Month: April 2014

Alternate Dispute Resolution (ADR): Mediation & divorce

A2blThis article will briefly set out mediation as a dispute resolution mechanism and the use thereof in disputes which arise unnecessarily at a later stage in divorce proceedings.

Mediation can be defined as the process by which a mediator assists the parties with litigation to resolve the dispute between them by facilitating discussions between the parties, by assisting them in identifying issues, clarifying priorities, exploring areas of compromise and generating options in an attempt to resolve the dispute. It must be noted that the mediator does not make a decision, even if requested to do so by the disputants. This can be differentiated from arbitration in that an arbitrator hears evidence and arguments in an adjudicative role and makes a decision as to the outcome.

Divorce is an area of law whereby recent developments have changed the approach to mediation. Previously, in the absence of a settlement agreement, issues such as children, maintenance and the division of assets could be left to the court. The Children’s Act 38 of 2005 (hereafter referred to as ‘the Act’) introduces mediation and in certain instances makes mediation a prerequisite. Section 33 of the Act states that if the co-holders of parental responsibilities and rights with regard to children are experiencing difficulties in exercising their responsibilities and rights, those persons must, before seeking the intervention of a court, first seek to agree on a parenting plan determining the exercise of their respective responsibilities and rights in respect of the child. In preparing this parenting plan the parties must seek the assistance of a family advocate, social worker, psychologist or mediation through a social worker or other suitably qualified person. The exact meaning of a ‘suitably qualified’ person is yet to be defined.

Acting Judge Brassey in his judgement in Brownlee v Brownlee in the South Gauteng High Court further stressed the need to rely on mediation in matrimonial disputes. The Judge voiced his unhappiness at the failure of both parties’ attorneys as they did not advise their clients to use mediation before settling the matter through the court. In line with this dissatisfaction the Judge capped the fees of the attorneys of both parties.

One cannot conclude that the judgement in the Brownlee case gave precedence to the use of mediation for the resolving of disputes surrounding divorces. However, one should consider the appropriateness of mediation as a dispute resolution mechanism. If encouraged from the onset it has the ability to promote the expeditious and cost effective resolution of disputes.

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.

Domain names, trademarks and dispute resolution

A3blA trademark is defined in Section 2 of the Trade Marks Act of 1993 as a mark used or proposed to be used by a person in relation to goods or services, for the purpose of distinguishing the goods or services in relation to which the mark is used or proposed to be used from the same kind of goods or services connected in the course of trade with any other person.

Examples of trademarks would be BMW in relation to cars, or the golden arches of McDonald’s in relation to fast food. The definition above includes any mark that can be graphically represented; however, for the purposes of this discussion, we will only speak of words that can be represented as a domain name. A domain name is a unique name that identifies a website, for example, the ‘google’ in www.google.com.

One of the functions of a trademark is to identify the origin of certain goods or services. In certain cases a domain name may also assume a similar role in that it may identify the origin of a business and its goods and services. A domain name may be registrable as a trademark if it is distinctive and used in commerce in relation to goods and services. Therefore it is possible for a domain name to include a trademark, for example ‘www.sony.co.za’, ‘Sony’ being a registered trademark.

The fact that trademarks are territorial by nature and that the same mark may be registered in the same country for different goods or services creates a conflict between trademarks and domain names. For example, you can register the trademark ‘Helix’ in relation to computers in South Africa and in England. Additionally you can register the trademark ‘Helix’ in relation to computers in South Africa and in relation to sweets in South Africa. However, if your trademark is well-known, for example, the ‘Beacon’ trademark in relation to sweets, then you may have remedies to bar the registration of said trademark in relation to other goods or services, depending on the circumstances.

In contrast, a domain name is completely unique and universal and is allocated on a first-come first-served basis. For example, there can only be one ‘www.victoriassecret.com’ in the world even though X may own the trademark ‘Victoria’s Secret’ in America and Y may own the exact same trademark in South Africa.

Consider the following scenario:

Lucy is the proprietor of the well-known trademark Coco Chanel, which is registered in America, South Africa and various other countries. The website www.cocochanel.com is associated with the Coco Chanel brand. She decides that she would like to market the brand more in South Africa, so she instructs her IT department to acquire the ‘www.cocochanel.co.za’ website. Her IT department reports back to her and informs her that there is already such website and that it is used to sell clocks in South Africa. Lucy wants to know if there is a way that she can get the domain name from the clock seller.

As the trademark proprietor of a registered trademark, Lucy has three options. She can attempt to purchase the domain name from the South African clock seller, she can pursue civil litigation for trademark infringement or she can engage in alternative dispute resolution (ADR). There are generally only these three options because of the fact that most domain name registries adopt a passive attitude towards deregistration or transfer and will only proceed therewith on the basis of a court order or a decision of a recognised ADR service provider.

Due to the high costs and lengthy nature of litigation and because the clock seller refuses to sell his domain name to Lucy, she decides to attempt ADR and leave civil litigation as a last resort. Lucy can approach the South African Institute of Intellectual Property Law (SAIIPL), which is accredited as a dispute resolution provider in relation to the .za Alternate Dispute Resolution Regulations.

In terms of the new procedure anyone can lodge a complaint against a .co.za domain if the domain name “takes advantage of the rights” of that party or “is contrary to law or likely to give offence to any class of persons”.

According to the SAIIPL website “complaints can be filed against domain names which incorporate registered trademarks or even trademarks which are not registered but which are well-known. Complaints can also be filed against domain names which amount to hate speech or racism or any other such names which are contrary to public policy.”

