BOUNDARY WARS: WHAT TO DO WITH AN ENCROACHING NEIGHBOUR

“Good fences make good neighbours” (wise old proverb)

You find out that the fence/wall/house your neighbour is building, or has built, is actually on your land – what can you do about it?

No problem of course if you are happy to sell the land in question to your neighbour at an agreed price, or if your neighbour voluntarily removes the encroachment. But if instead you come to blows and end up in court, what will the outcome be? Regrettably, as a recent Supreme Court of Appeal (SCA) case shows, there is no easy answer to that question, hence the practical advice at the end of this article.

A most misleading fence causes confusion

To illustrate, the facts in this matter were these –
A had bought a number of properties, on one of which was a substantial but incomplete “structure”.

A thereafter sold 27 of its properties to B, blissfully unaware that the incomplete structure partially encroached on one of the properties it was selling.

A had been lulled into a false sense of security by an existing fence on the property as to where the property’s boundary was, hence its belief that the incomplete structure was entirely on its own land.

When, two years later, A discovered the encroachment, it asked the High Court for an order that B be forced to transfer the land in question back to it.

Demolition? Or damages and transfer?

Confirming the High Court’s refusal to force such a transfer, the SCA commented that “adjudication in relation to encroachment is fraught with complexities”, and the hard fact is that, unless and until new legislation is put in place to specifically address these complexities, you are faced with many grey areas.

Broadly, the many court cases relating to encroachment over the years suggest that –
Your primary remedy is – in theory at least – a demolition order. You may even be able to enlist the assistance of your municipality in this regard.

However our courts have in many cases, after weighing up what is reasonable and fair in all the circumstances, refused demolition and instead ordered payment of damages as compensation for the encroachment. Regrettably there is no certainty as to exactly how a court will calculate these damages.

Although in practice a court ordering damages rather than demolition is also likely to order that the land in question now be transferred to the encroacher, that won’t necessarily happen. Indeed the SCA in this case queried whether Constitutional considerations around arbitrary deprivation of property might prevent such an order. One can imagine the practical problems that would ensue if that happens.

One thing that is now certain, per the SCA’s decision, is that an encroacher cannot just go on the offensive and force you to transfer the land to it. It can defend itself against your application for demolition if you make one, but, like the landowner in this case, you could just sit back passively exercising your ownership rights.

A relevant factor will always be whether the encroaching structures comply with planning, zoning, building and environmental regulations. The fact that the building in this case was an illegal structure (for want of approved building plans) was another nail in the encroacher’s coffin.

Another thing to bear in mind – any delay on your part in objecting to the encroachment increases the risk of the court refusing to order demolition.

The bottom line – what you should do

You really don’t want to risk a court action with all those complexities and grey areas in the law.

So, prevention being as always much better than cure, before you build anything make 100% sure that you are indeed building on your own land. Remember that old fences and boundary walls may, as happened in this particular case, not always reflect the boundaries correctly.

On the other side of the fence (as it were), take legal advice immediately you learn of any encroachment, planned or actual, onto your property.

GARNISHEE ORDERS – ARE 2 MILLION OF THEM NOW INVALID? AN ACTION PLAN FOR EMPLOYERS, CREDITORS AND DEBTORS

“The ability of people to earn an income and support themselves and their families is central to the right to human dignity” (Extract from judgment below)

“Garnishee” orders (more properly “Emoluments Attachment Orders” or EAOs) are often used by creditors to attach a debtor’s earnings. The debtor’s employer is served with a court order to deduct specified amounts from the debtor’s salary or wages. The employer pays those deductions over to the creditor until the debt and legal costs are settled in full.

Misuse! The facts that alarmed the High Court

Supporters of this process argue that, fairly obtained and implemented, garnishee orders are not only an efficient and cost effective method of debt recovery, but less traumatic for debtors than executions against property.

The problem however lies in the potential for misuse, as shown in the recent high-profile High Court case brought on behalf of a group of low wage earners. After defaulting on loan repayments, they had each been persuaded to sign consents to judgment with an undertaking to pay off the debt in instalments, consent to the issue of a garnishee order, and consent to the jurisdiction of a court in another district. The debtors denied that the documents were properly explained to them or that they signed them voluntarily.

Garnishee orders were duly issued, leaving the debtors in many cases with completely unaffordable deductions. For example, over half of one employee’s salary was attached. Another employee had almost her whole salary attached in terms of three orders granted against her on the same day.

Orders invalidated – the practical result

The problem lies in the Magistrate’s Court Act which governs the issue of garnishee orders. It imposes no limit on the number of orders that may be granted against a debtor, nor any limit on the amount that may be deducted. Moreover, these orders can be issued by clerks of court giving rise, in at least some district courts, to a “rubber stamping” exercise based solely on whether a debt judgment has been obtained or not. Debtors can also consent to the jurisdiction of a court far away from where they live and work, effectively depriving them of their right of access to the courts.

These provisions, held the Court, are unconstitutional, and the garnishee orders in question are therefore unlawful and invalid.

The practical result (pending a likely appeal, subject to referral to the Constitutional Court for confirmation, and subject to amendments to the Act reportedly being prepared as a matter of urgency by the Department of Justice and Constitutional Development), is that, in the Western Cape at least –
Garnishee orders may no longer be issued by clerks of court. They must be issued under “judicial oversight”, in other words by a magistrate – no doubt after a full enquiry into the affordability to the debtor of the deductions sought.

In cases where the National Credit Act applies (which will be most cases like this) only the court where the debtor lives or works will have jurisdiction – making it much easier for the debtor to appear in court and be heard.

Employers, Creditors and Debtors: Your action plan

So what happens now? Garnishee orders that comply with the above new criteria are still valid and enforceable. But with media reports suggesting that as many as 2 million existing garnishee orders may now be invalid, all role players – including employers, creditors and debtors – need to check any existing orders urgently.

What you don’t want to do is risk breaching a valid court order, so unless and until a garnishee order is actually set aside by a court (or you have the creditor’s written agreement to stop deductions as an interim measure), treat it as at least provisionally valid unless your lawyer gives you specific advice to the contrary.

Don’t rely on the various reports and opinions you will read in the media – a lot of them are confusing and some are completely misleading. Take full advice in any doubt!

TAX SEASON STARTS 1 JULY: YOUR DEADLINES

Tax Season for individuals and trusts is upon us once again.

Your important dates for filing your ITR12 Tax Return for the period 1 March 2014 to 28 February 2015 are –
30 September 2015: Manual submissions, or

27 November 2015: Returns submitted via eFiling or electronically through the assistance of a SARS official at an office of SARS, or

29 January 2016: Provisional taxpayers via eFiling.

EMPLOYERS, EMPLOYEES: EARNINGS THRESHOLD UNCHANGED

Overtime limits and pay, working hours regulation, meal intervals, rest periods, night, Sunday and Public Holiday work – these are some of the basic protections and benefits in terms of the Basic Conditions of Employment Act (BCEA) which don’t apply to employees whose earnings exceed a specified threshold.

Every year in the past the Department of Labour has announced a 1st July annual increase in the threshold, but this year the threshold remains unchanged at R205,433-30 p.a.

POPI: DON’T PANIC!

“Don’t Panic” (Douglas Adams, Hitchhiker’s Guide to the Galaxy)

Almost every business in South Africa will be affected by POPI (the Protection of Personal Information Act), but don’t be misled by the many articles and media reports doing the rounds that imply you are at immediate risk of non-compliance. No general commencement date has yet been set, and even when it is, we will still have at least a full year thereafter to comply.
Having said that, there’s certainly merit in being prepared. In a nutshell, build your compliance program around identifying what personal data you hold, why and under what authority you hold it, and how secure it is.

But don’t panic if you haven’t started on that yet. When a commencement date is actually announced (hopefully in the not-too-distant future, now that the way is cleared for the appointment of an Information Regulator) we’ll let you have some practical advice on how to go about preparing for compliance.

THE AUGUST WEBSITE: ONLINE LEARNING FOR ENTREPRENEURS

If you own a small business, if winter’s chill means less time in the Great Outdoors and more time indoors, and if you don’t want to waste a golden opportunity to grow your business savvy – then start mining the treasure trove of educational resources available to us all on the Internet.

Business News Daily has a convenient list of “10 Online Programs to Boost Your Business Skills” on its website at http://www.businessnewsdaily.com/7780-online-business-education-programs.html.

Many of them are free, and they offer everything you can think of in the way of useful business education. Choose a course that fits your needs and available time, then immerse yourself in a variety of learning channels like video tutorials, articles, online chat, seminars, even opportunities for collaboration and hands-on learning.

Then again please don’t stay locked up indoors all winter long! Science has confirmed again and again just how good it is for us to get outdoors regularly – see for example “Surprising science-backed ways to boost your mood” on BusinessInsider’s website at http://www.businessinsider.com/science-backed-things-that-make-you-happier-2015-6.

Have a Great Women’s Month this August!

