WHEN DOES A CLAIM PRESCRIBE?

January 14, 2016 Schnetlers Leave a comment

The issue of the legal nature of a vindicatory claim and whether it gives rise to a debt that is subject to the three year extinctive prescription period has been decided differently by different divisions of the High Court. On 28 May 2015 the Supreme Court of Appeal came to a final decision in Absa Bank v Keet[1] as to whether claims under the actio rei vindicatio prescribe after 3 years or not.

One of the first questions that your attorney will ask you when you consult him is when your cause of action arose so that they can ascertain whether your claim has prescribed. If your claim is prescribed, it means that you no longer have any legal remedies available to you. Claims arising from a debt prescribe after three years and the rules of prescription are set out in the Prescription Act, 1969.

There is one specific claim where the application of the 3 year prescription period was uncertain and this was in regard to claims under the actio rei vindicatio. This is a legal action by which the plaintiff demands that the defendant return a thing that belongs to the plaintiff, and it may only be used when the plaintiff owns the thing and the defendant is impeding the plaintiff’s possession of the thing.

A rei vindicatio action is often used in disputes surrounding instalment sales where ownership only passes on the payment of a last instalment or where instalments are not duly paid. This is mostly coupled with a claim for cancellation. In other words, the seller cancels the sale agreement and claims return of the thing sold.

In the case of Absa Bank v Keet[2] the seller of a motor vehicle attempted to cancel the sale agreement and to claim the return of the vehicle sold. The purchaser of the vehicle responded to this claim with a special plea stating that the claim for the return of the vehicle had prescribed.

The reason for stating that the claim had prescribed was that the agreement on which the seller sued would have come to an end on the date on which he contended the amount outstanding became due and payable, and that it was more than 3 years since that amount became due.

In the case of Staegemann v Langenhoven[3] it was held that a vindicatory claim does not prescribe after three years. The High Court in the Keet case held that this case was wrongly decided because if Staegemann were correct, ‘the Bank could withhold its demand for the tractor for another decade or even longer, and then demand return of the vehicle so that it could calculate its damages’.

The Supreme Court of Appeal (SCA) in the Keet case had to decide whether the High Court was correct in holding that the seller’s claim for the repossession of its vehicle is a ‘debt’, which for the purposes of the Prescription Act prescribes after three years.

The SCA made an important distinction between extinctive prescription and acquisitive prescription to come to its final decision. Extinctive prescription deals with a creditor’s right of action against a debtor, which is a personal right. On the other hand, acquisitive prescription deals with acquiring real rights to property (in terms of the Prescription Act a person can acquire ownership of property after 30 years of uninterrupted possession). Real rights are primarily concerned with the relationship between a person and a thing and personal rights are concerned with a relationship between two persons.

The person who is entitled to a real right over a thing can, by way of vindicatory action, claim that thing from any individual who interferes with his right. Such a right is the right of ownership. If, however, the right is not an absolute, but a relative right to a thing, so that it can only be enforced against a determined individual or a class of individuals, then it is a personal right.[4]

The Supreme Court of Appeal is therefore of the opinion that to consider a vindicatory action as a ‘debt’ which prescribes after three years is contrary to the scheme of the Act and that this would undermine the significance of the distinction which the Prescription Act draws between extinctive prescription and acquisitive prescription. In other words, what the creditor loses as a result of operation of extinctive prescription is his right of action against the debtor, which is a personal right. The creditor does not lose a right to a thing.

The SCA has therefore made it clear that to equate the vindicatory action with a ‘debt’ has the unintended and absurd consequence in that by way of extinctive prescription the debtor acquires ownership of a creditor’s property after three years instead of 30 years. The vindicatory action therefore does not prescribe after three years.

[1] (817/13) [2015] ZASCA 81 (28 May 2015)

[2] (817/13) [2015] ZASCA 81 (28 May 2015)

[3] Staegemann v Langenhoven & others 2011 (5) SA 648 (WCC).

[4] Wessels Law of Contract in South Africa 2 ed vol 1 p 3-4.

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)

Family Law

WHAT IS THE ROLE OF THE FAMILY ADVOCATE?

January 14, 2016 Schnetlers Leave a comment

The Family Advocate has many duties but in the context of Divorce Law, they are mostly consulted for making sure that all Parenting Plans and divorce Consent Papers are in the best interest of any minor children involved. The public can, however, also have access to the Family Advocate and it is important to note that they offer a free service.

