YOUR DUTY TO DISCLOSE EVEN IF YOU DO NOT CLAIM FROM YOUR INSURER

A4BInsurance to most people is a grudge purchase. We buy insurance and pay our monthly premiums and then forget about it until we want to claim. We are sold policies where, if we do not claim, we get a later benefit. Ever wonder about losses that you suffer and do not claim for and what effect it has on your policy?

In the recent unreported judgment in Sherwin Jerrier v Outsurance Insurance Company Limited the Pietermaritzburg High Court was faced with such a question. Mr Jerrier claimed for damages to his car caused by an accident that he was involved in on 8 January 2010.

The insured (Mr Jerrier) took out a policy in December 2008. He did not report a loss that he suffered in April 2009, after inception of his policy, to his insurer. The damage to his vehicle amounted to over R200 000 and the incident attracted further third party liability.

The specific policy as most, if not all policies do, provided that “you need to inform us immediately of any changes to your circumstances that may influence whether we give you cover, the conditions of cover or premium we charge. This includes incidents for which you do not want to claim but which may result in a claim in the future.”

As with most of our household policies, these are monthly policies, and we continuously need to make disclosure to the insurer of things such as losses or damage, moving to a new house, et cetera. The court in this instance found that the reasonable man would have concluded that the previous losses would, from a claims history perspective and also from a moral risk perspective, be indicative of a change in his circumstances. The Court found that the insurer was correct in not accepting liability for the loss suffered in January 2010.

In short, even if you do not claim, let your insurer rather know of a loss or a potential claim. Anything that may be deemed to influence the risk or would indicate a change in circumstances, such as moving to a new property, needs to be disclosed to the insurer. It is not unreasonable to expect this of the insured.

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

WHO IS TO BLAME?

A3BEmily and Nathan were a happily married couple in their early thirties with two minor children. Emily was a stay at home mom and Nathan was the breadwinner of the family. The family decided to take a vacation in Sun City, which ended tragically when Nathan was fatally injured on a Valley of the Waves ride. Who was to take care of the family now that Nathan was no longer there and who was to pay the price for the family holiday that ended in a tragic loss?

If the question of negligence is hanging in the air then the obvious word to pop into one’s mind would be that of delict. In Kruger v Coetzee 1966 (2) SA 428 A 430E-G the formulation for negligence was established by Holmes in two steps:

(a) a diligens paterfamilias in the position of the defendant –

(i) would foresee the reasonable possibility of his conduct injuring another in his person or property and causing him patrimonial loss; and

(ii) would take reasonable steps to guard against such occurrence; and

(b) the defendant failed to take such steps.

In the case of Za v Smith (20134/2014) [2015] ZASCA 75 (27 May 2015) the father and breadwinner of the family died in a tragic accident while on vacation at a mountain resort close to Ceres, Western Cape, after falling off a sheer precipice (a steep rock or cliff). The wife of the deceased took the matter to the Supreme Court of Appeal, who considered three elements, namely wrongfulness, negligence and causation.

The background facts were taken into account, namely the fact that the park was used for recreational purposes for the public upon paying an entry fee. Furthermore, the 150 metres gorge drop where the deceased fell to his death was not visible, especially in snowy weather, nor were there any signs of warning.

Wrongfulness:

The court a quo did not find the Respondents to be wrongful as they did not have the duty to warn guests of the danger that was blatantly apparent to them. However, in the abovementioned case it was reiterated that ”the test for wrongfulness is whether it would be reasonable to have expected the defendant to take positive measures, while the test for negligence is whether the reasonable person would have taken such positive measures; confusion between the two elements is almost inevitable. It would obviously be reasonable to expect of the defendant to do what the reasonable person would have done. The result is that conduct which is found to be negligent would inevitably also be wrongful and visa versa.”[1]

If the abovementioned case is taken into consideration then Emily would most likely be successful in her application for compensation for herself, as well as in her capacity as mother of the two minor children, if it is found that Sun City Holiday Resort was negligent and wrongful and had causation.

[1] Za v Smith (20134/2014) [2015] ZASCA 75 (27 May 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. Errors and omissions excepted (E&OE)

SOUTH AFRICAN ATTORNEYS NOW PAINTED WITH THE SAME BRUSH

A2

As a young attorney I am often confronted with the question whether there is a body that governs the legal profession or whether we, as the peacemakers of a nation, have carte blanche to act as we wish, not abiding to any rules or regulations. Are we free to do as we please?  Strangely enough I do not feel offended by questions of this nature, and to be blatantly honest, I can comprehend why such a question may be asked. I once read a quote by Mario Puzo that is self-explanatory: A lawyer with his briefcase can steal more than a hundred men with guns.” 

