The law reports – June 2012

June 1st, 2012
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David Matlala BProc (University of the North) LLB (Wits) LLM (UCT) LLM (Harvard) HDip Tax Law (Wits) is an adjunct professor of law at the University of Fort Hare.

April 2012 (2) The South African Law Reports (pp 337 – 661); [2012] 1 The All South African Law Reports March no 1 (pp 491 – 612) and no 2 (pp 613 – 685)

Abbreviations:

FB:  Free State High Court

KZD: KwaZulu-Natal High Court

GNP: North Gauteng High Court

SCA: Supreme Court of Appeal

Attorneys

Professional negligence: The main issue in Mlenzana v Goodrick & Franklin Inc 2012 (2) SA 433 (FB) was liability for professional negligence, which arose after a claim for loss of support and funeral expenses expired in the hands of the defendant firm of attorneys, Goodrick & Franklin Inc. The plaintiff’s file was handled by one S, a recently admitted attorney without much experience. In the course of handling the file she made many mistakes. The plaintiff provided S with sufficient information to lodge a claim with the Road Accident Fund (RAF); the only outstanding information being the deceased’s contract of employment and payslips, which S needed to have an actuarial calculation done before lodging the claim. However, waiting for the actuarial calculation before lodging the claim was totally unnecessary as it could have followed in due course. Although S was provided with the name and contact number of the deceased’s employer, she continued to write letters to the plaintiff requesting outstanding documents. As the plaintiff was living in an informal settlement, the letters went astray and never reached her. The attitude of S was that it was the duty of the plaintiff to look for outstanding documents; her duty being confined to writing letters requesting same. After the claim prescribed, the plaintiff sued the law firm for what she could have received from the RAF had her claim been lodged and prosecuted properly.

After separation of the issue of merits from quantum, Rampai J held that S had made herself guilty of professional negligence and accordingly rendered the defendant liable for the loss that could be proved or agreed, as well as payment of costs. The fact of the matter was that S, on behalf of the defendant, did not take reasonable steps, not only to obtain information she believed was required, but also to exercise the skill, knowledge and diligence expected of an average attorney. As a result of such ‘disturbingly shocking’ lack of skill, knowledge, diligence and care, she failed to appreciate the value of the vital information her client had supplied before the expiry of the prescriptive period. A prudent attorney would have felt it wise to lodge the claim on the strength of the available information, however he reckoned it to be. S did not require absolutely accurate information about every component of the compensation that the plaintiff was entitled to claim. Since S had failed to exercise the skill, knowledge and diligence expected of an average attorney, she had acted negligently and her negligence rendered the defendant liable to the plaintiff.

Companies

Concrete business rescue plan required: In terms of s 131(4) of the Companies Act 71 of 2008 (the Act), a court may make an order placing a company under supervision and commencing business rescue proceedings if the court is satisfied that the company is financially distressed, it has failed to pay over any amount in terms of an obligation under or in terms of a public regulation or contract with respect to employment-related matters, or it is otherwise just and equitable to do so for financial reasons and there is a reasonable prospect of rescuing the company. Alternatively, the court may dismiss the application, making any further necessary and appropriate orders, including an order for placing the company under liquidation. In Southern Palace Investments 265 (Pty) Ltd v Midnight Storm Investment 386 Ltd 2012 (2) SA 423 (WCC) the court dismissed with costs an application by Southern Palace to place the respondent, Midnight Storm, under supervision and to commence business rescue proceedings. Furthermore, the respondent was placed in provisional winding-up. The respondent, which was developing a hotel, was a member of a group of companies involved in acquiring and developing commercial properties. After investigation at the instance of the governor of the South African Reserve Bank and the Deputy Registrar of Banks, which found that the group had unlawfully raised funds from members of the public while one of the companies in the group had unlawfully conducted business as a bank, the companies were ordered to return the funds to members of the public – hence their financial distress. The group owed creditors a minimum amount of some R 494 million and, as all companies within the group had ceased carrying on business, there was no income being generated. Counsel for the applicant indicated that a potential investor, H, was prepared to negotiate agreements with all stakeholders and inject some R 120 million into the group coffers. However, no further details of the proposed negotiations were forthcoming.

