SCHOOL FEES: STATUTORY DEBT AND PRESCRIPTION
School fees DO prescribe after 3 years
School fees do NOT have statutory status
What is a statutory debt?
A statutory debt is a debt where both the liability to pay and the specific amount are established by law.
- SECTION 11 OF THE PRESCRIPTION ACT
Section 11 of the Prescription Act 68 of 1969 makes provision for the time periods of when debt will prescribe.
We refer to Section 11 which states the following:
- Periods of prescription of debts
The periods of prescription of debts shall be the following—
(a) 30 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) …..
(c) …..
(d) save where an Act of Parliament provides otherwise, three years in respect of any other debt.
It’s been incorrectly stated by some parties that school fees are a statutory debt and therefor it is seen as a tax, and any debt imposed in terms of any tax only prescribe after 30 years.
Even though provision is made for school fees in the South African Schools Act 84 of 1996, it does not amount to a tax as referred to in Section 11(a)(iii) of the Prescription Act.
School fees amount to “any other debt” which falls under Section 11(d) of the Prescription Act and therefore school fees prescribe after 3 years.
- SECTION 39 OF THE SCHOOL’S ACT
The levying of school fees are governed by Section 39 of the School’s Act, and states the following:
- School fees at public schools.—
- Subject to this Act, school fees may be determined and charged at a public school only if a resolution to do so has been adopted by a majority of parents attending the meeting referred to in section 38 (2).
- ……
As is clear from Section 39, schools MAY determine and charge school fees if a resolution to do so has been adopted. The levying of school fees are not compulsory (it must be noted that there are over 30 000 public schools in South Africa and only 10% thereof are fee paying schools). The amount payable in respect of school fees are not decided by the State and payment of school fees are also not made to the State. As such school fees cannot possibly be a statutory debt.
- CASE LAW: Eskom v Bonjanala Platinum District Municipality and Another
There are parties who are of the opinion that school fees amount to a tax as per Section 11(a)(iii) of the Prescription Act and therefore only prescribe after 30 years.
In South Africa the courts have defined tax very narrowly and, in the case of Eskom v Bonjanala Platinum District Municipality and Another (560/2003) the Supreme Court of Appeal held that municipal service levies were not a tax as defined in terms of Section 11(a)(iii).
If municipal service levies, which are paid to the State, is not a tax, it is impossible to even consider that school fees, which are not paid to the State, can be a tax as defined in Section 11(a)(iii).
Therefore, the prescription period for school fees are 3 years as set out in Section 11(d).
- DEPARTMENT OF BASIC EDUCATION
We have also discussed the issue of prescription of school fees with the Department of Basic Education in which they confirm that school fees prescribe after 3 years.
- LAW JOURNAL: Potchefstroom Electronic Law Journal
In an article that was published in the Potchefstroom Electronic Law Journal (2011 Vol 14 No. 6), page 53 it elaborates on the time period applicable to prescription of school fees.
“Schools should be reminded that a debt for school fees would be extinguished after a period of three (3) years unless the prescription period is interrupted. The three years commence as soon as the debt is due. With school fees this would usually be the enrolment date or the date set in the contract. If the claim is based on negotiorum gestio or unjustified enrichment, the prescription commences after the administration of the affairs has been completed or the service was supplied”.
- INTERRUPTION OF PRESCRIPTION
There are 3 manners in which prescription can be interrupted:
- Payment made by the debtor:
As the School’s Act is silent on the method of payment and allocation of payments, common law principles should be used to ensure that payments are allocated in a logical way that makes financial sense. In terms of common law principles, such as International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Practice (GAAP), payments made should be allocated to the older debt first.
By allocating payments to the older debt first, school’s do not run the risk of older debt prescribing. This will have the positive financial impact that older debt are settled and schools may still continue to collect newer debt which does not run the risk of prescribing.
- Service of the summons on the debtor:
In order to proceed with the issuing and service of summons, and to interrupt prescription, it is imperative that schools comply with the School’s Act. Schools are to ensure that processes, such as the delivery of Section 41 letters, are done correctly and that the Annexure A check list is completed and signed by both parents and the principal on admission to the school.
Should further legal action be required and judgment granted, this judgment will be valid against the name of the debtor for a period of 30 years.
- Signing of an Acknowledgement of Debt:
Even though signature of an Acknowledgement of Debt is a method of interrupting prescription the Courts are reluctant to grant judgments based on Acknowledgement of Debts without school’s having taken further legal steps, such as issuing and service of summons.
Once prescription has been interrupted the collection process can continue for a further 3 years.
CONCLUSION
Schools should be cautious not to confuse the time period of prescription with the time period for which judgments are valid and should question those who advise otherwise.
It is therefore clear that School fees are not a statutory debt and that school fees prescribe after 3 years.
Legal Update from the Desk of Simone Porter LLB (UJ) and Monica Zwecker Bcom Law (UP), LLB (UP) CeeBee Managing Director and In-House Attorney
