Is it beneficial to create a Trust?

A Trust can be described as a legal relationship which has been created by the founder, who places assets under the control of Trustees. This either happens during the founder’s lifetime (inter vivos trust) or at the death of the founder (testamentary trust). This article will focus on the advantages and disadvantages of an inter vivos trust.

The advantage of a trust is firstly, that inter vivos trusts can be used to minimise estate duty. No estate duty should be payable on assets owned by the Trust as a Trust does not terminate or come to an end, since it has perpetual succession. Estate duty is currently taxed at 20% of the gross estate value. This saving in estate duty can be substantially large, especially for high net worth individuals who are worth millions of rands. Secondly, as the Trust’s assets are not owned by the beneficiaries, the creditors of the beneficiaries do not have a claim regarding the assets of the Trust. This advantage is especially important for people who are exposed to potential liability. Companies as well as individuals are able to transfer assets to Trusts. Lastly, because Trusts have perpetual succession, beneficiaries will be able to continue enjoying the benefit of the Trust assets even if one of the Trustees were to pass away.

The disadvantages are firstly, the costs of setting up a Trust, which can be high. It may cost up to R 20 000 to set up a Trust. If immovable property is transferred to the Trust then transfer duty needs to be paid. The founders of the Trust may also be liable to pay Donations tax, which is taxable at 20% of the value of the assets transferred to the Trust. Transfer duty is taxed according to a sliding scale. Secondly, Trustees could find themselves personally liable for losses suffered by the Trust if it can be proven that they did not act with care, diligence and skill in terms of section 9 of the Trust Property Control Act. It is important to note that “skill” requires more than just acting in good faith. Trustees may be proven to be negligent not only if they invested in risky investments, but also if they invested capital too conservatively, causing the capital not to grow sufficiently. Trustees also need to be aware of the fact that they can still be held liable if only one Trustee has signing power on behalf of the Trust and he/she makes a poor decision that holds all the Trustees liable for his negligence.

The founder of the Trust needs to recognise that the assets in the Trust do not belong to him/her anymore. The assets belong to the Trust. Should this loss of control (from founder to Trust) not occur, the Trust may be seen as an alter ego of the founder, which could result in the assets being included in creditors’ claims as well as having estate duty consequences.

The earnings from the assets in the Trust are taxed at 40%, and interest exemptions do not apply to Trusts. Also, the inclusion rate for Capital Gains tax for an inter vivos trust is 66.6% whereas the inclusion rate for individuals is 33.3%. Lastly, as we can see from the above, a Trust is not for everyone.

It is important to weigh up the advantages and disadvantages before deciding whether to go ahead or not. The best decision would be to speak to a certified financial planner or attorney who can assist you in making the correct decision regarding your personal situation.

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Can somebody take the law into his/her own hands?

The mandament van spolie is a summary remedy, usually issued upon urgent application, aimed at restoring control of property to the applicant from whom it was taken through unlawful self-help, without investigating the merits of the parties’ rights to control.

From the definition above it is evident that this remedy is unique, because it is not used to protect rights at all. The mandament van spolie is a unique remedy aimed at undoing the results of the taking of property by means of self-help. The idea is that people should enforce and protect their property rights by legal means and procedure, and not by self-help and force, because self-help eventually results in chaos and anarchy. For this reason it is usually said that this remedy is based upon the principle that nobody is allowed to take the law into his/her own hands. Due to its aim of restoring peace and order and discouraging self-help, the spoliation remedy does not investigate the merits of any of the parties’ interest in the property and neither of the parties is allowed to raise the question of rights. The court is simply concerned with the factual investigation, namely whether there is proof of existing control and proof of unlawful spoliation of that control. If there was in fact existing control and unlawful spoliation the court will order the spoliator to restore the spoliated control to the applicant immediately, regardless of whether that control was in fact unlawful or even legal.

The spoliation remedy is aimed at preserving peace and order in the community. People cannot be permitted to circumvent the remedy by contract. Parties to a contract cannot agree that one of them will be permitted to take property from the other without proper legal procedure. The requirements for this remedy were set out in two classic decisions that are still the most important authorities in this regard, namely Nino Bonino v De Lange 1906(T) and Yeko v Qana 1973(A).

  1. Proof that the applicant was in peaceful and undisturbed control of the property. The first requirement means that the applicant had control over the property in question. For purposes of the spoliation remedy this control must have existed “peacefully and undisturbed” for a period long enough, and in a manner stable enough, to qualify any unlawful disturbance of the peace. The requirement that the control must have been peaceful and undisturbed does not refer to its legal merits, but simply to the fact that it must have been relatively stable and enduring. If not, there can hardly be a question of disturbance of the situation.
  2. Proof that the respondent took or destroyed that control by means of unlawful self-help or spoliation. The second requirement for the spoliation remedy is that the existing peaceful and undisturbed control must have been unlawfully spoliated by the respondent.

One can, therefore, safely say that possession is 90% of the law. The reason for this is that spoliation is not permitted in our law. The person must use the legal processes at his disposal and cannot take the law into his own hands.

References:

A J van der Walt & G J Pienaar: Introduction to property law, 5th edition, pg 218-223.

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Can I still go to the CCMA after I settled?

If an employee has been demoted after a fair process and has accepted the demotion, could they still go to the CCMA for unfair labour practice. It’s important to first take into account the circumstances.