The roles of the Family Advocate include the following: to provide education to family members and to others involved in the systems serving the family and youth; to help identify the strengths and needs of families; to be a mediator between the system and the family by helping to educate professionals on the strengths and needs of the family; to help family members understand the different roles of the agencies involved in the system and how they may affect the family and assist families in identifying and utilizing necessary services.

A Family Advocate helps state and local agencies and systems adopt more strengths-based and family-driven programs, policies, and services. The focus is to better meet the needs of families and their youth who have mental illness, co-occurring disorders or substance use disorders and improve outcomes for all, including families, youth, and the agencies they utilize.

A Family Advocate also has the authority to draft Parenting Plans at no cost which will help provide the minor child with a stable and suitable schedule between the two parents. A Family Advocate cannot however provide for a maintenance amount as this falls under the jurisdiction of the maintenance court. Should a parent feel like they are not sure of their rights or responsibilities towards their minor child, the Family Advocate can be approached in order to arrange a meeting between the two parties to mediate the rights and responsibilities between the two parties. This process is also at no cost, however should one of the parties deny the meeting, the Family Advocate has no authority to subpoena them to attend the meeting.

The Family Advocate is a perfect remedy for parents who have their child’s best interest at heart and who aim to provide a stable environment for the child when both parents are no longer together.

Contracts

DO’S AND DON’TS OF SURETYSHIP

January 14, 2016 Schnetlers Leave a comment

On 29 May 2015, in the case of Dormell Properties 282 CC v Bamberger[1], the Supreme Court of Appeal (SCA) set out the importance of, firstly, expressly pleading a suretyship clause in a plaintiff’s particulars of claim and, secondly, ensuring that the contract to which a deed of suretyship is annexed is duly signed by all parties thereto.

In the case of Dormell Properties 282 CC v Bamberger[2] (Dormell case) there were two agreements of importance. The first agreement was a written offer to lease agreement concluded between Dormell and Edulyn, duly represented by Bamberger in his capacity as sole director, in terms of which Bamberger undertook to bind himself as surety for Edulyn’s obligations under a second agreement, being the agreement of lease.[3]

The first agreement was properly signed by the parties; however, the agreement of lease was only signed by Bamberger. Annexed to the agreement of lease was a deed of suretyship which Bamberger signed. The deed of suretyship and agreement of lease were annexed to Dormell’s particulars of claim as if this suretyship was the instrument that bound Bamberger as surety and co-principal debtor for the fulfilment of the obligations of Edulyn.[4]

In the court a quo, Savage AJ found that ‘a contract of suretyship requires a valid principal obligation with someone other than the surety as debtor and the liability of the surety does not arise until this principal obligation has been contracted (Caney [C F Forsyth and J T Pretorius Caney’s The Law of Suretyship in South Africa 6 ed (2010)] at 47)’.[5] In the SCA the appellant conceded that no express reference to the first suretyship clause was made in the particulars of claim, but argued, inter alia, that the omission caused no prejudice to Bamberger.[6]

Dormell’s cause of action was based on the deed of suretyship attached to the agreement of lease and not on the suretyship clause in the first agreement. To seek to change this now would amount to an amendment of the particulars of claim and the advancing of a case which was not initially pleaded. Bamberger therefore contended that he was not given the opportunity to raise any defence which he could have raised to the suretyship clause.[7]

The SCA set out that ‘the purpose of pleadings is to define the issues for the parties and the court. Pleadings must set out the cause of action in clear and unequivocal terms to enable the opponent to know exactly what case to meet. Once a party has pinned its colours to the mast it is impermissible at a later stage to change those colours.’[8] Furthermore the court found that Dormell should have expressly alleged a valid contract of suretyship (i.e. that the terms of the deed of suretyship were embodied in a written document signed by or on behalf of the surety which identified the creditor, the surety and the principal debtor). Dormell had to allege the cause of the debt in respect of which the defendant undertook liability as well as the actual indebtedness of the principal debtor.[9]

In the Dormell case the deed of suretyship was invalid and enforceable because it was annexed to an agreement of lease which wasn’t signed by Dormell, and therefore the suretyship was in respect of a non-existent obligation. Dormell conceded that the suretyship pleaded was invalid, but argued that Bamberger would not suffer any prejudice if Dormell was allowed to rely on the suretyship in the first agreement instead. The court found that although it does have discretion regarding keeping parties strictly to their pleadings, it does not agree that this discretion reaches as far as to place a party in the disadvantageous position of not being permitted to raise any legal defence.[10]

