The law reports – January/February 2017

February 1st, 2017
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November 2016 (6) South African Law Reports (pp 1 – 333); [2016] 4 All South African Law Reports October (pp 1 – 297)

Heinrich Schulze BLC LLB (UP) LLD (Unisa) is a professor of law at Unisa.

This column discusses judgments as and when they are published in the South African Law Reports, the All South African Law Reports and the South African Criminal Law Reports. Readers should note that some reported judgments may have been overruled or overturned on appeal or have an appeal pending against them: Readers should not rely on a judgment discussed here without checking on that possibility – Editor.

Abbreviations

FB: Free State Division, Bloemfontein

GJ: Gauteng Local Division, Johannesburg

GP: Gauteng Division, Pretoria

SCA: Supreme Court of Appeal

WCC: Western Cape Division, Cape Town

Consumer protection

Sale in execution: In Sheriff, Piketberg and Another v Lourens 2016 (6) SA 110 (WCC); [2016] 4 All SA 239 (WCC) the Sheriff sold an immovable property situated at Piketberg, at an auction pursuant to a court order for the execution of a judgment. The conditions of sale were available for inspection before the sale. The relevant clause provided that the buyer would be liable ‘for the payment of all costs and charges necessary to effect transfer, including but not limited to conveyancing costs, transfer duty or value added tax (VAT) attracted by the sale and any Deeds Registration Office levies.’

The purchaser, Lourens, refused to pay the VAT amount of R 88 200 due. The Sheriff was thus unable to have the property registered in Lourens’ name. Lourens also failed to respond to the Sheriff’s demand for payment of the VAT.

The Sheriff then applied for the cancellation of the sale in terms of r 46(11)(a) of the Uniform Rules of Court (the rules). Lourens launched a counter-application and opposed the sale on the basis that the auction did not comply with reg 22(5)(d) of the Consumer Protection Act 68 of 2008 (CPA) and applied for the sale to be declared null and void. He also applied for the repayment of his deposit. Lourens alleged that the sheriff failed to inform him prior to the sale that VAT would be payable. He also alleged that the Sheriff acted in bad faith because he had failed to establish the VAT status of the trusts whose property was being sold. He also argued that the relevant clause in the contract was unfair and unenforceable under the CPA.

Mahomed AJ confirmed that execution sales and auctions are subject to the CPA in terms of s 45(1), which specifically mentions such sales. Regulation 22(2) stipulates that auctioneers may not sell goods, which are not their property unless they have entered into a written agreement with the owner of the goods. Further, reg 22(5) requires auctioneers to perform their duties ‘in accordance with the highest standards applicable to auctions.’

The court confirmed that the sale of fixed property attracts either VAT or transfer duties, but not both. If the seller is a VAT vendor then VAT will be payable. Sales are usually VAT inclusive, unless the contract provides otherwise.

The Sheriff is not obliged to extend his inquiries beyond the extent of any real rights that may exist against the property. There is no duty under the rules to inquire about the VAT status of the judgment debtor whose property is being sold.

The court reasoned that it would be inappropriate for it to invoke an onerous interpretation of the Act and regulations in order to place additional regulatory burdens on the Sheriff’s office. Sheriff’s offices are already operating with limited capacity and resources within the terrain of increased consumer protections.

It further pointed out that execution sales are regulated by r 46, but also by the regulations under the CPA. It is obvious that reg 22(2) contains a gap as it does not provide for execution auctioneers. There is a need to harmonise the provisions of the CPA regulations with those of the Uniform Rules.

The court concluded that the auction was valid and binding. The sheriff was thus entitled to apply for the cancellation of the agreement due to the repudiation of the buyer and to retain the deposit paid until his own damages could be determined.

Credit law

Place of delivery of s 129 notice: In Blue Chip 2 (Pty) Ltd t/a Blue Chip 49 v Ryneveldt and Others (National Credit Regulator as Amicus Curiae) 2016 (6) SA 102 (SCA) the appellant, Blue Chip, was a credit provider in terms of the National Credit Act 34 of 2005 (NCA). It entered into a number of small, unsecured credit agreements with the first respondent, Ryneveldt, as well as with the other respondents. These were all entered into in Bloemfontein. It provided that monthly instalments had to be paid on specified dates into Blue Chip’s bank account held in Bloemfontein.

Ryneveldt defaulted on his payments in terms of the agreement and Blue Chip sought payment of the full outstanding amount. On the default, Blue Chip sent a notice in terms of s 129(1)(a) of the NCA to be delivered by registered post to Ryneveldt’s elected domicilium citandi et executandi, in Kimberley, which fell outside the Bloemfontein Magistrates’ Court’s jurisdiction. It was common cause that the said notice reached the post office in Kimberley, which notified Ryneveldt to collect it.

Ryneveldt did not react to the notice within the prescribed period and Blue Chip then issued a letter of demand in terms of s 56 of the Magistrates’ Courts Act 32 of 1944 (the Act). In response thereto, Ryneveldt gave written consent in Bloemfontein to judgment in respect of the debt, interest thereon and costs in terms of s 58 of the Act.

The magistrates’ court refused to grant the judgment in favour of Blue Chip, for lack of jurisdiction. It reasoned that s 28(1)(d) of the Act had not been complied with in that the delivery of the s 129 notice, being an element of the cause of action, did not occur within the area of jurisdiction of the court. As a result the magistrates’ court did not have jurisdiction to deal with the matter.

On appeal the FB held that although the s 129 notice ‘does not, however, form part of the cause of action’, the delivery of the s 129 notice ‘completed’ the cause of action and the court, therefore, did not have jurisdiction to deal with the matter.