A case involving Builders Warehouse

The facts in Builders Warehouse (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration and Others[1] can be summarised as follows: The employee worked as an Administrative Manager at Builders Warehouse (Pty) Ltd. She was informed by doctors that she was very ill and would most likely have to go to hospital frequently and take various types of medication. Over the next three years her absenteeism increased significantly and her employers became concerned as she was no longer able to do her job effectively, even when she was not absent, due to the side effects of her medication.

Builders Warehouse, after having discussions with the employee, suspended her pending an investigation into her capacity to undertake the functions of an administrative manager, taking into account her health and performance. Builders Warehouse held an incapacity hearing and the external chairperson ruled that, due to the employee’s excessive and increasing absenteeism, dismissal was the appropriate sanction. The chairperson, however, offered her a demotion instead of a dismissal. The employee accepted this demotion in writing.

After this agreement between Builders Warehouse and the employee was concluded, she obtained legal assistance and subsequently complained to the CCMA that Builders Warehouse had committed an unfair labour practice by demoting her.

The question here is whether the employee was entitled to refer an unfair labour practice dispute concerning the demotion to the CCMA.[2]

The arbitrator in the CCMA decided that because there was consent to the demotion, the CCMA did not have jurisdiction to hear the dispute. The employee then appealed to the Labour Court and once again to the Labour Appeal Court, of which the outcomes are set out below.

Outcomes of the case

The Labour Court and the Labour Appeal Court looked at Section 186(2)(a) of the Labour Relations Act[3] in this regard, which states:

“Unfair labour practice means any unfair act or omission that arises between an employer and an employee involving unfair conduct by the employer relating to the promotion, demotion, probation (excluding disputes about dismissals for a reason relating to probation) or training of an employee or relating to the provision of benefits.”

The Labour Appeal Court upheld the judgement in the Labour Court and found that although a binding contract comes into existence when employers and employees settle their differences by agreement, such an agreement does not mean that the CCMA does not have jurisdiction to hear the dispute. The fact that the parties have agreed that the employee accepted demotion is not a complete defence for the employer because the ambit of this unfair labour practice is wide enough to include the implementation of an agreement to accept demotion.[4] The Labour Appeal Court confirmed that the determination of whether a demotion took place, unlike the determination of dismissal, does not require an arbitrator to determine if there was consent or not.[5]

Conclusion

Although consent is a relevant issue in regard to the merits of a dispute regarding an unfair labour practice, it is not a jurisdictional prerequisite. This means that the CCMA does have the power to hear a matter relating to a demotion even though there was consent thereto.

References:

Builders Warehouse (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration and Others (PA 1/14) [2015] ZALAC

Labour Relations Act 66 of 1995

[1] (PA 1/14) [2015] ZALAC.

[2] (PA 1/14) [2015] ZALAC Par 12.

[3] Act 66 of 1995.

[4] Builders Warehouse (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration and Others (PA 1/14) [2015] ZALAC Par 14.

[5] Builders Warehouse (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration and Others (PA 1/14) [2015] ZALAC Par 13.

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Should I use a protection order or a harassment order?

There are people who suffer emotional and physical abuse on a daily basis but are not quite sure what they can do to prevent it. There are two options available to them. They can either apply for a protection order or apply for a harassment order. However, many people do not know the difference between the two and which order would suit their situation.

What is a protection order?

A protection order is described as being a form of court order that requires a party to do or to refrain from doing certain acts. These orders flow from the court’s injunction power to grant equitable remedies in these situations. The following is required to be present when applying for a protection order:

  1. Need to show a pattern of abuse.
  2. It has to be a form of domestic violence, which includes:
  3. Physical violence
  4. Sexual violence
  5. Financial violence
  6. Emotional/verbal violence
  7. The violence needs to be directed at the person who wants to make the application.

A protection order forms part of the Domestic Violence Act. This means that the abuse needs to be between persons that live in the same house, like brother and sister, or mother and father, etc. An application is made for a protection order and thereafter a return date is set. At the return date the applicant can change their mind and ask that the order be removed. If not, the order is granted, and it is binding for life. If the respondent breaches the protection order, he/she may receive up to five years’ imprisonment. If the applicant applies for a protection order under false pretences the applicant may receive up to two years’ imprisonment.

The application for a protection order is an ex-parte application, which means that the application can be made without having the respondent at court. This can cause problems in the instance where the respondent is innocent, but does not have a chance to defend himself/herself.

What is a harassment order?

If you’ve been the victim of abusive or threatening behaviour by someone other than a person living with you, or with whom you have a domestic relationship, it may be harassment. There are different things you can do if you’re being harassed, such as applying for a harassment order. The following is important to know about harassment orders:

a) No pattern is needed, and a first offence can be sufficient for a Harassment Order.

b) No relationship is required, and it can be against someone you don’t even know.

c) No violence is required.

d) Harassment includes: following, messaging, unwanted packages, letters, psychological harm, physical harm, financial harm, etc.

If you decide to apply for a harassment order without knowing who it is against, the court has the power to order a police official to investigate the matter. The application for a harassment order takes place in open court, which means that it is not private. This can sometimes prevent victims from making the application. Once a harassment order is granted, it is binding for five years. If the applicant wants to withdraw the order, the court must be satisfied that the conditions have changed. Breach of a harassment order can result in five years’ imprisonment, which is the same punishment for applicants who make the application under false pretences.

It is important to know that there are remedies available to victims who are in abusive relationships. Whether it is emotional, physical or financial abuse by someone you know or stalking and harassment by someone you don’t know.

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)