TO PROSECUTE OR NOT

A1_bAn action may be a crime or a delict but where your actions were trivial, a court may decide not to prosecute you or a judge will not entertain a claim against you due to the de minimis non curat lex rule.

If you find yourself charged with a minor crime such as theft for taking one small sweet from a store then the de minimis non curat lex rule (de minimis), which means “the law does not concern itself with trifles”, may come in handy for you.

De minimis is a decision of a court to allow unlawful conduct to go unpunished due to its triviality. An example of such a decision is where the Appellate Division in S v Kgogong refused to convict a person of theft because the accused stole a worthless piece of paper. Another example would be from the case of S v Dane where a person accused of malicious damage to property was acquitted because all he had done was to cut a small portion of another person’s hedge.

The application of the de minimis maxim is very limited in regard to statutory offences. This was discussed in the case of DPP (EC) v Klue in which the High Court overturned the Magistrate’s decision that the offence of driving a vehicle on a public road with a blood alcohol concentration exceeding the prescribed minimum was de minimis.

The High Court held in the abovementioned case that the aims and objectives of the legislation containing the offence are important and that the Road Traffic Act, in particular the provision offended, is aimed at reducing road accidents. The High Court also held that there was no room for the Magistrate to apply the de minimis maxim because the minimum amounts had already been determined after careful consideration by the Legislature.

The de minimis maxim also applies to criminal assault charges and delictual claims. In regard to delictual claims, when a person’s bodily integrity has been wrongfully and intentionally infringed, he or she can claim satisfaction with the actio iniurarum unless the de minimis rule applies to his or her claim. In regard to criminal assault charges trivial assaults, such as a slap on the back or a shove in a crowd may be disregarded in terms of the de minimis rule. This would have to be seen in context of the nature of the act, especially where one is dealing with sexual assault, as a mere touch could be very serious and in these circumstances the de minimis rule would not come into play.

The purpose of the de minimis rule is to avoid the burdening of the courts with minimal complaints which would result in wasted costs, resources and time. It is further to avoid the situation where more serious crimes and delictual claims take even longer to be dealt with due to these trivial issues taking up the court’s time. This will result in the criminal justice system and the court system being brought into disrepute for not being able to deal with serious matters efficiently.

Bibliography
• Burchell J: Principles of Criminal Law 2006 (3rd ed) 355 – 356
• S v Kgogong 1980 (3) SA 600 (A)
• S v Dane 1957 (2) SA 472 (N)
• DPP (EC) v Klue 2003 (1) SACR 389 (E)
• Road Traffic Act 93 of 1996

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.

VALIDITY OF ANTENUPTIAL CONTRACTS

A4_bOne must be careful when drafting and signing an Antenuptial Contract. Aside from ensuring that the contents is all correct, one must also ensure that all the necessary provisions are contained therein to make the contract valid. The consequences of neglecting to do so may result in a marriage in community of property even though the parties had no intention of this at the time of their marriage.

Attorneys are often trusted with the task of drafting an Antenuptial Contract. This is a contract, which one signs to regulate the property regime of a marriage. If a couple does not sign, an Antenuptial Contract then the marital property regime will be that of in community of property. The presence of an Antenuptial Contract means that the marital property regime is that of out of community of property and the parties must specifically stipulate whether they would like the accrual system to apply to their marriage or not.

The importance of ensuring that all the necessary provisions are contained in the Antenuptial Contract to result in a valid contract was discussed in the 2014 Supreme Court of Appeal Case of B v B[1]. In this case, no values were stated in respect of any of the assets listed in the Antenuptial Contract and they were also not properly identified. In B v B the court stated that if the terms of a contract are so vague and incoherent as to be incapable of a sensible construction then the contract must be regarded as void for vagueness.[2]

According to Section 6(1) of the Matrimonial Property Act[3] ,a party to an intended marriage which does not, for the purpose of proof of the value of his or her estate at the time of the commencement of the marriage, declare the value in the contract, then he or she may do so within six months of the marriage in a statement attested to by a notary. If this is not done, according to Section 6(4) of the Marital Property Act, the net value of the estate of a spouse is then deemed to be nil at the time of the marriage. In effect, such a contract is valid but it will effectively render the marriage in community of property since nothing was excluded from the accrual.

