Heinrich Schulze BLC LLB (UP) LLD (Unisa) is a professor of law at Unisa.
May 2012 (3) The South African Law Reports (pp 1 – 324); [2012] 2 The All South African Law Reports April no 1 (pp 1 – 110) and no 2 (pp 111 – 224)
Abbreviations:
GSJ: South Gauteng High Court
WCC: Western Cape High Court
Cohabitation
No duty to support subsequent to cohabitation: In McDonald v Young 2012 (3) SA 1 (SCA) the appellant, McDonald, and the respondent, Young, had cohabited ‘as man and wife’ for seven years. After their relationship broke down, McDonald unsuccessfully instituted a High Court action against Young for an order declaring that an express joint venture agreement had existed between them in respect of certain immovable property, alternatively for an order that Young pay him maintenance.
On appeal, Theron JA agreed with the High Court’s finding that McDonald had failed to prove the existence of a joint venture agreement. As to whether Young was under a duty – by operation of law or alternatively by virtue of a tacit contract – to support McDonald subsequent to their cohabitation, the court held that no duty of support arose by operation of law in the case of unmarried cohabitants; any obligations arising during the subsistence of their relationship arising only by agreement. In this regard, it referred with approval to the reasoning in the earlier decision in Dawood and Another v Minister of Home Affairs and Others; Shalabi and Another v Minister of Home Affairs and Others; Thomas and Another v Minister of Home Affairs and Others 2000 (3) SA 936 (CC).
The court further held that a tacit contract was established by conduct and there had to be evidence of conduct justifying an inference that there was consensus between the parties. McDonald’s stated belief that there was an express contract between him and Young in respect of the property precluded an inference to the effect that the parties had entered into a tacit agreement – the terms of which were inconsistent with the express agreement to which he testified – because such an inference could not be drawn where it would conflict with what he said was the actual position.
The appeal was accordingly dismissed with costs.
Company law
Purpose of business rescue: At stake in Oakdene Square Properties (Pty) Ltd and Others v Farm Bothasfontein (Kyalami) (Pty) Ltd and Others 2012 (3) SA 273 (GSJ) was the meaning and aims of s 131(4) of the Companies Act 71 of 2008, which deals with the newly introduced concept of business rescue for companies.
In short, a business rescue application results in a moratorium on enforcement action and creditors cannot proceed to have the property attached and sold.
The facts in Oakdene were as follows. The applicants, which included the holder of 40% of the shares in the first respondent farm Bothasfontein (the company), applied to have the company placed under business rescue. The company owned immovable property known as the Kyalami racetrack complex. The remaining two shareholders opposed the business rescue application. One of these two shareholders, Nedbank, was also a major creditor of the company and held a mortgage bond over its immovable property. Nedbank had obtained judgment against the company and was in the process of having the property attached for sale in execution when the business rescue application was lodged. Nedbank and the other opposing shareholder believed that the company should rather be wound-up and accordingly lodged a counter-application for its winding-up. The company was involved in several disputes and pending court cases pertaining to agreements concluded on its behalf with entities associated with certain of the directors.
Two applications to institute business rescue proceedings served before Claassen J. For the sake of brevity only the first will be dealt with here. The court confirmed that the general aim of business rescue is to preserve the value of a company’s business as a going concern and to prevent job losses. In order to avoid the negative social effects of unnecessary liquidations, business rescue must be given preference over liquidation.
However, different considerations apply when a company has no employees and no actual ‘business’ to save. In such circumstances, the interests of creditors should carry more weight than those of the company.
In the present case the applicants did not seek the rehabilitation and continued existence of the company, but envisaged that the business rescue practitioner would sell the immovable property in the open market. Their application was thus based on the secondary objective of business rescue, namely ensuring a better return for creditors or shareholders than could be achieved in liquidation.
However, no factual evidence was presented to indicate that a liquidator would be less successful than a business rescue practitioner in realising the property for its market value. A liquidator could sell the property through public auction or private treaty.
