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December 07, 2019

Life insurance paid to trustee of insolvent estate and not to intended beneficiary



Mr Wentzel took out a life insurance policy with Discovery Life Limited (Discovery) insuring the life of his wife, whom he was married to in community of property in 2007, in terms of which he appointed himself as the beneficiary of the policy. The same policy also insured his life and appointed his wife as beneficiary in the event of his death.
Their joint estate was sequestrated in 2012.
Mrs Wentzel died in 2017 and Mr Wentzel claimed the proceeds from Discovery as the beneficiary of the policy.
Discovery informed Mr Wentzel that the payment of the proceeds would be made to the trustees of the insolvent estate. He approached the Pretoria High Court in Wentzel v Discovery Life Limited and Others to object and claimed that the administration of the insolvent estate had long since been finalised.
The court had to decide whether the payment of a life insurance policy by an insurance provider to a nominated beneficiary, being an unrehabilitated insolvent, would vest in the beneficiary or the trustees of the insolvent estate.
The court found that the estate of the insolvent remained vested in the trustees until such time that the insolvent was either re-vested with the estate, pursuant to a composition or his rehabilitation, neither of which had occurred. Accordingly, it directed that the insurance proceeds had to be paid directly to the trustees of the insolvent estate.
The moral of this tale is that the Wentzels should have made the beneficiary of the Discovery policy a trust and not themselves. Living Trust-centered estate plans provide superior asset protection.


November 16, 2019

The Requirements for a Universal Partnership




In South African law, there is no such thing as a common-law marriage, no matter how long a couple may live together. This is a common misunderstanding.

A widely-used definition describes “domestic partners” as “two adults who share an emotional, physical and financial relationship like that of a married couple but who either choose not to marry or cannot legally marry. They share a mutual obligation of support for the necessities of life.”

Cohabiting couples do not have the same automatic rights as married couples under the law. If parties live together but don’t conclude any form of agreement regulating their respective legal rights and obligations, on dissolution of the cohabitation, a party that feels he or she is entitled to something from the other party (who disagrees), must go to court, at some expense, to prove that entitlement. To do so, the party must prove they were in a ‘Universal Partnership’, so that one party is entitled to certain property and assets of the other party, on separation.

The requirements for a Universal Partnership were canvassed at length in Le Roux v Jakovljevic (14-05429) 2019 ZAGPJHC 322 (5 September 2019)

The Plaintiff sought a declaratory order that a universal partnership existed between the parties. The Defendant denied the existence of a partnership, universal or otherwise.

Having regard to all the facts and circumstances of this case the court concluded that was more probable than not that a tacit agreement [universal partnership] had been reached. Their partnership enterprise included both the business and their family life. The plaintiff’s impression as to the core of their relationship was borne out by the conduct of the parties.

“Where a court finds it impossible, impracticable or inequitable to physically divide a particular asset between the parties or to cause it to be auctioned and to have the proceeds divided between them it can place a valuation on that asset with due regard to the particular circumstances concerning its value at date of dissolution of the partnership. The court may then award the assets to a partner and order him to pay the other her share”.

This was the court’s analysis:

In Paixao v Road Accident Fund2 Cachalia JA held that:

“Proving the existence of a life partnership entails more than showing that the parties cohabited and jointly contributed to the upkeep of the common home. It entails, in my view, demonstrating that the partnership was akin to and had similar characteristics – particularly a reciprocal duty of support - to a marriage.”
[17] The requirements for the existence of a universal partnership are summarised in the matter of Pezutto v Dreyer and others 3 which was also confirmed in Butters v Mncora4 at par 17:

