Often loan agreements provide that a loan amount will be due and repayable upon written demand by the lender, alternatively within ‘n fixed period from when such written demand is delivered.
In Trinity Asset Management (Pty) Ltd v Grindstone Investments 132 (Pty) Ltd 2018 (1) SA 94 (CC), the Constitutional Court, by majority decision, recently found that a claim based on a loan, advanced by Trinity to Grindstone, had prescribed.
Trinity entered into a loan agreement with Grindstone on 1 September 2007, in terms of which Trinity advanced a loan to Grindstone in three tranches during February 2008. Trinity made written demand to Grindstone towards the end of 2013, and failing payment by Grindstone, applied to the High Court during July 2014, seeking an order for the provisional liquidation of Grindstone. Grindstone’s reply to the provisional liquidation application, was that the claim for repayment had prescribed due to (more than) 3 (three) years having lapsed since the loan was advanced to it. The High Court, Supreme Court of Appeal and the Constitutional Court found that the claim for repayment had prescribed (i.e. that prescription commenced running when the loan was advanced). Trinity was left with no recourse.
To avoid facing the same fate as Trinity, and to defer the running of prescription until such time that the loan amount actually becomes due and repayable (albeit after 3 [three] years of the loan being advanced), loan agreements should always contain clear and definitive repayment terms insofar as the amount due and repayable, and the time of repayment thereof, is concerned.