Where a company is involved in legal disputes and litigation, a business rescue practitioner would face serious challenges in preparing a business rescue plan catering for all uncertainties and possible outcomes. Many of the disputes would be solved by a liquidation order. A liquidator is entitled by law to sell immovable property free of a lease, thus avoiding difficulty surrounding the validity of a lease. A liquidator also has the power to have certain transactions set aside.
A business rescue practitioner would not be able to resolve the deadlock caused by the antagonism between shareholders, and the expected lack of cooperation and support would have a negative impact on the business rescue proceedings. Liquidation is a more appropriate solution in the case of a deadlock.
The fees, costs and expenses of a liquidator are taxed by the Master, meaning that they are subject to independent control. This protection is not available with respect to the fees charged by a business rescue practitioner and the costs may thus be higher.
Here, several years had lapsed since the company last published financial statements. A business rescue practitioner must have access to the financial statements in order to perform his functions and taking steps to obtain these from directors would result in further delays and higher costs. In contrast, the absence of financial statements should not affect a liquidator, who simply has to gather the company’s property and realise it.
The court dismissed the first application with costs and ordered that the company be placed in final liquidation.
Delict
Vicarious liability: In Kasper v André Kemp Boerdery CC 2012 (3) SA 20 (WCC) the court was asked to consider the vicarious liability of an employer for the conduct of his employee.
The facts were that the appellant, Kasper, who was a farmer, instructed his worker to rake up weeds from a field, pile them onto a trailer, and then to tow the trailer to a donga and dump the weeds into it. The worker raked the weeds into piles but decided that, instead of transporting them to the donga, he would set them afire. He lit the first heap and the fire flared out of control. The fire crossed onto the neighbouring land of the respondent (André Kemp Boerdery), causing damage. The neighbour sued for compensation. In issue was whether the farmer could be held vicariously liable for the acts of his worker where the worker had disobeyed his instructions. In the court a quo Kasper was held to be vicariously liable for his employee’s conduct.
On appeal to a full Bench of the WCC, Gamble J held that it could not be said that, in burning the weeds rather than dumping them in the donga, the employee had ‘completely disengaged himself from the duties of his contract of employment’. His conduct fell within the ‘important distinction’ that the court in Moghamat v Centre Guards CC [2004] 1 All SA 221 (C) drew between ‘a prohibition which limits the sphere of employment’, on the one hand, and ‘one which only deals with conduct within the sphere of employment’, on the other hand. The facts of the present case clearly fell within the latter category or, as was held in Feldman (Pty) Ltd v Mall 1945 AD 733, the conduct of the employee constituted an ‘improper mode’ of the discharge of the employee’s contract of employment. In conclusion on this point, the court posed the following rhetorical question: If the employee was not acting within the course and scope of his employment with the defendant, in whose business was he engaged?
Kasper was accordingly held to be vicariously liable for the damage caused by his employee and the appeal was dismissed with costs.
Husband and wife
Effect of antenuptial contract: In JG v MG 2012 (3) SA 12 (FB) JG (the husband) and MG (the wife) were married out of community of property with the exclusion of the accrual system. The husband had concluded an agreement with a retirement village in terms of which he was granted a life interest in one of the village units. The agreement provided that an occupier was not entitled to cede his right of occupation without prior approval. The antenuptial contract (ANC) concluded by the parties provided for the cession of the husband’s right of occupation to the wife and stipulated that the right would accrue to her for the duration of her life. In subsequent divorce proceedings the wife claimed maintenance as well as implementation of the ANC. The trial court found that the provisions of the ANC granting the wife the right of occupation of the unit in question were void ab initio and unenforceable, and made a maintenance order under s 7(2) of the Divorce Act 70 of 1979 directing the husband to grant the wife the right to occupy the unit.
On appeal to a full Bench, Van der Merwe J held that the finding of the trial court in respect of the provisions of the ANC was incorrect. The prohibition in the life-interest agreement concluded by the husband did not result in the nullity of the cession provided for in the ANC; rather, the cession had to be interpreted to mean that the husband would abandon his right of occupation for the duration of the wife’s right of occupation. Consequently, the trial court ought to have awarded the wife a right of occupation on the basis that she was entitled to it, and not under a discretionary award of maintenance.
