Marriage

VALIDITY OF ANTENUPTIAL CONTRACTS

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

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

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

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

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

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

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

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

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

[3] 88 of 1984.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.

Schnetler’s internal news

HOW WE SPENT OUR 67 MINUTES…

A1_bThe Schnetler’s team dedicated their 67 minutes for Mandela Day on 17 July 2015 by spending some time with the elderly of Huis Uitsig in Parow to cheer up their day!We also packed a small package for each of them, consisting of toiletries, warm socks, beanies and sweets and chocolates. The residents at Huis Uitsig were so pleased and excited to receive their packages from the Schnetler’s team on that rainy and cold Friday morning.  We spent our time handing out the packages to each resident in the Frail Care Unit. We were treated to a ‘thank you’ speech and sing-a-long by the residents as well as a visit with the oldest resident at Huis Uitsig who is101 years old!  Schnetler’s is so pleased that we managed to brighten the day of so many by means of a small donation.

Compiled by Laura Ames

Liquidation

COMPANY LIQUIDATION STRATEGIES

A creditor who’s claim against a company has not been paid on due date is, as a matter of law, entitled to apply for the liquidation of the company.  If the court is satisfied that the company is unable to pay the debt, a liquidation order will normally be granted, with the often distressing consequence that jobs are lost, assets are sold at far below their value and a business which, if given a respite, would have regained its financial health, ceases to exist.

The new Companies Act, No 71 of 2008, has introduced the concept of business rescue, which is intended to assist financially distressed companies in restructuring their business in a manner that maximises the likelihood of the company continuing in existence on a solvent basis.  Business rescue certainly has its place in the South African economic environment, and its growth and wider application should be encouraged.  There are, however, a number of drawbacks.  The business rescue practitioner has to be paid, and his fee is frequently substantial.  Furthermore, the business rescue plan has to be approved by 75% of the creditors voting interests, and by 50% of the independent creditors (i.e. creditors who are not directors, shareholders or members of the same company group).  If the business rescue plan is not approved, liquidation of the company will be the almost inevitable result.

Item 9 of Schedule 5 to the 2008 Companies Act provides that the liquidation of companies continues to be governed by the applicable provisions of the previous Companies Act, No 61 of 1973 (“the 1973 Companies Act”).  Which brings me to Section 347(1) of the 1973 Companies Act, dealing with the powers of the court hearing a liquidation application.  It provides as follows:  “The court may grant or dismiss any application under s 346, or adjourn the hearing thereof, conditionally or unconditionally, or make any interim order or other order it may deem just …”.

The power which the court has to adjourn the application, or make “any other order it may deem just” is a power infrequently exercised and one which has received insufficient attention by the courts.  That power should, for example, be exercised in conjunction with the power granted a court in terms of Section 354(1) of the 1973 Companies Act, which states that the court may at any time after commencement of a winding up, on the application of a liquidator, creditor or member “and on proof to the satisfaction of the court that all proceedings in relation to the winding up ought to be stayed or set aside, make an order staying or setting aside the proceedings …”.

In Klass v Contract Interiors 2010 (5) SA 40 (W), the court held that the power vested in the court by Section 354 is an unfettered discretionary power.  The court may, in deciding whether a winding up is to stayed, have regard to the wishes of the majority of creditors, and to considerations of commercial morality.  This approach echoes the reasoning adopted in Calgary & Edmonton Land Co Ltd (1975) 1 All ER 1046 (CH).  It is also consistent with a line of cases which state that, in liquidation and sequestration applications, a court may postpone the granting of a liquidation or sequestration order to enable a debtor to pay the claim of the applicant creditor, where it appears that the debtor has realistic prospects of doing so (Rosenbach & Co (Pty) Ltd v Singh’s Bazaars (Pty) Ltd 1962 (4) SA 593 (D);  Payslip Investment Holdings CC v Y2K Tech Ltd 2001 (4) SA 781 (C) at 787-789).

