Month: May 2014

A misuse and abuse of the Insolvency Act

A3blOn the 4th of March 2014, Cape Town High Court Justice Binns-Ward granted an interdict against a company, for exploiting the Insolvency Act (hereinafter 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 with great probability demonstrate that the execution creditor (often banks) miscalculated its claim and afford the debtor an opportunity to a 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 apply to court for setting aside of default judgment.

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 S4(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 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 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 date specified in the notice of surrender, however this provision is intended for the benefit of creditors 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 that sequestration costs can be paid and that 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 judgment 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.

Reference: 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.

Traffic officer confiscated your cellular device? Know the procedures that need to be followed.

A4blSince 2011 the City of Cape Town: Traffic By-Law, 2011 has made it possible for an authorised officer to confiscate your cellular device if you are caught using it in your car while driving.

If you end up getting caught red-handed, these are a few things you should know to make sure that all the correct procedures are followed when your cellular device gets confiscated.

The City of Cape Town: Traffic By-Law, 2011 (hereinafter “the By-Law”) prohibits driving a motor vehicle on a public road, firstly, while holding a cellular or mobile telephone or any communications device with any part of the body and, secondly, while using or operating a cellular or mobile telephone or other communication device unless it is affixed to the vehicle (like a handsfree kit).[1]

According to the By-Law an authorised officer may, in the interest of public safety, confiscate a handheld communication device if he informs the owner of such device of the reasons for doing so. He must issue a receipt to the owner, stating the place at which such device may be claimed, and he must follow all procedures contained in any policy of the city dealing with the confiscation and impoundment of property.[2] The policy applicable in the City of Cape Town is called the Standard Operating Procedure on the Impoundment of Goods and Animals, 2012.

An authorised official exercising authority in terms of any By-Law of the City to impound goods, shall issue to the offending party a receipt for any property removed and impounded. This receipt must indicate:

  • A list of the property to be removed and impounded;
  • The physical condition of the goods (to ensure that they are returned in the same physical condition that they were in when impounded);
  • The address where the impounded goods will be kept;
  • The hours during which the goods may be collected;
  • The maximum period for storage of goods before they are disposed of;
  • The conditions for the release of the impounded goods;
  • The name and office number of a council official to whom any representation regarding the impoundment may be made;
  • The date and time by when representation must be made;
  • The terms and conditions relating to the sale of unclaimed goods, by public auction, where no claim (and/or representation) is received.[3]

The City may sell any cellular device that hasn’t been claimed within ninety days after the date of impoundment through public auction which shall be advertised in local newspapers. Municipal officials and councillors, their spouses, relatives and acquaintances are prohibited from purchasing any of these impounded goods. Fees may be levied for the storage of the cellular device and any other expense incurred by the Council during impoundment. Said fees shall be determined by Council and may be adjusted from time to time. Fees and fines shall be paid at the Council cash office between the hours of 08:00 and 16:00 on Mondays to Fridays. [4]

Goods may be returned to the owner, or his or her representative, upon presentation of proof of payment of all fees related to the impounding and storage of the goods and any fines imposed prior to and/or during impoundment. Owners or their representatives can collect their goods during the hours and at the venue indicated in the impoundment notice served on the offender. [5]

Officials of the City must take reasonable steps to prevent any damage to impounded goods; however, it will not be responsible for any damage caused to goods where a reasonable duty of care was exercised. Digital photographs shall be taken of all impounded goods. [6]

A person who contravenes a provision of this By-Law commits an offence and a person who commits such an offence is, on conviction, liable for a fine or a term of imprisonment not exceeding 3 years, or both. [7]

Reference List

  • The Standard Operating Procedure on the Impoundment of Goods and Animals, 2012
  • The City of Cape Town: Traffic By-Law, 2011

[1]S 38(1) of the City of Cape Town: Traffic By-Law.

[2]S 38(4) of the City of Cape Town: Traffic By-Law.

[3] S 8, S 9 of the Standard Operating Procedure on the Impoundment of Goods and Animals, 2012.