On appeal to the SCA, Pillay JA pointed out that being a creation of statute, the magistrate’s court derives its powers from the Act. Section 28 grants jurisdiction to a magistrate’s court ‘if the cause of action arose wholly within the district or regional division’.

The SCA pointed out that where it is essential to the successful pursuit of a contractual claim that a letter of demand be sent, the sending of that letter is part of the cause of action. In particular, where a statute provides that before an action can be commenced or a claim enforced against a debtor, a notice be given, the giving of that notice is essential to the successful pursuit of the claim and proving that it was given, is part of the cause of action.

The court concluded that it was clear from s 129(1)(a) and (b) of the NCA that prior to commencing legal proceedings to enforce an agreement, the credit provider must deliver a written notice to the consumer wherein attention is drawn to the default in repayment, setting out various options open to him or her whereby the pressure of the default could be alleviated. It is a mandatory requirement.

A plaintiff credit provider must aver compliance with ss 129 and 130 in the summons or particulars of claim to disclose a cause of action where the suit is based on a credit agreement to which the NCA applies. In the absence of such averment the pleading will be excipiable.

It was common cause that delivery of the s 129 notice took place outside the area of jurisdiction of the Bloemfontein Magistrate’s Court. The cause of action did, therefore, not arise ‘wholly within the district or regional division’ of that court and the appeal was dismissed.

Delict

Misrepresentation: In Cuba NO and Others v Holoquin Global (Pty) Ltd and Others [2016] 4 All SA 77 (GJ) the applicants were the trustees in a family trust. The trust claimed payment of R 2 million from three respondents. The second respondent, Ben-Israel, was the sole director of the first respondent, Holoquin. The trust and Ben-Israel had entered into a share subscription agreement. Alleging that it had lawfully cancelled the agreement, the trust sought restitution by Holoquin of what it had received in terms of the agreement. The claim against Ben-Israel and the third respondent, Butkow, was founded on an alleged warranty that all information and documentation provided by them to the trust was true and accurate. They were alleged to be jointly and severally liable to pay the sum of R 2 million to the trust consequent on their breach of the warranty.

Holoquin raised a number of special defences to the claim:

  • First, it argued that the trust was not properly before the court as there was no evidence in the founding affidavit that all the trustees had authorised the first applicant (also a trustee) to conduct the litigation on their behalf.
  • Secondly, it contended that the share subscription agreement provided for disputes arising from it, to be referred to arbitration.
  • Thirdly, it contended that there was no proper resolution or decision by the joint trustees, which authorised the first applicant to address the letter of demand calling on Holoquin to perform its obligations under the agreement or the letter of cancellation.

Rubens AJ confirmed that the general rule is that the trustees of a trust must join in suing. Holoquin’s challenge to the first applicant’s authority to conduct the litigation was unfounded. The first applicant expressly alleged in the founding affidavit that he was duly authorised by his co-trustees to represent the trust in the litigation. There was no suggestion that his allegations were untrue, and affidavits provided by the other trustees put paid to Holoquin’s submission. The same held true for the first applicant’s authorisation to address the letter of cancellation on behalf of the trust.

Turning to the trust’s claim for repayment by Holoquin of the R 2 million in terms of the agreement, the court found that –

  • Holoquin was in breach of the share subscription agreement;
  • the agreement was lawfully cancelled by the trust; and
  • Holoquin had not advanced any legitimate defence for repayment of the sum of
    R 2 million, apart from the alleged arbitration defence to the claim.

The court dismissed trust’s claim against Ben-Israel and Butkow, and held it to be an unfounded attempt to bind parties who were not parties to the subscription agreement.

In an alternative claim against Ben-Israel and Butkow, the trust relied on alleged misrepresentations by them to induce the trust to conclude the subscription agreement and effect payment of R 2 million to Ben-Israel when they well knew that the entire authorised share capital had been issued and that Ben-Israel was not in a position to issue the 31 112 shares subscribed for by the trust. The court confirmed that the representations made by Ben-Israel and Butkow were false. However, it could not be inferred that they must have fraudulently intended to induce the trust to conclude the subscription agreement and the court could not exclude the possibility of an innocent even if misguided belief on their part that the subscription agreement would be implemented in accordance with its terms. The issue was referred for oral evidence.

On the issue of the arbitration clause, the court held that the dispute was not one which was required to be referred to arbitration. The trust was therefore entitled to approach the court for relief.

Holoquin was ordered to pay the trust R 2 million, plus interest.

Insolvency

Voluntary surrender: In Ex parte Fuls and Three Similar Matters 2016 (6) SA 128 (GP) the court held that it will not accept the voluntary surrender of the estate of a debtor with debts arising from credit agreements, unless the debtor explains why a proper application of debt relief measures under the National Credit Act 34 of 2005 (NCA) would not yield a better result for creditors.

The crisp facts in Ex parte Fuls were that the applicants in the four matters before the court applied for the voluntary surrender of their estates. Three of the four applicants were represented by the same firm of attorneys and relied on virtually identical affidavits. The same valuator had been used and the valuations of the furniture and household goods seemed unrealistically optimistic. The applicants’ lists of creditors revealed that they had entered into credit agreements.

Van Niekerk AJ confirmed that one of the requirements for voluntary surrender is that the debtor has to show that it will be to the advantage of creditors if their estate is sequestrated. The court had to decide whether this requirement had been satisfied.

The NCA was enacted specifically to deal with consumer credit and consumer over-indebtedness. It contains several remedies for consumers who are unable to pay their debts. One of these is debt review, in terms of which debts may be re-arranged, postponed or restructured. Another possibility is that the consumer may be exonerated if it is found that credit was granted recklessly. These remedies were designed in the interest of consumer debtors and will relieve them from financial strain.