A company faced with a liquidation application may therefore, if it is able to show that it will be able to pay the debt within a realistic time, succeed in averting the liquidation application.  A couple of self-evident and practical points need to be made, in this regard.  Firstly, a company running into cash flow problems must keep its creditors fully informed.  If it becomes clear that debts are not going to be paid on due date, the company should timeously ask the creditors for extensions of time, make realistic proposals as to the payment of any arrear amounts and, most importantly, ensure that it treats all its creditors equally, as regards payments of debts.  A creditor that finds out that its claim has been unpaid, while those of other creditors met, is likely to speedily resort to liquidation or other litigation proceedings.

By managing its creditors in this manner, a company will, if in due course one of the creditors loses patience and brings liquidation proceedings, be able to successfully resist liquidation by invoking Section 354 and the proviso to Section 347(1).

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.

Family Law

WHAT IS THE ROLE OF THE FAMILY ADVOCATE

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.

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.

Marriage

A PROMISE TO MARRY

In this article the legal consequences of breaking off an engagement will be discussed. Is it a contract, and if it is, can you institute a claim for damages due to a breach of this contract?In order to enter into a valid engagement to be married the following requirements must be met:

  • Both parties must have the capacity to act, which generally means that parties must be older than 18 years or if they are minors, that they have the necessary consent from their guardians.
  • Both parties must voluntarily consent to the engagement. A material mistake, such as the identity of either of the parties, will render the engagement void. There must also be no misrepresentations made by either of the parties; in other words, where it would have resulted in the contract not being concluded, had the other party known the truth.
  • Both parties must be permitted by law to marry each other. For example, you may only be engaged to one party, unless a polygamous engagement applies under African Customary Law.
  • One may not marry a sibling.

It is important to note that there is no law in South Africa that requires an engagement before   marriage.

Once a date for the marriage has been determined, there is a reciprocal duty to marry on that date, unless the date is changed by mutual agreement. Further, if no date has been determined, it is presumed that the marriage will take place within a reasonable time. Nevertheless, either of the parties may terminate the engagement, which may or may not attract a claim for damages or return of gifts.

An engagement can be terminated in the following ways:

  • Marriage
  • Death of either parties
  • Mutual agreement
  • Withdrawal of parental consent
  • Breach of promise
  • Termination by one party that is justified and based on sound reasons

It is important to establish whether there is a just cause for cancellation. If there is, the engagement may be validly terminated. A reason such as sterility or criminal activity, if it was only brought to the attention of the other party after agreeing to marry, may provide enough grounds to break off the engagement. If both parties agree to terminate the engagement, all gifts given in anticipation of the marriage, including the engagement ring, must be returned.

If one party breaches the promise to marry without justifiable reasons, the innocent party can, according to our law, institute a claim for damages, provided that the losses were within the contemplation of the parties. The innocent party can claim expenses incurred in anticipation of the wedding, thus placing the innocent party in the financial position he or she would have been had the engagement never been entered into. Further, the innocent party may keep or claim back the engagement ring as part of costs incurred.

In the case of Van Jaarsveld v Bridges, the court decided that a party cannot successfully institute a claim for prospective losses on the basis of a breach of promise to marry, because an engagement is not an ordinary contract in the context of contractual damages and should therefore not be placed on a rigid contractual footing. This means that a party may not institute a claim for damages placing him or her in the position he would have been had they gone through with the marriage. Previous court judgements indicate that compensation will be awarded at the discretion of the court and that each case must be evaluated on the basis of its individual circumstances.

In conclusion, it is important to note that a promise to marry is an agreement which attracts legal consequences; therefore one should not be hasty when deciding to ask the big question.

Bibliography:

Van Jaarsveld v Bridges 2010 (4) SA 558 (SCA).
Cloete v Maritz 2013 (5) SA448 (WCC).
Bull v Taylor 1965 (4) SA 29 (A).
Georgina Guedes, 23 October 2013, Mail and Guardian, “Five fallacies about engagement rings”.
A Guide to Divorce and Separation in South Africa, “Engagement and the Law”.
Ronald & Bobroff, “The engagement”.