“Our courts have accepted Pothier’s formulation of such essentiala as a correct statement of the law. (Joubert v Tarry & Co 1915 TPD 277 at 280 -1; Bester v Van Niekerk 1960 (2) SA 779 (A) at 783H – 784A; Purdon v Muller 1961 (2) SA 211 (A) at 218B – D). The three essentials are (1) that each of the partners bring something into the partnership whether it be money, labour or skills; (2) that the business should be carried on for the joint benefit of the parties and (3) that the object should be to make a profit. (Pothier: A Treatise on the contract of Partnership (Tudor’s translation) A fourth requirement mentioned by Pothier is that the contract should be a legitimate one.”
In Butters the history of the different types of partnerships as well as their applicability to cohabitants was discussed. It was held at par [18] that such partnerships can extend beyond commercial undertakings and that:

‘(a) Universal partnerships of all property which extend beyond commercial undertakings were part of Roman Dutch law and still form part of our law.
(b) A universal partnership of all property does not require an express agreement. Like any other contract it can also come into existence by tacit agreement, that is, by an agreement derived from the conduct of the parties.
(c) The requirements for a universal partnership of all property, including universal partnerships between cohabitees, are the same as those formulated by Pothier for partnerships in general.
(d) Where the conduct of the parties is capable of more than one inference, the test for when a tacit universal partnership can be held to exist is whether it is more probable than not that a tacit agreement had been reached. “6 (emphasis provided).

In the majority decision of Butters, it was held at par [19] that:

“Once it is accepted that a partnership enterprise may extend beyond commercial undertakings, logic dictates, in my view, that the contribution of both parties need not be confined to a profit-making entity….It can be accepted that the plaintiff’s contribution to the commercial undertaking conducted by the defendant was insignificant. Yet she spent all her time, effort and energy in promoting the interests of both parties in their communal enterprise by maintaining their common home and raising their children. On the premise that the partnership enterprise between them could notionally include both the commercial undertaking and the non-profit making part of their family life, for which the plaintiff took responsibility, her contribution to that notional partnership enterprise can hardly be denied.”

The Requirements for a tacit agreement
In the minority judgment in Butters, penned by Heher JA with whom Cachalia JA concurred, he summarised the approach to establishing whether a tacit agreement exists, as follows:
‘[34] This appeal is about an alleged tacit agreement. As in all such cases the court searches the evidence for manifestations of conduct by the parties that are unequivocally consistent with consensus on the issue that is the crux of the agreement and, per contram, any indication which cannot be reconciled with it. At the end of the exercise, if the party placing reliance on such an agreement is to succeed, the court must be satisfied, on a conspectus of all the evidence, that it is more probable than not that the parties were in agreement, and that a contract between them came into being in consequence of their agreement. Despite the different formulations of the onus that exist: see the discussion in Joel Melamed and Hurwitz v Cleveland Estates (Pty) Ltd 1984 (3) SA 155 (A) at 164G-165G; Christie’s The Law of Contract in South Africa, 6ed 88-89, this is the essence of the matter.’

ANALYSIS OF THE EVIDENCE

This Court is to approach the factual disputes which exist between the evidence adduced on behalf of the Plaintiff7, and the evidence presented on behalf of the Defendant, by applying the principles enunciated in the decision of Stellenbosch Farmers Winery Group Ltd and Another v Martell et Cie and Others9, Nienaber JA held as follows:

"To come to a conclusion on the disputed issues a court must make findings on (a) the credibility of the various factual witnesses; (b) their reliability; and (c) the probabilities. As to (a), the court's finding on the credibility of a particular witness will depend on its impression about the veracity of the witness. That in turn will depend on a variety of subsidiary factors, not necessarily in order of importance, such as (i) the witness' candour and demeanour in the witness-box, (ii) his bias, latent and blatant, (iii) internal contradictions in his evidence, (iv) external contradictions with

November 09, 2019

Why SME’s need contracts






Just like a person avoids drafting a will (because it’s a concession to mortality), some business owners avoid concluding contracts (with employees, suppliers, freelancers, etc.) because they think this is negative and anticipates problems.

Properly drafted contracts do not create problems -- they solve them. Written agreements are essential for a good working relationships with providers, vendors, partners and clients or customers.

Why do contracts make sense?