SELLING YOUR HOUSE? CHOOSE YOUR OWN CONVEYANCER

For most people, your house is your most important asset. So when you sell it (or any other property for that matter), it is absolutely critical to entrust the process to a conveyancer you can trust to act with both speed and integrity.

The conveyancer’s role

When you sell property, the conveyancer is the specialist attorney appointed as “transferring attorney” and tasked with carrying out the process of registering the buyer as the new owner. Only suitably qualified attorneys are admitted to practice as conveyancers, and only they can register transfer of ownership (and other property rights like mortgage bonds, servitudes etc) in the Deeds Office.

Your risk: What can go wrong?
First step in the process is normally the appointment of an estate agent to find a buyer for you and, as our regular readers will know, it is vital to have a clear agreement in place with the agent. Neither of you will want disputes to arise over the terms of the mandate or entitlement to commission (you particularly want to avoid risks like having to pay double commission). Bottom line – get your attorney’s advice before you agree to anything.

Next comes the actual sale agreement (also referred to as a “deed of sale” or “offer to purchase”). Not only must it be in writing, properly signed, and comply with a whole checklist of requirements, but things can go disastrously wrong if your agreement is in any way unclear, ambiguous, wrongly worded, incorrectly signed etc. It is also critical that you understand exactly what you are committing yourself to – with very few exceptions, our law will hold you to whatever terms and conditions are in the agreement. Sign nothing until your attorney has checked everything for you!

“Time”, as the old saying goes, “is money”, and any delay in the transfer process puts you at risk of substantial loss. Your conveyancer jumps through all sorts of hoops for you before lodging transfer documents in the Deeds Office and whilst some steps in the process need co-operation from third parties like bondholders, SARS and the local municipality, others depend on your buyer’s active participation. If the buyer either wants to delay transfer or hasn’t got his/her ducks in a row, for example is struggling to come up with a bond or other finance, you need rapid corrective action to be taken. Choose a conveyancer you can rely on to move the process along with a minimum of delay.

Insist on using your own attorney

The bottom line is that you ultimately carry more risk than the buyer if things go wrong. It is entirely fair therefore that you as seller have the right to nominate your own attorney to attend to the conveyancing, and it is vital that the sale agreement confirms this unambiguously. The fact that the buyer normally pays the conveyancer (as part of the transfer costs) is irrelevant. There is nothing to stop the buyer from appointing his/her own attorney to monitor the transfer process at his/her own cost, although that is seldom necessary. If a buyer pushes for the appointment of another conveyancer on the basis of discounted fees, remember that any such discount benefits the buyer, not you.

Don’t let anyone take away your right to choose your own conveyancer!

EMPLOYERS: IMPORTANT BREAKS FOR SMALL BUSINESSES YOU NEED TO KNOW ABOUT

“…..we believe that the SME sector is critical in stimulating economic development, and that it is also a pivotal area in terms of innovation, skills development, entrepreneurship, labour-absorption and job-creation” (from a speech by the Deputy Minister of Small Business and Development)
(Note: As always, be particularly careful to take specific advice on anything to do with our labour laws, they are complex and the penalties for non-compliance are severe.)

Last month we saw how only a defined “small business” can agree with employees that family responsibility leave days will count against their annual leave. This month let’s look at the various other provisions of the Basic Conditions of Employment Act (BCEA) which apply only to small businesses.

Does the BCEA apply to all employers and employees?

Yes, except to members of the National Defence Force, National Intelligence Agency, South African Secret Service, unpaid volunteers working for a charity, and in a few other specialised situations.

Can you contract out of the BCEA?

No, the BCEA overrides anything less favourable to employees in an employment contract or other legislation, although some (not all) conditions can be varied by collective agreements and ministerial determinations. That’s where the “Ministerial Determination 1: Small Business Sector” comes into play for SMEs.

Are you a “small business”?

In a nutshell, you will qualify as a “small business” if you employ less than 10 employees, provided you conduct only one business which is not formed by division or dissolution of an existing business. The determination doesn’t apply to domestic employees or to the public service, and a bargaining council agreement or another determination may take precedence.

Overtime

The normal restriction on overtime of 10 hours per week is extended to 15 hours per week.

The standard requirement to pay one and a half times normal wage for overtime is changed to one and a third for the first 10 hours of overtime, and one and a half times only for time over the 10 hours.

Averaging of hours

You can agree in writing with your employees that, for up to a year, their ordinary hours of work and overtime may be averaged (for example they could agree to work a number of extra hours this week in return for the same number of hours off next week) over a period of up to 4 months, up to a maximum average of 45 ordinary hours and 10 overtime hours a week.

Family responsibility leave

As we saw last month, you can agree in writing with your employees that their family responsibility leave days be deducted from their annual leave entitlement.

BUSINESS RESCUE – IS IT TOO LATE AFTER LIQUIDATION? THE SUPREME COURT OF APPEAL SPEAKS

An important new SCA (Supreme Court of Appeal) decision recently addressed the following scenario –

A close corporation runs a business renting out its commercial properties.

The properties are bonded to a bank.

The close corporation was placed into final liquidation by the High Court despite contending that it should rather be placed under business rescue.

5 months later it applied again for business rescue, but the High Court concluded that once a final liquidation is granted against a company (the same business rescue provisions apply to close corporations as to companies), it is too late to apply for business rescue.

On appeal however, the SCA held the opposite, in other words that you can apply for the business rescue of a company even after a final liquidation order is granted against it.

This is significant for you if …..

As the Court noted, the circumstances of a liquidated company could improve radically, even after liquidation, such that it would become profitable if allowed to trade. It could, for example, be awarded a contract for which it had earlier tendered, secure funding for future projects, or have a major creditor offer to subordinate its claim.

This decision could have a major impact on you if you are –
A creditor, supplier or customer of the company

An employee

A director, shareholder or surety

Anyone else with a stake in the outcome.

Uncertainty and disruption?

If, held the Court, business rescue proceedings will yield a better return for shareholders and creditors and jobs will be retained, there is no reason to deny business rescue only because the company is in final liquidation.

But this raises concerns of uncertainty and disruption. On liquidation, control of the company moves from the directors to liquidators, whose duties include making decisions which would impact on ongoing and new contracts, continued trading etc. One can imagine the potential mess and practical problems if liquidators have to operate with the knowledge that they could at any time be removed from office and control of the company returned to the directors.

“The simple answer” to those concerns, said the Court, “is that a court can dismiss any application for business rescue that is not genuine and bona fide or which does not establish that the benefits of a successful business rescue will be achieved.”

Liquidators – your fees and expenses

Remember that you are just a creditor of the company for anything due to you for remuneration and expenses incurred before the commencement of business rescue proceedings.

SARS: (TAX) CRIME DOESN’T PAY!

“The income tax created more criminals than any other single act of government” (Barry M. Goldwater)

SARS it seems retains a much higher enforcement capability than some recent media speculation has suggested. It has announced a 92% conviction rate in cases handed over for prosecution in tax and customs-related crimes, mostly involving high net-worth individuals, fraudulent VAT refunds and Income Tax fraud.

Per SARS: “Over the 2014/5 financial year, there were 256 individuals/entities convicted in cases involving R196 million, with fines totalling R9.6 million issued. An effective 555 years of imprisonment, 258 months of correctional supervision and 2,480 hours of community service were handed down to those convicted.”

THE JULY WEBSITE: DRONES – FLY THEM LEGALLY AND SAFELY FROM 1 JULY

The new Regulations applicable to all drones (RPAs or “Remotely Piloted Aircraft”) from 1 July are the subject of much confusion and a slew of media reports, many of them extremely misleading.

For some clarity, and hyperlinks to the new Regulations themselves, see the Safe Drone website with content from industry experts–
Links to the Regulations online on the Home Page www.safedrone.co.za

A simplified summary of laws relating to commercial, hobby and corporate/non-profit drone pilots at www.safedrone.co.za/new-caa-regulations-simplified

More on commercial drone operations at www.safedrone.co.za/how-to-operate-drones-legally

More for hobby drone pilots at www.safedrone.co.za/hobby-drone-pilots

Basic drone safety at www.safedrone.co.za/basic-drone-safety

“No drone zones” at www.safedrone.co.za/no-drone-zones

Lots more in the panels “CAA and Legal” and “Quick Questions” on the right hand side of each page.

Note: The Regulations themselves are extremely complex and failure to comply carries substantial risk of both civil liability and criminal penalties – take detailed advice in any doubt!

Have a great July, and don’t forget to do your bit for Nelson Mandela Month! See how at www.gov.za/nelson-mandela-month-2015.

LANDLORDS: CAN YOU SWITCH OFF YOUR DEFAULTING TENANT’S LIGHTS?

Your tenant isn’t paying rent and refuses to move out – can you turn the electricity off?

First – commercial or residential?

The judgment discussed in this article relates to a commercial occupier and as is noted below, residential occupiers enjoy additional protections to commercial occupants. There will no doubt be much debate in legal circles as to what extent this new decision might or might not assist landlords of residential premises. As always, take advice upfront!