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.

Schnetler’s internal news

SCHNETLER’S INC. IS “GOING GREEN”

As a law firm, it isn’t difficult to imagine the countless reams of paper which we consume each and every month. As a firm, we have realised that it too is our responsibility to unite our efforts with those of every other person who is consciously striving to erase our carbon footprint which is deeply embedded on our planet Earth.

It is predicted that Cape Town residents generate over 6000 tons of waste PER DAY! In other words, each person (and there are approximately 3,497,097 people in the greater Cape Town area) produces over 1.72 kilograms of waste per day. It is alarming to learn that waste generation in Cape Town escalates at approximately 7% a YEAR!

According to an Environmental Affairs and Tourism media statement issued in 2007, South Africa has set a national target of reducing the amount of waste going to landfills by 70% by 2022, and to minimise and treat the remaining 30%.

Recycling is our solution to this very serious issue, one which affects all of us. Recycling is something everyone can get involved in. Everyone can contribute positively towards ensuring that our planet does not develop into a colossal land fill. By implementing recycling in your everyday life, no matter what your financial position is, you can make a contribution towards living lightly on our planet.

For those who require further encouragement and validation that recycling really can and does make a difference to our environment, as well as to our ordinary lives, can find five reasons why YOU should recycle.

  1. “Recycling saves energy”
    Recycling saves energy for the reason that the manufacturer does not need to create something new from raw, natural resources. By using recycled materials we save on energy consumption, which too keeps production costs down.
  2. “Recycling reduces landfills”
    Recycling reduces the need for more landfills – nobody wants to live next to a landfill!
  3. “Recycling preserves our resources and protects wildlife”
    By recycling, we reduce the need to destroy the habitat of wild animals. Paper recycling alone, saves millions of trees.
  4. “Recycling is good for the economy”
    Recycling and purchasing recycled products creates a greater demand for more recycled goods. Products made from recycled materials use less water, create less pollution and less energy is used in the production thereof.
  5. “Recycling helps our climate problems”
    Recycling produces considerably less carbon dioxide, which reduces the amount of unhealthy greenhouse gas emissions.

The bottom line is that reducing waste means less pollution, fewer raw materials AND a financial saving!

Schnetler’s has become a supporter of Oasis Association, to whom we provide all of our firm’s recyclable goods. Oasis processed over 220 tons of recyclable waste a month during 2007!  This means that Oasis Association saved the City of Cape Town approximately 20 339 cubic metres of landfill. Today Oasis Association recycles over 260 tons of waste a month. We believe that it is EVERBODY’S responsibility and duty to support and make an active effort to save our environment.

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.

Liquidation

BUSINESS RESCUE PROCEEDINGS – PROBLEMS, HEADACHES AND ANOMALIES

The 2008 Companies Act has been criticised, in many respects and in many quarters.  A great many of the provisions found therein are difficult to understand, and some of them are downright bizarre.

Take, for example, the business rescue dispensation created by Chapter 6 of the 2008 Companies Act.  Business rescue is, of course, a well-intentioned and potentially promising alternative to the liquidation of companies.  The liquidation process results in the destruction of the company, loss of jobs, the sale of assets frequently at a fraction of their market value.  It is a lose-lose situation.  The underlying aim of business rescue is to provide an alternative mechanism by which the company can be restored to commercial viability, which should ultimately better serve the interests of creditors, employees and other stakeholders.

To achieve this, Chapter 6 of the Companies Act provides that a company may be placed in business rescue by resolution of its board of directors, or by order of court.  A business rescue practitioner (hereinafter referred to as “the BRP”) is appointed, who has wide-ranging powers of investigation and control and who, ultimately, prepares a business rescue plan.  That plan is required, by Section 150 of the 2008 Companies Act, to list the assets and liabilities of the company, probable dividend if the company was to be liquidated, a list of shareholders, and business plan proposals which set out the steps to be taken to restore the company to the position where it can continue trading or (if that cannot be achieved) to wind up the affairs of the company in such a manner that creditors will receive a more favourable dividend than would have become payable, on liquidation.