However, if a contract is contradictory and incoherent in other respects then it cannot be seen as a valid contract since there is no certainty as to the meaning of the contract and what the parties seek to achieve. This means that the contract would not embody terms that would enable to court to give effect to the intention of the parties at the time the contract was concluded.

The result of such a contract is that the Antenuptial Contract would be void for vagueness and that the marital property regime would be the default position according to the Marital Property Act, which is in community of property.

Therefore, parties are encouraged to read their contracts thoroughly and ensure that they understand the terms thereof and that the contract embodies their intentions without any further explanations or evidence.

[1] (952/12) [2014] ZASCA 14 (24 March 2014).

[2] B v B (952/12) [2014] ZASCA 14 (24 March 2014) par 7.

[3] 88 of 1984.

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.

RESCISSION OF JUDGEMENT

A3_bImagine receiving the nasty surprise that default judgement has been entered against your name because of a summons that you have never even received. It is necessary that you know the procedure of how to rescind a default judgement to get you out of this unwanted situation.

Many people are confronted with the unfortunate situation of a judgement being entered against their name, without even being aware that legal action is being taken against them. The reason for this is that when a party fails to deliver a notice of intention to defend a summons, a Plaintiff is entitled to lodge an application for default judgment.[1]

The reason for many Defendants not filing a notice of intention to defend, is the fact that they simply never receive the summons initiating an action against them. Personal service of documents by the Sheriff is only required where the matter affects a person’s personal status, such as with divorces and sequestrations. As it is not a requirement for the Sheriff personally, to serve a summons on a person, it can lead to situations where the Defendant never sees the summons, although the Sheriff stated that the summons has been legitimately served.[2] An example hereof many people who indicate their domicilium citandi et executandi or nominated address where notices are sent, in an agreement. In the event of the Defendant moving, the Sheriff will still deliver the summons to this address, but the Defendant will never receive it.

In the event of a Defendant not receiving a summons, certain steps have to be taken to have the judgment rescinded. The Defendant has to serve and file his application for rescission of judgment within 20 days after becoming aware of the judgment that was entered against him.[3] The Defendant (now the Applicant) is required to set out in an affidavit why the matter was not defended and what the bona fide defence is to the claim.  The onus is upon the Applicant to set out legitimate reasons for why the matter was not defended.[4]

When bringing an application for the rescission of judgement before court, the following principles are applicable:[5]

The Applicant must give a reasonable explanation for his default. The court will be unwilling to help the Applicant if it is found that he was aware of the proceedings against him or if the default was simply due to his own negligence. If the Applicant’s default is of a wilful or negligent nature, these will serve as considerations that the court will take into account when deciding whether an application should be granted.

In many cases an Applicant simply rescinds a default judgement to delay the inevitable. It is therefore necessary for the Applicant to show that he is not simply delaying the Plaintiff’s claim. A bona fide defence, in other word a genuine defence, must therefore be shown, although it is not required to deal fully with the merits thereof or produce any evidence in this regard.

Ultimately, the court has discretion whether to rescind the default judgment or not, based on whether good cause was shown by the Applicant.[6]

Although it involves an unwanted and often lengthy and expensive process, it is important to have any judgments against your name rescinded as soon as possible, as they have a negative impact on your credit rating. These judgements, if executed, will also leave you highly annoyed when the Sheriff shows up on your doorstep with a warrant of execution to seize your personal belongings.

[1] Magistrates Court, Rules of Court, Rule 12(1)(c)

[2] Magistrates Court, Rules of Court, Rule 9(3)

[3] Magistrates Court, Rules of Court, Rule 49(1)

[4] Du Plessis v Tager 1953 (2) SA 5 (O)

[5] Grant v Plumbers (Pty) Ltd 1949 (2) SA 470 (O)

[6] De Witts Auto Body Repairs v Fedgen Insurance Co Ltd 1994 (4) SA 705

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.

ANNULMENT OF A MARRIAGE

A2_bConsent is an essential element of a valid marriage and the parties to a marriage must confirm before the marriage officer during a civil ceremony that they voluntarily consent to marry each other.[1] There are certain circumstances where it can be said that consensus was not present, and this will be discussed below.