In deciding the above, the court looked at whether Bamberger would have conducted his case materially differently, had Dormell’s case been pleaded properly. The court found that he would have, in that he would have been in the position to raise the defence of non-excussion (i.e. that Dormell should have first claimed the outstanding amounts owed from Edulyn and only if they could not pay this amount, should Dormell have claimed from Bamberger).[11] He had not raised this defence in his plea or at the trial because the deed of suretyship annexed to the agreement of lease in terms of which he had waived the defence of non-excussion (which was not signed by Dormell) was relied upon.[12]

The SCA therefore found that Bamberger would suffer prejudice if it were to allow Dormell to rely on the suretyship clause in the first agreement which was not relied upon in the particulars of claim.[13] It is therefore crucial to, firstly, expressly plead the details of a valid suretyship clause in a plaintiff’s particulars of claim and, secondly, to ensure that the contract to which a deed of suretyship is annexed is duly signed by all parties thereto. If you do not do so you may find yourself in a situation where the courts will not allow you to enforce a valid suretyship.

[1] (20191/14) [2015] ZASCA 89 (29 May 2015)

[2] (20191/14) [2015] ZASCA 89 (29 May 2015)

[3] ibid para 1-3

[4] ibid para 5

[5] Dormell Properties 282 CC v Bamberger (20191/14) [2015] ZASCA 89 (29 May 2015) para 8

[6] ibid para 8

[7] ibid para 10

[8] ibid para 11

[9] ibid para 12

[10] Dormell Properties 282 CC v Bamberger (20191/14) [2015] ZASCA 89 (29 May 2015) para 15

[11] ibid para 19

[12] ibid para 20

[13] ibid para 21

Contracts

ARE RESTRAINT OF TRADE AGREEMENTS ALWAYS VALID AND ENFORCEABLE?

December 8, 2015 Schnetlers Leave a comment

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)

Wills and Esates

WHAT HAPPENS IF I DIE WITHOUT A WILL?

December 8, 2015 Schnetlers Leave a comment

Attorneys often emphasise the fact that you should have a will drawn up and revise it regularly in order to facilitate the bequeathing of your possessions after your death. Many people still omit to do this. The problem is that, should a person die without leaving a valid will, in other words intestate, his/her estate will be administered and distributed according to the stipulations of the Intestate Succession Act No 81 of 1987.

Below is a basic example of the effect an intestate death will have on the distribution of an estate. Should the composition of the beneficiaries of the deceased be more complex, the administering of the estate in terms of the Intestate Succession Act will also become more complicated.

Let us assume that person A dies and the value of his estate is R1.8 million. He is survived by his wife (B) and 2 children, of which one is of age and the other is a minor.

Scenario 1:

A and B is married out of community of property.

B inherits R125 000 or a child’s portion, whichever is the largest.

A child’s portion is calculated by dividing the total value of the estate by the spouse and number of children, in other words R1.8 million/3 = R600 000.

The spouse and children therefore inherits R600 000 each.

The inheritance of the minor will be paid to the Master’s Guardian’s Fund, as there is no will which determines that the minor heir’s inheritance should be placed in e.g. a Testamentary Trust, where the funds will be administrated on behalf of the minor until he/she becomes of age or reaches any other specified age.

Scenario 2:

A and B is married in community of property.

B inherits 50% of the estate due to the marriage in community of property.

B also inherits R125 000 or a child’s portion, whichever is the largest, with regard to the other half of the estate.

A child’s portion is calculated by dividing half of the total value of the estate by the spouse and number of children, in other words R900 000/3 = R300 000.

The spouse inherits R1.2 million and the children R300 000 each.

The fact that the inheritance of the minor will be paid to the Master’s Guardian’s Fund may place the spouse in such a dilemma that she has to devise plans to finance the amount payable to the Master’s Guardian’s Fund to the benefit of the minor heir. Alternatively she could register a mortgage against an immovable property in favour of the Master’s Guardian’s Fund.

In case of death without a valid will there will of course be no person or institution appointed to support the surviving spouse in the administering of the estate. This should not usually present a huge obstacle, but the spouse should consider carefully which person or institution she appoints to assist her in this task. She should also negotiate the Executor’s fee with the relevant person or institution before the administering of the estate commences.

Charity

A TIME OF GIVING

December 8, 2015 Schnetlers Leave a comment

-Kinney Oosthuizen

As part of its CSI portfolio, Schnetler’s is proud to be associated with the inaugural Horses for Causes Charity Fundraiser, to be held at Kenilworth Racecourse on 16 January 2016. A lot of work has gone into this particular event, and Schnetler’s has acted as the project’s attorneys on a pro bono basis. We have been part of the project team from the outset, playing a significant role in various project planning and implementation aspects.