Lights out for a nightclub

A case in point was decided by the High Court recently –
A landlord leased part of its building to a nightclub/bar business, owned by a close corporation.

The landlord paid electricity for the whole building to the municipality, and then the night club and other tenants had to refund the landlord pro rata.

When the nightclub fell into arrears (to the tune of over R300,000) the landlord asked the High Court for an order allowing it to cut the tenant’s electricity supply, pointing out that it needed to mitigate its damages and that all its other tenants would be prejudiced if the building’s electricity supply was cut for non-payment of the municipal account.

The close corporation turned out to have been deregistered, and therefore the “lease” was totally invalid (for more on the dangers of deregistration see “When CIPC Deregisters Your Company” in last month’s issue of LawDotNews).

Although there was no valid lease, the Court granted the disconnection order, holding that the building owner was effectively subsidising the nightclub’s business “which cannot be allowed to continue.”

Don’t take the law into your own hands!

Don’t be tempted to take the law into your own hands by cutting off your defaulting tenant’s electricity yourself. If you do, you face an immediate “spoliation order” application for unlawful dispossession (the rights and wrongs of your claims against the tenant are irrelevant at this stage), and that will put you in the wrong, waste time, and expose you to unnecessary legal costs and perhaps even a damages claim.

Rather – like the successful landlord in this case – take immediate advice on approaching the Court for assistance. Bear in mind that this may be a lengthy process, and that there are no guarantees here, particularly as the facts here were somewhat unusual, with the night club not actually being a “tenant” (the “lease” was never valid), and the arrears relating directly to non-payment for electricity. Also factor in that there was no element of residential occupation (which could have brought into play additional protections for occupiers/tenants), and that our courts may not always be as understanding of the landlord’s position as this one was.

Prevention – still better than cure

So whilst this judgment has been widely welcomed in media reports as a victory for landlords, the bottom line is that prevention is still better than cure – start off with a properly drawn lease (preferably supported by personal suretyships), do your credit checks properly, and make sure that any corporate entity you deal with is in fact still registered with CIPC.

SELLING A BUSINESS WITH GOODWILL: BEWARE THIS IMPLIED PROHIBITION

When you sell a business including its “goodwill”, you will likely be prevented from opening up in competition with your old business by a “restraint of trade clause” in the sale agreement.

Your 5 year restraint period lapses – what next?

Restraint clauses have to be reasonable in duration, so somewhere along the line your restraint period will lapse. And when that happens, you may think that you are now completely free to set up shop again.

But as an important High Court decision has highlighted, this is not entirely correct. In this particular case the restraint clause itself lapsed after 5 years, whereupon the key individuals involved (effectively the owners of the company that had sold the business), started up again in competition with the buyer. One can perhaps understand their confident assertion that they were perfectly entitled to do so and to actively canvas their former customers – after all, the buyer had happily agreed to the 5 year non-competition period.

But that’s not all …..

However, held the Court, the restraint clause was not the only restriction on the seller. Because the sale had included “goodwill”, the seller was, even after 5 years, still bound by an “implied prohibition” against the canvassing of former customers.

Critically, held the Court, such an implied prohibition applies to the seller regardless of whether or not the parties have agreed on a specific restraint clause. In this case therefore, although the buyer and seller had specifically agreed on only a 5 year restraint period, the seller still remained at least partially bound after the 5 years lapsed.

Sellers, Buyers – word your restraint clause correctly

Sellers: Even if by some chance there is no specific restraint clause in the sale agreement, you are still subject to an implied prohibition against canvassing existing customers if the sale includes the “goodwill” of the business. Avoid doubt and dispute with a restraint clause that specifically overrides any implied prohibitions (unless of course you are happy to never trade in the same field again).

Buyers: The implied prohibition in your favour is certainly better than nothing, but as illustrated in this case it leaves you vulnerable in certain critical respects –
Only the seller itself is bound by the implied prohibition, not key individuals. Thus the seller in this instance (a company) was bound, but the individuals who were merely the seller’s representatives were personally off the hook after 5 years,

The prohibition is limited both as to which of a business’ customers it applies to and as to what activities it actually prohibits (a restraint clause will typically prohibit more than just canvassing of existing customers), and

Your remedy for certain breaches of the prohibition is a damages claim rather than an interdict – and you may find it hard to prove what damages you have actually suffered.
Have your lawyer check that you are covered by a comprehensive and tightly-worded restraint clause.

RENTING IN A COMPLEX? READ THE RULES!

“….. parties are free to contract as they please. The law permits perfect freedom of contract. Parties are left to make their own agreements, and whatever the agreements are, the law will enforce them provided they contain nothing illegal or immoral or against public policy” (extract from judgment below)

Be warned – whether you buy into a residential complex or rent a house in one – the High Court has again upheld the right of Home Owners Associations (HOAs) to enforce their rules and regulations.

Owner defaults – tenant suffers

In this particular case a homeowner/landlord failed to pay fines imposed by the HOA for breach of its aesthetic rules. The HOA then restricted the tenant’s right to buy the electricity and water vouchers he needed to top up his pre-paid meters. The tenant approached the High Court for assistance, citing amongst other things his constitutional and statutory rights to basic services.

Critically however, both the owner and tenant had agreed to be bound by the HOA’s rules, which included the provision that “no electricity shall be provided or sold to any occupier or owner of any erf in respect of which levy payments are outstanding for a period of 60 days or longer, until such time as all outstanding levy payments are paid in full”. The tenant, held the Court, had freely agreed to be bound by the rules, and accordingly the HOA had acted within its rights.

When you buy or rent in a complex, read and understand all the rules and regulations – you are bound by what you agree to!

A note for HOAs

Homeowners should always be obliged to become and remain HOA members, bound by your rules and regulations. Ensure that owners cannot give occupation to anyone else without the occupier likewise agreeing to be bound.

FAMILY RESPONSIBILITY LEAVE – YOUR FAQs

When can an employee take fully-paid leave to deal with family matters and not have it deducted from his/her annual leave entitlement? This is often a source of confusion for both employers and employees, but it needn’t be. The BCEA (Basic Conditions of Employment Act) sets everything out clearly, although note that some employers grant more favourable terms than the statutory minimums, either in their discretion or in terms of a “collective agreement” with a trade union.

Am I entitled to family responsibility leave?

Yes, if you are covered by the BCEA (most employees are) and –
You have worked for over 4 months, and

You work 4 days a week or more.

When can I take it?
When your child is born (often referred to as “paternity leave” and not to be confused with “maternity leave” – more on that in a future newsletter), or

When your child (note that “child” means under 18 years old) is sick, or

In the event of the death of your spouse or life partner, parent or adoptive parent, grandparent, child or adopted child, grandchild or sibling.

How many days can I take?

You have 3 days (5 days for domestic workers) in each annual leave cycle – these days cannot be accumulated and lapse if not taken.

What proof must I give my employer?

Employers may require “reasonable proof” of the birth, illness or death.

Small businesses: can you contract out?

If you are a defined “small business” (i.e. you employ less than 10 employees, and conduct only one business which is not formed by division or dissolution of an existing business), you can agree in writing with your employees that family responsibility days will count against their annual leave. This does not apply to domestic employees or public servants.

INTERNATIONAL TRAVEL WITH CHILDREN FROM 1 JUNE: NEW RULES IN A NUTSHELL

Home Affairs has issued a brochure “New Immigration Regulations: Requirements made easy, effective 1 June 2015” available on its website at http://www.dha.gov.za/files/Brochures/Immigrationleaflet.pdf.
The brochure sets out in a nutshell the different requirements applying to –
Parents travelling with a child (but see the 1 June media report to the contrary “Home Affairs backtracks on new visa rules” at http://traveller24.news24.com/News/Home-Affairs-backtracks-on-new-visa-rules-20150601)

One parent travelling with a child

Travelling with a child who is not your biological child

Unaccompanied minors

Any child in “alternative care”.
Read also “What travel docs are needed when travelling with kids – made unbelievably simple by new tool” on Traveller24.

Take advice in doubt.

New Help Lines: Home Affairs has just launched dedicated numbers for you to call for assistance if you haven’t received your documents and need to travel – 072 634 0589; 072 634 0614; 073 567 6208; and 073 567 5968.

YOUR JUNE WEBSITES: KEEPING WARM AND WELL THIS WINTER

“If Winter comes, can Spring be far behind?” (Shelley)

Whether you are employed, self-employed or happily non-employed, you can’t afford to let Winter 2015 give you the blues or put you in your sick bed – Eskom’s ongoing contribution to our woes notwithstanding.

Be particularly careful of the flu this season. It hit the Northern Hemisphere hard and is trending higher in South Africa than in previous years (see the “Explore flu trends – South Africa (Experimental)” graph at https://www.google.org/flutrends/za/).

