More about legal costs

 

A client asked, “If I win my case will I get back all the fees I paid you?” 

Types of legal costs

There are three types of legal costs:

Party and party costs

These are the costs that a court will award the successful party in a court case. The losing party must pay these costs. They can be agreed or taxed. Taxed costs are those assessed by the Taxing Master of the court you sued out of.  The bill of costs is based on the applicable Magistrates’ or High Court tariffs laid down by law. You would proceed out of the Magistrate’s Court or Regional Court for matters up to R400 000. For claims above that amount, one would sue out of the High Court.

Your attorney will ask you to sign a fee agreement setting out the hourly rate of the attorney and his or her support staff. The agreement will make it clear that the rates are not according to tariff but are on an attorney and own client basis.

Even if you win the case, you will normally only recover the party and party costs and will have to pay your attorney his costs in full. These costs will always be more than the laid down tariff, so you will be out of pocket by the difference.

Attorney and client costs

If a court wants to show its displeasure about a defendant’s conduct during a trial, it may order the defendant to pay attorney and client costs. This is called a punitive costs order and is rare.

Such order obliges the losing party to pay party and party costs plus certain other legal costs, including costs for attendances between you and your attorney.

Of course, if the case is of a contractual nature and the contract has a clause that obliges the losing party to pay attorney and client costs, the court would make such a costs order.

Attorney and “own” client costs

Attorney and “own” client costs are the actual fees and disbursements a client pays his attorney in terms of their fee agreement. Such a costs order is equally rare.

In extreme cases, a court may punish the defendant's lawyer and order him or her to pay the costs de bonis propriis (out of his or her own pocket).

 

THE PROCESS TO WIND UP A DECEASED ESTATE

 

·      If your loved one passed away in a hospital, the medical practitioner will complete a BI-1663 form (notification of death) to certify the death. You will receive a copy.  If your loved one did not pass away in a hospital, the mortician will complete the form and hand it to the next of kin. You must take the BI-1663 form, with the deceased’s original valid South African identity card to the Department of Home Affairs who issues a death certificate. The funeral home or the Department of Home Affairs stamps ‘Deceased’ on the identity card or document of the deceased and punches a hole in the identity card. 

·         The estate of a deceased person must be reported to the Master of the High Court’s office in the area where the deceased lived. within 14 days from date of death. The following documents, where applicable, will also be required: 

ü  An original or certified copy of the Death Certificate and Identity Document.

ü  An original or certified copy of the marriage certificate.

ü  A declaration of marriage by the surviving spouse indicating the type of marriage.

ü  The original will and any annexures that may apply.

ü  A completed next-of-kin affidavit if there is no will in place.

ü  A completed inventory form.

ü  A declaration to confirm that the estate has not been reported at another Master’s office.

ü   

·         For estates valued at more than R250 000: 

ü  If an executor is not specified in the will of the deceased, the Master will appoint one on the deceased’s behalf. The family may also nominate an executor if there is no will. 

ü  The person nominated to wind up the estate (the executor or his or her agent – normally a lawyer, accountant, or trust company) reports the estate at the offices of the Master, who issues Letters of Executorship in favour of the executor or executrix, authorising him or her wind up the estate. 

·         For estates valued at less than R250 000 

ü  The Master will appoint a Master’s representative and will issue Letters of Authority (where the requirements are less stringent).

 

• On receipt of the Letters of Executorship, the executor arranges the publication of a notice to creditors in a local newspaper and government gazette, inviting them to submit any claims against the estate, within 30 days.

 

• Within 6 months of the issuing of the Letters of Executorship, the executor must submit an estate account (liquidation and distribution account) to the Master. This account gives effect to the wishes of the deceased in his will (or the laws of intestacy if there is no will).

 

• Once the Master approves the account, the executor has it advertised and that it lies for inspection for 21 days. If no objections are received within 21 days, he or she pays out the heirs and beneficiaries, and transfers any fixed property. 

The following words are commonly used when dealing with deceased estates:

 

• Estate – the deceased’s assets and liabilities property at the time of his or her death
• Testator – a man who makes a will
• Testatrix – a woman who makes a will
• Dying testate – when a person dies leaving a will
• Dying intestate – when a person dies without leaving a will
• Executor – a man who distributes the estate under a will
• Executrix – a woman who distributes the estate under a will
• Letters of Executorship – letters issued by the Master, authorising the executor to wind up the estate 

An executor makes sure that a deceased’s last wishes are adhered to regarding the distribution of his/her property and possessions.

He or she must also ensure that all the deceased’s debts are paid off. Any remaining money or property (called the residue) can then be distributed according to the deceased’s will or, if there is no will, in accordance with the Intestate Succession Act, 81 of 1987.

 

 

What is a usufruct?

 

The English word usufruct derives from the Latin roots usus and fructus, from verbs meaning to possess and to have the benefit of, respectively. 

A usufruct is a right given by an owner to someone else to use the owner’s property for a limited time, usually for a person’s lifetime. The holder of a usufruct, known as a usufructuary, has the right to use (usus) the property and enjoy its fruits (fructus), but does not acquire ownership of the property, known as the bare dominium. 

An example of a usufruct is where a husband in his will leaves his home to his children but directs that his wife has the use of the house and the furniture in it for her lifetime (or some other period, e.g., until she remarries). In this example, on his death the property will be transferred into the name of the children and the usufruct is simultaneously registered against the new title deeds in favour of his surviving spouse. 

Rights and obligations of the usufructuary 

In the above example, the wife: 

·         has the right to use and enjoy the property 

·         can let it out and earn the rental income 

·         cannot sell the property, mortgage it, or leave it to someone else in her will

 ·         must ensure that the property is maintained and is not altered or damaged in any way. She must pay the property rates and general day-to-day costs of maintaining it. The husband should leave enough money, possibly in a separate account, to ensure that the property is maintained and that his wife has enough money to pay for the rates and other property expenses 

·         is not obliged to do any extensive repairs that result from normal wear and tear or daily use. While there is no obligation for the usufructuary to insure the home against storm, fire, or other such damage, it is advisable and in her own interests to do so

 

·         may make improvements to the property but may not claim reimbursement when the usufruct ends. 

·         has the right to occupy and use the property until her death or remarriage, when the usufruct would lapse, and the full property rights would automatically vest in the children. 

Tax benefits 

Often, a usufruct is created to reduce the amount that the testator’s estate will have to pay in estate duty. While the children become the owners of the property, the estate duty liability is greatly reduced because the usufruct, which needs to be valued, passes to the surviving spouse free of estate duty, while the bare dominium is no longer the full value of the property but the difference between the property value and the value of the usufruct. 

A usufruct can also be created in a notarial deed of cession or retained by the seller when selling a property to reduce the amount of estate duty or transfer duty payable. When this is considered, it is important to be aware of the possible tax implications for the parties involved, both in the short and long-term.