Six months after John marries Laura they decide that they want to start a family. John finds out from the doctors that he is sterile and cannot have children. Laura is distraught and contacts her attorney, saying that she would never have married John if she had known that he could not have children.

Laura’s attorney explains to her the circumstances in which consensus will either be lacking or materially deficient, in which case the marriage can be annulled (set aside).

Firstly, a material mistake will result in a lack of consensus. A material mistake is limited to where there is a mistake as to the identity of your spouse or a mistake regarding the actual act of marriage in that you did not understand that the ceremony in which you took part resulted in marriage with the other party. In these circumstances there is uncertainty as to whether the marriage never came into existence or if it can be set aside. One may also make mistakes regarding the personal characteristics of your spouse. This may only be a ground on which the validity of the marriage can be challenged if these are material characteristics. The decision whether a mistake regarding a personal characteristic is material or not rests with the Court.[2]

Secondly, a misrepresentation by your spouse may justify the setting aside of a marriage if that misrepresentation relates to a material aspect of the marriage. In the scenario above, if John was aware of the fact that he was sterile before entering into the marriage with Laura, then Laura could attempt to prove that she was misled and state that if she was aware of John’s sterility, she would never have married him. However, if John was unaware that he was sterile, this is not a sufficient ground on which to set a marriage aside.[3]

Thirdly, if one of the parties was unduly influenced or placed under duress to marry the other party by any person including but not limited to the party to which they have been married, then there is no consensus and the marriage can be set aside.[4]

Fourthly, impotence, being the inability to have sexual intercourse, may be a valid ground for setting aside a marriage, but this will not be so if it was reasonably foreseeable at the time that the marriage was entered into that sexual intercourse wouldn’t take place based on factors such as age or illness.[5]

Fifthly, if the scenario above was altered to read that Laura was pregnant with another man’s baby at the time that she married John then he could apply to have the marriage set aside on the basis that this state of affairs would most likely result in an unhappy marriage. He may only make this application if he was unaware of the pregnancy at the time that they were married and if he has not waived his right to have the marriage annulled.[6]

Bibliography:

  • Robinson JA, Human S, Boshoff A, Smith BS, Carnelley M, Introduction to South African Family Law, 4th, 2009, 92 – 94.
  • Heaton J, South African Family Law 3rd, 2010, 37.
  • Marriage Act, 25 of 1961.

[1] Section 30(1) of the Marriage Act, 25 of 1961.

[2] Robinson JA, Human S, Boshoff A, Smith BS, Carnelley M, Introduction to South African Family Law, 4th ed. (2009) 92.

[3] Robinson JA, Introduction to South African Family Law, 4th ed. (2009) 93.

[4] Robinson JA, Introduction to South African Family Law, 4th ed. (2009) 93.

[5] Heaton J, South African Family Law, 3rd ed. (2010) 38; Robinson JA, Introduction to South African Family Law, 4th ed. (2009) 94.

[6] Heaton J, South African Family Law 3rd ed. (2010) 37; Robinson JA, Introduction to South African Family Law, 4th ed. (2009) 94.

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.

ARE RESTRAINT OF TRADE AGREEMENTS ALWAYS VALID AND ENFORCEABLE?

A1_b]Historically restraint of trade agreements were void and unenforceable unless the employer could prove that it was a reasonable agreement entered into between the parties. Fortunately for employers the position in our law has changed.

What are restraint of trade agreements?
An agreement that seeks to restrict a party’s right to carry on a trade, business or profession in such manner or with such persons as he/she sees fit, is restraint of trade.

Restraint of trade clauses are most commonly found in employment and partnership contracts, which usually takes effect after termination of the contract, or in sale of a business or practice.

Why are they controversial?
They are controversial because there is a clash of fundamental values: on the one hand there is freedom or sanctity of contract which relies on agreements being honoured, and on the other hand there is freedom of trade which is a constitutionally recognised right.

As with other contracts, restraint of trade agreements are presumed to be prima facie valid and enforceable. Whereas the onus had earlier been on the employer to prove that implementation of restraint of trade was fair and in public interest, the onus is now on the employee to show why enforcement in the particular circumstances would be against the public interest.

