Possible Prescribed Debt: Proof to Collect

Key takeaways

• The familiar three-year period is not the rule for every debt.
• The correct starting date may depend on when the debt was due and on legally relevant knowledge.
• A payment, message or settlement discussion must be assessed in its timing and context; do not assume it did or did not interrupt prescription.
• A demand letter and judicial process are not the same event.

First identify the debt

Start with the legal source of the amount rather than the collector’s current description. Find the credit agreement, loan, invoice, lease, acknowledgment of debt, damages claim, tax assessment, court order or other document said to create the obligation. Record the original creditor, current claimant, debtor, account number, principal amount and any alleged cession or transfer.

This matters because the Prescription Act provides different periods for different categories. Section 11 includes a 30-year period for specified debts such as a judgment debt and a debt secured by mortgage bond, a 15-year period for certain debts owed to the State, a six-year period for specified instruments and notarial contracts, and generally three years for other debts unless another Act provides otherwise. The category cannot safely be selected from an account label alone.

Build the due-date chronology

Create a table with one row for each material event and attach the source record to that row. Include:

• the date the agreement was made and its relevant repayment or performance terms;
• each invoice, instalment or contractual due date;
• the alleged default, cancellation, acceleration or maturity date;
• any demand that the claimant says was required before payment became due;
• when the creditor knew the facts giving rise to the debt and the debtor’s identity;
• every payment, credit, reversal and balance adjustment;
• each dispute, admission, settlement proposal or request for more time;
• every summons, return of service, court filing, order and judgment; and
• any fact said to delay completion of prescription.

Section 12 of the Prescription Act links commencement to when the debt is due and contains knowledge rules. The Supreme Court of Appeal’s decision in Trinity Asset Management v Grindstone Investments also shows why a contractual demand term and due date require the agreement and facts, not a general assumption that the last payment or first collection call always starts the clock.

Gather the agreement and account records

Keep the complete signed agreement and amendments, not only a quotation or the page containing the signature. Add terms and conditions that applied at the time, repayment schedules, invoices, statements from the first transaction through the current balance, settlement quotations and notices of cancellation or acceleration.

Reconcile the statements against bank confirmations, debit orders, cash receipts, refunds, insurance proceeds, write-offs and credits. Mark missing months or unexplained balance changes. Separate principal, interest, fees, collection charges and legal costs as far as the documents permit. Do not reconstruct a convenient “last payment date” from memory when bank or account records can show the transaction and allocation.

Preserve possible acknowledgements carefully

Section 14 of the Prescription Act deals with interruption by an express or tacit acknowledgement of liability, after which prescription may run afresh as the section provides. Preserve the exact wording, date, sender, recipient and surrounding conversation for every email, message, call note, payment proposal, signed balance confirmation or payment arrangement that could be relevant.

Do not decide from a single sentence that liability was acknowledged. The legal effect is fact-specific. The Supreme Court of Appeal’s decision in KLD Residential v Empire Earth Investments illustrates that even communications made during settlement negotiations can require careful analysis. Keep the complete negotiation, including any dispute or qualification, rather than extracting only the phrase relied on by one side.

Timing is also critical. An event said to interrupt prescription before completion is not the same as money paid after the debt has already been extinguished by prescription. Section 10(3) addresses payment after extinguishment, while section 126B of the National Credit Act contains additional rules for prescribed debt under a credit agreement to which that Act applies. Do not assume every old debt is a National Credit Act debt or that every payment “reactivates” it.

Separate demands from judicial process

Keep every demand, section 129 notice where applicable, summons, particulars of claim, return of service, notice of motion, court order and judgment. Record the court, case number, parties, issue date, service date, person and address served, outcome and any later enforcement step.

Section 15 of the Prescription Act deals with interruption through service of process by which payment is claimed. Its operation can depend on valid service and what happens to the proceedings afterwards. An informal demand or collection call is not, merely because it requests payment, the same as service of judicial process.

If the creditor says there is a judgment, obtain the order and reliable case details. A judgment debt falls into a different prescription category from an ordinary account. If you dispute service or only discovered the case later, preserve address history, travel or employment records and any evidence showing where you were when service was alleged.

Record facts that may delay completion

Section 13 lists circumstances in which completion of prescription may be delayed. Do not reduce that section to a generic checklist. Instead, record potentially relevant facts and their dates, such as legal incapacity, administration of an estate, an arbitration process, or the parties’ relationship or location where these may fall within the statutory wording. A lawyer can then test the facts against the applicable provision.

Keep proof of the creditor’s knowledge too. Section 12 does not allow a debtor to assume prescription started merely because the underlying event happened years earlier, and it does not permit a creditor to rely on avoidable lack of knowledge without analysis. Preserve when identifying information, an address, report, invoice, expert result or other material fact became available.

If the National Credit Act may apply

Section 126B of the National Credit Act applies to debt under a credit agreement to which that Act applies. It prohibits selling prescribed debt and addresses continued collection or reactivation where prescription is raised as a defence or would reasonably have been raised had the consumer known of it.

Keep the credit agreement, provider registration details, statements, collection history, credit-bureau entries and any written notice in which prescription was raised. If a participating bank or credit provider does not resolve the complaint, the National Financial Ombud Scheme publishes its current Banking and Credit Division route. A complaint does not automatically replace a required court response or determine prescription in every dispute.

Prepare a review pack

Put the records in this order:

1. A one-page issue summary stating who claims what and why prescription may matter.
2. The event table with source-file references.
3. The agreement, terms, amendments and any cession documents.
4. Complete statements and proof of payments or credits.
5. Demands, notices, calls, messages and settlement communications.
6. Summonses, service records, court filings, orders and judgments.
7. Proof relevant to knowledge, delay, identity or address history.
8. A list of missing documents and disputed dates.

Do not alter original messages or annotate the only copy of a document. Export electronic records with available headers and attachments, store working notes separately, and record how each item was obtained.

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