Enjoy Winter and stay on top form all the way through to Spring with these random websites to help you keep warm, healthy and happy –
“7 Scientific Tips for Staying Warm” on the LiveScience website at http://www.livescience.com/49050-staying-warm-scientific-tips.html

“8 Ways to Enjoy the Winter Months” on the Aurora Mental Health Centre website at http://www.aumhc.org/enjoying-winter.html

You Tube’s short video “8 Sick Remedies That Actually Work – Scientifically!” at https://www.youtube.com/watch?v=bYXZP8eZKCw

‘Solopreneurs’: Use the Time Management Matrix and other tips in “When Illness Strikes, the Entrepreneur is Ready to Fight” on the That’s The Idea website at http://thatstheidea.ca/when-illness-strikes-the-entrepreneur-is-ready-to-fight/

“Beat Seasonal Affective Disorder (SAD) and the Winter Blues” by Good Health at http://www.goodhealthsa.co.za/health-articles/article/_thread_/beat-seasonal-affective-disorder-sad-and-the-winter-blues

Take everyone out for a meal without breaking the bank. Google “Winter Restaurant Specials” for your area, or have a look at EatOut’s “Winter restaurant specials: our 2015 list” at http://www.eatout.co.za/article/winter-restaurant-specials

Or stay in with a special Winter treat – see how “How to Make Sipping Chocolate” on Food52 http://food52.com/blog/12064-how-to-make-sipping-chocolate

Have a Great (and Happy, Healthy) June and don’t forget Father’ s Day on the 21st)!

LANDLORDS: CAN YOU SWITCH OFF YOUR DEFAULTING TENANT’S LIGHTS?

Your tenant isn’t paying rent and refuses to move out – can you turn the electricity off?

First – commercial or residential?

The judgment discussed in this article relates to a commercial occupier and as is noted below, residential occupiers enjoy additional protections to commercial occupants. There will no doubt be much debate in legal circles as to what extent this new decision might or might not assist landlords of residential premises. As always, take advice upfront!

Lights out for a nightclub

A case in point was decided by the High Court recently –
A landlord leased part of its building to a nightclub/bar business, owned by a close corporation.

The landlord paid electricity for the whole building to the municipality, and then the night club and other tenants had to refund the landlord pro rata.

When the nightclub fell into arrears (to the tune of over R300,000) the landlord asked the High Court for an order allowing it to cut the tenant’s electricity supply, pointing out that it needed to mitigate its damages and that all its other tenants would be prejudiced if the building’s electricity supply was cut for non-payment of the municipal account.

The close corporation turned out to have been deregistered, and therefore the “lease” was totally invalid (for more on the dangers of deregistration see “When CIPC Deregisters Your Company” in last month’s issue of LawDotNews).

Although there was no valid lease, the Court granted the disconnection order, holding that the building owner was effectively subsidising the nightclub’s business “which cannot be allowed to continue.”

Don’t take the law into your own hands!

Don’t be tempted to take the law into your own hands by cutting off your defaulting tenant’s electricity yourself. If you do, you face an immediate “spoliation order” application for unlawful dispossession (the rights and wrongs of your claims against the tenant are irrelevant at this stage), and that will put you in the wrong, waste time, and expose you to unnecessary legal costs and perhaps even a damages claim.

Rather – like the successful landlord in this case – take immediate advice on approaching the Court for assistance. Bear in mind that this may be a lengthy process, and that there are no guarantees here, particularly as the facts here were somewhat unusual, with the night club not actually being a “tenant” (the “lease” was never valid), and the arrears relating directly to non-payment for electricity. Also factor in that there was no element of residential occupation (which could have brought into play additional protections for occupiers/tenants), and that our courts may not always be as understanding of the landlord’s position as this one was.

Prevention – still better than cure

So whilst this judgment has been widely welcomed in media reports as a victory for landlords, the bottom line is that prevention is still better than cure – start off with a properly drawn lease (preferably supported by personal suretyships), do your credit checks properly, and make sure that any corporate entity you deal with is in fact still registered with CIPC.

SELLING A BUSINESS WITH GOODWILL: BEWARE THIS IMPLIED PROHIBITION

When you sell a business including its “goodwill”, you will likely be prevented from opening up in competition with your old business by a “restraint of trade clause” in the sale agreement.

Your 5 year restraint period lapses – what next?

Restraint clauses have to be reasonable in duration, so somewhere along the line your restraint period will lapse. And when that happens, you may think that you are now completely free to set up shop again.

But as an important High Court decision has highlighted, this is not entirely correct. In this particular case the restraint clause itself lapsed after 5 years, whereupon the key individuals involved (effectively the owners of the company that had sold the business), started up again in competition with the buyer. One can perhaps understand their confident assertion that they were perfectly entitled to do so and to actively canvas their former customers – after all, the buyer had happily agreed to the 5 year non-competition period.

But that’s not all …..

However, held the Court, the restraint clause was not the only restriction on the seller. Because the sale had included “goodwill”, the seller was, even after 5 years, still bound by an “implied prohibition” against the canvassing of former customers.

Critically, held the Court, such an implied prohibition applies to the seller regardless of whether or not the parties have agreed on a specific restraint clause. In this case therefore, although the buyer and seller had specifically agreed on only a 5 year restraint period, the seller still remained at least partially bound after the 5 years lapsed.

Sellers, Buyers – word your restraint clause correctly

Sellers: Even if by some chance there is no specific restraint clause in the sale agreement, you are still subject to an implied prohibition against canvassing existing customers if the sale includes the “goodwill” of the business. Avoid doubt and dispute with a restraint clause that specifically overrides any implied prohibitions (unless of course you are happy to never trade in the same field again).

Buyers: The implied prohibition in your favour is certainly better than nothing, but as illustrated in this case it leaves you vulnerable in certain critical respects –
Only the seller itself is bound by the implied prohibition, not key individuals. Thus the seller in this instance (a company) was bound, but the individuals who were merely the seller’s representatives were personally off the hook after 5 years,

The prohibition is limited both as to which of a business’ customers it applies to and as to what activities it actually prohibits (a restraint clause will typically prohibit more than just canvassing of existing customers), and

Your remedy for certain breaches of the prohibition is a damages claim rather than an interdict – and you may find it hard to prove what damages you have actually suffered.
Have your lawyer check that you are covered by a comprehensive and tightly-worded restraint clause.

RENTING IN A COMPLEX? READ THE RULES!

“….. parties are free to contract as they please. The law permits perfect freedom of contract. Parties are left to make their own agreements, and whatever the agreements are, the law will enforce them provided they contain nothing illegal or immoral or against public policy” (extract from judgment below)

Be warned – whether you buy into a residential complex or rent a house in one – the High Court has again upheld the right of Home Owners Associations (HOAs) to enforce their rules and regulations.

Owner defaults – tenant suffers

In this particular case a homeowner/landlord failed to pay fines imposed by the HOA for breach of its aesthetic rules. The HOA then restricted the tenant’s right to buy the electricity and water vouchers he needed to top up his pre-paid meters. The tenant approached the High Court for assistance, citing amongst other things his constitutional and statutory rights to basic services.

Critically however, both the owner and tenant had agreed to be bound by the HOA’s rules, which included the provision that “no electricity shall be provided or sold to any occupier or owner of any erf in respect of which levy payments are outstanding for a period of 60 days or longer, until such time as all outstanding levy payments are paid in full”. The tenant, held the Court, had freely agreed to be bound by the rules, and accordingly the HOA had acted within its rights.

When you buy or rent in a complex, read and understand all the rules and regulations – you are bound by what you agree to!

A note for HOAs

Homeowners should always be obliged to become and remain HOA members, bound by your rules and regulations. Ensure that owners cannot give occupation to anyone else without the occupier likewise agreeing to be bound.

FAMILY RESPONSIBILITY LEAVE – YOUR FAQs

When can an employee take fully-paid leave to deal with family matters and not have it deducted from his/her annual leave entitlement? This is often a source of confusion for both employers and employees, but it needn’t be. The BCEA (Basic Conditions of Employment Act) sets everything out clearly, although note that some employers grant more favourable terms than the statutory minimums, either in their discretion or in terms of a “collective agreement” with a trade union.

Am I entitled to family responsibility leave?

Yes, if you are covered by the BCEA (most employees are) and –
You have worked for over 4 months, and

You work 4 days a week or more.

When can I take it?
When your child is born (often referred to as “paternity leave” and not to be confused with “maternity leave” – more on that in a future newsletter), or

When your child (note that “child” means under 18 years old) is sick, or

In the event of the death of your spouse or life partner, parent or adoptive parent, grandparent, child or adopted child, grandchild or sibling.

How many days can I take?

You have 3 days (5 days for domestic workers) in each annual leave cycle – these days cannot be accumulated and lapse if not taken.

What proof must I give my employer?

Employers may require “reasonable proof” of the birth, illness or death.

Small businesses: can you contract out?

If you are a defined “small business” (i.e. you employ less than 10 employees, and conduct only one business which is not formed by division or dissolution of an existing business), you can agree in writing with your employees that family responsibility days will count against their annual leave. This does not apply to domestic employees or public servants.