Further, speaking debt review is also more advantageous for creditors, as they can expect to receive all or a substantial part of what they are owed, even if it is over an extended period. In a sequestration creditors often do not even prove claims for fear of having to contribute to the costs.

An applicant for voluntary sequestration thus has to disclose whether or not he applied for debt review prior to applying for voluntary surrender and provide reasons if this was not done. If there was an application for debt review, a comprehensive report of the debt counsellor must be disclosed, setting out what procedures were followed and whether or not the applicant complied with debt restructuring arrangements.

Absent such disclosure, an application for voluntary surrender would not satisfy a court that the interests of creditors are better served by voluntary surrender than by proper application and adherence to the arrangements in terms of ss 86 to 88 of the NCA.

The court accordingly dismissed the four applications.

Marriage

Forfeiture of patrimonial benefits: The facts in Tlou v Ralebipi [2016] 4 All SA 251 (GP) were as follows: At the time of their marriage in 2011, the parties were each successful professionals who were financially secure. Their respective occupations often resulted in one or the other being away from the family home. The parties owned various immovable properties in Gauteng and North West province as well as a number of expensive vehicles. One of the properties was paid for by the plaintiff (the wife) while a number of other properties and the vehicles were paid for by the defendant (the husband). The wife alleged that the breakdown of the marriage was caused by the husband’s conduct in staying out late and coming back home often inebriated and at very late hours. Also a contributing factor was the work demands on each of the parties.

In a subsequent divorce action one of the issues in dispute was whether the parties were married in accordance with the tenets of customary law as contemplated in s 3 of the Recognition of Customary Marriages Act 120 of 1998. The court decided that a customary marriage was concluded between the parties in May 2011. The consequence of that order was that the marriage between the parties was regarded as being one in community of property.

It was then agreed by the parties that the issue of whether the defendant was entitled to an order claiming forfeiture of the patrimonial benefits of the marriage, be dealt with and decided as a separate issue.

Of relevance were the provisions contained in s 9(1) of the Divorce Act 70 of 1979. It provides that when a divorce is granted on the ground of the irretrievable breakdown of the marriage, ‘the court may make an order that the patrimonial benefits of the marriage be forfeited by one party in favour of the other, either wholly or in part, if the court, having regard to the duration of the marriage, the circumstances which gave rise to the breakdown thereof and any substantial misconduct on the part of the parties, is satisfied that, if the order for forfeiture is not made, the one party will in relation to the other be unduly benefited’.

Kollapen AJ referred with approval to the decision in Engelbrecht v Engelbrecht 1989 (1) SA 597 (C), in which, the court held that: ‘Unless the parties (either before or during the marriage) make precisely equal contributions the one that contributed less shall on dissolution of the marriage be benefited above the other if forfeiture is not ordered.’ It was undisputed that in the absence of an order of forfeiture, the wife would benefit. The court had to consider whether, regard being had to the duration of the marriage, the circumstances giving rise to its breakdown and any substantial misconduct on the part of the parties, such a benefit would be an undue one.

The marriage had endured for approximately 20 months and for most of that time it was characterised by conflict. The court could not find that it was the husband’s conduct alone which caused the breakdown of the marriage. Despite the wife’s allegations to the contrary, the court was not satisfied that it could be said that there was substantial misconduct on the part of the husband.

In considering what would be an undue benefit, the court noted that the duration of the marriage in this case was short. The longer the marriage the more likely it is that the benefit will be due and proportionate and conversely, the shorter the marriage the more likely the benefit will be undue and disproportionate. In the present case, because of the brevity of the marriage, the wife would indeed be unduly benefited if an order for forfeiture was not made. In addition, the husband had built up a substantial estate, mostly prior to the marriage. Moreover, the wife had sold her home, and retained the proceeds for herself.

However, the wife’s career was interrupted by the birth of her son which affected her work trajectory. In those circumstances, a partial forfeiture was considered justified. The wife was to forfeit all the patrimonial benefits of the marriage entered into between herself and the husband except for the benefits arising out of the property which formed the parties’ marital residence.

Each party was to pay its own costs.

 

Waiver of maintenance: The decision in W v H [2016] 4 All SA 260 (WCC) concerned the validity of a forfeiture clause in an antenuptial contract (ANC). The parties married in July 1992 in Germany. The marriage was governed by an ANC, incorporating the accrual system. The defendant (the husband) had convinced the plaintiff (the wife) to agree to a clause in the agreement, to the effect that she would under no circumstances be entitled to any maintenance in the event of divorce. At the time of her marriage the wife was 28 years old and the husband was 53. She was already pregnant and the husband was the father.

At the time of their marriage the husband had accumulated substantial wealth, including numerous properties.

Weinkove J held that the waiver of maintenance in the ANC was contrary to public policy and unenforceable. The relevant clause offended against public interest and considering the relative situation of the contracting parties at the time the clause was sought to be enforced, it rendered the enforcement of that clause unreasonable and voidable on the grounds of unfairness. Generally, any purported ouster of the jurisdiction of the court which deprives a party of a legal right or remedy is per se against public policy. The clause depriving the wife of maintenance was, therefore, not binding.

The court pointed to the husband’s conduct in concealing assets in his estate and his refusal to make proper disclosure as required by s 7 of the Matrimonial Property Act 88 of 1984. The court took note of the fact that the wife was in a less advantageous position than the husband at the time of entering into the marriage, that she was naïve and had nobody to properly advise her because the so-called legal experts she spoke to were not sufficiently informed, nor did they understand the laws of South Africa. Her main adviser was a business-law expert in Germany. The husband also failed to comply with his obligations in terms of the contract.

