September 7, 2021
Writing something inspiring in the beginning of September should be easy. There is so much to take positive inspiration from – we just ended Womens Month in August, it is the start of Spring and nature is waking up with blooms and blossoms wherever you look, and we are celebrating heritage month in our lovely country South Africa this month.
But the truth of the matter is, this is not a normal Spring season. Instead of walking around with smiles on our faces, smelling the roses as we go, we have to wear facemasks when out in public. Instead of attending spring festivals and planning holidays with loved ones, we are forced to social distance and nobody is sure when we will be able to gather in large numbers again. We are waking up every day to more news of loved ones being tested positive, and even the devastating heart-breaking news of loved ones passing on, not surviving the virus. People are scared and confused – vaxxers and anti-vaxxers are criticising each other on social media. No one knows what is lying ahead for us in the months and years to come. One thing that is sure though, is that nothing will ever be the same again.
Having said all that, I am still going to refer you to a story from nature. My grandmother had an Amaryllis flower, which flowered so well over the years that all of our family members have been fortunate enough to receive a bulb. Each year we would announce to each other “ouma is blooming”, when the pink flowers start to blossom.
My “ouma” plant sadly was eaten by worms this year – within the midst of everyday live and tragedy I saw too late that the leaves were turning brown. An early sign of worms eating at the bulb of the plant. I gave the necessary pesticide, but sadly it seemed to be too late as all the leaves of the plant died away.
Over the past weekend, I looked at my “ouma” plant and to my surprise I saw the green of a flower sprouting out of the bulb! The plant has no leaves, has been eaten rotten by worms, but not only is it not dead, it still has the energy to produce a flower!!
Sometimes looking at nature makes me feel small and even a little embarrassed. Through all the turmoil we face in our daily lives, we as humans many times feel like we cannot go on. Like the “worms” of our existence have eaten away at everything that could ever be considered as beautiful in our lives. May you, like me, take inspiration from the lesson learned from this little Amaryllis plant. May we stand proud through our storms – and not only survive them, but still find the energy to produce a beautiful flower!
September 7, 2021
“In common law, everyone is in general permitted to use their property for any purpose they choose, provided that the use of the property should not intrude unreasonably on the use and enjoyment by the neighbours of their properties” (extract from the “gym case” below)Consider this unhappy scenario – you buy your dream home (or perhaps new business premises), only to find that you are afflicted with the noisiest and most unreasonable neighbours you have ever encountered. A friendly approach to them produces no result. Can you get a court order to stop the noise? Let’s address that question with reference to two recent court cases, but first –
What must you prove?To get a “final interdict” (in this instance a court order compelling the offenders to put an end to the noise) you have to prove three things –
- “A clear right”,
- “An injury actually committed or reasonably apprehended”, and
- “The absence of similar protection by any other ordinary remedy” (in other words, you must show that you have no adequate alternative remedy available to you – an important aspect, as we shall see below).
- A pastor, needing “a peaceful environment to write, research, study and counsel his congregants”, applied to the High Court for an interdict against his neighbours. The problem was their home business in the form of a puppy daycare centre, operating in their garden and offering supervision, structured playtime, potty training, basic training, socialisation and so on for up to 17 dogs at a time.
- The complaint centered on barking on the property, triggering “a cacophony of barking from all the dogs in the neighbourhood” – starting at 6.30 am (Monday to Saturday) until 6 pm. This, said the pastor, was “disturbing and disruptive to the peaceful enjoyment of his property and to his daily activities”, plus it had seriously affected the value of his property.
- Before buying the property he had viewed it over a weekend when there was no noise, and, because it was important to him, had specifically asked the previous owner about whether there was a barking problem in the neighbourhood.
- After fruitless discussions with the neighbours, he reported them to the municipal authorities (the City of Cape Town), lodging complaints for almost 4 years, resulting only in the issue of a compliance notice which the City failed to enforce, and a failed attempt at prosecution.
- In the High Court the complainant’s attack relied not only on common law “nuisance law” but also on alleged contraventions of the Western Cape Noise Control Regulations (all local authorities have power to make such regulations in terms of National Regulations), the City’s Development Management Scheme (with its restrictions on home business activities) and Animal By-Laws.
- The puppy daycare business raised a series of defences to these lines of attack, and disputed many of the complainant’s factual allegations, but in the end result the Court ordered the business to stop operating immediately. The business activity, said the Court, was “abnormal use” of a residential property, and “While such noise may be bearable in a busy City, where there is a lot of activity, such as large volumes of traffic, the constant movement of people and crowds and noise created by businesses, it would definitely disturb the peace and serenity of a quiet neighbourhood where such noises are not expected, and to which the applicant is entitled.” (Emphasis supplied).