The husband’s appeal against the order of the trial court directing him to ensure that the wife was awarded the exclusive right of occupation of the unit was accordingly dismissed. The parties had to pay their own costs.
Insolvency law
Application for provisional sequestration: In FirstRand Bank Ltd v Janse van Rensburg and a Related Matter [2012] 2 All SA 186 (ECP) the applicant bank sought provisional sequestration orders against the respondent debtors, who were married to each other out of community of property. The bank relied on s 8(g) of the Insolvency Act 24 of 1936. It alleged that the debtors had committed an act of insolvency by applying for debt review in terms of s 86 of the National Credit Act 34 of 2005 (NCA).
The bank was a registered credit provider in terms of the NCA. In 2002 it lent money to a close corporation (CC) in which each of the debtors held a 50% membership interest. The CC was indebted to the bank in the sum of R 638 790,22 and the debtors signed a deed of suretyship in respect of such indebtedness.
The court requested submissions on the question of whether an application for debt review constitutes an act of insolvency and whether the bank had established that an act of insolvency in terms of s 8(g) of the Insolvency Act had been committed. The bank relied on the case of FirstRand Bank Ltd v Evans 2011 (4) SA 597 (KZD) for its proposition that notice of the fact that a debtor is under debt review constitutes an act of insolvency in terms of s 8(g) of the Insolvency Act.
Goosen J held that the reliance on the Evans case was misplaced. The applicant in that matter relied on a letter sent to it by the respondent, advising that the respondent had been placed under debt review. The judge in the Evans case pointed out that the purpose of the application for debt review was to obtain a declaration that the respondent was over-indebted. Referring to s 79(1) of the NCA, the court held that the statement of what constitutes over-indebtedness in s 79(1) for the purposes of the NCA establishes that a debtor who informs his creditor that he has applied for debt review is necessarily informing the creditor that he is over-indebted and unable to pay his debts. The court held that the requirements of s 8(g) are satisfied when the notice given by the debtor to the creditor conveys that the debtor is at present unable to pay his debts. It was found in the Evans case that the letter addressed to the creditor constituted an act of insolvency by the debtor in terms of s 8(g).
In the present case, the court further held that the Evans case was not authority for the general proposition that the mere fact of an application for debt review in terms of the NCA constitutes compliance with the provisions of s 8(g) of the Insolvency Act. The finding that an act of insolvency had been committed by the debtor in the Evans case turned on the delivery by the debtor to the applicant creditor of a written notice drawing to the attention of the creditor that the debtor had been placed under debt review and, given the particular facts of the Evans matter, the reasonable interpretation of that written notice by the applicant creditor. It was not found that notice of the mere fact of an application for debt review constitutes written notice of inability to pay a debt as required by s 8(g).
The court further emphasised the difference between an application for debt review, on the one hand, and an application for an administrative order, on the other hand. The court held that the procedure by which a debtor can apply for an administration order, in terms of s 74 of the Magistrates’ Courts Act 32 of 1944, involves a materially different procedure to that now provided by the NCA. The application for an administrative order meets the particular requirements of s 8(g) of the Insolvency Act, namely notice in writing delivered to a creditor in which the debtor states that he is unable to meet his financial obligations. An unequivocal statement of inability to pay is a critical requirement.
The procedure by which a consumer or debtor applies for debt review in terms of the NCA is different. The application for debt review in terms of s 86 of the NCA does not involve notice given by the debtor to the creditor in which the debtor declares an inability to pay one or more of his debts. A notice of inability to pay a debt envisaged by s 8(g) of the Insolvency Act must be given deliberately and with the intention of giving such notice. No such notice formed the basis of the bank’s applications in the present instance. The written notice on which the bank relied was one communicated by a credit bureau rather than by the debtor. It therefore fell short of what was required as it could not be found that the credit bureau acted on the basis of authority specifically conferred by the respondents or on the basis of any general authority that could bind the respondents.
The conclusion was that the bank had failed to establish that the debtors committed an act of insolvency in terms of s 8(g) of the Insolvency Act.