In South Africa there are four statutory law societies in place:  The Cape Law Society, The Law Society of the Northern Provinces, The KwaZulu-Natal Law Society and The Free State Law Society. Every attorney in our country is a member of the law society in which he / she is practising law.  Each of these law societies had their own separate sets of rules which applied to their members.  This worked all good and well until in more recent times law firms started to branch out to different parts of the country.

National law firms normally have offices and branches in various provinces and different sets of rules would apply to each different branch of the same firm – this created chaos and led to some untenable situations.

Little did we know back in 2009, when discussions on the nationalising of rules for attorneys initially kicked-off, that all South African lawyers will be painted with the same brush seven years later!

The unification of the four sets of rules was a long and complex process. During 2014 attorneys had to approve the new standardised rules at annual general meetings of the provincial law societies, where after the Judges President and Chief Justice had to give the proverbial thumbs up. These discussions and negotiations lasted nearly a decade and after the long wait, the National Rules for the Attorneys’ Profession finally came into operation on 1 March 2016.

The Rules consist of eight parts and 55 rules in total. Some of these rules include inter alia rules regarding the general practice of attorneys, accounting rules for law firms, rules on the conduct of attorneys and the process of disciplinary proceedings against attorneys whose conduct is unprofessional and dishonourable.

So, the simple answer to the popular question I am often asked is, yes we do! As with many other professions legal practitioners are also bound to their own set of rules.

Law is an imperfect profession in which success can rarely be achieved without some sacrifice of principle. Thus all practicing lawyers — and most others in the profession — will necessarily be imperfect, especially in the eyes of young idealists. There is no perfect justice, just as there is no absolute in ethics. But there is perfect injustice, and we know it when we see it. ALAN DERSHOWITZ, Letters to a Young Lawyer

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).

LET SCHNETLER’S HELP YOU TO TIE THE KNOT

A1BSchnetler’s Inc participated in the Canal Walk Wedding Show which was held over the weekend of 19 – 21 February 2016. The question which we posed to the betrothed couples in attendance at the wedding show was, “Have you thought about the legal aspects of getting married?” The responses which we received were varied; however, many of the couples were genuinely oblivious to the reason as to why a law firm would be required when planning their fairy tale weddings.

Upon explaining to these couples the purpose of our presence at the wedding show, the scales fell from their eyes and they comprehended the significance of having an Antenuptial Contract drafted – a document which would permanently govern their marriage, unlike the flowers, food and drinks which would aid in making their wedding one to remember, but would also quickly wilt, be consumed or thrown away.

In South African law, there are various marital regimes which may govern one’s marriage. The three matrimonial systems which intending spouses may choose between are:

  1. In Community of Property
  1. Out of Community of Property with the Accrual System
  1. Out of Community of Property without the Accrual System

For the sake of conciseness, I shall only be addressing the first of the aforementioned matrimonial systems in this article. Please read next month’s newsletter to become educated on Antenuptial Contracts and the consequences of the inclusion and exclusion of the accrual system.

IN COMMUNITY OF PROPERTY

A marriage automatically creates community of property and profit and loss in the absence of an Antenuptial Contract. Every marriage is presumed to be in community of property unless the contrary is proven i.e. the existence of an Antenuptial Contract. In such a marriage, all assets of both spouses are merged into a joint estate in which both spouses hold equal, undivided shares. Both parties have equal powers in the administration of the joint estate and are also accountable to the other spouse for any transactions with the estate’s assets.

There are, however, certain assets which are excluded from the joint estate:

  • Debts or bequests by third parties with a specific exclusion clause;
  • Damages sustained by one of the spouses for non-patrimonial loss i.e. pain and suffering;
  • Certain insurance policies may be excluded from the community;
  • Betrothal and wedding gifts.

A significant disadvantage of this marital regime is that should one of the parties be sequestrated, both spouses will automatically be declared insolvent. Another disadvantage, which has proven to be a limitation, is that certain transactions require both spouses’ consent in writing i.e. the purchasing and selling of property.

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).

WHO MAY BE APPOINTED AS DIRECTOR?

A3BCertain people are not eligible to be appointed as directors of a company. In this article we look at who is disqualified from being a director as well as the effects of the actions of such persons while still acting as director.

A company must not knowingly permit an ineligible or disqualified person to serve or act as a director, according to section 69(3) of the Companies Act 71 of 2008. “Knowingly” includes the situation where the company should reasonably have known that the person is ineligible or disqualified.