Let me give you a brief outline of the Horses for Causes project.

The launch of the inaugural Horses for Causes Charity Race Day will be held at Kenilworth on Saturday, 16 January 2016. The day will be uniquely and intently focussed on the valuable community upliftment work which the 16 NGOs participating in Horses for Causes perform. A large marquee tent erected in the grandstand area will display and showcase the work done by the 16 NGO beneficiaries, exposing racegoers to the empowerment and upliftment work performed by the participating NGOs.

The NGOs taking part in the event are involved in a wide spectrum of community upliftment activities, including skills development, sport, sustainable waste recycling and disposal, empowerment of people with disabilities, music, dancing, developing an effective bone marrow register, relieving the plight of neglected and abused street animals, rural education and healthcare, and providing career opportunities in the thoroughbred horseracing industry.

Funds raised on the day will be split equally amongst the 16 NGOs. Racegoers, corporate sponsors and the general public will have the opportunity of showing their financial support and generosity. Opportunities include sponsoring of races on the card, participating in fun-filled auction sales, purchasing hospitality tables in one of the three illustrious restaurant areas in the main grandstand, and making donations to the Horses for Causes fund. All amounts donated are tax deductible, and are split equally amongst the participating NGOs.

In addition to top quality horseracing, the day will offer a fun-filled family-orientated entertainment programme which will include mini cricket, tag rugby, celebrity sprints, live music, dance groups and fashion soirées. Think of the glitz and glamour of the J&B Met, combined with a really worthwhile community upliftment vibe, and you will get the general picture.

Entrance is free. It is bound to be a significant event on the Cape Town social calendar. The amount raised for the benefit of the participating NGOs will depend on the generosity of the public, but the benefits which funds donated will generate cannot be measured. Any contribution could help youngsters achieve great things in education, sport, music, dancing; be the start of a waste disposal drive in Cape Town’s neighbourhoods; purchase a wheelchair for a child who would otherwise not be able to afford one; save lives and treat disease at a clinic in rural South Africa; investments which can never be valued in money, which are unique and priceless.

Horses for Causes is presented by the Riverside Estates Educational & Upliftment Trust, which is registered as a public benefit organisation for purposes of Section 18A of the Income Tax Act, No 58 of 1962. Section 18A provides that any bona fide donation to a public benefit organisation approved by the Commissioner, not exceeding the greater of 5% of the taxable income of the taxpayer or the sum of R100 000,00, is tax deductible. Donations to the Horses for Causes Charity Race Day therefore qualify for such deduction. The website provides the necessary information on how to make a donation.

Further details of the event are to be found on www.horsesforcauses.org.za, on Facebook (horsesforcauses) and on Twitter (@horses4causes). Enquiries can be directed to Tracy on 021 424 5843 or info@horsesforcauses.org.za

Children’s Act

SCHNETLER’S GIVES BACK TO THE YOUTH

December 8, 2015 Schnetlers Leave a comment

-Laura Ames

Life’s most urgent question is: what areyou doing for others? – Martin Luther King Junior

On 03 December 2015, Schnetler’s Inc donated a box full of goodies to the children at the Red Cross Children’s Hospital. The box included board games, colouring books, crayons, play dough, lollipops, puzzles and other educational toys and books. To many, these items are not considered as very ‘exciting’ gifts to receive, however, to some, these toys and games help make another day as a sick child, bearable. Our donation was just a small contribution aimed at lighting up some children’s lives.

The Red Cross Children’s Hospital manages around 260 000 patient visits each year, the majority of who are from exceptionally poor and marginalised communities. One third of the little patients are younger than a year. This extraordinary place of healing advocates that no child will be turned away. There are also no visiting hours as parents are encouraged to be a part of their child’s healing journey.

Patients are referred from within Western Cape, the rest of South Africa and across broader Africa. The hospital provides training to paediatric healthcare professionals from the entire sub-continent and conducts ground-breaking research into childhood illnesses that has a global impact.

The hospital’s stature far outweighs its 260 000 annual patient visits. It holds the hope of a healthy childhood, a parent’s faith in healing, and a medical professional’s gift of prevention and cure for tomorrow’s most precious resources – our children.

Red Cross Children’s Hospital is constantly in need of everyday necessities, toys, blankets, nappies and very importantly, volunteers who are willing to spend quality time with the children.