- The owners of a property in a multi-storey building in the centre of Cape Town (a married couple living there and an attorney running a law practice in it) approached the High Court for an interdict against the neighbouring gym on the grounds of a substantial noise nuisance. The married couple’s bedroom window is just over a metre away from the window and balcony of the gym.
- The gym’s premises are zoned for commercial use, and there was no dispute that the area was subject to “substantial traffic noise”, but the complaints centered on allegations that the gym produced “loud techno/dance music with a strong beat” and microphone-amplified voice instructions to attendees at gym classes – at times ranging from 6 am to 6.45 pm.
- Many of the facts of the matter were, as is common in such bitterly fought matters, in dispute, and ultimately the Court declined to grant the interdict partially on the grounds of unresolved disputes of fact. Clearly the fact that the area was subject to considerable levels of “inner-city noise” anyway played a part, but the deciding factor seems to have been the Court’s finding that the complainants had declined the neighbour’s offer to follow the processes of the local Noise Control Regulations, which the Court held to provide an “adequate alternative remedy”.
- Moral of this story – don’t expect too much peace and quiet in a city centre, and exhaust all alternative remedies before asking for an interdict!
Property buyers – do your “noise risk” homework upfront!Which leads us to a general note of caution to anyone about to buy a property – prevention being as ever a lot better than cure, investigate and understand the potential for “noisy neighbours” disrupting your peace and quiet before putting in your offer. For example, the pastor in the puppy case took at face value the seller’s reassurances about excessive barking in the neighbourhood – he could perhaps have saved himself 5 years of stress and trouble had he been a bit more cynical and returned to the neighbourhood at various times during the week just to check. And bear in mind that what may be considered a totally unreasonable noise level in one context could be considered quite acceptable in another. As the Court in the gym case put it: “…the applicants cannot expect the quiet serenity of the suburbs while living in the inner-city, which comprises a mix of commercial and residential properties, and particularly having purchased a property that is immediately adjacent to a commercially-zoned property.” (Emphasis supplied). Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
September 7, 2021
“Don’t fear death, plan for it” (Anon)Amazingly, here we are in the middle of a deadly pandemic yet still some 70% – 80% of working South Africans are said to have no will in place. That’s crazy for two reasons –
- Without a will your loved ones are exposed When you die your grieving family must start learning to cope without you, don’t expose them to the added uncertainty and worry that they will face if you haven’t left in place a valid will (often referred to as a “Last Will and Testament” to distinguish it from a “Living Will”). Without a will, your estate will be wound up in accordance with our laws of “intestate succession”. You have forfeited your right (and duty) to ensure that your loved ones each receive what they need from your estate, that your children and their inheritances are properly looked after, and that your estate is wound up by someone you trust.
- Estate planning is essential Estate planning in this context is the process of arranging your financial affairs in such a way that the legacy you leave is as large and as well-structured as possible. This needn’t be overly complicated or expensive, and everyone should have their own estate plan regardless of age, health or financial position. In a nutshell you are looking to maximise assets, to reduce estate costs and the taxman’s cut, and to streamline the process of winding up your estate so your heirs are paid out as quickly as possible. No will means no estate plan, and no estate plan means unnecessary worry, cost and delay for your grieving family.
How to protect your family with a 15-point checklistUse this checklist to make sure you provide for your family’s happiness and financial wellbeing long after you are gone –
- Make a will: See above – a will is a no-brainer! The consequences of dropping the ball on this one are so serious, and it is so easy to make a proper will, that endangering your family’s security and happiness by not having one just makes no sense at all.
- Don’t Procrastinate: Procrastination is human and, when it comes to contemplating one’s own mortality, entirely understandable. But it’s not forgivable – death is inevitable, and absolutely no one, no matter how healthy or young, can assume that they will be alive tomorrow. All too often death comes without knocking, so don’t fear it – plan for it. Now.
- Beware the DIY route: As tempting as it may be, going the DIY route (online will templates are easily found) is a bit like packing your own parachute for your first jump without assistance – great if you are an expert, but for most of us getting professional help makes a great deal more sense. It’s not you but your loved ones who have to live with any mistakes you make now!
- Ensure validity: Your will to be valid must comply with all legal formalities, and although the courts have a discretion to declare a “defective” will valid that process is uncertain, slow and expensive. Rather get it right upfront.
- Avoid ambiguity and dispute: Any lack of clarity in the wording of your will is fertile ground for dispute, and our courts are regularly called upon to sort out bitter, divisive and expensive family feuds that could have been avoided with a professionally drafted will setting out clearly and concisely exactly what the deceased’s wishes and intentions were.