Section 69(7) lists the persons on which there are an absolute prohibition, being juristic persons, minors or any persons disqualified in terms of the Memorandum of Incorporation. Section 69(8) lists the persons that are disqualified on a temporary basis, being someone who has been prohibited by the court or whom the court has declared a delinquent, unrehabilitated insolvents, persons who were removed from an office of trust on the grounds of misconduct involving dishonesty, and persons who were found guilty of a criminal offence and imprisoned without the option of a fine, or were ordered to pay a higher fine for being found guilty of any dishonesty crimes.[1]

A question that arises here is what the effect would be of appointing a prohibited director. Section 69(4) says that a person immediately ceases to be a director if they are prohibited from being a director, but section 71(3) states that if a shareholder alleges that a person is disqualified then the person must be removed by a board resolution before they cease to be a director. This means that any act done by such a person, despite his disqualification, will be valid and binding on the company unless the third party who was involved in the act was aware that the person they were dealing with was disqualified.[2]

Section 162(5) (a)-(f) sets out the grounds for an order of delinquency. A court must make an order declaring a person to be a delinquent director if the person:

  1. consented to serve as a director, or acted in the capacity of a director or prescribed officer, while ineligible or disqualified to be a director;
  2. acted as a director in a manner that contravened an order of probation;
  3. grossly abused the position of director while being a director;
  4. took personal advantage of information or an opportunity, or intentionally or by gross negligence inflicted harm upon the company or a subsidiary while being a director;
  5. acted in a manner that amounted to gross negligence, wilful misconduct or breach of trust while being a director; or as contemplated in section 77(3) (a), (b) or (c);
  6. has repeatedly been personally subject to a compliance notice or similar enforcement mechanism;
  7. has been convicted of an offence at least twice, or subjected to an administrative fine or similar penalty; or
  8. was a director of a company or a managing member of a close corporation, or controlled or participated in the control of a juristic person that was convicted of an offence, or subjected to a fine or similar penalty, within a period of five years. [3] & [4]

If a person is declared a delinquent in terms of section 162(5) (a) or (b) it is unconditional and for the lifetime of the person. If a person is declared a delinquent in terms of section 162(5) (c)-(f) this is temporary for a minimum of 7 years.[5]

It is therefore very important, when appointing a director, to make sure that he is qualified in terms of the new Companies Act. One must do proper research about a person accordingly before appointing him as a director of a company because it is possible that if you do not do so, the company in which you are a shareholder may have to bear the consequences of the actions of this disqualified person.

References:

  • Companies Act 71 of 2008
  • FHI Cassim et al Contemporary Company Law (2012)

[1] Section 69(7) – (8) of the Companies Act 71 of 2008.

[2] Section 69(4) and 71(3) of the Companies Act 71 of 2008.

[3] Section 162(5) (a)-(f) of the Companies Act.

[4] FHI Cassim et al Contemporary Company Law (2012) 435 – 437.

[5] FHI Cassim et al Contemporary Company Law (2012) 438.

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).

USUFRUCT AND CAPITAL GAINS TAX

A2BWhat is a usufruct?

“A usufruct provides to the usufructuary a right of use of property or assets, lifelong or for a specific period, but the usufructuary does not acquire ownership of the relevant property or assets.”

Usufruct is often applied as part of estate planning in order to save on Estate duty, as the calculated value of the usufruct qualifies as deduction for Estate duty, should the usufructuary be the surviving spouse. E.g. a woman may bequeath her property to her son provided that her spouse has lifelong usufruct from it.

Obviously this kind of bequest may create problems, as the son is not able to utilise the property for personal use or rent it out as long as his father is still alive. If we talk about agricultural property the problems escalate and the practical administration of the usufruct can result in many a headache.

These issues are, however, of a personal nature and our opinion is that the root of the problem is actually the accountability of Capital Gains Tax which will revert to the owner when the property is eventually sold.

The value of the usufruct when it is created is recovered from the market value of the property in order to determine the bare property value. This calculated value will then represent the base cost of the property when it is eventually sold.

Example:

I, TOUGH TINA, bequeath my immovable property to my son, LITTLE JOHN, subject to the lifelong usufruct of my spouse, BIG JOHN. BIG JOHN is thus the usufructuary and LITTLE JOHN the bare owner.

Suppose the value of the property for the purpose of this example is R1 million. The usufruct value is calculated by capitalising R1 million allowing for BIG JOHN’s life expectancy (according to tables) and multiplying it by 12% (or a % as approved by SARS), in other words R1 million x [ table determined factor amount ] x 12%.  Assume this translates to R800,000.

The bare property value at the death of TOUGH TINA is thus R1 million minus R800,000 = R200,000. Should LITTLE JOHN sell the property at R1.5 million before BIG JOHN’s death, taxable Capital Gains will potentially amount to R1.3 million on which tax is payable.

We are not in principle against usufruct, but it is clear that costs and the influence of Capital Gains Tax on usufruct should be studied thoroughly before considering such a stipulation in your will.