INTERNATIONAL TRAVEL WITH CHILDREN FROM 1 JUNE: NEW RULES IN A NUTSHELL

Home Affairs has issued a brochure “New Immigration Regulations: Requirements made easy, effective 1 June 2015” available on its website at http://www.dha.gov.za/files/Brochures/Immigrationleaflet.pdf.
The brochure sets out in a nutshell the different requirements applying to –
Parents travelling with a child (but see the 1 June media report to the contrary “Home Affairs backtracks on new visa rules” at http://traveller24.news24.com/News/Home-Affairs-backtracks-on-new-visa-rules-20150601)

One parent travelling with a child

Travelling with a child who is not your biological child

Unaccompanied minors

Any child in “alternative care”.
Read also “What travel docs are needed when travelling with kids – made unbelievably simple by new tool” on Traveller24.

Take advice in doubt.

New Help Lines: Home Affairs has just launched dedicated numbers for you to call for assistance if you haven’t received your documents and need to travel – 072 634 0589; 072 634 0614; 073 567 6208; and 073 567 5968.

YOUR JUNE WEBSITES: KEEPING WARM AND WELL THIS WINTER

“If Winter comes, can Spring be far behind?” (Shelley)

Whether you are employed, self-employed or happily non-employed, you can’t afford to let Winter 2015 give you the blues or put you in your sick bed – Eskom’s ongoing contribution to our woes notwithstanding.

Be particularly careful of the flu this season. It hit the Northern Hemisphere hard and is trending higher in South Africa than in previous years (see the “Explore flu trends – South Africa (Experimental)” graph at https://www.google.org/flutrends/za/).

Enjoy Winter and stay on top form all the way through to Spring with these random websites to help you keep warm, healthy and happy –
“7 Scientific Tips for Staying Warm” on the LiveScience website at http://www.livescience.com/49050-staying-warm-scientific-tips.html

“8 Ways to Enjoy the Winter Months” on the Aurora Mental Health Centre website at http://www.aumhc.org/enjoying-winter.html

You Tube’s short video “8 Sick Remedies That Actually Work – Scientifically!” at https://www.youtube.com/watch?v=bYXZP8eZKCw

‘Solopreneurs’: Use the Time Management Matrix and other tips in “When Illness Strikes, the Entrepreneur is Ready to Fight” on the That’s The Idea website at http://thatstheidea.ca/when-illness-strikes-the-entrepreneur-is-ready-to-fight/

“Beat Seasonal Affective Disorder (SAD) and the Winter Blues” by Good Health at http://www.goodhealthsa.co.za/health-articles/article/_thread_/beat-seasonal-affective-disorder-sad-and-the-winter-blues

Take everyone out for a meal without breaking the bank. Google “Winter Restaurant Specials” for your area, or have a look at EatOut’s “Winter restaurant specials: our 2015 list” at http://www.eatout.co.za/article/winter-restaurant-specials

Or stay in with a special Winter treat – see how “How to Make Sipping Chocolate” on Food52 http://food52.com/blog/12064-how-to-make-sipping-chocolate

Have a Great (and Happy, Healthy) June and don’t forget Father’ s Day on the 21st)!

THE NEW TRANSFER DUTY RATES: WILL YOU PAY LESS, OR MORE?

In a nutshell, the transfer duty tax breaks announced in Budget 2015 will reduce costs for most middle-income households but will increase costs of property transactions above about R2,65m (with maximum savings at about the R2m to R2,3m level).

Remember that no transfer duty is payable when VAT applies to a sale.

The new rates

The new exemption level, brackets and transfer duty rates are –

To illustrate …

EMPLOYERS: IS “TEAM MISCONDUCT” GROUNDS FOR DISMISSAL?

Here’s an unhappy scenario for any employer –
You are losing a fortune in stock shrinkage,

You can prove that the losses stem from theft by a particular group of employees,

But you cannot prove that each member of the group is individually responsible.
What can you do?

A recent Labour Court case illustrates.

Fast food filching – a team effort
A fast food outlet was suffering large (up to R120,000 per month) stock losses, always when one particular shift, comprising cooks, “expediters” and cashiers, was on duty.

Security and stock handling measures failed to stem the losses.

Several warnings were issued to staff. They were told that they had a duty to report theft, that the stock shrinkage was “intolerable”, that there was a “zero tolerance” policy to theft and that disciplinary action would be taken if the losses continued. These warnings bore no fruit.

Disciplinary enquiries were held and the whole team – all 11 members of the shift – was dismissed for theft.

The thefts stopped immediately.

The dismissed employees took the matter to the CCMA where an arbitrator, finding the dismissals to have been unfair, awarded 6 months’ compensation to each of them.

On review, the Labour Court set aside this ruling and held the dismissals to have been substantively fair.

The law and collective liability

This was, held the Court, a case of “team misconduct”, and accordingly “there is no need to prove individual guilt. It is sufficient that the employee is a member of the team, a team the members of which have individually failed to ensure that the team meets its obligations, in our given case, to ensure that there is no stock loss.”

Note that similar principles apply to cases of “collective misconduct”, “derivative misconduct” and “common cause purpose” – but as always, our labour laws being as complex as they are, and with substantial penalties awaiting the unwary employer, it is always worth taking full advice on your particular circumstances.

DROWNING IN OLD DEBT? CHECK FOR THIS DEFENCE

If you are being chased for an old debt which you just cannot pay, consider whether it may have “prescribed” – if so, the debt is extinguished and you cannot be forced to pay.

Most debts prescribe after 3 years (up to 30 years for some debts such as judgments, tax debts and mortgage bonds) unless interrupted in some way – usually if you acknowledge liability for the debt or make a payment against it, or if summons is served on you.

Critically however, until now it has been up to you to raise the defence of prescription – there has been nothing stopping your creditor (or a debt collector to whom your debt has been sold) from chasing you for prescribed debt and hoping that you don’t know enough about the law of prescription to raise the defence.

Now an amendment to the NCA (National Credit Act) specifically prohibits anyone from selling, continuing the collection of, or re-activating any prescribed debt to which the NCA applies (it applies to most common credit agreements – take advice if you aren’t sure whether you are covered).

In other words, where the NCA applies, your prescribed debt can neither be sold to a debt collector, nor enforced by either the creditor or the debt collector.

Creditors: Don’t delay!

Of course this new law serves as a reminder to all creditors (and debt collectors) to take enforcement action against debtors without delay. In particular don’t leave issuing summons until the last minute – you have to actually serve the summons on the debtor before the 3 year period expires.

1 MAY AND THE NEW BBBEE CODES – WHAT YOU SHOULD DO NOW

The new BBBEE Codes of Good Practice are due to come into effect on 1 May. There has (at date of writing) been much speculation around whether or not this will happen, or whether the transitional period for implementation will be extended at the last minute.

Regardless, every South African business should consider now whether or not it should renew its verification under the existing codes whilst it still can. Some experts are suggesting that many “measured entities” stand to drop down two levels under the new codes, and that a renewal before 30 April will at least ensure retention of your existing level for a year. There is a lot at stake here so take advice on whether or not this is applicable to you.

The new thresholds

Remember that the generic turnover thresholds (not currently applicable to certain sector codes) have been increased as follows –
Exempt micro-enterprises (EMEs): The annual turnover threshold for EMEs has doubled to R10m from R5m. If you qualify (to be confirmed annually by an affidavit as to both annual total revenue and level of black ownership), you are deemed to be a Level 4 contributor (100% recognition level). You will go up to Level 1 (the highest level) if you are 100% black owned, and to Level 2 if you are 51% black owned.

Qualifying Small Enterprises (QSEs): The threshold for QSEs has been increased to R50m from R35m.

Large Enterprises: Over R50m you are a “Large Enterprise”.

EXCHANGE CONTROLS – EASING UP

The media has highlighted the increases, announced in the 2015 Budget Speech, in social grants, benefits for micro businesses, income tax (see “The New Tax Tables” below), “sin taxes”, fuel and Road Accident Fund levies etc.

But there has been less attention paid to the proposed relaxation in exchange controls for South African residents, effective 1 April. They are significant –

The annual or emigration “foreign capital allowance” more than doubles from R4m to R10m (R20m per family unit).

The annual “single discretionary allowance” of R1m, which is additional to the R10m foreign capital allowance, may now be used for any legal purpose abroad (rather than the previous system of sub-categories of use).

The dispensation for credit card usage, currently limited to individuals, will be extended to corporates.

Authorised dealers may now process corporate investment up to R1 billion per year (doubled from R500 million), as well as the carrying forward of any unused allowance.

THE NEW 2015/16 TAX TABLES

ENTREPRENEURS – YOU HAVE UNTIL 2 APRIL TO HELP DRIVE SME-FRIENDLY REFORM!

“We must strive to build a nation of entrepreneurs and not a nation of job seekers” (Lindiwe Zulu, Small Business Development Minister)

Are you an SME hamstrung by government red tape, insufficient tax incentives and general lack of support for entrepreneurial businesses?

If so, here’s something you can do about it.

