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 (Pty) Ltd v Impala Caravans (Pty) Ltd 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.

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.

When can a landlord use a duplicate set of keys to enter leased premises?

A CLIENT ASKED: As a landlord/owner, is it their right to have a set of keys to an apartment they are renting out?  I read somewhere that in an emergency, fire or burst pipe, it is the landlords right to be able to enter (but only in the case of an emergency) and in all other instances they need permission to enter to inspect.  Is there a law re this?

The short answer is that the landlord should have a duplicate set of keys, provided he or she doesn't invade the privacy of the tenant and only uses the keys in a case of emergency. To avoid doubt, this is a provision that should be included in a lease agreement.

In terms of the Rental Housing Act, 1999, as amended, it is an offence that may result in the imprisonment of the landlord or a fine (although imprisonment is highly unlikely) if the landlord, amongst other things, provides the tenant with a dwelling that is uninhabitable or fails to maintain the leased premises.

A landlord may not enter leased property without giving a tenant reasonable notice and then only to inspect the property, to make repairs to the property, to show the property to a prospective tenant, purchaser, mortgagee or its agent or if the property has been abandoned or having obtained a court order.

What about situations of sudden emergency?

A landlord may well need a key in order that he may be able to enter quickly in the event of emergency – fire, burst pipes or whatever. He may need a key to enable him or those authorised by him to read meters or to do repairs which are his responsibility. 

I would suggest that a landlord should indeed hold a set of keys, to carry out necessary repairs expeditiously, with the permission of the tenant – in the ordinary course, and without his or her permission – in the case of emergency.

I fail to see how the landlord can carry out the works “expeditiously” if the landlord does not hold a key.

An agreement of lease should contain a clause dealing with Lessor’s rights of entry and carrying out of works that contains not only the usual rights of the landlord (or his agent) to enter the premises to inspect them, to carry out any necessary repairs, replacements, or other works, or to perform any other lawful function in the bona fide (good faith) interests of the landlord or the tenant, provided that:

·         The tenant’s right to privacy cannot be violated during the lease period;

·         Should the landlord wish to inspect the property, reasonable notice to the tenant must be given;

·      The landlord shall hold duplicate keys to enter the premises without notice, only in the event of emergency – fire, burst pipes or whatever – and if the tenant is not available to seek his prior permission. The landlord must handle the keys in a proper and responsible manner.

Without such written permission to hold keys and enter the premises to deal with a burst pipe, the landlord will have to exercise his discretion in good faith in the interests of the landlord or the tenant. That could lead to later legal arguments.

Marriage in community of property and suretyships.

Since the introduction of the Matrimonial Property Act of 1984 (the Act), spouses married in community of property share the same rights regarding the disposal of the assets of the joint estate (the combined assets of both spouses), the contracting of debts which lie against the joint estate and the management of the joint estate, subject to certain limitations. An example is a restriction on signing a suretyship on behalf of the joint estate.

If one spouse wants to incur credit on behalf of the joint estate, the credit provider may insist that the spouse binds himself or herself as surety, to guarantee payment.

The Act provides that the spouse shall not bind himself as surety without the written consent of the other spouse, but sets out a proviso: should a suretyship be provided in the ordinary course of a person’s business then such a suretyship is deemed valid even if spousal consent was not given.

What constitutes ‘in the ordinary course’ of that spouse’s business?

the Supreme Court of Appeal (SCA) was asked to answer this question in the case of Ockie Strydom v Engen Petroleum Limited (184/2012) [2012] SCA: Is a spouse bound by a suretyship even though he/she was unaware that his/her spouse had signed one? Or even if a spouse refused to give written consent?

The SCA had to decide what constituted acting in the ordinary course of one’s profession, trade or business. It found that the determination of whether a person acted in the ordinary course of his/her business was a question of fact that must be judged objectively with reference to what was expected of a businessman/businesswoman. For example, if you are a salaried employee and want to buy a car on lease, signing a suretyship will not be in the course of your ordinary business, and your spouse must consent in writing.

The opposite would apply if you are involved in a business such as a company, close corporation, partnership or trust, and have a commercial interest in the business’ success or failure. In this case, you can sign a suretyship and bind the joint estate, even if your spouse did not consent to the suretyship in writing. Thus, no consent is required to sign as surety, despite being married in community of property, as you signed the suretyship in the ordinary course of your business.

South African Law of Delict

A “civil wrong”. It basically deals with the circumstances in which one person can claim compensation from another for harm that has been suffered.

Damages in delict are divided into:

1.    patrimonial/special damages (including medical costs, loss of income and the cost of repairs);

2.    non-patrimonial damages/general damages (including pain and suffering, disfigurement, loss of amenities and injury to personality);

3.    pure economic harm (not connected to any physical injury or damage to property).

Three main delictual remedies/actions to deal with damages:

1.    Aquilian action (relates to patrimonial loss):

Harm or Loss – plaintiff must have suffered harm; harm must be patrimonial, which means monetary loss sustained due to physical damage to a person or property.

Conduct must be wrongful (unreasonable and without lawful justification).

Defences

One must be at fault, and accountable and one’s blameworthiness must be intentional or negligent.

There must be causation both factual and legal.

Damages – The primary objective is to compensate the person who has suffered harm. To restore the plaintiff’s patrimony and place him in a position he would have been in prior to the act of delict committed on him. Therefore, money is considered an adequate replacement for the lost patrimony. A court will not make an arbitrary award in the absence of available evidence. Where damages cannot accurately be assumed, a court may exercise its own judgment in the matter, provided it has facts.

However, if Plaintiff’s negligent conduct contributes to the loss, this is considered when determining the extent of the Defendant’s liability. This basically reduces the damages award.

2.    Actio iniuriarum (relates to injuries concerning personality)

Essential elements of liability

General elements of delict must be present, but specific rules have been developed for each element. Causation is assumed to be present. The elements of liability under the actio iniuriarum are as follows:

harm, in the form of a violation of a personality right (one’s corpus, acts of a sexual or indecent nature, and wrongful arrest and detention), dignitas (“worthiness,” “dignity” and “self-respect”), and fama (defamation);

wrongful conduct (statements, either oral or in writing, as well as physical contact or gestures, could also arise. The principles are the same as those applicable to the Aquilian action.

Intention (must be at intentional fault – no negligence)

Under the action iniuriarum, harm consists in the infringement of a personality right:

Defences

Damages – public policy determines what should be included. For example: the discharge of a duty, the exercise of a right or the furtherance of a legitimate interest.

3.    Action for Pain and Suffering

Relates to pain and suffering and psychiatric injury – derived partly from the Aquilian action, and partly from the use of reparative fines.

Harm or loss: Pain and suffering – personal bodily injury to the plaintiff: for example, actual pain, the loss of amenities of life and the loss of life expectancy.

Conduct: in the form of a positive act, an omission or a statement.

Wrongfulness or unlawfulness: unreasonable conduct.

Fault: blameworthiness in the form of intention or negligence.

Causation: factual causation and legal causation.