1. They provide certainty.
A well-drafted contract clearly sets out each party’s expectations. It helps both parties focus on their business relationship and removes any uncertainty about their respective rights and duties.

2. Contracts outline obligations and remedies.
Parties need to know what their obligations to each other are and what the consequences of failing to perform (breach) may be.  E.g. the contract may state that if one party sues the other and wins, the loser pays all the costs.

3. They provide alternative remedies.

The contract should provide for alternative dispute mechanisms, such as an obligation to first meet to attempt to resolve thorny issues, and that failing, to mediate the dispute or go to arbitration. Usually this avoids lengthy and expensive litigation and may even restore the trust relationship between the disputants.

4. Contracts help you end the business relationship.

The contract sets out when and how either party can terminate the contract (e.g. after a material breach, a specific time period, etc). This creates certainty.

5. Contracts anticipate the unforeseen.

A commonly included clause in business contracts is the “force majeure” or the “act of God” provision. This clause in a contract sets out the parties’ obligations and rights in the event of an unforeseeable event, such as a natural disaster, or any other circumstances beyond their control that makes it unreasonably difficult to perform under the contract.



October 26, 2019

Retirement age – when must I retire?



Eventually, everyone needs to stop working. Some people prefer to retire at an early age while others choose to work for as long as possible. Whatever your preference, you need to know what your rights and options are.

RETIREMENT AGE

The labour legislation does not deal directly with the issue of retirement age. However, it does say that no one may be unfairly discriminated against because of their age. This means that the employer and employee must agree on a retirement age.

There are three possible situations that you could find yourself in:
         Your employment contract requires you to retire at a certain age.
        You have agreed with your employer on a retirement age or there is a company norm.
         There is no mention of retirement in your contract and there is no agreement.

If you sign an employment contract that stipulates a retirement age, then you can legally be required to retire at that age. The organisation won't be required to give you notice.
If the retirement age is not in the contract but is agreed or if there is an organisational norm, then the employer can give you notice requiring you to retire at that age. The notice period will be the same as the notice period for termination of employment set out in your contract of employment.

When would there be deemed to be an organisational norm? There is a general understanding that the "normal" retirement age is 55, 60 or 65 but this understanding is too vague to be useful in specific instances. Indications of the organisation's norm can be found in:
         the rules of a company's provident or pension fund (but this is not definitive)
         company policy.

If there is no mention of a retirement age in your contract and there is no organisational norm, then you can continue to work until you are unable to do your job properly. Your employer can only terminate your contract in accordance with the labour legislation (that is for misconduct, operational requirements or incompetence) and will have to follow the procedures set out in your contract and labour law. The courts have found that it is unfair discrimination for your employer to terminate your employment services just because of your age.

WHAT IF YOU CONTINUE TO WORK AFTER THE RETIREMENT AGE?

There is no legal certainty regarding the rights of an employee who works beyond retirement age. It is thus advisable for the employer and employee to clearly define the terms of employment after the retirement age, for example how long the employee will continue to work for and what notice is required to terminate the employment.


October 12, 2019

Noise - know your rights as a neighbour




Shakespeare said in The Tempest (2:2), “Misery acquaints a man with strange bedfellows.”

When we live side by side in high density complexes it’s inevitable that you will encounter neighbours that are unpleasant and make your life miserable by barking dogs, loud music, arguing and shouting, swearing, banging doors or drilling.

South African law distinguishes between 'Disturbing Noise’ - which is "objective and is defined as a scientifically measurable noise level," and 'Noise Nuisance' - which is a subjective measure and is defined as “any noise that disturbs or impairs or may disturb or impair the convenience or peace of any person."

What rules apply?
Disturbing Noise in an urban environment is governed by municipal by-laws. An example of this kind of noise would be loud music that is played to all hours of the night. Most municipalities have by-laws in place that focus on the level of decibels reached rather than the actual time frame in which noise is made.