SAICA (the South African Institute of Chartered Accountants) reports several successes in influencing government’s SME policies following its 2014 survey and it has now commissioned a new 2015 survey to explore other challenges that SMEs have, and to establish what government and big business can do to improve the likelihood of SMEs contributing to growth and to higher levels of employment.

All you need is 20 minutes to complete the new survey at https://www.surveymonkey.com/r/SMERESEARCH2015.

Do it Now!

The closing date for the survey is 2 April.

THE APRIL WEBSITE: DIRECT MARKETERS HASSLING YOU? HERE’S HOW TO OPT-OUT

If you are inundated with unwanted direct marketing phone calls, SMSes, spam emails and junk mail, you can either contact each sender directly to request removal from their database, or you can save yourself a lot of time and trouble with a once-off registration on the DMA (Direct Marketing Association of South Africa) website at https://www.nationaloptout.co.za/.

Your details will be added to their National Opt-Out Database to ensure that you are no longer hassled by members of the DMA. The process is flexible – if you don’t want to do a global opt-out you can choose specific opt-out times, channels and industries.

Have a Great April!

“WHEN THE EMAIL IS DEADLIER THAN THE MAIL”: WATCH WHAT YOU E-AGREE TO!

“The email of the species is deadlier than the mail.” (Stephen Fry)

Last month we discussed the need for a “non-variation” clause in every agreement you sign, and the dangers of not having one.

This month we turn to the related danger of inadvertently concluding, amending and/or cancelling agreements by email or other electronic (“data”) messaging.

The car-wash contract that died in cyberspace

Take for example the facts of a case recently before the Supreme Court of Appeal –
The owner of car-washing units rented them out to an “operating agent” in terms of agreements with non-variation clauses. Any “consensual cancellation” had to be in writing and signed by both parties.

The agent, in financial difficulty, discussed cancellation with the owner in an exchange of emails, each of which ended with the sender’s typed name (mostly first names only).

The agent, held the Court, had validly cancelled the agreements electronically by means of these emails.

Were the emails “written”?

Our law is clear: “A requirement in law that a document or information must be in writing is met if the document or information is –
In the form of a data message; and
Accessible in a manner usable for subsequent reference.”
Clearly the emails in this case complied and were therefore indeed “written”.

Were the emails “signed”?

Two types of electronic signature are recognised in our law –
An “advance electronic signature”, which carries a digital certificate from an accredited authority, is required where any law imposes on parties the requirement for a signature.

But where the signature requirement is not imposed by any law but is rather something agreed by the parties (as in this case, via the non-variation clauses), all that is required is an “ordinary” electronic signature, which doesn’t need to have any form of certificate. Simply put it is just data “intended by the user to serve as a signature”.

A sender’s typed name at the end of an email (or other “data message”) will, unless the parties have agreed on another specific type of electronic signature, suffice provided that it –

Identifies the sender,
Indicates the sender’s “approval of the information communicated”, and
“Was as reliable as was appropriate for the purposes for which the information was communicated”.
The Court found on the facts of this case that only an “ordinary” electronic signature was required, the emails complied with the above requirements and thus were indeed “signed”.

Accordingly the contracts were validly cancelled.

What contracts cannot be electronic?

Certain types of agreement/document – most importantly property sales and wills – are specifically excluded and must be written and signed in physical form.

The bottom line – three things to remember
Remember that in most cases agreements are binding even when they are verbal – a recipe for confusion and dispute. First step therefore is to always insist that every contract you enter into is both written and signed, with a non-variation clause as discussed last month.

That said, always be careful what you agree to, not just via email, but via any type of data message (think SMSes, What’s App messages, Social Media messages and so on).

Make sure that any agreement you are party to specifies –

Whether electronic recordal, signature, variation and/or cancellation will be valid and binding,
If so, specify the required format.

HOME OWNERS ASSOCIATIONS: ARE YOU STILL AT RISK ON INSOLVENCY?

Here’s a scenario that is unfortunately a real risk these days –
You are a member of a Home Owners Association (HOA),

Your HOA is struggling to recover arrear levies from another homeowner who has fallen into financial difficulty.
If the arrears aren’t recovered, you and the other homeowners will have to chip in to cover the shortfall.

The liquidation risk revisited

And as regular LawDotNews readers will recall, conflicting High Court judgments last year exposed HOA members to an increased risk of this happening in cases where the defaulting member’s estate is liquidated or sequestrated.

Fortune has however smiled on HOAs and their members in the form of two recent Supreme Court of Appeal decisions which have made collection of these arrears a whole lot easier.

In a nutshell – when the liquidator/trustee of an insolvent owner’s estate sells the property, the HOA can block transfer to the buyer until the arrear levies are paid. The arrears, held the Court, have to be paid to the HOA as a “cost of realisation of the property” – in other words, before bondholders and other creditors are paid. With the happy result that (provided of course the sale price is high enough) the HOA will be paid in full.

HOAs – your checklist

Ensure that your HOA is protected in this regard by title deed conditions obliging all owners –
To become and remain members of the HOA and to be bound by its constitution (with rules and regulations requiring prompt payment of levies), and

To obtain a levy clearance certificate before transferring ownership to a buyer, who must in turn be bound to join the HOA.
In any event, prevention being as always much better than cure, insist that your HOA –
Keeps a close eye on any levy accounts going into arrear.

Acts immediately to collect outstanding levies, taking legal action if necessary. Slow, ineffective debt collection processes will not only put unnecessary strain on the HOA’s finances, but they ultimately risk a defence of prescription being raised by the debtor.

Bondholders – your risk just increased!

There is a lot at stake here. The overall problem is a huge one – the Court heard that “just 35 members of NAMA [National Association of Managing Agents] are owed fees in excess of R28 million in respect of members whose properties were subjected to forced sales”. And where the liquidation sale price is low and the arrears high, you could be writing off a substantial debt.

EMPLOYERS, EMPLOYEES: YOU AND THE NEW FIXED TERM CONTRACT RULES

The new Labour Relations Amendment Act gives significant new protections to employees on a new or renewed fixed term contract.

What follows is of necessity only a brief summary of some complex new provisions in our labour laws – your downside if you get this wrong will be substantial, so specific advice is essential!

The exclusions

Excluded are –
Employees earning over R205,433-30 (the current Basic Conditions of Employment Act threshold),

Small employers (less than 10 employees) and start-ups (under 2 years old and less than 50 employees – note that some specific exceptions apply here),

Fixed term contracts permitted by statute, sectoral determination or collective agreement.

The employee protections

If you employ anyone for more than 3 months on a fixed term contract (or succession of contracts), they effectively acquire the rights and protections of permanent employees unless –
The nature of the work itself is of a limited or definite duration, or

You can demonstrate (the onus is on you) any other “justifiable reason” for fixing the term of the contract.

What is a “justifiable reason”?

Circumstances – specifically stated to be non-exclusive – in which fixed term contracts are justified include replacing a temporarily absent employee, a temporary increase in the volume of work (12 months or less), students gaining work experience, specific projects, limited time work permits, seasonal work, retirees, and so on. There are inevitably going to be grey areas here, so take advice on your specific circumstances.

Note: All fixed term contracts must …..
Be in writing, and

State the reasons justifying the fixed term.

Rights and remedies

If you can’t justify a fixed term contract, it is deemed to be an indefinite one, your employee “must not be treated less favourably than an employee employed on a permanent basis performing the same or similar work, unless there is a justifiable reason for different treatment”, and must have equal rights to apply for vacancies.

Note that any fixed term contracts entered into before 1 January (the Act’s commencement date) are largely excluded for 3 months, giving affected employers some breathing space to comply.

Even where fixed term employment is justified, after 24 months the employee will, with only a few exceptions, be entitled to severance pay.

DRONING ON ….. NEW REGULATIONS “IN THE WINGS”

Lawfully or not, we South Africans are, it seems, increasingly buying and using drones for a whole host of purposes – amidst conflicting reports as to quite how serious the legal and other risks of doing so are.

Thankfully, the Civil Aviation Authority, which last year promised a strict clamp down on illegal drone usage, has now announced that it is finalising changes to its Regulations that will specifically regulate the use of “Remotely Piloted Aircraft Systems”. The proposed amendments are available on DefenceWeb’s website at http://tinyurl.com/sadrones but it’s not clear yet what the final version (scheduled for the end of March) will look like.

Watch this space!

REPORT CORRUPTION! OFFICIAL FIRED FOR A MARIE BISCUIT BRIBE

In “Bureaucrats and Brick Walls – Fight Back!” last month we looked at the no-nonsense approach our courts are taking to corrupt, inefficient and disinterested public officials.

Further proof of this tough stance comes from a recent Labour Court ruling confirming the dismissal of a Home Affairs official who admitted receiving a packet of biscuits in exchange for “quicker services”.

Clearly, the size of the bribe is irrelevant – report any corruption by phoning the National Anti-Corruption hotline 0800 701 701.

THE MARCH WEBSITE: KICK-START EVERY DAY WITH A POWER SHOWER!