An unreasonable restraint is contrary to the public interest and hence unenforceable. The reasonableness of a restraint of trade clause or agreement is judged on two bases: broad interests of community, and interests of the parties themselves.

Reasonableness inter partes depends on a variety of factors:

–    Does the employer have a protectable interest?
–    Area and duration of restraint (possibility of partial enforcement)
–   Concession by the employee in the contract that restraint is
reasonable, and inequality of bargaining power of parties (these
factors carry little weight)

Examples of protectable interests are confidential information, trade secrets, customer connections and lists, and goodwill of the business. However, it does not include interest in the elimination of competition, and the investment of time and capital in the training of the employee.

It is not sufficient simply to label confidential information as such. In order to be confidential the information must be commercially useful, in other words capable of application in trade or industry, have economic value to the person seeking to protect it, and be known only to a restricted number of people.

With regards to trade connections, it will only be relevant when the employee has close working relations with the customers, to such an extent that there is a danger of him/her taking them with him/her when he/she leaves the business. Relevant factors here include the following:

– duties of the employee;
– his/her personality;
– frequency and duration of the contact with the customers;
– his/her influence over them;
– nature of his/her relationship with them (degree of attachment,
extent of their reliance on him/her);
– level of competition between the rival businesses;
– type of product sold; and
– evidence that customers were lost when he/she left the business.

With reference to the above the following questions must be asked:
a)  Does party A have an interest deserving of protection?
b)  Is such interest being prejudiced by party B?
c)   If so, how does A’s interest weigh up qualitatively and
quantitatively against B’s interest in not being economically
inactive and unproductive?
d)  Is there some broader facet of public policy that requires the
enforcement or rejection of the restraint?

If restraint of trade agreement is reasonable inter partes, it may still be unenforceable if it is damaging to the public interest for a reason not peculiar to the parties.

Sources:
Basson v Chilwan & Others [1993] 3 SA 742
Sunshine Records (Pty) Ltd v Flohing & Others 1990 (4) SA 782 (A)
Magna Alloys & Research (SA) (Pty) Ltd v Ellis 1984 (4) SA 874 (A)

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.

CONTRACTING WITH MINORS IN A DIGITAL CONTEXT

A2_bIn this article, we examine whether contracts entered online by minors, using their parents’ credit cards, are legally binding in the specific context of social media such as Facebook.

Both Common law and legislation deal with the capacity of minors who enter into different types of contracts. According to the Children’s Act, 38 of 2005 a minor is a person between the ages of seven and 18 years. In terms of common law a minor does not have sufficient capacity to incur binding obligations under a contract and must obtain the assistance or consent of their guardian to do so. This consent can be given before the contract is concluded or thereafter, in which case it is seen as ratification of the contract. There are exceptions to this rule, which may be found in various pieces of legislation as well as in common law, such as contracts where the minor obtains only rights and no duties (e.g. a donation).

A minor can escape liability even when they have been bound in terms of the contract (i.e. where the guardian has assisted the minor in the conclusion of the contract, consented to or ratified the contract). This can be done where the contract was prejudicial to him or her at the time that it was concluded. The court may then, on application, set the contract aside and order that each party be placed in the same position as what they were in before the contract had been concluded.

Facebook is currently involved in an ongoing class-action lawsuit. In this lawsuit, a class of parents in America are pressing their claim that Facebook should change how it handles online transactions by minors.

Attorneys for the parents in the above case note that it is important that Facebook has knowledge of a user’s actual age but still treats children the same as adult users when it comes to taking their money.

One of the biggest issues here is that reciprocal performance, being the payment of money via credit or debit card and the child obtaining credits, takes place almost immediately. Therefore, if the parent were to be refunded, the minor would be unjustifiably enriched using the credits.

The system, that Facebook currently employs, is therefore problematic since it takes advantage of children who may not fully understand the contracts that they are entering into when they purchase game credits. Furthermore, should the parents be immediately refunded in the current system, it may lead to situations where the parent consents to the purchases and then after the child obtains the enjoyment from the credits, request that their accounts be credited due to a ‘lack of consent’.

It is therefore clear that this system of payment should be changed. We should obtain clarity on how to deal with this in South Africa once the class-action suit in America has been concluded and a solution has been reached. At present, it seems that there will be no alternative for parents whose children overspend or use their credit or debit cards, without permission. If your child has, a Facebook gaming habit it is a good idea to keep a close eye on your wallet until we have clarity on the recourse available to parents who find themselves in this situation.