The court considered a number of factors in deciding on the quantum of maintenance to be awarded to the wife, including the 24-year duration of the marriage, and the vast disparity between the parties’ income earning capacity and their means. Much of the husband’s evidence was clouded and rejected by the court. It held that parties to a marriage owe each other a duty of utmost good faith at the time of the conclusion of an ANC and throughout the marriage.

Applying the above considerations to the facts of the present matter, the husband was directed to pay maintenance to the wife personally until her death or remarriage, in the amount of R 30 000 per month. Subject to the husband fully complying with all the terms of the order that amount would be reduced by R 1 000 for every R 285 000 in excess of R 4,4 million, which the wife was paid by the husband in respect of the accrual in his estate.

In deciding on costs, the court held that the husband, a senior advocate, had conducted the present litigation in a manner aimed at making it too expensive for the wife to litigate against him. It was the fault of the husband that the divorce trial took 50 days of court time. He adopted a ‘scorched earth’ policy with a total disregard for the costs involved.

The husband was accordingly ordered to pay the wife’s costs on an attorney and client scale, which included the cost of two counsel as well as the qualifying costs and their attendance fees of a number of expert witnesses.

Mortgage bonds

Rectification of: In AfrAsia Special Opportunities Fund (Pty) Ltd v Royal Anthem Investments 130 (Pty) Ltd [2016] 4 All SA 16 (WCC) the court was asked whether mortgage bonds are susceptible to rectification to correct any error and to record the true position.

The salient facts were that AfrAsia instituted action against Royal Anthem (RA) based on bonds registered by RA over RA’s immovable property as security for a loan advanced by AfrAsia to Craigan (Pty) Ltd (Craigan), another company in the same group as RA. The bonds were registered after RA signed a ‘limited guarantee agreement’ for R 22 million payable by Craigan to AfrAsia. Both RA and Craigan were represented by one Paget. Paget provided AfrAsia with a board resolution authorising RA to become a party to the transactions and to register ‘a mortgage bond over certain immovable assets of the Company’ in favour of AfrAsia. The resolution appeared to be signed by Paget and the other director, Muller. However, Muller denied ever signing such a document and declared his signature to be a forgery.

RA raised several defences against AfrAsia’s claim. For space considerations only two of these defences will be discussed here. First, RA argued that the bonds were registered as surety bonds although there was no suretyship agreement. The bonds also incorrectly stated that the main debtor was Scarab Investment Holdings (another member of the group) instead of Craigan. RA thus instituted a counter-claim for a declaration that the mortgage bonds were null and void. AfrAsia then applied for rectification of the bonds to replace ‘deed of suretyship’ with ‘limited guarantee’ and to reflect the correct main debtor as Craigan.

Secondly, RA relied on the lack of authority by Paget to represent the company. Paget had acquired all the shares in RA from Muller through a company named Market Demand Trading 620 (Pty) Ltd but the shares and their attendant rights had been pledged and ceded back to Muller as security until the full purchase price for the shares had been paid. Muller remained a director pending full payment, but Paget was also appointed as a director and took over executive management of RA although he was never appointed as managing director. AfrAsia was unaware of all these facts and believed Paget to be the managing director of RA.

In dealing with RA’s first defence, Binns-Ward J held that it was not a legal requirement for the validity of a bond that the nature of the underlying obligation must be described, but if it is, rectification of any errors to reflect the true position is possible as with any other contract. Provided there is an underlying obligation, any errors in describing the obligation will not affect the validity of the bond. Since it was understood by all the parties that the bonds were registered as a result of the guarantee agreement and that Craigan was the main debtor, rectification of the bonds would be unobjectionable. However, it would be pointless if the underlying obligation was not valid.

In deciding on RA’s second defence, the court pointed out that the fundamental question was whether Paget had authority to bind RA to the limited guarantee and bonds. The Turquand rule could only apply if the person had express, implied or ostensible authority subject to an internal management rule. Section 20(7) of the Companies Act 71 of 2008 (the Act) could also only serve as a defence against non-compliance with certain provisions of the Act if Paget had some form of authority to represent the company.

The court further held that Paget had no express authority, and even if it was accepted that he had implied authority as de facto managing director it would only extend to the ordinary scope of a company’s day-to-day business. Binding the company to payment of another company’s debts and securing the obligation with a bond over a substantial part of its assets was not a ‘normal’ contract and the company could thus not be bound.

From the evidence it was clear that AfrAsia did not believe Paget had authority to bind RA on his own, since they insisted that both directors had to sign the agreement. There was also no evidence of any misrepresentation by RA that Paget was authorised to convey the board’s consent to these transactions.

AfrAsia’s claim based on the bonds was dismissed.

Other cases

Apart from the cases and topics that were discussed or referred to above, the material under review also contained cases dealing with: Administrative justice, arbitration, civil procedure, company law (business rescue), competition law, constitutional law (housing; human rights; and validity of legislation), criminal law, criminal procedure, delict, immigration, intellectual property, labour law, land reform and mining and minerals.