Entrepreneur Magazine’s “How This Showering Trick Can Make You More Energized for the Work Day” at www.entrepreneur.com/article/241614 suggests a 90 second morning shower routine to give you –
More energy

Less stress

A stronger immune system

Improved blood circulation

Increased ability to lose fat

Help with depression.
Have a great (and energised) March!

STRUGGLING TO EVICT A “COMMERCIAL” OCCUPANT? DON’T STRESS ABOUT PIE

A recent Constitutional Court judgment highlights a fundamental difference in the legal protections afforded to two types of unlawful occupant –

Residential occupants: Occupants residing on premises are afforded protection in terms of PIE (The Prevention of Illegal Eviction from and Unlawful Occupation of Land Act) with its many onerous requirements for eviction. Note that even residents of “commercial” property are covered – it is not the categorisation of property that counts, but whether or not the unlawful occupier resides on it.

“Commercial” occupants: In contrast, “commercial” occupants (“juristic persons and persons that do not use buildings and structures as ‘a form of dwelling or shelter’”) have no such protection, and are accordingly (in principle at any rate) easier to evict.

To illustrate …..

The case in question concerned a mixed-use property which was sold on an insolvency auction. The previous owners refused to vacate and the new owner asked the Court to evict two classes of unlawful occupier –
A business in the form of a vehicle service station and convenience store operating from the commercial portion of the property, and

The previous owners of the property who personally resided on the residential portion.
Because the buyer had not complied with PIE, eviction was granted only for the non-residential occupants (the service station and various employees). The previous owners themselves could not be evicted without PIE compliance.

BUREAUCRATS AND BRICK WALLS – FIGHT BACK!

“Bureaucracies are inherently antidemocratic. Bureaucrats derive their power from their position in the structure, not from their relations with the people they are supposed to serve” (Alan Keyes, American politician)

Fighting red tape is a growing problem worldwide, and we South Africans are certainly not immune. We should welcome therefore two recent court decisions which threaten inefficient/disinterested/ corrupt bureaucrats with personal liability for legal costs if their misconduct forces us to fight them in court.

Case 1: Government officials ordered to pay legal costs – personally

A provincial hospital patient whose son was born with severe disabilities as a result of medical negligence succeeded in having the relevant Health Department declared liable for damages. The High Court further awarded her legal costs on the punitive attorney and client scale and ordered that 50% of such costs (likely to total about R500,000 according to media estimates) be paid personally by three officials –
An attorney employed in the State Attorney’s office,

A senior legal administrative officer employed by the department of health, and

A medical practitioner employed as a medico – legal advisor by the department of health.
This order followed the Court’s findings that the government’s decision to defend the claim was reckless, and after the Court had slated all three officials for a long list of failures, indifference and incompetence in their handling of the matter. The plight of the mother and her severely disabled son as observed by the Court was “symbolic of the destruction wrought by the callous, incompetent indifference on the part of public officials inflicting South Africa at the moment.”

Case 2: Tender trouble, and a stark warning to truant office bearers

The Supreme Court of Appeal, in confirming the setting aside of the award of a municipal tender on the grounds of a string of irregularities, errors and defective processes, warned the Municipality that any recurrence of such conduct would risk the Court taking the decision away from it and awarding the tender itself.

“That”, said the Court, “may also result in identifiable officials responsible for that situation being ordered to pay the costs personally, because: ‘It is time for courts to seriously consider holding officials who behave in the high-handed manner described above, personally liable for costs incurred. This might have a sobering effect on truant public office bearers.’”

So if you come up against a brick wall of bureaucracy …..

Public officials, said the High Court, “should not be terrorised and paralysed into not doing their jobs by the fear that every little error could be met by the extreme sanction of a personal cost order”.

In fact the many officials who do their jobs efficiently and honestly deserve our full support and acknowledgment.

But if you are unlucky enough to run into a brick wall of bureaucratic bungling, disinterest and inefficiency, don’t take it lying down. Have your lawyer send a formal warning to the officials in question – perhaps the fear of personal liability will focus their minds on actually providing the public services they are paid to provide.

CONTRACTS – LEAVE NO SHADOW OF A DOUBT

Contracts should always contain a “non-variation” clause providing that no variation of the agreement is of any force or effect unless it is in writing and is signed by all parties.

A recent High Court case resulting from a property dispute shows why.

Landlord v Tenant: The restaurant that fell on hard times …..
A restaurant owner, who rented premises in terms of a lease agreement containing a standard non-variation clause, fell on hard times and ran up rental arrears.

The landlord cancelled the lease and gave written notice to the tenant to vacate the premises.

When the tenant refused to vacate, the landlord asked the Court for an eviction order.

The tenant’s defence was that it had verbally agreed with the landlord to pay a reduced rental (set at 25% of daily takings), that it had complied with this alleged “compromise agreement”, and that it should not therefore be evicted. It argued (citing public policy considerations amongst other legal principles) that an oral agreement should suffice in the particular circumstances.
….. and the certainty principle

But to no avail. Commenting that when parties to a contract impose restrictions on their own powers to vary the contract “they do so to achieve certainty and avoid later disputes”, the Court granted the eviction order and gave the tenant 5 days to vacate the premises.

Protect your position
A non-variation clause, worded correctly to suit your particular needs, is essential. Without it, you could end up arguing endlessly (and expensively) in a succession of courts about who agreed what, with whom, and when.

Comply strictly with the clause, no matter how great the temptation may be to accept verbal undertakings and agreements from the other party. This is a case where compliance with formalities is essential.

Even if by some mischance your agreement allows verbal amendment or cancellation, still reduce everything to writing to avoid uncertainty and dispute down the line.

P.S. Beware electronic amendment!

Next month we’ll look at a related danger – that of inadvertently concluding, amending and/or cancelling agreements by email or other electronic messaging, which can amount to both “written” and “signed” agreement.

CREDITORS: HOW TO SECURE YOUR SURETY CLAIMS IN BUSINESS RESCUE

Will your claims against sureties be prejudiced if your claim against the main debtor is compromised during business rescue proceedings?

Regular LawDotNews readers will recall the different approaches taken by various High Courts to this question, and creditors will be relieved to learn that now the Supreme Court of Appeal has confirmed that your suretyship claims can indeed be protected – but it’s up to you to do so.

Your Action List
Your best protection remains a correctly worded suretyship – as in this case, where the bank’s standard suretyship document specifically catered for the eventuality of the main debtor’s claims being compromised. Have your lawyer check your suretyship forms now.

Moreover, said the Court, the surety’s liability to you is “fixed” if you have actually taken final judgment against him/her, and is not therefore affected by a subsequent business rescue plan. Take enforcement action early.

More widely, the Court commented that “unless the plan itself made specific provision for the situation of sureties”, a surety’s liability may in any event be unaffected by business rescue. On one hand, that might possibly throw a lifeline to even those creditors not assisted by the above principles. On the other, it implies that you might actually lose your suretyship claims if the rescue plan is worded to that effect. Long before you are called on to consider any business rescue plan, check that nothing in it might let sureties off the hook.

BUDGET 2015: SUBMIT YOUR TIPS

“Giving money and power to government is like giving whiskey and car keys to teenage boys” (P.J. O’Rourke)

Finance Minister Nhlanhla Nene will table the 2015 Budget in Parliament on Wednesday 25 February 2015 at 2 p.m. All Budget documents will be available on the National Treasury website http://www.treasury.gov.za/ as soon as the Minister starts speaking.

Help him with your Budget Tips. Submit them online via the National Treasury website at http://tinyurl.com/2015BudgetTips or fax them to (012) 406 9055.

THE FEBRUARY WEBSITES: YOUR PRACTICAL GUIDE TO SURVIVING BLACKOUTS

“What fresh hell is this?” (Dorothy Parker)

Regrettably it seems that loadshedding is going to be particularly bad in the next few months – have a look at all the “red” days in Eskom’s loadshedding calendar at http://www.fin24.com/Economy/LIVE-Eskom-state-of-the-system-briefing-20150115.

Here’s what you need to do –
Prepare: Keep an eye on http://loadshedding.eskom.co.za/ and your municipality’s schedules – links at http://www.eskom.co.za/Pages/loadsheddingmunic.aspx (Cape Town – watch for new schedules from 1 February). But accept that you may get no warning, so in times of high risk, assume the worst – and prepare for it.

Invest in a UPS: Protect your computers and other electrical equipment with an Uninterrupted Power Supply or two. Even if your insurance policy covers damage from the power surges which are often associated with outages (not all policies provide such cover – check with your broker), sudden unexpected computer shutdowns can result in significant loss/corruption of data as well as difficulties in re-booting.

If you want to go further and buy a generator: Research your needs and the options thoroughly first. See Moneyweb’s “The Generator Generation” at http://www.moneyweb.co.za/moneyweb-south-africa/the-generator-generation.

Make the best of it: Read Health 24’s “How to survive load shedding” http://www.health24.com/Lifestyle/Environmental-health/21st-century-life/How-to-survive-load-shedding-20140307 for some practical tips on making life in the dark bearable.