Bibliography

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.

DISCLAIMER NOTICES

A3_bDisclaimer notices offer protection for owners and employees concerning shopping centres, stadiums, parking lots and other public areas. For these notices to be effective, certain requirements have to be adhered to. False reliance on these disclaimers can be a very expensive mistake. Find out whether your disclaimer notice will be sufficient to protect you and your employees.

Disclaimer notices are commonly seen in shopping centres, stadiums, parking lots and other public areas. These notices are generally aimed at protecting the owner or employees with regards to the area in question, by exempting him/her from legal liability when a member of public using the area suffers damage.

It is well established that disclaimer notices are enforceable when properly implemented. This is clear from the extract below:

Durban’s Water Wonderland (Pty) Ltd v Botha and Another (1999) 1 All SA 411 (A) at 115:

“If the language of a disclaimer or exemption clause is such that it exempts the proferens from liability in express and unambiguous terms effect must be given to that meaning. If there is ambiguity, the language must be construed against the proferens. (See Government of the Republic of South Africa v Fibre Spinners & Weavers (Pty) Ltd 1978 (2) SA 794 (A) at 804 C.)”

According to prevailing case law, when considering whether a disclaimer notice is effective, two factors have to be considered:

Firstly, from the Durban Water Wonderland case, it is evident that for the disclaimer’s content to be effective, the wording thereof must not be ambiguous. It is therefore required that the disclaimer must indicate in express terms what the person relying on the disclaimer is exempted from when someone reads the disclaimer. However, any alternative meaning of the disclaimer notice cannot be too widely interpreted. It is simply required that the meaning of the disclaimer is clear to anyone reading it. This test is implemented so that a vague statement cannot be regarded as sufficient to bind someone according to the legal principle of so called “quasi-mutual assent”, which is the underlying basis binding a person that reads a disclaimer notice.

Consider the following examples: “the owner of the property is hereby exempted” and “the owner, managing agent and any other employee is hereby exempted”. In the first example only the owner of the property is exempted from liability, while in the second example, employees of the owner and the managing agent of the property are included under the exemption clause. The first example would not have been sufficient if damage was caused to a person by the negligence of an employee, as employees were clearly not within the ambit of the notice. It is therefore important to ensure that the wording of a disclaimer is clear, unambiguous and is sufficient to protect all parties that need protection.

A further issue to take into account when the effectiveness of a disclaimer notice is considered is the question whether such disclaimer has been properly displayed. A disclaimer can only be effective when it is found that the disclaimer was displayed in an appropriate position, which would allow the reasonable person to have seen the disclaimer, or to ought to have seen the disclaimer. Practical issues, such as the size of the disclaimer, the distance from the viewer, the visibility, font and positioning of the disclaimer should be taken into account. This test is implemented as the content of the disclaimer can only fall within the knowledge of a person, when the notice is of such a nature that it is easily spotted by someone. When a disclaimer is affixed to a premise, it is therefore important that the above factors be taken into account.

It is clear that a disclaimer is an effective method of protection, especially when used in areas where large amounts of people visit frequently. However, the use of a disclaimer notice is a potentially risky practise, as it must be ensured that the wording and placement thereof is sufficient for the reliance thereon. It is recommended that an attorney be consulted before putting up such a notice.

Bibliography

Cases

Durban’s Water Wonderland (Pty) Ltd v Botha and Another (1999) 1 All SA 411 (A)

Government of the Republic of South Africa v Fibre Spinners & Weavers (Pty) Ltd 1978 (2) SA 794 (A)

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.

WHEN IS A TENANT AN ILLEGAL OCCUPANT?

A4_bWhere the Contract of Lease is breached in any way by the tenant and he or she after receiving notice thereof has not remedied such a breach within the period agreed upon, then the landlord may cancel the contract. The tenant will be found to be an illegal occupier in this instance.

Where a tenant fails to perform as agreed upon in his Lease agreement, he will be found to be in breach of that agreement. An example of this is a failure to pay rent timeously or at all. The landlord must notify the tenant in writing of his decision to terminate the contract by means of a letter of cancellation, allowing the tenant a reasonable period, or such timeframe as agreed upon in terms of such a lease, to vacate the property.