The bank’s application was therefore dismissed.
National Credit Act
Applicability to lease contract: In Absa Technology Finance Solutions (Pty) Ltd v Viljoen t/a Wonderhoek Enterprises 2012 (3) SA 149 (GNP) the court was asked to pronounce on whether a straightforward lease of movables where there is no deferred payment, or any fee payable for the deferment, is subject to the National Credit Act 34 of 2005 (NCA).
The facts were that the plaintiff, Absa, a financial institution, acquired certain digital display boards that it leased to Viljoen at an agreed invariable monthly rental. The agreement provided that the goods were to be supplied by someone other than the lessor (described in the agreement as the ‘supplier’) and that the lessee would take delivery of the goods and hold them on the lessor’s behalf for the duration of the agreement. The agreement made no provision for the transfer of the ownership of the goods. Viljoen defaulted on his monthly payments and Absa lodged a claim for payment of arrear rental, damages and ancillary relief.
Viljoen’s main defence against the claim was that the lease constituted a credit agreement in terms of the NCA and that Absa had failed to send the requisite s 129 notice. Section 129 requires a creditor to send a notice to the debtor before legal action can be instituted against the latter.
The court invoked r 33(4) of the Uniform Rules of Court and ruled that the question as to whether the NCA applied to the agreement had to be decided first and separately from all issues arising from the action.
Tuchten J referred to the earlier decision in Tucker v Ginsberg 1962 (2) SA 58 (W), in which the court, in interpreting s 14(1) of the Usury Act 37 of 1926, held that the court must look at the nature of the transaction and not its object. However, Tuchten J pointed out that there was no provision in the NCA equivalent to that of s 14(1) of the Usury Act, which deemed a transaction ‘substantially one of money lending’ subject to the provisions of this Act.
The court held that the scope of the NCA is determined, inter alia, by the provisions of s 8(4) of the NCA. The definition of a ‘credit agreement’ requires two essential characteristics –
The agreement in Absa Technology did not constitute a lease as defined in s 8(4)(e) because there was no provision for a transfer of ownership as required. The agreement was also not a general unnamed credit agreement under s 8(4)(f) because there was no provision for the deferment of the payment, or for the payment of a fee or interest.
The court concluded that, unless an agreement is a simulated agreement aimed at unlawfully avoiding the application of the NCA, the agreement will be a common law lease agreement that is not subject to the NCA.
Over-indebtedness: In Andrews v Nedbank Ltd 2012 (3) SA 82 (ECG) summary judgment was granted against the appellant debtor for payment of an amount in respect of money lent and advanced by the respondent, Nedbank, to the debtor in terms of a written agreement and incorporated into a mortgage bond that Nedbank had registered over the debtor’s immovable property.
In an appeal against the summary judgment, the debtor relied on the ground that the court erred in finding that he (the debtor) had placed insufficient facts before it to enable the court to exercise its discretion in terms of s 85, read with ss 86 and 87, of the National Credit Act 34 of 2005 (NCA).
Smith J held that the fact that the legislature did not enumerate factors or circumstances that should be considered by the court when called on to exercise its discretion meant that the court had to exercise a judicial discretion with due regard to all relevant facts placed before it. These circumstances must include the purpose of the NCA, as detailed in s 3, as well as the consumer’s prospects and future ability to satisfy its obligations in terms of the credit agreement, particularly in a case where there was no question of the reckless granting of credit.
Accordingly, so the court reasoned, based on all the facts, it would not have come to a conclusion other than the one of summary judgment handed down in the court a quo. The debt counsellor had already restructured the debtor’s debts but had failed to make provision for the payment of interest, which formed a substantial part of the payment to Nedbank. The impact of the addition of that further liability on the debtor’s restructured financial position was patently apparent and did not require consideration or confirmation by a debt counsellor. The court was unable to find any evidence of misdirection on the part of the judge that would indicate that he did not exercise his judicial discretion properly.
The appeal was accordingly dismissed with costs.