Your taps may run dry: A side-effect of extensive blackouts is loss of pressure in municipal water supply – in some cases your taps will run dry altogether – because of reliance on booster and other electrical pumps. Have an alternative supply of water on hand!

Keep your vehicles topped up: You don’t want to coast into your local service station on an empty tank only to find its pumps are out of action or that Eskom has bought up all the diesel.

Check flight times: Refuelling issues at airports may cause significant flight delays.

Have a great February – and don’t forget ♥ Valentine’s Day ♥ on the 14th!

BEWARE PRESCRIPTION: THE TALE OF THE “WATERTIGHT CASE” THAT DIED A SAD AND SUDDEN DEATH

“Sad is the day when a party with a watertight case comes to court and he is stopped in his tracks by a sudden death due to a fatal blow from a watertight defence of prescription. The present matter is a classic case of this nature”

(extract from judgment below)

Here’s another warning from our courts about the dangers of procrastination when it comes to matters of law.

An employee’s pension fund is unlawfully raided
A post office branch manager’s failure to comply with his employer’s “secure mail antifraud system policy” resulted in a posted credit card being given to the wrong person, who promptly took advantage by fraudulently using the card. The post office suffered loss when it was forced to refund the bank.

Having dismissed the employee for misconduct after a disciplinary hearing (an action in the Labour Court to reverse this dismissal is still pending), the employer sought to recover its losses by deducting R159k from the employee’s pension fund.

Whilst employers may in certain stipulated circumstances make deductions from an employee’s pension fund, the Court held that on the facts of this case the employer had acted unlawfully.

Nevertheless the Court dismissed the employee’s claim, leaving him with only R55k in his pension fund and a liability for his own legal costs. His only mistake – he issued summons after expiry of the 3 year prescription period.

A prescription for failure

The general rule in our law is that, with a few specific exceptions, any debt becomes unclaimable (“prescribed”) 3 years after it becomes due.

However that 3 year period only starts running when you actually become aware of –
The debt,

The identity of the debtor, and

The “facts from which the debt arises”
Note that you have to act reasonably here – you are deemed to have had the required knowledge if you “could have acquired it by exercising reasonable care”.

Critically, the Court pointed out that “knowledge of the legal conclusions is not required before prescription begins to run”, so it was no help for the employee in this case to claim that he didn’t understand the “legal consequences” of his delay.

In short, it’s up to you to become aware of any possible claim and to seek legal advice on it without delay.

THE WAGES OF FRAUD: 15 YEARS IN PRISON

“White collar criminals who commit offences of a certain magnitude must not be permitted a soft landing” (extract from judgment below)

The recent “J Arthur Brown” judgment by the Supreme Court of Appeal (SCA) has received a lot of media attention, and victims of serious crime will take heart from the Court’s robust approach.

Mr. Brown had been sentenced by the High Court to fines and suspended sentences after pleading guilty to two counts of fraud involving “tens of millions of Rand”.

Sentencing – no soft landings

The SCA drastically increased those sentences to an effective total of 15 years’ imprisonment, in the process illustrating several important principles in our criminal law –
Power to increase sentences on appeal: The State can appeal against a sentence imposed by a lower court where it results from a “material misdirection” by the trial court or where it “can properly be described as ‘shocking’, ‘startling’, or ‘disturbingly inappropriate’.”

Minimum sentences: Where minimum sentences are provided for by statute, courts can only impose a lesser sentence if there are “substantial and compelling circumstances” to justify doing so.

Imprisonment for fraud: In cases of fraud involving more than R500,000 the prescribed minimum sentence is 15 years’ imprisonment, even where only “potential” rather than “actual” prejudice to victims is proved.

Equal justice: Our courts will “guard against creating the impression that there are two streams of justice; one for the rich and one for the poor”.

Criminal intention: The fact that an offender’s level of criminal intention was that of dolus eventualis* rather than “direct intention” does not in itself justify any deviation from the minimum sentence provisions – it is just one factor to be taken into account. (*Dolus eventualis, as regular LawDotNews readers will recall from our May 2014 article “The Pistorius Trial: What Must the State Prove? And what is “Dolus”?” is a form of “legal intention” where a criminal proceeds with his/her criminal action/s despite foreseeing the possibility of resultant harm).

Victims of crime –fight back!
Report it! Our courts have yet again shown that they will not easily allow criminals – including white collar criminals – “a soft landing”.

If you think that the sentence handed down is unfairly lenient, push for an appeal to have it increased.

TAX PENALTIES – WHAT MUST SARS PROVE?

SARS has the power to impose severe penalties on any taxpayer failing to declare or pay taxes in accordance with law.

For example, in a case recently before the Tax Court, a corporate taxpayer was audited by SARS and found to have overstated input VAT. It was assessed (after partial allowance of an objection) for –
Some R16m in tax, plus

200% “additional tax” – R32m, plus

10% penalties – R1.6m, plus

Late payment interest – R5m.

In effect the taxpayer’s total tax bill more than tripled from R16m to R55m.

The taxpayer asked SARS to “be lenient and waive the Additional Tax, penalty & interest” on the basis that “it was never our intention to defraud SARS and to evade the payment of any amount of tax payable…..We were under the impression that our auditor was handling all our tax affairs and we trusted his judgment as we do not have tax and accounting experience.”

SARS was unmoved by this plea and the taxpayer approached the Tax Court for relief.

SARS, held the Court, had rightly concluded that the taxpayer’s failure to produce documentation in support of VAT inputs claimed by it “constituted intent by the [taxpayer] to obtain an improper VAT refund with a view of defrauding the fiscus”.

The onus on SARS

Nevertheless the Court set aside the 200% additional tax on the ground that SARS had accepted the onus to prove that the penalty was correctly imposed and had failed to produce any evidence as to how and why it had decided to impose the extra tax, nor had it proved “that the imposition of the additional tax was justified”.

Take professional advice upfront – it could help your challenge later

In another Tax Court decision relating to an understatement penalty of R47m, which the Court reduced substantially whilst also waiving penalty interest in full, the Court commented: “I am of the view that having received advice, there were reasonable grounds for the [taxpayer] to take the tax position which he did. Nor can it be said that he did not take reasonable care – he did so by consulting the experts”.

That seems to be a clear suggestion that seeking professional advice before taking a stance on any major tax question may well help you in challenging any excessive penalties imposed on you.

PROPERTY SALES: DON’T BE AN UNREGISTERED CREDIT PROVIDER!

Be careful when buying and selling property that you aren’t held to have lent more than R500,000 to the other party. As a recent High Court case illustrates, that will leave you with no contractual claim to your money.

The seller, the buyer, and the loans
Having bought a property for R700,000, the buyer paid the seller in full and took occupation.

He was however unable to take transfer when it emerged that a bondholder was owed money as a result of an unlawful transfer of the property to a third party.

To enable the seller to pass transfer to him, the buyer lent the seller three amounts of money totalling R882,397. The seller signed an acknowledgment of debt for that amount and then repaid R250,000.

When the seller failed to repay the balance, the buyer sued him.

The law

The buyer’s summons, held the Court, was defective because it did not allege that the buyer had registered as a “credit provider” in terms of the NCA (National Credit Act). That, held the Court, was fatal to the buyer’s summons –
The NCA requires you to register as a credit provider where either –

You make more than 100 loans (other than “incidental credit agreements”), or

The total amount you loan comes to more than the set threshold of R500,000.

The total amount loaned by the buyer to the seller in this case being over the threshold, the buyer was obliged to be registered under the NCA as a “credit provider”.

It is irrelevant if, as in this case, the loan is a “once-off” or if the lender doesn’t “frequently” provide credit. If the total amount loaned is over R500,000, registration is required. In other words, the NCA’s registration requirement doesn’t apply only to those who make a business of providing credit – it also applies to you and to me in our daily lives.

The trap (for all lenders, not just in property transactions) and the danger

If you lend money to anyone (as part of a property transaction or not) and if you are required to register as a credit provider but don’t, your loan agreement is unlawful and void. Your only chance of recovering your money then will be to sue for “unjustified enrichment” which has its own set of requirements for you to prove, and defences for the debtor to raise.

Don’t take a chance of falling into this little-known trap. If your property deal is structured in such a way that you may need to be registered as a credit provider, seek legal advice immediately, and certainly before you lend money to anyone.

THE JANUARY WEBSITE: MAKE 2015 YOUR YEAR OF VISIONARY LEADERSHIP

“In the middle of difficulty lies opportunity” (Albert Einstein)

2015 is it seems going to present us with many challenges and that, as Einstein pointed out, means that it will also be a year of many opportunities. Take advantage of them by honing your leadership skills.

Who better to learn from than one of the greatest leaders and visionaries in recorded history?

“11 Leadership Lessons from Alexander the Great” at http://tinyurl.com/11Alexander is INSEAD’s analysis of Alexander’s strengths (and his weaknesses) to give us insights into his power that remain relevant today.

Learn from him. Become a visionary leader, and make 2015 a year of success and happiness!

Have a Healthy, Happy and Successful 2015!