If the tenant chooses to ignore the notice of cancellation of the lease agreement by remaining on the property and continuing to use and enjoy it, the tenant will be regarded as an illegal occupier of the property. The same applies if the tenant continues to occupy the property after the expiration of the initial lease period. An illegal occupier may be evicted from the rented property by the landlord or owner. This will be done at a Magistrate’s or High Court and for that the services of a lawyer will be required.

There is no longer a Common Law right to evict someone. Instead the owner or landlord must follow the procedures and provisions of the Prevention of Illegal Eviction and Unlawful Occupation of land Act 19 of 1998 (hereinafter referred to as the “PIE Act”). The tenant must be notified of the pending action, by means of a Notice of Intention to Evict and this must be done at least 14 days before the date of the court hearing. This notice must also be sent to the respective Municipality involved.

On the date of the hearing, the court will consider factors such as whether the person is an unlawful occupier, whether the owner has reasonable grounds for eviction and alternative accommodation available to the tenant. It is now considered a criminal offence to evict someone without a court order to that effect. Constructive eviction, for instance, where a landlord cuts the water or electricity supply to the property in order to “drive” the tenants out, is a criminal offence.

The type of action or application that your legal representative will bring will vary depending on the facts and circumstances of the matter. Such actions or applications can be heard in the Magistrate’s or High Court, depending on the value of the occupation and not the leased property value. The lease agreement may also have a clause embodied in it where the parties agree to a particular court’s jurisdiction, where upon that will be followed. If the court proceedings are successful a Warrant of Ejectment may be issued, whereupon the owner or landlord may proceed with the eviction of the illegal occupier.

Once the owner or the proprietor of the leased property has followed all the prescribed procedures as laid out in the PIE Act and they have established that their tenant is considered an unlawful occupier then they may proceed with the above-mentioned steps in order to evict them from their property.

An unlawful occupier may be removed from the premises upon the instruction of an Eviction Order / Warrant of Eviction with the assistance of the Sheriff of the respective court at a minimal fee. The steps laid out in the PIE Act are simple to understand and follow allowing a transparent and fair chance to both the landlord and the tenant in these difficult situations.

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.

THE CREDIT AGREEMENT

A4_bIf you default on a credit agreement and action is taken against you by the credit provider, you still have time, according to Section 129(3)(b) read with 129(3)(a) and S129(4) of the National Credit Act (“NCA”)[1] as well as the case of Firstrand Bank Limited v Nomsa Nkata[2] to re-instate the credit agreement until the goods have been sold in execution.

Prior to the National Credit Act coming into force, the position regarding the right of a consumer to re-instate a credit agreement was determined by the principle of redemption in common law. According to this principle, a consumer would be able to re-instate the credit agreement by paying the credit provider the full amount of the debt, together with ‘default charges’ and reasonable costs of enforcing the agreement. According to the National Credit Act, ownership and possession of an item or premises can be redeemed by paying only the amount overdue at that date, together with charges and costs.

The issue, however, is at which point it becomes too late to pay the amount overdue in the execution process. This issue was addressed in the recent case of FirstRand Bank Limited v Nomsa Nkata.[3] Section 129(3) and (4) of the NCA states the following:

“(3) Subject to subsection (4), a consumer may –

(a) at any time before the credit provider has cancelled the agreement re-instate a credit agreement that is in default by paying to the credit provider all amounts that are overdue, together with the credit provider’s permitted default charges and reasonable costs of enforcing the agreement up to the time of re-instatement; and –

(b) after complying with paragraph (a), may resume possession of any property that had been repossessed by the credit provider pursuant to an attachment order.

(4) A consumer may not re-instate a credit agreement after –

(a) The sale of any property pursuant to –

(i)         an attachment order; or

(ii)        surrender of property in terms of section 127;

(b) The execution of any other court order enforcing that                                  agreement; or

(c) The termination thereof in accordance with section 123.”

The Supreme Court of Appeal found in the FirstRand Bank Limited case that in terms of both the common law as well as the NCA, “the Rubicon has been, and remains the sale in execution.” This means that at any point up until the time of the sale in execution, the consumer can put a halt to the execution proceedings and reinstate the agreement by paying the amount overdue, together with charges and costs.