 


 

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

December 2016 (6) South African Law Reports (pp 335 – 663); [2016] 3 All South African Law Reports August (pp 345 – 667); [2016] 3 All South African Law Reports September (pp 669 – 959); [2016] 4 All South African Law Reports October (pp 1 – 297); [2016] 4 All South African Law Reports November (pp 299 – 664); 2016 (12) Butterworths Constitutional Law Reports – December (pp 1515 – 1599)

Abbreviations:

CC: Constitutional Court

GJ: Gauteng Local Division, Johannesburg

GP: Gauteng Division, Pretoria

KZD: KwaZulu-Natal Local Division, Durban

SCA: Supreme Court of Appeal

WCC: Western Cape Division, Cape Town

 

Advocates

Striking off the name of a person from the roll of advocates: Section 7(1) and (2) of the Admission of Advocates Act 74 of 1964 (the Act) provides among others that the General Council of the Bar of South Africa (the GCB) may apply to the High Court for an order striking off the name of any person from the roll of advocates if that person is not fit and proper to practise as an advocate. In General Council of the Bar of South Africa v Jiba and Others [2016] 4 All SA 443 (GP) the applicant, GCB, made application for removal of the names of the three respondents from the roll of advocates on the ground that they were not fit and proper to continue practising as advocates. The first respondent, Jiba, was an advocate and Deputy National Director of Public Prosecutions. At some stage she also became the Acting National Director of Public Prosecutions. The second respondent, Mrwebi, was an advocate and Special Director of Public Prosecutions and Head of the Crime Unit within the National Prosecuting Authority (NPA). The third respondent, Mzinyathi, was an advocate and Director of Public Prosecutions, North Gauteng. The application was based on the request of the NPA, which was not happy with the conduct of the three respondents in the handling of among others, the case of Freedom Under Law v National Director of Public Prosecutions and Others 2014 (1) SA 254 (GNP) (the Mdluli case). In that case, the applicant Freedom Under Law (FUL), sought and was granted an order setting aside the decision of the second respondent in the present case (Mrwebi), to withdraw fraud and corruption charges against Mdluli, a Lieutenant General in the South African Police Service. Mdluli was arrested and charged with 18 offences including assault, kidnapping, rape, murder, fraud and corruption. While in detention Mdluli wrote to President Zuma promising that if the charges against him were withdrawn, he would see to it that he (Zuma) would be re-elected as President of the African National Congress (the governing political party) and of the country. After his lawyers made representation to the second respondent, Mrwebi, including repeating the promise made to President Zuma, fraud and corruption charges were withdrawn (by the second respondent), while murder and other charges were withdrawn by one advocate Chauke, Director of Public Prosecution, South Gauteng. In withdrawing fraud and corruption charges, the second respondent indicated that such was done after consultation, and therefore, with the consent of the third respondent, Mzinyathi. The GCB further contended that in her opposition to the Mdluli review application, the first respondent conducted herself in a manner which showed that she was not fit and proper to continue as an advocate.

Legodi J (Hughes J concurring) held that the first and second respondents were not fit and proper persons to continue practising as advocates and accordingly ordered that their names be struck from the roll of advocates. The two were ordered to pay the costs. The application against the third respondent was dismissed with costs as it had not been shown that he was a party to the withdrawal of fraud and corruption charges against Mdluli.

The court held that by failing to despatch the record (the docket and other documents) in the Mdluli review application as required by r 53 of the Uniform Rules of Court, the first and second respondents did so in bad faith. When the record was eventually despatched, even though incomplete, the first respondent acted contrary to the oath she took when she was admitted as an advocate and also flouted the requirements of her position as Deputy National Director of Public Prosecutions. Furthermore, she also disregarded the directive of the Deputy Judge President of the Gauteng Division, Pretoria, to deliver her answering affidavit by a specified date. Also, she disregarded the advice of her senior counsel on brief and, after getting the services of a new legal team, she acted contrary to the advice of senior counsel. The court further held that the first respondent was lying, was misleading the court, showed no remorse, was dishonest, acted mala fide and display an ulterior motive. In brief, she was determined to do everything in her power to ensure that the charges against Mdluli were permanently withdrawn.

Much of what the court said about the first respondent also applied to the second respondent. But more than anything else, he took the decision to withdraw the fraud and corruption charges against Mdluli on his own rather than in consultation with the third respondent as required by the National Prosecuting Authority Act 32 of 1998 and, thereafter, sought to mislead the court into believing that such was done after consultation and with the concurrence of the third respondent. Moreover, such withdrawal was not justified as there was prima facie evidence of commission of the offences as alleged. To add to that the second respondent was not honest and candid with the court.

Civil procedure

Application for rescission of judgment does not suspend operation of eviction order: Section 18(1) of the Superior Courts Act 10 of 2013 (the Act) provide among others that ‘unless the court under exceptional circumstances orders otherwise, the operation and execution of a decision which is the subject of an application for leave to appeal or of an appeal, is suspended pending the decision of the application or the appeal.’ It should be noted that the section deals with the effect of leave to appeal or the appeal itself. In Erstwhile Tenants of Williston Court and Others v Lewray Investments (Pty) Ltd and Another 2016 (6) SA 466 (GJ) the applicants, who were former occupants of a building in Parktown, Johannesburg, sought to extend the operation of the section to applications for rescission of judgment. The facts were that the owners of the property, the respondent Lewray Investments and another, were granted an interim eviction order pending a final eviction order. Thereafter, the applicants launched an application for rescission of the eviction order and contended that its effect was to suspend the operation of the eviction order. They accordingly sought restoration of possession, contending that the eviction order was unlawful. Their application was indicated as mandament van spolie. The application was dismissed with costs.

Meyer J held that it had been the intention of the legislature for the operation and execution of a decision, which is the subject of an application for rescission also to be automatically suspended, such decision would have been expressly included in s 18(1). The legislature would have expressed its intention to include such decision in clear and unambiguous language. To hold that the section had such effect would result in the absurdity that the filing of any unmeritorious application for rescission would foil the operation and execution of a decision, which was the subject of such an application. A person against whom the decision was the subject of an application for rescission could always approach the court under r 45A of the Uniform Rules of Court to suspend its execution pending finalisation of an application for rescission.