In the course of the business rescue investigation, however, the BRP is vested with various powers which are, to say the least, perplexing.  One of these is found in Section 136(2)(a) which empowers the BRP to either partially or conditionally suspend, for the duration of the business rescue proceedings, any obligation of the company under business rescue (hereinafter referred to as “the BR company”) that arises under an agreement to which the BR company was a party, prior to the commencement of the business rescue proceedings, and which would otherwise become due during those proceedings.

The question is – how does that draconian power fit in with the well-known contractual principle of reciprocity?  Reciprocity means that, if two parties conclude a contract in which both of them have rights and obligations, Party A cannot enforce any of its rights without, at the same time, tendering to comply with its obligations.

So where does Section 136(2)(a) leave a creditor who concluded a contract with a BR company, prior to commencement of business rescue, under which both parties have outstanding rights and obligations?  Is the BRP able to suspend, for the duration of the business rescue proceedings, the obligations of the BR company but, at the same time, require the creditor to carry out the creditor’s obligations, without receiving any counter-performance from the BR company?

Take, for example, a distributorship agreement under which the manufacturer of products has, prior to BRP, appointed the BR company as a sole distributor in South Africa, on condition that the BR company markets and advertises the product in question, thereby ensuring that it acquires a reputation and market share.  May the BRP simply suspend those marketing and advertising obligations, but still insist that the BR company carry on acting as exclusive distributor?  Can the BRP of a franchise company under business rescue decide to suspend the obligation to pay royalties to the franchisor, but insist that the franchisee nevertheless be entitled to carry on the franchise operation?  Many other examples will illustrate why, in a commercial setting, it would be grossly unfair to expect a party to continue performing under a contract, although the obligations of the other party are suspended.

The courts have to thus far not had occasion to pronounce upon the meaning and effect of Section 136(2)(a), or how it will impact on contracts which create reciprocal obligations.  All that one can safely say is that, in the meantime, creditors with ongoing contractual obligations with companies in business rescue are left in a state of uncertainty and vulnerability, and exposed to a mechanism which is certainly open to abuse and exploitation by companies who have been placed in business rescue.

Clarification from the courts, or an amendment to Section 136 of the 2008 Companies Act, is urgently required.

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.

Insurance

SHOULD YOU ASK FOR A RISK SURVEY FROM YOUR INSURER?

In a recent unreported decision in the High Court of South Africa, North Gauteng High Court, the Court was again faced with the principles regarding disclosure of material information by an insured to its insurer.

What is interesting about this case is that the insurer was estopped from raising the defence of non-disclosure by placing a burden on the insurer to undertake a certain risk assessment of the property. The facts of the matter are fairly simple. The insured instituted action against its insurer for a loss suffered as a result of a fire on its premises which destroyed the building. The insured further claimed for a loss of rentals. A lot of evidence was led about the underwriting of the policy. What is important is the fact that the insured, through its broker, requested that the property be insured. On 15 March 2010 the property was insured and the broker requested the insurer’s representative to urgently arrange for a survey of the premises. The insurer’s representative then requested the insurer to conduct an urgent survey to determine the risk pertaining to the premises. By 24 May 2010 the survey had still not been conducted. The insurer repudiated the insured’s claim on the basis that it was under the impression that it was insuring certain offices/warehouses, but that the actual tenant of the property conducted the business of fibreglass manufacturing. The insurer was of the view that fibreglass manufacturing is a different risk to that of an office or warehouse, or property developers and suppliers of bedding goods they thought they were insuring.

