Bankorp, Volkskas and Absa: Prescription of Debt Owed to the State
I fondly remember the prestige and pride that engulfed me as I successfully opened my savings, cheque and credit card accounts with Volkskas in 1995, or was it 1997? Little did I know that my pride then was a product of my oblivion as Volkskas existed primarily to further Afrikaner empowerment – while I may have passed my matric Afrikaans exceptionally, I was nowhere near being an Afrikaner.
These nostalgic thoughts involuntarily resurfaced again this week with the release of the report by the Public protector, Busisiwe Mkhwebane on the failure of the post-apartheid government to recover more than R1 billion (R1.125 billion to be precise) from Absa for the contentious lifeboats/loans thrown to Bankorp during the Apartheid era by the South African Reserve bank in order to rescue Bankorp from financial collapse. These illegal bailouts – both Former Judge Willem Heath and Judge Dennis Davis investigated the nature and tenor of the bailouts and found them to be illegal in 1999 and 2000 respectively – by the Reserve Bank covers a period from 1985 to 1992. But why must the value of the bailouts be recovered from Absa and not Bankorp, you ask? Because Volkskas had bought Bankorp and then later metamorphosed into Absa.
While the report of the Public protector raises many questions, many of which are legal, including the non-retrospective applicability of the law, I will look at the the report primarily through the prism of the Prescription Act 68 of 1969, section 11 of which is reproduced hereunder:
“11 Periods of prescription of debts:
The periods of prescription of debts shall be the following:
(a) thirty years in respect of- (i) any debt secured by mortgage bond; (ii) any judgment debt; (iii) any debt in respect of any taxation imposed or levied by or under any law; (iv) any debt owed to the State in respect of any share of the profits, royalties or any similar consideration payable in respect of the right to mine minerals or other substances;
(b) fifteen years in respect of any debt owed to the State and arising out of an advance or loan of money or a sale or lease of land by the State to the debtor, unless a longer period applies in respect of the debt in question in terms of paragraph (a);
(c) six years in respect of a debt arising from a bill of exchange or other negotiable instrument or from a notarial contract, unless a longer period applies in respect of the debt in question in terms of paragraph (a) or (b);
(d) save where an Act of Parliament provides otherwise, three years in respect of any other debt.”
It cannot be gainsaid that the loans extended to Bankorp under discussion gave rise to a debt owed to the South African fiscus, and by necessary implication, the State. Equally, it must be emphasised that, for purposes of debts, save where an Act of Parliament provides otherwise, the Prescription Act shall apply. One here thinks of the Road Accident Fund Act where minors, persons under curatorship and those with mental disabilities are involved; the Apportionment of Damages Act which makes provision for prescription to run twelve months after judgment where the wrongdoers are jointly and severally liable; the Institution of Legal Proceedings Against Certain Organs Of The State Act; and the Compensation for Occupational Injuries Act which provides that prescription begins to run twelve months after the accident.
From the above, and while it may be laudable that those who benefited nefariously under apartheid as Bankorp / Absa did, should “pay back the money”, one of the many defences (to be more precise, a point in limine) Absa may raise, is one of prescription of the debt. This point takes into account that a period of 15 years as laid down by the Act has already expired from when the debt became due.
Unless the State (or the Public Protector’s report) can rely on any of the provisions under section 12 of the Act, the debt under discussion will for all intends and purposes have prescribed. This will be the case under section 12 if the debtor wilfully prevents the creditor from coming to know of the existence of the debt, prescription shall not commence to run until the creditor becomes aware of the existence of the debt;
A debt shall not be deemed to be due until the creditor has knowledge of the identity of the debtor and of the facts from which the debt arises: Provided that a creditor shall be deemed to have such knowledge if he could have acquired it by exercising reasonable care.
Author: Frank Setati