Section 18 only provided for the automatic suspension of the operation and execution of a decision pending an application for leave to appeal or an appeal. No other section of the Act provided for automatic suspension of the operation and execution of a decision, which was the subject of an application to rescind, correct, review or vary an order of court. There was nothing which indicated an intention on the part of the legislature to broaden the automatic suspension of the operation and execution of decisions beyond those included in s 18. Accordingly, the eviction of the applicants by execution of the interim eviction order did not amount to an unlawful deprivation of possession of the property. As a result they were not entitled to relief by way of mandament van spolie.

Companies

Business rescue – moratorium on legal proceedings against a company: According to s 133(1) of the Companies Act 71 of 2008 (the Act) the general rule is that no legal proceedings, including enforcement action, against the company subject to business rescue proceedings or in relation to any property ‘belonging to the company, or lawfully in its possession’, may be commenced or proceeded with in any forum. To this general rule there are exceptions in respect of which legal proceedings may commence or proceed such as with the written consent of the business rescue practitioner, with leave of the court or in the case of criminal proceedings.

In JVJ Logistics (Pty) Ltd v Standard Bank of South Africa Ltd and Others 2016 (6) SA 448 (KZD); [2016] 3 All SA 813 (KZD) the issue was whether the applicant, JVJ Logistics, was in ‘lawful possession’ of the property in question, being a motor vehicle, so as to prevent an enforcement action against it, namely immediate return of the vehicle. There the facts of the case were that the applicant bought a motor vehicle (truck) in terms of an instalment sale agreement. The applicant took possession of the vehicle while the first respondent, Standard Bank, retained ownership pending final payment. When the applicant fell into arrears with payment of instalments, the first respondent cancelled the agreement, after which it obtained a court order confirming cancellation and directing immediate return of the vehicle. Thereafter, the applicant was placed under business rescue proceedings and, as it needed the vehicle to conduct business, it brought the present application for an interdict restraining the first respondent from recovering the vehicle from it.

Olsen J dismissed the restraint application with costs. The court held that it was plain that an action in relation to property ‘not lawfully’ in the possession of the company could be maintained notwithstanding the moratorium. A purchaser under a normal bank instalment agreement reserving ownership of the vehicle to the bank acquired jus possidendi when put in possession of the property in terms of the agreement and lost it if the agreement was cancelled. From the moment the contract relating to the vehicle between the applicant and the first respondent was cancelled, the former’s possession was precarious, dependent as it were on the will of the first respondent as to whether it would or would not exercise its right to dispossess the applicant. Because of cancellation of the contract, the applicant’s possession of the vehicle was ‘unlawful’ and, therefore, not protected.

Note – A similar decision was reached in Southern Value Consortium v Tresso Trading 102 (Pty) Ltd and Others 2016 (6) SA 501 (WCC). Other cases reported during the period under review, dealing with business rescue proceedings, were Arendse and Others v Van der Merwe and Another NNO 2016 (6) SA 490 (GJ); [2016] 4 All SA 48 (GJ) (leave to institute proceedings against a company in business rescue); Absa Bank Ltd v Naude NO and Others 2016 (6) SA 540 (SCA) (challenging a vote approving a business rescue plan); and Eravin Construction CC v Bekker NO and Others 2016 (6) SA 589 (SCA) (prohibition against enforcement of pre-business rescue ‘debt owed’).

Contingency fees agreement

Attorney is not entitled to 25% of the capital amount recovered for the client: In Masango v Road Accident Fund 2016 (6) SA 508 (GJ) the plaintiff, Masango, having instituted a claim for compensation against the defendant, Road Accident Fund, the matter was settled and a draft order handed up to be made an order of court. There was a contingency fees agreement between the plaintiff and his firm of attorneys, clause 8 of which provided that if the plaintiff was successful in the proceedings a fee would be payable to the attorney, calculated at 25% (exclusive of value-added tax (VAT)) of the total amount awarded and/or obtained by the plaintiff in consequence of the proceedings. The clause further provided for the addition of 14% VAT, on top of the 25% fee, as well as for all disbursements (including interest) after which the remaining balance would be paid to the plaintiff. In brief, the clause provided that the attorney’s fee was 25% of the capital amount payable to the plaintiff, over and above which would be added 14% VAT. The issue before the court was whether clause 8 in particular, and a few other clauses, rendered the contingency fees agreement invalid and of no force and effect.

Mojapelo DJP made the draft order an order of court but declared the contingency fees agreement invalid and of no force and effect. As a result the attorney’s fees were held to be limited to the party and party costs on the High Court scale as agreed or taxed, which taxed or agreed costs would not exceed 25% of the capital amount provided for in the draft order.

It was held that a fee was only payable for professional services, which had been rendered. It was an established principle that charges for work not actually done could not be allowed on taxation. The practitioner’s statement for fees had to be specific in respect of the particular business done and for which a fee was charged. In litigious work the normal fees for attorneys were fees for services actually rendered or advice actually given. There was no basis for the practitioner to charge 25% of the client’s capital as his or her fees. The 25% of the client’s capital was introduced only as a maximum limit. The agreement in the instant case simply provided for the attorney to charge 25% of the capital amount as fees. There was no basis in the Contingency Fees Act 66 of 1997 (the CFA) that authorised or sanctioned such a provision in fee agreements or such practice by legal practitioners.

An attorney could not charge for anything other than the services he or she actually rendered. The services that an attorney charged for had, of necessity, to be specified in his or her account unless the client, properly informed, waived details of the services for which he or she was charged. There was no basis for an attorney to charge as his or her fees a percentage, be it 25% or even a smaller percentage, of the amount awarded to the client. The CFA did not provide such a basis.