Unlike court litigation, disputes filed with SAIIPL are normally concluded within the short period of two to three months and the fees are significantly lower than normal litigation. Thus it is better to attempt ADR before civil litigation if your complaint falls within the scope of SAIIPL’s services.

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. 

A misuse and abuse of the Insolvency Act

A1blOn the 4th of March 2014, Cape Town High Court Justice Binns-Ward granted an interdict against a company for exploiting the Insolvency Act (hereafter referred to as ‘the Act’). This is what the Company did:

Every week the Company’s employees scanned the ‘green gazette’ for advertisements of sales in execution of residential properties. The Company employs consultants all over the country. The consultants then canvass the business of the execution debtors concerned. The debtors are told by the consultants that a cancellation of the sale in execution can be achieved by availing of the provisions of the Insolvency Act.

The Company offers to arrange the publication of a notice of surrender in terms of Section 4(1) of the Act for the payment of a fee. They further indicate to the debtor that there will be no consequences if an application to court does not follow. This buys the debtor 30 days. In the 30 days the Company, if the debtor so wishes, will at an additional fee conduct a forensic audit in which it will demonstrate with great probability that the execution creditor (often banks) miscalculated its claim and afford the debtor an opportunity to reach a compromise with the execution creditor.

When debtors default on their payments the banks instruct attorneys to take action against them. The bank can get these attorney fees back from them in a separate account with different interest rates, but they are not allowed to add it to the balance of their bond with higher interest involved; they can only add entries pertaining to their bond account, not legal fees. The Company then argues that the bank is in breach of contract, and applies to court for setting aside of default judgement.     

What does the Insolvency Act say?

Section 4(1) of the Act requires a notice to be published not more than thirty days but not less than fourteen days before application is made for surrender of the estate of the debtor. Section 5(1) of the Insolvency Act provides that it is unlawful to sell any property in the debtor’s estate in question which has been attached under writ of execution, after the publication of a notice of surrender (in terms of Section 4(1) in the Gazette (this provision is for bona fide voluntary surrender application, not fraudulent applications), unless the person charged with the execution writ did not know of publication and the property is valued at less than R5000.

The decision to publish a notice of surrender by a debtor involves intention of the debtor to eventually apply to court for the acceptance of surrender and to carry out the necessary steps involved in order to obtain such sequestration order. One can withdraw a notice of surrender (in terms of Section 7) by applying to the Master of the Court for written consent, or in terms of Section 6 the notice of surrender lapses if no application for surrender is made after 14 days of the date specified in the notice of surrender. However this provision is intended for the benefit of creditors and not debtors. Section 6 makes it clear that no legitimate purpose can be served by the publication of a notice of surrender if the estate in question is not actually insolvent, and if it cannot be shown, sequestration costs can be paid and sequestration will be advantageous to creditors.

This case involved an application to court, where the applicant sought an interdict against the respondent for engaging in business of publicising notices of surrender (unlawfully) in terms of Section 4(1) of the Act. The Court held that the Company is interdicted from carrying on this sort of business. It is unlawful and fraudulent and a misuse of the provisions of the Act. It is clear from the facts of the case that in virtually all the cases the debtors never had the intention to go through with the surrender; it was merely done with the object of frustrating sales in execution. A notice of surrender is not an acceptable device for gaining time to undertake forensic audits of client’s accounts with the execution creditor, or to find a basis to apply for the rescission of the judgement that is in the process of being executed.

In conclusion it is therefore important to note that the publishing of notices in terms of Section 4(1) of the Act should only be done with the intention of a subsequent sequestration. 

References:

FirstRand Bank Limited (Applicant) v Consumer Guardian Services (Pty) Ltd & 9 Others (Case no: 10978/2012)

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.

Abstract system of ownership acquisition

A4blIn South African law ownership can transfer by means of an original or derivative method. The difference between these two methods is found in the fact that ownership by way of original acquisition proceeds without the cooperation of the previous owner, compared to the derivative method which requires cooperation between the parties.

A discussion of the original method for ownership acquisition falls outside the scope of this article and consequently only examples will be mentioned. They are prescription, attachment and mixing. The basis for original acquisition is that no intention is required between the parties. For example, if you lease a piece of land and later decide to build a swimming pool on it, you will become the owner of the swimming pool as soon as you put the pool in the ground. The only possible remedy here for the lessee will be an enrichment claim. The lessee has to satisfy all the requirements for enrichment before he will be successful with his claim.

The second method for ownership acquisition is by using the derivative method. The main requirements for this form of ownership acquisition are firstly, the parties must have a clear intention to transfer ownership and secondly, there must be delivery or registration of the property. The first requirement is self-explanatory but it is important to be aware that a person’s legal status can play an important role in determining the validity of the transfer. The requirement of delivery only becomes applicable if the parties intend to transfer movable property. There is a variety of different forms of delivery in South African law, but the most important is delivery with the long hand, delivery with the short hand, attornment and constitutum possessorium. The requirement of registration only becomes important when the parties intend to transfer ownership of immovable property. Both delivery and registration must be accompanied with a clear intention to transfer ownership.

It is in the derivative form of ownership acquisition that a distinction should be made between the causal and abstract system. The causal system involves that ownership can only pass if the underlying agreement or obligation is valid. This system practically means that if the party had the intention to transfer ownership but the actual contract is invalid, ownership will not pass.

The opposite view is followed in the abstract system, which is the system that the South African law follows. The abstract system means that even if the underlying agreement or obligation is invalid, ownership will still pass as long as the parties intended that ownership pass, together with the requirement of delivery or registration, whichever the case may be.

The abstract system provides protection to a bona fide third party, where the causal system neglects to provide the same protection. The shortcomings in the abstract system in South African law are, however, compensated for in the field of undue enrichment law.

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.

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