- Foreign assets: If you have assets in another country, you may need a foreign will as well as a South African one – ask a professional.
- Consider business continuity: If one of your assets is an operating business, or an interest in one, put a continuity plan in place so it can be carried on without interruption.
- Review your will regularly: This one is easily (and commonly) overlooked. You finally get a will in place and think “great, that’s it then”. Not so! Personal circumstances change, laws change, taxes change – diarise to review and if need be update/replace your will no less than annually.
- Choose your executor wisely: This can be make or break for your family. Choose someone you can depend on to wind up your estate quickly and professionally.
- Pay special attention to your minor children’s needs: Firstly, this is your chance to leave each of your children what they will need financially. You could split your estate in equal portions, or you may decide to differentiate based on each one’s situation and needs (a tip here to avoid a family feud – explain to everyone upfront the reason for your decision). Now is also where you nominate your choice of guardian for your minor children – don’t leave that choice to others! Ensure also that your minor children’s’ inheritances are held in trust for them, with your choice of trustees.
- Reduce costs and taxes: To maximise what your heirs receive you need to look at all the costs your deceased estate will have to pay out. A professional can guide you through the process of minimising estate duty, executor’s fees and costs (beware of false economy here – “cheap” could also be “nasty”!). Taxes – income tax and capital gains tax in particular – can take a sizeable chunk of your estate without proper planning.
- Nominate beneficiaries whenever you can: Where you are able to, nominate beneficiaries for your life policies, annuities, tax-free investments etc to ensure payout directly to chosen recipients, without all the delay inherent in the process of winding up your estate and in many instances reducing costs and taxes. Take professional advice here – different rules apply to each of these categories.
- Plan for liquidity issues. Plus, what will your family live on? You don’t want the executor to be forced to sell an asset (your house or business perhaps) that you have left to a particular heir, but that will happen if there is insufficient cash in the estate to meet the various costs and taxes of winding it up. Similarly, your bank accounts and the like will be frozen once the bank becomes aware of your death, so you need to find another way to ensure that your family has cash to live on whilst your estate is being wound up (it can be a lengthy process with all the red tape). Separate bank accounts, life policies (see above), family trusts and the like might work in your particular circumstances, but specific professional advice is key here.
- Leave your loved ones an “Important Information” file: This is critical. There are too many heartbreaking stories of grieving spouses and children floundering in a sea of confusion and worry because they have no idea where the deceased’s will is, how the estate is structured, what assets there are, what debts, how to access password-protected computers, where important documents are kept, who they should contact for help. Sometimes they are even at sea as to what assets they have in their own names. The list is endless.What should be in the file? In short, everything that your survivors might need, starting of course with details of where your will is. Put yourself in their place – what would you need to know if you were the survivor? What information and documents would make it easier for you to get on with life? Once again, professional advice and assistance will save your loved ones a mountain of trouble and concern.A last thought on this aspect – have “that conversation” with your family as soon as possible. It’s not easy but they deserve no less. Ideally bring them in at the start of your planning and the creation of your “Important Information” file. At the very least they must know about it, where it is and how to use it.
- What else? No generalised estate planning checklist can ever be comprehensive. Tailor your plan to your particular needs. Brainstorm, ideally with family and professional input, what else needs attention.
September 7, 2021
“PIE recognises that in appropriate circumstances the right to full exercise of ownership must give way, in the interest of justice and equity, to the right of vulnerable persons to a home.” (Extract from judgment below)“Unlawful occupiers” of land have strong rights under our Constitution and other laws, and most property owners and landlords understand the need to tread carefully whenever the issue of eviction arises. They are required to comply fully with the provisions of PIE (the “Prevention of Illegal Eviction and Unlawful Occupation of Land Act”) – certainly achievable but never to be taken lightly. Bear in mind that a court order is required before eviction, with additional restrictions applying during the pandemic lockdowns. A recent Supreme Court of Appeal (SCA) decision shows just how energetically our courts will enforce those occupier rights, even when the strict letter of the law appears to be 100% in favour of the landowner.
The 84 year old grandmother who can live on in her childhood home
- A landowner bought on a liquidation auction a piece of land and a house occupied by an 84 year old widow and her disabled son.
- The widow had lived in the house since she was 11 years old, her father being employed by the farm owner at the time. She in due course married another farm employee and lived on in the house with him. Widowed, she was reassured by verbal undertakings from previous owners that she had a lifelong right to live on in the house.