Eloff AJ held that the court had a discretion not to grant a business rescue order. In exercising that discretion the court would give due weight to the legislative preference for rescuing ailing companies if such a course was reasonably possible. It would therefore be inappropriate for a court faced with a business rescue application to maintain the mindset from the earlier regime of judicial management that a creditor was entitled ex debito justitiae to be paid or to have the company liquidated. While every case had to be decided on its own merits, it was difficult to conceive of a rescue plan in a given case that would have a reasonable prospect of making success of the company concerned continuing on a solvent basis unless it addressed the cause of the demise or failure of the company’s business and offered a remedy that had a reasonable prospect of being sustainable. A business plan that was unlikely to achieve anything more than to prolong the agony (ie, by substituting one debt for another without there being light at the end of the tunnel) was unlikely to suffice. One would expect, at least, to be given some concrete and objectively ascertainable details, going beyond mere speculation in the case of a trading or prospective trading company, of –

  • the likely costs of rendering the company able to commence with its intended business or to resume the conduct of its core business;
  • the likely availability of the necessary cash resources in order to enable the ailing company to meet its day-to-day expenditure, once its trading operations commenced or resumed;
  • the availability of any other necessary resources, such as raw materials and human capital; and
  • the reasons for suggesting that the proposed business plan had a reasonable prospect of success.

Husband and wife

Usefulness of token or minimal maintenance: In MG v RG 2012 (2) SA 461 (KZP) the appellant wife, MG, instituted proceedings against the respondent husband, RG, in the North Eastern Divorce Court, Durban, in which she sought a decree of divorce, maintenance of R 1 000 per month, division of the joint estate and forfeiture of the benefits of the marriage, being the matrimonial home and a motor vehicle. The divorce court granted a decree of divorce and ordered division of the joint estate but rejected the requests for maintenance and forfeiture of the benefits of the marriage. The present appeal to the High Court was against the refusal of a maintenance order and forfeiture of the benefits of the marriage. The appeal was upheld, the court granting the appellant token maintenance of R 1 per annum, while the claim for forfeiture of marriage benefits was remitted to the divorce court for reconsideration.

Gabriel AJ (Ndlovu J concurring) held that, unless maintenance was granted at the time of divorce, the duty of care between spouses ceased to exist. Accordingly, an order for maintenance of a spouse had to be made at the time of divorce as it could not be made thereafter. Moreover, South African courts have recognised that token maintenance, most often in the form of R 1 per annum, was sometimes necessary despite the absence of a present need, in order to preserve the right to approach the court for increased maintenance in the future if a spouse’s personal circumstances were to change. Claims for token or minimal maintenance were recognised and were capable of being granted as a matter of judicial discretion, having regard to the factors listed in s 7(2) of the Divorce Act 70 of 1979. Failure to grant token maintenance would put an end to any possible claim that the appellant could have against the respondent in the future if her circumstances changed.

Local government

Disconnection of electricity supply without court order: Section 97(1)(g) of the Local Government: Municipal Systems Act 32 of 2000 requires a municipality to make provision for termination or restriction of municipal services when payments of ratepayers are in arrears. This section must be read together with s 102(1), which empowers a municipality to consolidate any separate accounts of persons liable for payment to it. In Rademan v Moqhaka Municipality and Others 2012 (2) SA 387 (SCA) s 25(1) of the Credit Control and Debt Collection Bylaws of 14 May 2004 provided that the respondent municipality, Moqhaka Municipality (Kroonstad), could restrict or disconnect the supply of water and electricity or discontinue any other service to any premises whenever a user of any service failed to make full payment on the due date or failed to make acceptable arrangement for the payment of any amount for services, rates or taxes. The appellant, Rademan, paid for all other services provided by the respondent, like water, electricity, sanitation, refuse, etcetera, but refused, notwithstanding demand, to pay rates and taxes. As a result, the respondent disconnected electricity supply. It did so without a court order. A magistrate held that the disconnection was unlawful. On appeal to the FB, Jordaan J and Khan AJ reversed the decision of the magistrate. A further appeal to the SCA was dismissed with costs.