Requirements of a s 129 notice: Where a credit agreement makes provision for the sending of notices to a postal address and makes provision for the service of litigation documents at a physical address, proof of sending a notice to the physical address is insufficient to comply with the requirements of s 129 of the National Credit Act 34 of 2005 (NCA). This was the gist of the court’s finding in Greeff v FirstRand Bank Ltd 2012 (3) SA 157 (NCK).
Greeff and FirstRand Bank were parties to a mortgage loan agreement. The agreement provided for a postal address to receive ‘all forms, communications and notices which will be sent by registered or ordinary post’ and a physical address for ‘the service of all forms, notices and documents in respect of any legal proceedings which may be instituted’.
After Greeff fell into arrears with the monthly payment, the bank sent the required s 129 notice to her physical address. Greeff denied having received this notice. After default judgment was granted, Greeff applied for rescission of the judgment based on the defence that she was over-indebted, which defence the court rejected.
However, the court, of its own account, raised the question whether the notice had been ‘sent’ to Greeff as required by s 129 of the NCA. The bank argued that the contract provided for the service of more important documents, such as court documents, to the physical address of the consumer and that the s 129 notice was such a document, it being the first step in the litigation process.
Olivier J held that where a consumer has chosen a method of delivery for documents for purposes of the NCA, proof of sending the document by means of that method is sufficient to prove ‘delivery’ without proving that the consumer had actually received the document. In this regard, the court referred with approval to the decision in Rossouw and Another v FirstRand Bank Ltd 2010 (6) SA 439 (SCA).
Where the credit provider uses a method of delivery other than that agreed on, the credit provider must prove actual receipt of the document in order to comply with the requirements of s 129.
The court further pointed out that the s 129 notice is not a document ‘in respect of legal proceedings’. It is simply a notice that is expressly authorised in the agreement to be sent by registered post. Sending a letter by registered post also does not constitute ‘service’ as provided for in the agreement.
As a result, so the court reasoned, the bank bore the risk of non-receipt. The court consequently held that default judgment should not have been granted.
A single judge, as well as a full court, in the GSJ found that proof of dispatch was sufficient. This was confirmed by the Constitutional Court, which held that it was sufficient for a credit provider to prove that a s 129 notice was delivered to the consumer and it was not required to prove that the notice did, in fact, come to the debtor’s attention. The court held that the credit provider should ordinarily show delivery of a notice by proving registered dispatch to the address of the debtor and that the notice reached the appropriate post office for delivery to the debtor. It held further that, if the debtor contends that the notice was not received, the court must establish whether the credit provider complied with the provisions of the NCA and, if it is found that it has not, the Act requires the matter to be adjourned for the credit provider to take the steps directed by the court to enable the debtor to exercise his rights – Editor.
Prescription
Acquisitive prescription: In Morgenster 1711 (Pty) Ltd v De Kock NO and Others 2012 (3) SA 59 (WCC) the court was asked to decide whether the applicant had acquired a portion of the respondent’s farm in the Somerset West district through acquisitive prescription.
The applicant was the owner of the farm Morgenster to the north of the cadastral boundary with the respondents’ farm, Waterkloof, to the south. A wire fence ran along, but not exactly along, the cadastral boundary from east to west, the fence deviating somewhat north of that boundary. The strip south of the fence up to the cadastral boundary was in dispute. The applicant sought to be declared its owner while the respondents claimed ownership by acquisitive prescription. In issue was whether the respondents had proved, as required by s 1 of the Prescription Act 68 of 1969 (the Act), that they had ‘possessed [the said portion of the applicant’s farm] openly and as if [the respondents] were the owner[s] thereof’ (my insertions).
Rogers AJ held that they had not. The possession contemplated in s 1 of the Act is so-called civil possession. Such possession has an objective and a subjective element, namely physical possession coupled with animus domini (ie, the intention of being owner).
The court was not satisfied that the respondents had openly possessed the disputed land: There was no clear-cut evidence that the respondents’ predecessors in title had erected the fence in question, or that the area was cultivated or used for grazing. In addition, there was no evidence that the predecessors in title of the respondents had the required mental attitude of owners. Accordingly, the court declared the applicant the owner of the land.
The application was allowed with costs.