[4]S 10, S 11 of the Standard Operating Procedure on the Impoundment of Goods and Animals.

[5]S 12 of the Standard Operating Procedure on the Impoundment of Goods and Animals.

[6]S 16 of the Standard Operating Procedure on the Impoundment of Goods and Animals.

[7] S 39 of the City of Cape Town: Traffic By-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.

Abstract system of ownership acquisition

A2blIn South African law ownership can transfer by means of an original or derivative method.

The difference between these two methods are 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 acquires ownership acquisition falls outside the scope of this article and consequently examples will only 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,  as soon as you put the pool in the ground you will become the owner of the swimming pool. 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 that 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 selfexplanatory 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 as you atleast have to be.

The requirement of delivery only becomes applicable if the parties intend to transfer movable property. There are a variety of different forms of delivery in South African law, but the most important are delivery with the long hand, delivery with the short hand, Attornment and constititutum possessorium. The requirement of registration only becomes important when the parties intend to transfer ownership in 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. The 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 actual in the abstract system. South African law follows the abstract system. The abstract system means that 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 deliver or registration, as 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 short comings in the abstract system in South African law are 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.

Self-defence

A1blJustifiable self-defence means warding off an unlawful attack.

This article will discuss the requirements that need to be met in order to succeed with this defence.

In South Africa violent crime has become a massive concern for many who call this wonderful place home, but what can we do about it?

In our law we are entitled to protect our own interest and those of others, but unfortunately many citizens do not know the ambit of these defences.

A person acts in private or self-defence, and his act is therefore lawful, if he uses force to repel an unlawful attack which has commenced, or is imminently threatening upon his life, bodily integrity, property or other interest which deserves to be protected, provided that the defensive act is necessary to protect the interest threatened, is directed against the attacker, and is reasonably proportionate to the attack.[1]

The requirements to succeed with this defence are as follows:

  1. The attack must be unlawful (without legal justification).[2] An example of a lawful attack will be if the parties consented to the attack, like in sport, for example a boxing match. The list of situations where an attack will be lawful is unfortunately not a closed list and public policy will determine if the attack was justifiable; and
  2. The attack must be directed at an interest which legally deserves to be protected;[3] and
  3. The attack must be imminent but not yet completed;[4] and
  4. Private defence must be directed at the attacker;[5] and
  5. The defensive act must be necessary in order to protect the interest threatened (it must be the only way in which the attacked party can avert the threat to his rights or interests);[6] and
  6. There must be a reasonable link between the attack and the defensive act.[7]

The last two requirements listed as “e” and “f” will in most cases be the two problematic requirements. To decide if the defensive act was necessary in the circumstances will be determined after the fact (post facto). This, off course, makes it very difficult for a person to determine in the heat of the moment if the act will be necessary. The court will take all the facts of the matter into consideration and then decide if the person’s actions were necessary to protect his interest.

The next problematic requirement is that there must be a reasonable link between the attack and the defensive act. Here the same difficulties will arise as above, because the courts will determine the reasonability of the defence in relation to the attack after the fact. It stands to reason that there ought to be a certain balance between the attack and the defence. After all, you may not shoot and kill another person who strikes you with a fly-swatter. If the ambit of self-defence is therefore understood properly and used correctly, we as South Africans will, to a certain extent, be able to protect ourselves better.

 Reference: 

[1] Par 2, pg 101 Snyman, Fifth edition. This definition was accepted by the court in Engelbrect 2005 SACR 41(W) 106 par 228. (Snyman par 3, pg 103, Fifth edition).

[2] Par 2, pg 104 Snyman, Fifth edition. S v Goliath 1972 3 SA 1 (A) 10.

[3] Par 1, pg 106 Snyman, Fifth edition.

[4] Par 3, pg 104 Snyman, Fifth edition.

[5] Par 2, pg 107 Snyman, Fifth edition.

[6] Par 3, pg 107 Snyman, Fifth edition.

[7] Par 2, pg 109 Snyman, Fifth edition.

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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