Bosielo JA (Lewis JA and Petse AJA concurring) held that there was no statutory instrument that required a municipality to obtain a court order authorising the discontinuation of a municipal service. A municipality was not required to approach the court each time a ratepayer defaulted to obtain a court order authorising discontinuation of services. Such a proposition would be both unrealistic and untenable. Given the rate of protests and demonstrations regarding service delivery across the country, concomitant with the refusal by ratepayers to pay their rates, taxes and fees for municipal services, it was not practical for municipalities to pursue those issues in courts. Requiring such a process would result in municipalities being mired in such cases, losing precious time in the process and unnecessarily incurring high legal bills.

Minors

Child’s right to bring, and to be assisted in bringing, matter to court: Section 14 of the Children’s Act 38 of 2005 (the Act) provides that every child has the right to bring, and to be assisted in bringing, a matter to court, provided that the matter falls within the jurisdiction of that court. This section was dealt with in FB and Another v MB 2012 (2) SA 394 (GSJ), where the first applicant husband and the respondent wife were married to each other and had two minor children, one aged 16 (the second applicant) and the other aged 17. When the marriage between the parties was dissolved by divorce, the settlement agreement provided that the primary residence of the children vested with the respondent, while the first applicant was accorded a right of access. Thereafter, the first and second applicants sought a court order changing the terms of the settlement agreement so as to vest primary residence of the second applicant with the first applicant, who would be permitted to relocate the former to Portugal to live, study and develop career prospects. The applicants also sought the appointment of an advocate to represent the second applicant in the pending main application. The intention was that the advocate should particularly address the needs of the second applicant. The court granted an order appointing an advocate for the second applicant, reserving costs.

Meyer J held that, unlike s 28(1)(h) of the Constitution, s 14 of the Act did not limit the assistance to which a child was entitled to that of a legal practitioner assigned by the state. The section did not prescribe the manner in which a child was entitled to bring a matter to court nor the way in which he was entitled to be assisted. The paramount consideration in determining such issues was the best interests of the child concerned. A request by a child to be assisted in legal proceedings by his legal representative would only be refused in exceptional circumstances since the child concerned, particularly where he was a party to the proceedings, would otherwise be placed in a worse position than all other natural or legal personae that enjoyed such right. His best interests would not be served by refusing him assistance by a legal representative in the conduct of the main application.

Motor vehicle accidents

Effect of concession of liability by the Road Accident Fund: In Gusha v Road Accident Fund 2012 (2) SA 371 (SCA) the appellant, Gusha, suffered serious bodily injuries in a motor vehicle accident and was paralysed. The injuries were sustained when a motor vehicle in which he was a passenger swerved off the road to avoid an oncoming unidentified motor vehicle being driven on the incorrect side of the road. During negotiations, and before the issue of summons, the respondent Road Accident Fund conceded the merits of the claim and accepted liability for damages suffered by the appellant in an amount which was yet to be proved. In view of the concession relating to the merits of the claim, the only issue left for determination was the amount of damages. At the hearing of the matter, the respondent sought to amend its plea and raise the issue of contributory negligence on the part of the appellant as he was not wearing a seat belt at the relevant time. The appellant contended that the terms of the agreement between the parties precluded the respondent from amending its plea and raising the issue of contributory negligence as the purpose thereof was to reduce the amount of compensation payable to the appellant, if any. The GNP held, per Legodi J, that the terms of the agreement did not prohibit the respondent from seeking to rely on the appellant’s contributory negligence and making application to amend its plea to seek apportionment of the appellant’s damages. An appeal against the High Court order was upheld with costs.