Our case law has developed to a point where the Short Term Insurance Act has cleared up what test should be applied to establish the materiality of a non-disclosure. It boils down to the simple question as to whether a reasonable person would have considered the facts that should be disclosed reasonably relevant to the risk and assessment thereof, to the insurer. In layman’s terms, if you sit down and apply for insurance, you must consider all facts that a prudent person would disclose to his insurer that may affect the risk. For example, if you have a property and a compost heap that has the risk of catching fire, it must be disclosed to this insurer that you have such a compost heap. Should you fail to do so this may have an adverse effect at claim stage if the compost heap catches fire and damages your property.

What is interesting, however, is that the Court in this instance upheld the insured’s Plea of Estoppel. The insured contended that it was stated to them that an urgent survey would be done.  The insurer did not revert to the insured to inform them that a survey would no longer be conducted, as a consequence of which the insured was entitled to accept that a survey had been done.

What we as consumers can take out of this case is that if you are in doubt as to what should be disclosed, you should request the insurer to conduct a survey of your risk. By doing this you place the burden on the insurer to make sure that they are satisfied with the risk that they are accepting.  This will in all probability raise potential problems for the insurance industry. Understandably, an insurer cannot employ people to assess every risk that it places on its books. If every insured requires such an assessment this can create an administrative and costly nightmare for the insurance industry.

The question should also be raised whether the insured should not from the outset have disclosed that its tenant was in the business of fibreglass manufacturing. Surely it would have been prudent to make such a disclosure at the outset. What the broker has done, however, is to place a burden on the insurer to satisfy itself about the risk, and the insurer failed to do this. That failure, in the Court’s view, entitled the insured to indemnification.

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.
Wills and Esates

MUTUAL WILLS

The most general mutual will is that of a married couple. This does not mean, however, that the estates are joined and that the Testator and Testatrix have to make a joint decision about the distribution of their estates. Each party may make independent decisions about the distribution of his/her estate within one will.  As a result a mutual will is very popular among married couples, but the person who draws up the will, should take into consideration each party’s assets, liabilities and needs regarding inheritance to determine whether he/she should draw up separate wills or a mutual will, i.e. 2 separate wills within one document or one will which determines that merging of the respective or mutual wills should take place.

In the case of a mutual will there should be a description regarding the execution of the will should the spouses die simultaneously or within a short period, e.g. 30 days of each other. For argument’s sake, the Testator and Testatrix could be in a car accident. The testator dies and the Testatrix is in a critical condition, rendering her unable to draw up a new will; provision should be made in the will  for such scenarios.

Legislation acknowledges the principle of freedom of bequeathment; each person therefore has the right to bequeath his/her assets according to his/her preference. Despite a Testator and Testatrix having a mutual will, one of the parties could decide, for whatever reason, to have another individual will drawn up which is dated later than the mutual will. The surviving spouse will not be able to insist that the mutual will be accepted as the last will and testament.

One party also does not need the other party’s permission to amend a mutual will. Each party has the right to draw up a new will at any time, without any obligation to inform the other party thereof. Should the mutual will turn out to be the last will of the deceased, it will become the valid will regarding the deceased, regardless of whether the surviving spouse had already drawn up another will.

Merging of estates takes place when the estates of two people are joined into one upon the death of  the first spouse, mainly with the aim of managing an asset in which both parties had an interest. Normally a limited right, such as a usufruct, should be created in terms of any of the assets in the estate to the benefit of the surviving spouse. Even with merging of estates the surviving party has the right to accept or reject the mutual will and the resulting merging of estate assets after the death of the first party. It boils down to the fact that, even where merging of estates is determined in the will, the mutual will does not have much value if the surviving party rejects the stipulations of the will after the death of the deceased party.

The way in which the creation of the merge is worded in a will is of extreme importance, as the wrong choice of words could have a major impact on the payment of policies outside the estate which should fall to the surviving party’s lot. The acceptance or rejection of a will in which a merge was created should also be considered carefully, as there are several implications, e.g. Transfer duty, Donations tax and Capital Gains Tax.

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.