Marriage

COMMON LAW MARRIAGE IN SOUTH AFRICA

November 4, 2015 Schnetlers Leave a comment

In South African law there is no such thing as a common law marriage. People simply believe that living together with another person for a continuous period of time establishes legal rights and duties between them.

This is a common misunderstanding especially with young adults.

The only way to be protected in our law is to enter into a universal partnership agreement. Such an agreement clarifies the rights and duties of the partners. The agreement will determine what would happen to property and assets of the couple if they should decide to separate. The agreement is, however, not enforceable in so far as third parties are concerned. Only a valid marriage is enforceable against third parties. It is important to note that partners can sometimes be jointly and severally liable if they acted within the scope of the partnership. An agreement such as this will be legally binding as long as it contains no provisions that are immoral or illegal. If there is no agreement on the dissolution of a universal partnership agreement, a party would only be entitled to retain those assets which he or she has purchased and owns and further would be entitled to share in the assets proportionately in terms of the contribution which they have made to the partnership.

To prove the existence of such a partnership it must be shown that:

The aim of the partnership was to make profit.
Both parties must have contributed to the enterprise.
The partnership must operate to benefit both parties.
The contract between the parties must be legitimate.
There must be valid consent.
There is an intention to create a legally binding agreement.

Where there is no express agreement, a tacit agreement may be proved if it is found that it is more probable than not that such an agreement had been reached between the parties at the time of cohabitation.

Because the existence of a universal partnership is somewhat difficult to prove, and it may not be a claim that you wish to have to make or defend, it is advisable to consider entering into a contract that spells out how property should be dealt with on termination of the relationship by death or otherwise. Such a contract would provide some certainty for cohabitees regarding the division of assets and settlements of liability on termination of the relationship.

Some of the consequences of the absence of a legal ground between parties in such relationships are:

No exemption from donations tax in respect of donations between them.
Cohabitees do not benefit from the laws relating to the exemption from estate duty of bequests to spouses.
There is no reciprocal obligation of maintenance.
Cohabitee is not a recognised claimant if his/her partner dies intestate.
There is no right to property or assets that belong to cohabitee.
There is no reciprocal duty to contribute to household necessities.

The Domestic Partnerships Bill of 2008 is still in its formulation stage and it remains to be seen how it is to be implemented. In the current constitutional dispensation it is unlikely that a partner will be left in despair, taking into account the Domestic Partnerships Bill.

Sequestration

THE SEQUESTRATION PROCESS

November 4, 2015 Schnetlers Leave a comment

The sequestration process involves a Court Application.The Applicant in the Application is either yourself for your own sequestration (voluntary surrender) or the Applicant is one of your creditors (either a friendly or aggressive creditor).

The applications are similar and although there are some different requirements for each, the result is the same.

Voluntary surrender

Voluntary surrender refers to the process whereby a natural person can make an application to place him/herself under an order for sequestration.

A person is insolvent if his/her liabilities exceed his/her assets. In such a case he/she can apply for voluntary surrender of their estate. Anybody can apply for voluntary surrender at any stage as soon as he/she is insolvent, even if they have been or are under debt counselling, for example.

The person who wants to sequestrate him/herself, will depose to an Affidavit which explains why he/she claims he/she is insolvent. This will be drafted by the Attorneys who will bring the application on behalf of the Applicant. As soon as the Affidavit is signed, the application will be issued at Court and a Court date is assigned. The Applicant does not have to appear in Court as the Advocate appears on his/her behalf.

If the Court grants a provisional order on the first Court date, the matter will be postponed for approximately one month. During that month notice will be given to all creditors, and if on the return date no-one has opposed the application, the order will be finalised and the Applicant’s estate will be sequestrated.

Compulsory sequestration

Applications are also made by way of a Court application; however, in this case the Applicant will be a creditor of the debtor. If it is a creditor with whom the debtor does not have a good relationship, we refer to it as an “aggressive” sequestration (for example the bank).

However, the banks seldom bring sequestration applications against the average debtor as it is much cheaper and easier for them to follow the collection procedures: attach property and sell it and/or attach your salary.

If it is a creditor with whom the debtor has a good relationship, we refer to it as a “friendly” sequestration (for example a family member or a friend to whom you owe money).

Aggressive (“unfriendly”) sequestration

Where an unfriendly creditor brings a sequestration application against a debtor, we refer to it as an aggressive sequestration. It is also a forced sequestration as opposed to voluntary surrender.