On the issue of VAT the court held that s 65 of the Value-Added Tax Act 89 of 1991 (the VAT Act) made it clear that any price (fee) advertised or quoted (charged) by a vendor (legal practitioner) included VAT. VAT was levied on the supply by a vendor (the legal practitioner) and not on the consumer (the client) of services supplied by the vendor. It was, therefore, a tax on the legal practitioner and not the client. The quoted price (fees) was deemed to include VAT unless it was broken down into its components in terms of s 65 of the VAT Act to show the price without VAT, the amount of VAT and the price inclusive of VAT. What the client paid to the legal practitioner was the price (fee). The client did not pay VAT, although the price could be structured to account for the VAT payable by the legal practitioner to the South African Revenue Service. Regardless of how the price was structured or quoted, the final price charged by the vendor (legal practitioner) was (always) inclusive of VAT. VAT was not a tax, which the legal practitioner incurred on behalf of the client, and, therefore, recoverable from the client. It was a tax levied on the practitioner (as the supplier) and for which such practitioner was liable.

Delict

Liability for negligent misrepresentation and non-disclosure of secret commission: In Attorneys Fidelity Fund Board of Control v Intibane Mediates and Others 2016 (6) SA 415 (GP) the Law Society of South Africa (the LSSA) and the Attorneys Fidelity Fund (the AFF) mandated one Ramothibe, who was trading as the first respondent, Intibane Mediates, to find a suitable property, which could be used as their joint headquarters. Ramothibe found such building, which was owned by the third and fourth defendants, Erf 49-1 and Head Brothers respectively, both of which were represented by their director, Roome. Roome indicated his bottom-line price for the property as R 37,5 million. The contract was finalised and the purchase price duly paid. Thereafter, the AFF found out that the bottom-line price was in fact R 32 million and that Ramothibe and Roome concluded a confidential and secret agreement in terms of which the extra R 5,5 million was Ramothibe’s undisclosed commission. As Ramothibe had since passed away and his company Intibane had been deregistered, the plaintiff AFF proceeded against the third and fourth defendants on the basis of their director’s negligent misrepresentation and non-disclosure of Ramothibe’s secret commission. The claim was upheld with costs and the third and fourth defendants ordered to pay the R 5, 5 million secret commission with interest.

Potterill J held that on the common-cause facts it was established that during the negotiation process the AFF had no, and could not have had, any knowledge that Ramothibe, for his services, would also earn an inordinate amount of secret commission. There was no doubt that Ramothibe had a duty to disclose the commission to the AFF. Roome could in law never be entitled to a share of the commission be agreed to with Ramothibe and should be disgorged thereof. The AFF could reasonably have expected Roome to inform it that Ramothibe, its agent, was aspiring to secret commission that was inflating the purchase price. Roome would lose nothing as his real bottom-line price of R 32 million would still be attained. Yet Roome found it necessary to conclude non-disclosure agreements and addendums, thus making it clear that he knew he was acting untoward. Roome, in the common-cause facts and circumstances of the case, had a legal duty to inform the AFF of the secret commission. Policy considerations would in those circumstances place a legal duty on Roome, as the seller, to inform the AFF that his bottom-line price was R 32 million and that pressure was being placed on the AFF to pay more to accommodate a secret-commission deal being induced by Roome and the AFF’s own consultant, Ramothibe.

Fundamental rights

Judicial oversight of emoluments attachment order: Section 65J(2) of the Magistrates’ Courts Act 32 of 1944 (the Act), dealing with garnishee orders, provides among others that an emoluments attachment order (EAOs) shall not be issued unless the judgment debtor has consented thereto in writing or the court has so authorised or unless the judgment creditor or his or her attorney has sent a registered letter to the judgment debtor advising of the amount, together with costs, still outstanding and filed with the clerk of the court an affidavit setting forth the amount of the judgment debt, together with costs, still outstanding. The essence of the section is that an emoluments attachment order may be issued with the consent of the judgment debtor, by the clerk of the court or the court. The constitutionality of issuing an emoluments attachment other than by the court, that is, when it is issued with the consent of the judgment debtor or by the clerk of the court, was dealt with in University of Stellenbosch Legal Aid Clinic and Others v Minister of Justice and Correctional Services and Others 2016 (6) SA 596 (CC); 2016 (12) BCLR 1535 (CC). The facts of the case were that the applicant University of Stellenbosch Legal Aid Clinic acted for a number of low-income earners, the majority of whom were farmworkers, who concluded small loan agreements with credit providers. The agreements provided that in the event of breach of contract legal proceedings would be instituted in a magistrates’ court where the debtor was neither resident nor employed. The debtors having failed to make the required repayment, credit providers instituted legal proceedings in those courts and obtained default judgments, which were followed by EAOs. Before the WCC the constitutionality of s 65J(2) and validity of the EAOs were contested. Desai J declared the section unconstitutional and the attachment orders invalid.

As a result the applicant sought a CC order confirming the declaration of invalidity of the section. The credit providers appealed against the order of invalidity of the EAOs. The court dismissed the appeals with costs and declined to confirm the invalidity of the section. Instead, the section was saved from invalidity through severance and reading-in approach. The result was that only EAOs made with the consent of the judgment debtor and those made by the clerk of the court were declared invalid. It was held that in all instances an EAO had to be made by the court.

