe after 15 years, and bills of exchange prescribe after six years. All other debts are governed by a three year prescriptive period.

The question arises: which period of prescription, if any, applies to an arbitration award?

In PSA & another v CCMA & others (2008) 29 ILJ 1546 (LC), the Labour Court (the Court) was concerned with an application to make an arbitration award an order of court. In opposing the application, the respondents alleged that the arbitration award had prescribed. Mohlahlehi J held that arbitration awards are considered "debts" in terms of the Act, and prescribe after three years. He referred to Mpanzama v Fidelity Guards Holdings (Pty) Ltd [2000] 12 BLLR 1459 (LC) where the Court confirmed that the provisions of the Act apply to the provisions of the Labour Relations Act, 66 of 1995 (LRA).

In CEPPAWU & another v Le-Sel Research (Pty) Ltd [2009] 5 BLLR 421 (LC), it was held that if action to enforce an arbitration award is not instituted within three years of the debt arising, the Court lacks the necessary jurisdiction to entertain the claim.

The prescription period may be interrupted by service of any process. The word "process" is defined in section 15(6) as:

". . . a petition, a notice of motion, a rule nisi, a pleading in reconvention a third party notice referred to any rule of the court, and any document whereby legal proceedings are commenced."

Once an award has been issued, the successful employee may enforce it in terms of either sections 143 or section 158(1)(c) of the LRA. In National Union of Metal Workers of South Africa (NUMSA) v Espach Engineering (2010) 31 ILJ 987 (LC), it was held that these processes fall within the ambit of section 15(6) and are available to the successful employee even though the employer may have filed a review application. In Police & Prison Civil Rights Union on behalf of Sifuba v Commissioner of the SA Police Service (2009) 30 ILJ 1309 (LC), it was held that the filing of a review does not interrupt prescription as envisaged by section 15(6) of the Act.

The practical implication is that an arbitration award may prescribe after three years and the employee in whose favour the award has been issued, would no longer be entitled to enforce it. This is likely to impact on review applications instituted by employers where the successful employees have not sought to enforce the award.

Notably, a court cannot take into account prescription on its own, and the issue must be raised in the pleadings.

Melanie Hart

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