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).

STEP BY STEP GUIDE TO EASY UIF CLAIMS

A1BAlice recently lost her job. She is feeling very despondent since she has no income to provide for her family and cover her monthly expenses. She recalls that while she was employed she made monthly Unemployment Insurance Fund (UIF) contributions. However, Alice has no idea how to claim from the UIF and whether she qualifies as a claimant.

  1. WHO CAN CLAIM FROM THE UIF?

All workers who contributed to the UIF can claim if they have been fired, if their contract has come to an end, or if their employer is bankrupt. Domestic workers who have more than one employer can claim if they lose their job with one of their employers or if an employer dies.

  1. WHO CANNOT CLAIM?
  • Persons who resigned or quit their jobs
  • Persons who are suspended from claiming due to fraud
  • Persons who do not report at set dates and times
  • Persons who refuse training and advice that may be given by UIF staff
  • Persons who receive benefits from the Compensation Fund or from an Unemployment Fund established under the Labour Relations Act
  1. WHEN CAN I CLAIM FROM THE UIF?

You can start claiming from the last day of employment until your UIF benefits are used up or you started working again. Your current contract must have expired before registering for UIF. Furthermore, you must claim within six months after your last day of employment.

  1. HOW DO I REGISTER FOR UIF BENEFITS?

Unemployed workers must apply for UIF benefits in person at their nearest labour centre. 

Step 1: Documentation

This step is of utmost importance if you want to claim your UIF successfully for the first time. It is important to have all the necessary documentation in order to avoid repeated trips to the labour centre. The required forms are available as PDF downloads at ezuif.co.za/uif-forms.

You need:

  • Your 13-digit bar-coded ID or passport
  • UI-2.8 for banking details (Note that this needs to be signed by your bank and be accompanied by a stamped bank statement to confirm your bank account details.)
  • Form UI-19 to show employment history. This form is to be filled in by your previous employer. (Note that the Labour Department will check your last four years of work history to calculate your UIF benefit amount. Make sure you have all necessary declarations from previous employers dating back four years. If an employer has failed to issue you with a declaration, he must also fill out a UI-19 form.)
  • A workseeker form
  • Last two pay slips

Step 2: Go to the nearest labour centre

Once you have all the documents, go to the nearest labour centre. You can find the address and telephone number of your nearest centre at http://www.labour.gov.za/contacts/contacts. Note that the average waiting period at the labour centre can be anything from two to six hours, so make sure you have enough time. There is a slight chance that the staff at the labour centre may ask unemployed workers to go for training or advice – this is within their rights and you will have to take their advice.

  1. HOW WILL I BE PAID?

Once you have registered for UIF benefits the staff at the labour centre will issue you with a UIF checklist. On this checklist you will find the address of the venue where you must sign for payment, as well as the date and time for your attendance.

Step 1: Go to the signing venue

You must appear at the designated venue on the date and time stipulated in order to sign for your first UIF payment. It is important to be on time. Take the UIF checklist and your ID document with you.

Step 2: Sign the unemployment register and receive UI-6A forms

If you have successfully registered for UIF, your name will be read out from a list. You will be required to sign a register to mark your attendance and confirm that you are still unemployed. Collect all the UI-6A forms (one for each future signing). Keep all these documents in a safe place as you will need them every time you are due for a UIF payment. This whole process can take up to three hours. Your first payment will be paid into your bank account within two to four days after you have signed the register.

Step 3: Note your next signing date

Make sure you are aware of your future signing dates – they are printed on your UI-6A forms. Signing dates will be approximately four weeks apart. You will have to hand in the relevant UI-6A form every time you attend, so make sure you have it with you. Note that your application may be delayed and not yet processed by the date of your first signing. It is recommended that you call the relevant labour centre the day before going to the signing venue to ensure that your application has been processed. If your application has not yet been processed you do not need to go to the signing. Ask for the date of the next signing.

  1. HOW MUCH WILL I BE PAID?

The amount that you will be paid will depend on the amount of your monthly salary when you were employed.

Workers who earned less than R12 478 per month will receive approximately 36-56% of their average monthly salary for the previous four years; the higher the salary, the lower the percentage.

Workers who earned more than R12 478 per month will receive a fixed monthly benefit of approximately R4250-R4550.

How long you will be eligible to receive UIF payments depends on the length of time that you have contributed to the fund. You are eligible to receive one day’s worth of benefits for every six days that you had worked and contributed to the UIF over the previous four years. The maximum number of days you can claim for is 238. 

Note: You can calculate your UIF monthly payments by using the EZUIF calculator provided at: http://ezuif.co.za/2012-uif-benefits-calculator/

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).