- But when the new purchaser of the property (by now no longer farmland but an urban sub-division of the original farm) she was unable to produce any written agreement confirming her life right to occupation.
- The new owner then gave the widow and her son notice to vacate and when they refused to leave, he obtained an eviction order from the magistrate’s court.
- After a 12 year trek through the courts, the SCA finally confirmed the setting-aside of the eviction order, and the importance of this to landowners lies in the fact that the owner here had jumped through all the hoops required by PIE –
- The verbal “lifelong right of occupation” granted by previous landowners was not enforceable against subsequent buyers,
- The landowner had removed his consent to the occupants’ right of occupation, thereby terminating it,
- The occupants were therefore “unlawful occupiers”,
- The landowner had offered them suitable alternative accommodation.
A Court’s discretion to refuse eviction – the “just and equitable” test
- Our courts always retain a discretion to refuse eviction from residential property and “must be satisfied that the eviction is just and equitable”.
- The SCA held that in all the circumstances and facts of this particular case, eviction would not be just and equitable. Major factors were clearly the widow’s advanced age, her 73 year history of living in the house, her disabled son, and her reliance on verbal assurances from previous owners that she had a lifelong right of occupation (which she clearly if mistakenly believed would be enforceable against new owners).
- Had the land still been farmland the widow would have enjoyed the protection given to farmworkers by ESTA (the “Extension of Security of Tenure of Land Act”) and although the land had now changed to urban land, “her status as a vulnerable person, even in the context of PIE, has essentially remained unchanged.”
- Commenting that “No case in which an order of eviction from a residence is sought can ignore the visceral reality of what is sought, namely the ejectment of a person from their home in vindication of a superior right to property. Nor can the legal process by which the order is obtained be divorced from our fraught history of eviction and ejectment of vulnerable persons from their homes”, the Court held in all the circumstances that this was a case in which considerations of justice and equity “outweighed protection of the exercise of the right to property that an entitlement to an order of ejectment provides.”
- This despite the landowner’s offer to give the widow alternative accommodation in the form of ownership of a unit in a secure residential complex, an offer she turned down because “She was accustomed to life in the house she presently occupied and enjoyed not only the freedom and space it afforded her but also the environment around it.”
- The offer of alternative accommodation, although made in good faith by the landowner, did not tilt the scales in favour of eviction because “This was not a case in which the reasonableness or otherwise of an unlawful occupier’s refusal to vacate was a central issue … The true issue concerned the dignity of an elderly and vulnerable woman and a person with disabilities in the circumstances of the first respondent and her son. To hold that these weighty considerations are to give way merely because an alternative abode is offered would negate the first respondent’s dignity rather than protect it.”
The lesson for landowners and landlordsThe significance of the landowner’s defeat here is perhaps best summarised in the Court’s own words (emphasis supplied): “PIE recognises that in appropriate circumstances the right to full exercise of ownership must give way, in the interest of justice and equity, to the right of vulnerable persons to a home.” Before buying property, check for any occupiers, “lawful” or not, and make sure that you can evict them if you need to. As a landlord, ensure that your lease is watertight, and your legal rights protected. There is no substitute for full and specific professional assistance! Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
September 7, 2021
“Creditors have better memories than debtors” (Benjamin Franklin)In these hard times of pandemic and economically destructive unrest, an unfortunate number of businesses face collapse, and many will opt for the “first aid for companies” option of business rescue. Creditors coming out of that process with a shortfall (only the luckiest creditors are likely to emerge with full settlement) will naturally look to any personal suretyships they hold to cover that shortfall. A recent SCA (Supreme Court of Appeal) decision has brought welcome clarity to the question of whether – and in what circumstances – such personal suretyships will survive the business rescue process. Both directors and creditors need to understand the outcome, and to act accordingly.
Sued for R6m, a CEO’s defence crumbles
- A company CEO (Chief Executive Officer) signed a personal suretyship in favour of a creditor supplying the company with petroleum products.
- When the company fell upon hard times it was placed into business rescue. Eventually a business rescue plan was adopted, the rescue process was terminated, and the creditor sued the CEO for the shortfall on its claim of just over R6m.
- The CEO’s main defence was that his liability as surety was an “accessory obligation” – in other words, if the creditor’s claim against the principal debtor (the company) fell away, he should be released from his liability as surety.
- But, held the Court, although a principal debtor’s discharge from liability does indeed ordinarily release the surety, our law allows the creditor and the surety to agree otherwise.