Voluntary association
Power by association to discipline non-member: In Clur v Keil and Others 2012 (3) SA 50 (ECG) the applicant, Clur, operated a fishing charter operation and the fifth respondent was a voluntary association, the Kei Mouth Ski Boat Club, which had been granted a government licence to manage a boat launch site on the Kei River marine reserve ‘as a public facility’. During January 2010 the club charged Clur, a non-member, with fishing illegally in a marine reserve. He denied the charge and argued that the clients whom his skipper took out in his boat were ‘merely preparing fishing tackle’. He was found guilty as charged and ‘permanently banned’ from using the club’s launch site. In an application for review, the court had to decide whether the club had the authority to impose disciplinary sanctions on a non-member such as Clur.
Plasket J held that, under the principle of legality, any action taken by a public body had to be justified by positive law, and the same rule applied to private bodies exercising public powers. On an analysis of the legislative and administrative scheme under which the provincial government had granted the club its licence, it appeared that the latter was not empowered to conduct disciplinary proceedings against non-members, and accordingly the finding of guilt and the sanction imposed on Clur fell to be set aside.
The application was thus allowed with costs.
Wills
Requirements for valid amendment of a will: The importance of drafting a will in clear and unambiguous terms was highlighted in the case of Taylor and Others v Taylor and Others 2012 (3) SA 219 (ECP). The facts were that, approximately one year before his death, the deceased learnt that he was terminally ill. In March 2006 he drafted and formally executed a will. In it he bequeathed his house to his three children and his personal effects and the residue of his estate to his wife. In September 2006 he drafted a document in which he set out his ‘wishes’ with respect to his property. The deceased expressed in the document that it was his wish that his wife be allowed to remain living in the house, that his household effects be used in the house until their replacement, that his more specialised effects (eg his stamp collection, books, power tools and other similar assets) be given to his family or sold and that any cash, shares or overseas investments should go to the children.
In October 2006 the deceased died and a dispute arose between his wife and his children as to the distribution of his estate. The applicants were the deceased’s three children, who contended that the ‘wishes document’ was intended by the deceased to be an amendment of his will. The deceased’s wife argued to the contrary.
The question before the court was whether, in terms of s 2(3) of the Wills Act 7 of 1953 (the Act), the deceased had intended the ‘wishes’ document to be such an amendment. Section 2(3) of the Act provides: ‘If a court is satisfied that a document or the amendment of a document drafted or executed by a person who has died since the drafting or execution thereof, was intended to be his will or an amendment of his will, the court shall order the Master to accept that document … as a will, although it does not comply with all the formalities [required by s 2(1) of the Act]’ (my insertion).
Griffiths J considered the language of the document and the circumstances preceding its drafting, and held that the deceased had not intended the document to be an amendment of the will that he executed in March 2006.
The court pointed out that the discretionary language used, such as ‘it is my wish’, ‘the two flats can be rented’, ‘it is suggested that’, ‘in the distribution … please be as fair as possible’ and so on, militated against such a finding, as did the circumstances: A few months before drawing up the document, the deceased had formally executed the will and therefore must have been aware that an amending document would require the same formalities. That he had this knowledge and yet did not formally execute the document indicated that he did not intend it to amend his will.
The language employed by the deceased in the document that he drafted in September 2006 did not demonstrate an intention on the part of the deceased to amend his last will and testament. On the contrary, what it appeared to indicate was that the deceased intended that his last will and testament should stand but that it was his desire, notwithstanding the bequests made therein, that his family should stand together when it came to the administration of the estate and the distribution of the assets, and that these should be distributed equitably among the parties involved.
Moreover, there was no evidence that, in the period between the drafting of the will and the document, his life circumstances had changed to such an extent as to persuade him to change his will.
The application was thus dismissed with costs
Other cases
Apart from the cases and topics referred to above, the material under review also contained cases dealing with administrative law, damages, divorce, execution, immigration, insolvency, insurance, labour law, local authorities, motor vehicle accidents, pleadings, powers of the President, practice, stay of proceedings and theft of electricity.
This article was first published in De Rebus in 2012 (July) DR 43.