Noise Nuisance is more subjective and usually happens over a longer period. It's defined as noise that "disturbs or impairs or may disturb or impair the convenience or peace of any person”. This could include any of the following:

·         dogs that bark incessantly;
·         playing a musical instrument or operating a television set loudly;
·         operating machinery or power tools;
·         shouting and talking loudly;
·         operating a vehicle that causes a noise;
·         driving a vehicle on a public road in a manner that causes a noise nuisance;
·         the discharge of fireworks in a residential area causing noise nuisance.

Noise Nuisance is always illegal and is enforceable, regardless of when it takes place.

Dealing with the problem:

The most practical and cost-effective way to deal with a noise nuisance would be to approach your neighbour directly and politely and tell them of the problem and, together, find a solution.

If you cannot sort out the problem, you should consider appointing a mediator to facilitate a resolution to the dispute.  If a neighbourly approach doesn’t work:

·         The first option is to lay a complaint with your local authority by way of a written statement. Law enforcement officials will investigate the problem to see how serious the situation is. If necessary, they can instruct the reduction of the noise and if the offenders don't comply, they can issue a fine, and in extreme cases even confiscate the equipment causing the noise nuisance.

·         If the above fails and the offence persists, your lawyer would ask your neighbour to desist and if that too fails, will approach the court for an interdict to stop the noise nuisance. The court considers these factors when determining if the actions are unlawful: the type of noise, the degree of persistence, where the noise occurs, the times when the noise is made, and all efforts made to resolve the matter. You must satisfy the judge that the noise has negatively affected your quality of life, your health, your comfort and your general well-being.

If an interdict is issued and the neighbour persists with the unlawful actions, the neighbour may be found guilty of contempt of court, in which case the court may impose a fine or alternatively imprisonment in serious cases.

A balancing act:

The legal principal is that "a man is allowed to have free use and enjoyment of his property, provided that in doing so, he does not infringe on the rights of his neighbour”. Our judges have adopted the view that "some discomfort, inconvenience or annoyance from the use of neighbouring property needs be endured".


September 25, 2019

Some RICA provisions found to be unconstitutional


In the recent Pretoria High Court case of AMABHUNGANE CENTRE FOR INVESTIGATIVE JOURNALISM NPC Judge Sutherland had to consider two discrete questions:- 

·         The first is a challenge to the constitutionality of several provisions of the Regulation of Interception of Communications and Provision of Communication Related Information Act 70 of 2002 (RICA) which statute permits the interception of communications of any person by authorised state officials subject to prescribed conditions.

·         The second question is a challenge to the admitted practice of the State in conducting 'bulk interceptions' of telecommunications traffic on the basis that no lawful authority exists to do so. The. National Strategic Intelligence Act 30 of 1994 (NSI) and the Intelligence Services Control Act 40 of 1994 (ISO) are implicated in the analysis of this issue.
The challenge to RICA’s constitutionality arose when one of the journalists of the investigative journalist group, the amaBhungane Centre for Investigative Journalism, discovered that he was being spied on during South Africa’s infamous “Zuma Spy Tapes” saga.
It was argued that bulk interception practices were considered to unreasonably and disproportionately encroach upon constitutionally entrenched privacy rights.

The judge agreed and found that the act was inconsistent with the constitution in that RICA:

  • Did not provide a notification procedure for subjects of interception;
  • Did not ensure sufficient judicial independence for authorising authorities;
  • Failed to provide appropriate safeguards when an order was granted without notice to individuals under surveillance;
  • Lacked appropriate procedures to be followed when state officials examine, copy, share, sort through, use, destroy and/store data obtained from interceptions;
  • Failed to prescribe special procedures for cases when the subject of surveillance was either a practicing lawyer or a journalist.
To remedy these issues, the judgment suspended the invalidity of the act for two years to allow for parliament to bring the legislation in line with the constitution, but in the interim, added a number of new sections to the RICA Act to remedy the above issues. These safeguards provided to lawyers and journalists are of particular importance to South Africa’s democratic framework.