- And the suretyship agreement in this case did just that. It contained “unobjectionable” and “standard” terms which included a specific agreement by the surety that he would remain liable even if the creditor “compounded with” the company by accepting a reduced amount in settlement of its claim. Nor was there any mention in the business rescue plan of its effect on creditor claims against sureties (it could, for example, have provided specifically for sureties to remain on the hook, or to be released). But the deciding factor remained that the wording of the suretyship was such that the creditor did not abandon its claim against the surety by supporting the business rescue plan.
- Bottom line – the CEO goes down over R6m, and the creditor has another shot at emerging unscathed from the mess.
September 7, 2021
“Consequential Loss: This is loss not directly caused by the insured event, but is an indirect result of the event. This is loss or damage that was not foreseen by the insurer or the policyholder at the time the policy was taken out. Consequential loss is in many instances not covered and cover is dependent on the risk that the policy covers” (South African Insurance Association definition)
One of the risks you run in any business is being sued for losses you cause to someone else. Although normally your risk of legal liability is linked to the claimant proving some form of negligence on your part (i.e. the onus is on the claimant to prove your negligence), there are exceptions. To take one example (as seen in the case discussed below) a “carrier of goods for reward by land” has “absolute liability” to deliver goods undamaged; and thus the onus switches to the carrier to prove a lack of fault.
No matter who has to prove what there could be serious money at stake here, so taking upfront measures to protect yourself is prudent.
Protecting your business with insurance
Your first line of defence is of course always the practical one of minimising the actual risks of causing any form of harm or loss to any and all role-players – customers/clients, suppliers, employees etc. On the legal side, disclaimers and exclusion clauses are commonly used for the purpose but they have their limitations and should never be relied on as foolproof.
That is where taking out commercial (business) insurance can make sense – if all else fails, you can look to your insurer to cover you for whatever damages you may be found liable to pay.
Beware however – as a recent High Court judgment aptly illustrates, even with insurance you could find yourself up the creek without a paddle if you are found liable for “consequential damages”.
What are “consequential damages”?
Before we get into the details of this particular High Court case however, it’s important to know that several types of damages could be awarded against you –
- What are often called “general damages”, i.e. “those damages that flow naturally and generally from the kind of breach of contract in question and which the law presumes the parties contemplated as a probable result of the breach.” An electrician for example negligently frying a business customer’s distribution board is likely to be sued firstly for the cost of replacing it.
- What are often called “special”, “consequential” or “indirect” damages, i.e. “those damages that, although caused by the breach of contract are ordinarily in law regarded as too remote to be recoverable unless in the special circumstances attending the conclusion of the contract, the parties actually or presumptively contemplated that they would probably result from the breach.” To stick with the negligent electrician example above, the business might also sue for consequential loss such as the sales it lost because it had no electricity. The test then would be whether the electrician and the business had in mind that loss of sales would probably result from the distribution board’s failure.
Let’s see that distinction playing out in action…
Sued for R2.2m “loss of profits” and not covered by insurance
- A transport company (a “carrier”) agreed to move two valuable machines for a customer which intended to rent them out to the film industry.
- Both machines were substantially damaged in transit and the carrier was found to have breached the contract of carriage and to have caused the losses through negligence.
- The carrier claimed from its insurers to cover its liability (it had taken out “goods in transit” cover of R1m for each machine), and the insurer duly paid out a total of R1.7m for direct losses in the form of the repair of one machine and the replacement of the other.
- No problem for the carrier there; but it was a different story with the second part of the damages claim. This was for “loss of profits” suffered by the customer through being unable to rent out the machines whilst waiting for them to be repaired/replaced.
- The insurer refused to pay out this second part of the claim (R2,218,464) because it had agreed to cover only “actual” damage to the machines. The goods in transit policy specifically excluded “consequential financial loss as a result of any cause whatsoever”. That left the carrier fighting the customer without the safety net of insurance cover.
- The carrier argued that its liability to the customer was limited to the R1m goods in transit cover per machine. But to no avail, the Court holding that the contract of insurance was between the transport company and its insurers and therefore it did not prevent the customer from claiming damages for losses beyond those covered by the carrier’s insurance.
- Critically, the Court found on the facts that “This type of loss must have been contemplated and reasonably foreseen when the carriage contract was concluded by the parties” and that the customer’s loss of income followed logically from the fact that it could not hire out the machines.
- The end result – the transport company must pay, out of its own pocket, whatever consequential damages the customer can prove (presumably the customer will go for its original R2.2m claim).
Check your contracts, and your insurance cover!
The lesson here of course is to make sure that your contracts protect you from liability for “consequential damages” and the like, and/or to check that your insurance cover will protect you if you get sued for any liability beyond “general damages”. If there is an “exclusion” clause in the policy such as the one discussed above, you’re on your own!
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.