Reading the majority judgment Zondo J (Cameron J filing a concurring judgment while Jafta J dissented) held that where the court had authorised the issuing of an EAO there was judicial oversight. However, where a judgment debtor had consented thereto in writing there was no judicial oversight. Under the Act there were cases where the court authorised the issue of EAOs, while there were also cases where attachment orders were issued without any court intervention. That meant that there was judicial oversight in those cases where it was the court that authorised the issuing of an attachment order, while there was no judicial oversight in those cases where EAOs were issued without any prior intervention of the court. To the extent that the Act made provision for the issuing of EAOs without judicial oversight, it was inconsistent with s 34 of the Constitution and constitutionally invalid. To avoid that invalidity, the section had to be read as providing that in all instances EAOs had to be issued by the court.

See also:

Medical aid schemes

Credit balance in members’ personal medical savings accounts belongs to members and not the medical aid scheme: Section 4(4) of the Financial Institutions (Protection of Funds) Act 28 of 2001 (the FI Act) provides that a financial institution, including a medical aid scheme, ‘must keep trust property separate from assets belonging to that institution and must, in its books of account, clearly indicate the trust property as being property belonging to a specified principal.’ The section must be read together with s 4(5), which provides that ‘trust property invested, held, kept in safe custody, controlled or administered by a financial institution or a nominee company, under no circumstances forms part of the assets or funds of the financial institution or such nominee company.’

In Registrar of Medical Schemes and Another v Genesis Medical Scheme 2016 (6) SA 472 (SCA); [2016] 3 All SA 449 (SCA) the issue was whether credit balance in a medical scheme member’s personal medical savings account (PMSA funds) was property held by the medical scheme on behalf of its members or was the property of the medical scheme to be used for its own purposes and would, therefore, form part of its insolvent estate in the event of its liquidation. There the appellant Registrar of Medical Schemes rejected the annual financial statement of the respondent Genesis Medical Scheme as it treated the PMSA funds as its property. The WCC per Davis J held that the approach of the respondent was correct. An appeal against the High Court order was upheld with costs.

Willis JA (Seriti JA and Tsoka AJA concurring while Cachalia and Dambuza JJA dissented) held that it would offend against justice if PMSA funds were available to the predations of the concursus creditorum in the event of the insolvency of a medical scheme. There could be no question that funds invested by members of a medical scheme in their savings accounts with that medical scheme constituted incorporeal assets invested, controlled and administered by the scheme for and on behalf of its members. In unmistakable terms, s 4(5) of the FI Act ring-fenced items such as the savings accounts of members of a medical scheme from any concursus creditorum. Not only did s 4(4) provide that the savings accounts should be accounted for separately but it also provided the indicator as to how the books of account were to show the amounts standing to the credit of a member’s savings account as a liability of the scheme with there being a corresponding asset showing the assets as being separate from those of the scheme. In addition, in terms of reg 10(3) of the Medical Schemes Act 131 of 1998 Regulations, if a member owed a debt to a medical scheme at the termination of his membership of the medical scheme that member could use PMSA funds standing to his credit to offset such debt. If PMSA funds belonged to a medical scheme, such set-off would not be possible. The issue of set-off could only arise if PMSA funds were assets of members and not of the medical scheme.

Motor vehicle accidents

Claim by driver based on negligence of owner of vehicle: Section 17(1) of the Road Accident Fund 56 of 1996 (the Act) provides among others that the Road Accident Fund (the Fund) shall be obliged to compensate any person (the third party) for any loss or damage, which the third party has suffered as a result of any bodily injury to himself or herself, caused by or arising from the driving of a motor vehicle by any person, if the injury is due to the negligence or other wrongful act of the driver or owner of the motor vehicle. In brief, the section makes provision for compensation to a third party (innocent party) who is injured in a motor vehicle collision caused by the negligence or other wrongful conduct of the driver or owner of such vehicle.

In Abrahams v Road Accident Fund 2016 (6) SA 545 (WCC) the plaintiff, Abrahams, was injured in a single-vehicle collision when, as a driver, there was a tyre burst which resulted in him losing control of the vehicle during which it overturned. The defendant, the Fund, resisted the claim and raised a special plea that it was not liable as the injuries suffered by the plaintiff were not caused by the negligent and wrongful conduct of another driver or owner but by the plaintiff himself. On the other hand, the plaintiff contended that the defendant was liable for the negligent and wrongful conduct of the owner of the vehicle who gave him express permission to drive the vehicle, which was not properly maintained and was not roadworthy.

Salie-Hlophe J held that the provisions of the Act and the liability of the Fund created therein was that a driver of a motor vehicle who was a wrongdoer (the negligent driver) had no claim against the Fund when there was a single-motor vehicle collision and if there was no other driver or owner who was to blame for the collision. However, in the instant case the owner of the vehicle was to blame. At common law a justiciable claim accrued to the plaintiff the moment he was injured and suffered loss or damage as a result of the owner allowing or consenting to him to use the vehicle which was not in proper working order.

Other cases

Apart from the cases and material dealt with or referred to above the material under review also contained cases dealing with: Amending broadcasting digital migration without consulting with broadcasters and statutory bodies, approval of residential development scheme, consumer credit agreement, constitutionality of male-only and female-only dormitory rules, contributory negligence, declaration of mortgaged property as executable, disallowing a percentage of income tax deductions, effect of inadequate legal representation of a co-accused, granting of school fee exemption, informal settlement qualifying as housing, infringement of copyright, maintenance of divorced spouse until remarriage or death, marine insurance, meaning of administrative action, medical negligence, oppressive conduct in company law, ownership of copyright in cinematograph film, prescription period of debt owed to municipality, proof of claims in insolvency, refusal of building plans by municipality, rescission of judgment, rights and duties of members of a body corporate, separation of power, set-off by bank of money deposited into customer’s account, striking attorney from the roll for misconduct and subdivision of agricultural land.

 This article was first published in De Rebus in 2017 (Jan/Feb) DR 40.

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