September 21, 2019

Product liability and the strange case of a snail in a ginger beer bottle



In England and the US, there is a legal principle called “tort” that derives from the French for ‘wrong’. This is known as “delict’ in South African Law, which describes the circumstances in which one person can claim compensation from another for harm that has been suffered.

Actions under the Consumer Protection Act 68 of 2008 (the “CPA“)

In a 1932 case that changed the law of product liability in England, the House of Lords in Donoghue v Stevenson [1932] AC 562 heard that Mrs Donoghue drank a bottle of ginger beer in a cafĂ©. A dead snail was in the bottle. She fell ill, and she sued the ginger beer manufacturer, Mr Stevenson. The court held that the manufacturer owed a duty of care to her, which was breached, because it was reasonably foreseeable that failure to ensure the product's safety would lead to harm to consumers and awarded her damages.

In South Africa, product liability is regulated by the CPA.

Section 5 of the CPA provides that the CPA shall apply to every transaction, agreement, advertisement, production, distribution, promotion, sale or supply of goods or services.

Section 61 of the CPA renders producers or importers, distributors or retailers of any goods, liable for harm caused by the supply of unsafe goods, product failure, defective or hazardous goods as well as where such harm is as the result of inadequate instructions or warnings being given to the consumer. This liability arises irrespective of whether the producer, importer, distributor or retailer acted negligently. Subject to certain exceptions set out in the Act, liability is therefore strict. One such exception to this general principal is if, at the time the goods were supplied to another person alleged to be liable or at the time the goods were supplied to the consumer, the goods were safe and fully functional and free from the alleged defect or hazard.

Unless a consumer has been expressly informed and expressly accepted goods that are not of a good quality, the consumer has the right to receive goods that are reasonably suitable for the purposes for which they are generally intended, good quality, good working order, free of defects or hazards, useable and durable for a reasonable period having regard to the normal use and the surrounding circumstances of their supply. Thus, producers, importers, distributors or retailers are prohibited from producing and distributing unsafe goods. The CPA imposes strict liability on producers, importers, distributors or retailers for supplying unsafe goods. Strict liability is also imposed in respect of product failure, defective and hazardous goods.

So, if you get sick because you drink a cooldrink that contains a snail, you can claim damages from any or all the producers, importers, distributors or retailers of the beverage.

Product liability that falls outside the CPA

Transactions concluded for the supply of goods or services to a consumer who is a juristic person are excluded from the ambit and application of the CPA where such a consumer has an asset value or annual turnover exceeding R2 000 000 (Two Million Rands).

When is a supplier liable for loss caused to the user by a defect in the product? The court said in Ciba-Geigy (Pty) Ltd v Lushof Farms (Pty) Ltd:

‘[A] manufacturer who distributes a product commercially, which, in the course of its intended use, and as the result of a defect, causes damage to the consumer thereof, acts wrongfully and thus unlawfully . . .’.

There must be a contractual nexus between the parties. Their contract should lay down the ambit of their reciprocal rights and obligations. This would define, expressly or tacitly, the nature and quality of the performance required from each party. While the contract persists, each party has adequate and satisfactory remedies if the other commits a breach.

Damages for product defects that fall outside the ambit of the CPA would not extend to a third party ‘not in contractual privity’. This is illustrated in the case of AB Ventures v Siemens where AB Ventures concluded a written agreement with Lumwana Mining Company Limited under which AB Ventures undertook to construct to completion the Lumwana Copper Mine in northern Zambia. Several parties were involved in the supply chain. Siemens had to supply four specialized electrical units, that turned out to be defective. AB Ventures unsuceesfully sued Siemes for damages, the court concluding that there was no legal nexus  between AB Ventures and Siemens.  

Basically, in damages claims for product liability the first principle of the law of delict is that loss ordinarily lies where it falls.