Leach JA (Cloete and Cachalia JJA concurring) held that at the time of the conclusion of the agreement the respondent clearly gave no thought to the possibility of any contributory negligence on the part of the appellant. The issue of any such negligence was thus ‘never a live one’. In those circumstances the respondent, by conceding the ‘merits’ and accepting ‘liability for damages still to be proven’, accepted liability without qualification for whatever damage the appellant had suffered as a result of his injuries, subject to proof of those injuries and damages that ought to be awarded. The respondent’s unqualified concession of liability rendered it both ‘impermissible and opportunistic’ for it to attempt to introduce the appellant’s alleged contributory negligence in order to seek a reduction in the extent of its liability.

Prescription

Commencement of prescription of a debt: Section 12(1) of the Prescription Act 68 of 1969 (the Act) provides, among others, that prescription shall commence as soon as the debt is due. Furthermore, s 12(3) provides that a debt shall not be deemed to be due until the creditor has knowledge of the identity of the debtor and the facts from which the debt arises, provided that a creditor shall be deemed to have such knowledge if he could have acquired it by exercising reasonable care. These provisions were dealt with in Gunase v Anirudh 2012 (2) SA 398 (SCA), where the respondent, Anirudh, sued the appellant, Gunase, his former attorney, for loss suffered as a result of the appellant’s failure to lodge a third party claim with the Road Accident Fund (RAF), then known as the Motor Vehicle Accident Fund, with the result that the claim prescribed. The claim arose in July 1992 when the respondent was injured in a motor vehicle accident, after which he instructed Gunase to lodge the claim and prosecute it to finality. When the appellant’s law practice closed in 2000, the claim was not yet lodged with the RAF and had prescribed. The respondent became aware of the closure of the practice but did nothing further until 2005, when he consulted with a new attorney. In 2006 the new attorney wrote a letter of demand to the appellant and eventually issued summons in October 2006, more than 14 years after the motor vehicle accident occured. The appellant raised a special plea of prescription of the claim against him, which special plea was dismissed by the KZD, per Hughes-Madondo AJ. An appeal against the High Court order was upheld with costs.

Seriti JA (Brand and Maya JJA concurring) held that s 12(3) of the Act imposed a duty on the creditor to exercise reasonable care to obtain knowledge of the identity of the debtor and the facts from which the debt arose. A creditor was not allowed to postpone the commencement of the running of prescription by his failure to take reasonable steps. The impact of s 12(1) read in conjunction with s 12(3) was that prescription started to run as soon as the creditor had or ought to have had knowledge of the identity of the debtor and the facts from which the debt arose.

In the instant case, applying an objective standard, the respondent failed to exercise reasonable care as required by s 12(3). If he had, he would have known that the appellant did not lodge his claim at least shortly after the appellant ceased practising as an attorney.

The appellant’s offices were closed in 2000 and, if the respondent had made inquiries at the RAF or had consulted with another attorney, the possibilities were that he could have known during 2001 that the appellant had not lodged his claim. He would have gained knowledge of the facts from which his claim arose during the course of 2001.

The respondent’s failure to institute action timeously was caused by his inaction and not his inability to obtain knowledge of the relevant facts timeously.

  • See 2011 (Jan/Feb) DR 44.

 

Conclusion of law is not a fact and does not prevent the running of prescription: The application of s 12(1) and (3) of the Prescription Act 68 of 1969 arose in Claasen v Bester 2012 (2) SA 404 (SCA), where the respondent, Bester, sold his farm to the appellant, Claasen. The contract had a buy-back clause that entitled the respondent to repurchase the farm. The respondent alleged that he had instructed the attorney who drafted the contract to make provision for the repurchase price to be market-related. However, no provision for the purchase price was made in the buy-back clause. The respondent became aware of such omission on receiving a copy of the contract in March 2004. After seeking legal assistance, he was advised that the buy-back clause was vague. In December 2007 the respondent instituted proceedings for a declaration that the entire contract for the sale of his farm to the appellant was void or voidable and, as a result, he was entitled to return of the farm and accordingly tendered return of the purchase price. The appellant raised a special plea that the respondent’s claim against him had prescribed as three years had elapsed since the respondent became aware of the failure to provide for the repurchase price in the buy-back clause. In the FB Van Zyl J held that the claim had not prescribed. An appeal against the High Court order was upheld with costs.