The creditor who brings the application must have established a claim against the debtor; in other words, the debtor must indeed owe the creditor money. A second requirement is that there must also be a benefit to creditors. Thirdly, the debtor must have committed an act of insolvency.

If a creditor brings an aggressive application against a debtor, the debtor can oppose such an application if he/she is not insolvent or if there is another reason why the order should not be granted.

Process for “unfriendly” and “friendly” sequestrations

The process for both these applications is the same and it is only the Applicant that differs.

As with voluntary surrender, an Affidavit will be given by the creditor to explain why he avows that the debtor owes him/her money. He will attach proof thereof (contract/statement) and also proof that the debtor has committed an act of insolvency (where the debtor has written a letter to say that he/she cannot pay the debt). In both instances the Applicant must prove that there will be a benefit to creditors to have the debtor sequestrated.

Once the Affidavit has been signed, the necessary documentation will be drafted, issued at Court and a Court date assigned. As soon as this is done, the documents will be served on the debtor, employees of the debtor, Master of the High Court and the South African Revenue Services by the Sheriff. The provisional order should also be given to all creditors above R5 000.00 by way of registered post. If the application is not opposed, a final order will be made for the sequestration of the debtor/Applicant.

Schnetler’s internal news

SELECTIVE ENFORCEMENT OF LEGISLATION BY THE BUREAUCRACY – IS IT PERMISSIBLE?

November 4, 2015 Schnetlers Leave a comment

We live in a country where a government agency is frequently, due to inadequate resources, unable to enforce the legislation controlled by it, against those contravening such legislation.

Consequently, many businesses and persons who operate outside the law more or less with impunity. Unlicensed businesses continue to thrive, unlicensed taxi vehicles patrol the streets, rates and taxes are not collected. In short, many transgressors of the law go unpunished, because law enforcement agencies are under-resourced.

So where does that leave the people (sometimes few in number) who are prosecuted, fined or otherwise punished when the bureaucrats who catch up with them? Is it not unfair to enforce the law against some, but not others?

This interesting conundrum faced the Gauteng High Court in the matter of Quick Drink Company (Pty) Ltd & Others v Medicine Control Council & Others. The Medicine Control Council had seized a large consignment of electronic cigarettes imported by Quick Drink, on the grounds that they contained nicotine, a scheduled medicine. The evidence before the court established that electronic cigarettes were widely available in South Africa, and that many other importers and distributors of electronic cigarettes went unpunished. The Medicine Control Council averred that it faced capacity constraints that prevented it from going after others.

The court held that selective enforcement of legislation is constitutional only if it were rational or rationally connected to a legitimate government purpose. If the target of selective enforcement shows, in court proceedings, that it was being treated differently from other identical offenders, the discrimination would be unfair in the absence of proof of rational connection between the targeting and some legitimate government purpose. The failure by the Medical Control Council to explain why it was Quick Drink that was targeted, and not other offenders, was in the court’s view of decisive importance. In giving judgment, the court said the following: “Where resources are limited it may be unreasonable to expect every potential defaulter to face the might of the law. Under such circumstances the law may then be enforced in an unequal and possibly haphazard manner and I cannot imagine that it would be open to someone to challenge such an act of enforcement on that basis alone… It would, however, be a different matter when, beyond being unequally enforced, the law is enforced in a selective manner and where no rational basis for the selectivity exists. Selectivity must be an option open to law-enforcement agencies. There may be many viable reasons why a law is selectively enforced – the selection may enhance the efficacy of the system or the selection may be justified by the availability of resources. Accordingly, even though the concept of selective enforcement may appear to be at odds with the values of equality, there may well be cogent justification for it and it would appear to me that, given that rationality is a part of the rule of law, selective enforcement would pass constitutional muster when it is rational. If this were not the case it would be open to law-enforcement agencies, who carry both enormous power as well as responsibility in applying and enforcing the law, to do so irrationally and to the prejudice of those affected. In this case it would have been known to the first respondent [the Medicine Control Council] that there were many importers, manufacturers, wholesalers and distributors of e-cigarettes in the South African market, most of whom were already doing business in the public retail space. If those businesses represent a group, then it is indeed inexplicable why enforcement was chosen in respect of only one business within that group.”

The court accordingly set aside the seizure of the consignment of e-cigarettes from Quick Drink, pending the outcome of further litigation in which the final review and setting aside of the seizure would be decided.

The case perhaps provides useful grounds upon which businesses and individuals can defend themselves against unequal and irrational treatment by the bureaucracy.

Compiled by: Annerine du Plessis