September 05, 2019

Threatening sequestration or winding-up to force payment




Some attorneys believe that the threat of sequestration or winding up will force a debtor into submission. Take care, as this may justify a special order for costs.

s15 of the Insolvency Act reads:

Compensation to debtor if petition is an abuse of court’s procedure or malicious or vexatious.—Whenever the court is satisfied that a petition for the sequestration of a debtor’s estate is an abuse of the court’s procedure or is malicious or vexatious, the court may allow the debtor forthwith to prove any damage which he or she may have sustained by reason of the presentation of the petition and award him or her such compensation as it may deem fit.

Similarly, a winding-up application will be refused where a creditor’s application is an abuse of process, e.g. where the application is brought to bring pressure on the debtor to obtain payment of money to which the applicant is not entitled or is bona fide disputed.

In Walter McNaughtan (PtyLtd v Impala Caravans (PtyLtd where the company had been “put to needless expense in resisting [the] application although it had expressly warned the applicant of the basis on which the application would be opposed”, the court, when dismissing the application, held that the “conduct of the applicant in nevertheless persisting in a futile application which was doomed to failure from the beginning” and justified a special order for costs.

Basically, the court has an inherent jurisdiction to prevent abuse of its process and, even where a ground for winding-up is established, the court will not grant a winding-up order where the sole or predominant purpose of the applicant is mala fide and with an ulterior or improper purpose, or to harass or oppress the company or to fraudulently defeat its rights.
Having said that, where proper grounds for a winding-up are established, the court ought not to exercise its discretion against the applicant unless it appears that the improper and ulterior purpose is at least the predominant purpose motivating the applicant.

The court could even grant an interdict restraining a person from bringing or proceeding with, or dismiss, an application for the winding-up of a company if that application is or would be an abuse of the process of the court. The court’s jurisdiction to grant an interdict or dismiss the application should be exercised with great circumspection and with regard to the justice of the case on each side.



August 30, 2019

How does a Body Corporate deal with pet problems in sectional title schemes?


Prescribed Conduct Rule (“PCR”) 1 deals with the keeping of pets, and states:

Keeping of animals, reptiles and birds: 

(1) The owner or occupier of a section must not, without the trustees’ written consent, which must not be unreasonably withheld, keep an animal, reptile or bird in a section or on the common property.

(2) An owner or occupier suffering from a disability and who reasonably requires a guide, hearing or assistance dog must be considered to have the trustees’ consent to keep that animal in a section and to accompany it on the common property.

(3) The trustees may provide for any reasonable condition in regard to the keeping of an animal, reptile or bird in a section or on the common property.

4) The trustees may withdraw any consent if the owner or occupier of a section breaches any condition imposed in terms of sub-rule (3).

What does a breach mentioned in (4) mean, and when can the trustees of a body corporate withdraw their consent?

Trustees must use the standard of the ‘reasonable man’ and can only withdraw their consent to the keeping of a pet if an owner breaches any of the reasonable conditions imposed by them in granting their consent. Withdrawal would be reasonable if: 

  • the conditions are not being met (for example an owner keeps four dogs instead of two);
  • the pet is causing a nuisance to other owners or occupiers (for example where a dog is barking persistently); or
  • the pet is considered dangerous to other owners or occupiers (for example where an offending owner keeps a poisonous snake as a pet).

Before consent is withdrawn, the owner must be given: 
  • notice of the breach;
  • an opportunity to remedy the situation;
  • a hearing where evidence is given;
  • the trustees’ must be decided by majority vote;
  • the trustees’ decision must be minuted;
  • the owner must be given written notice of the withdrawal of consent; and
  • the pet owner must be given a reasonable time to remove the pet.

If the owner refuses to remove the pet, the body corporate is not entitled to forcibly remove a pet from a person’s possession. It can approach the local SPCA to intervene and if justified implement legal process to remove the pet.

Another option is to get an adjudication order for the removal of the pet from the Community Schemes Ombud Service (“the CSOS”). In terms of section 38 of the CSOS Act it is possible that any person may make an application to the CSOS if such person is a party to or affected materially by a dispute. The Body Corporate can therefore make an application to the CSOS to declare a dispute against the owner who has kept their pet in the scheme despite the trustees having withdrawn their permission.