Lewis JA (Harms DP, Shongwe, Majiedt JJA and Plasket AJA concurring) held that knowledge of legal conclusions was not required before prescription began to run. The fact that a party did not appreciate the legal consequences that flowed from the facts did not delay the running of prescription. In the instant case prescription began to run in March 2004 when the respondent knew that no provision as to the price at which he could buy the farm back from the appellant had been included in the deed of sale. That he believed nonetheless that the provision was enforceable was irrelevant. That being the case, any claim that the respondent might have had prescribed by the date that the summons was issued and served in December 2007.

Unlawful occupation of land

Eviction must be just and equitable: Section 4(6) of the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act 19 of 1998 provides that if an unlawful occupier has occupied the land in question for less than six months at the time when the proceedings are initiated, a court may grant an order for eviction if it is of the opinion that it is just and equitable to do so, after considering all the relevant circumstances, including the rights and needs of the elderly, children, disabled persons and households headed by women. In Occupiers of Mooiplaats v Golden Thread Ltd and Others 2012 (2) SA 337 (CC) the GNP, per Rabie J, acting in terms of this section, granted an eviction order against the applicants, the unlawful occupiers of the land. The applicants were a group of some 170 families which had unlawfully occupied the property of the first respondent, Golden Thread, having erected structures there as their homes. The local government in whose area of jurisdiction the property was situated, the City of Tshwane Metropolitan Municipality (the city), although cited as a party, did not take part in the proceedings and only sent counsel on a ‘watching brief’. As a result, the city did not provide information on the applicants, their housing needs and on how it could assist in providing alternative land or housing. The High Court held that it was just and equitable to grant an eviction order and indicated a date by which the applicants had to vacate the property or face eviction by the sheriff. The Constitutional Court granted the applicants leave to appeal and set aside the High Court order with costs, remitting the matter to the High Court for reconsideration.

In a unanimous judgment delivered by Yacoob J, the court held that where residents had been in occupation of land for less than six months, a court was not expressly obliged to investigate whether a municipality could reasonably make land available for people who faced eviction. However, that was not decisive to the ‘justice and equity’ inquiry. That was so since, if a court had before it a case in which the land occupation fell short of six months, it was obliged to consider all the relevant circumstances. In the instant case close to 200 families would have to be evicted and, in all probability, would be rendered homeless consequent to the eviction. In the face of that consequence, the question whether the city was reasonably capable of providing alternative land or housing was of ‘crucial importance’. Further, the High Court was alive to the fact that the city owned vacant land that could be made available for that purpose. It was impossible for the High Court to conclude that the eviction was just and equitable without investigating this aspect.

Other cases

Apart from the cases and material referred to above, the material under review also contained cases dealing with allotment of shares not being a permissible tax deduction, amalgamation of medical aid schemes, arrest of vessel as security for claim, cessation of membership of a close corporation, construction guarantee in building contracts, debt rearrangement in consumer credit agreements, determination of the capacity of a public school, effect of confirmation of liquidation and distribution account, effect of non-appearance of appellant in court, inordinate delay in seeking leave to appeal, liability for omission, National Credit Act 34 of 2005 not applying to cheques, liquidators having to act jointly, loss of support claim of heterosexual life partner, meaning of disaster management, obligation of commercial tenant to continue trading, ownership of land, passing off, pension benefits of non-member spouse on divorce, praedial versus personal servitude, pre-emption right, prescription of minor’s claim, removal of base station of mobile cellular service provider, removal of liquidator, remuneration of liquidator, renewal of government service agreement, right of access to information, separation of quantum from merits, sequestration rather than liquidation of trust, substitution of High Court maintenance order by maintenance court, taxation of costs, universal partnership in marriage out of community of property and veld or forest fire.

This article was first published in De Rebus in 2012 (June) DR 44.