The reason that the above provision was placed in the NCA was to make provision for the fact that many consumers borrow money over an extended period in order to finance the acquisition of large purchases such as a home or a motor vehicle. It was also noted in the above judgment that less affluent citizens may make use of extended credit to purchase household items and appliances. Therefore the NCA assists consumers in providing them with the option of paying the overdue amount rather than having to pay the entire amount of the debt.

The Court established in the FirstRand Bank Limited case that Section 129(4) (b) can only be used before the sale has taken place and not thereafter. Once the sale has taken place the credit agreement cannot be re-instated between the consumer and the credit provider. Should you find yourself in the temporary position of not being able to pay the monthly instalments of your credit agreement but are able to pay those instalments at a later stage, and to not want to cancel the credit agreement, then it is imperative that you pay the money which is overdue to the Credit Provider prior to any sale in execution as you will not be able to re-instate the agreement thereafter.

Bibliography

  • National Credit Act, 34 of 2005

Firstrand Bank Limited v Nomsa Nkata, (213/14) [2015] ZASCA 44 (26 March 2015)

[1] 34 of 2005

[2] (213/14) [2015] ZASCA 44(26 March 2015)

[3] (213/14) [2015] ZASCA 44(26 March 2015)

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.

DIFFERENCES BETWEEN LIQUIDATION AND SEQUESTRATION PROCESS

A3_bThe application for liquidation and sequestration processes are often confused. Many people think that the processes are the same.

However, there is a big difference between these two processes.

A simple way to describe liquidation is that liquidation is the winding up of a firm by selling off its free assets to convert them into cash to pay the firm’s unsecured creditors. Before a liquidation application can be issued in court, a founding affidavit needs to be drafted. This affidavit will include all the details of the Applicant and / or Respondent. The Applicant is the person who wants to liquidate the company and the Respondent is the company. In the case where the Applicant is the company, there will be no Respondent. The affidavit will also include any details of the company, employees and creditors. A bond of security also needs to be signed for the purpose of the Master of the High Court.

Once the application is issued, the only people who receive this notice is the South African Revenue Services (SARS), the Master of the High Court, employees of the company and any trade unions. As soon as this is done, a Master’s certificate is obtained verifying the application, and a provisional liquidation order is granted.  A return date is then set, and all creditors are notified of the provisional liquidation through registered post and by placing the provisional order in two local newspapers. Should the Applicant’s attorneys receive no notice of intention to defend the matter, a final liquidation order is granted. The order together with the application is sent to the Master of the High Court and a liquidator will be appointed.

Sequestration is the preferred option for the individual who has exhausted all other options of resolution, and is now in a position where even if all their assets are sold, they would be left with such a high shortfall that it would be unreasonable to expect them to recover from this loss. A sequestration involves a little more administration work before a court date can be obtained. Before the Notice of Motion and Founding Affidavit are drafted, a valuer needs to be appointed in order to value the Applicant or Respondent’s estate. This needs to be done in order to ascertain whether the debtor is indeed over-indebted, and whether he / she has enough assets to provide a benefit for all creditors involved.

In the matter of a voluntary sequestration, the Applicant will be the party whose estate is to be sequestrated. The valuer needs to value the property of the Applicant on a forced sale scale. This will be calculated by subtracting 20% of the actual value of the property.

As soon as the valuer has made an estimate for the Applicant / Respondent’s estate, a Statement of Debtor’s Affairs needs to be handed in to the Master of the High Court for inspection by all creditors. This needs to be done no less than 14 or more than 30 days before the court date. A Notice of Surrender needs to be sent through registered post to all creditors to inform them that the Statement of Debtor’s Affairs is available for inspection.

The Notice of Surrender needs to be posted in two local newspapers and the Government Gazette no less than 14, or more than 30 days before the court date. Once all of the above-mentioned requirement has been adhered to, the notice of surrender can be annexed to the Founding Affidavit and can be heard by the court, no Bond of Security is needed at this point. A sequestration can only be heard by the High Court, whereas a liquidation can be heard either by a Magistrate’s Court or by the High Court, depending on the merits of the case.

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.