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28 Feb 2017

Accepting offers after they have lapsed

It happens every now and again that offers are accepted after the deadline to do so, has expired. Naturally the resultant reaction by everyone is “what do we do now??! Is this a valid sale or is it void? Or is it, maybe voidable?”

The simple reality of the matter is that there is (at least to my knowledge) only one reported judgment in our country’s history which actually specifically deals with this scenario, that of Manna v Lotter, which judgment was handed down in March 2007 already in the Western Cape High Court.

In essence what happened here, was that the offer only arrived at the seller’s desk some 3 or 4 days after it had already expired. Nonetheless, the seller accepted the offer and returned it to the agent, who sent it to attorneys for further action. No one noticed that the expiry date had already lapsed well and truly, by the time it had been accepted. The buyer paid his costs; signed the transfer documents and did all that was required of him. The seller however then went silent and only after the buyer started to make some significant noise, did the seller suddenly turn around to say that in her opinion the sale was void as it was accepted out of time!

One may be tempted to argue that by accepting the offer out of time, it amounts to a “counter offer” of sorts – and if that were true, then it would have to follow that the buyer would have to somehow accept this in writing to comply with the Alienation of Land Act’s requirements. The judge in this matter however, saw things differently. He held that this clause is one that is there, solely for the benefit of the buyer – much like a bond clause – and that as such, it was for the buyer to decide whether to waive the benefit of that clause. The judge then reasoned further that this being the case, when a seller accepts an offer “out of time”, it does not amount to a counter offer. The formalities of the Alienation of Land Act are all still perfectly intact – the sale agreement is in writing; it is signed and it identifies the property and selling price. According to the Judge, all that remained is for the buyer, once he becomes aware of the late acceptance, to then, and within a reasonable time, waive the deadline he had imposed for his benefit. And once he does, the sale agreement becomes final and binding.

As such, and should you find yourself in this predicament that an offer was accepted out of time, all one needs to do to ensure that the sale is indeed safe, is to obtain something from the buyer ASAP and in writing wherein he / she states that he / she waives the benefit of that clause and is still prepared to proceed with the sale agreement and then communicate this to the seller ASAP too!

Robert Krautkrämer

28 Feb 2017

How to Freeze Your Dodging Debtor’s Assets

“Pyrrhic victory”, n.  A victory gained at such great cost that it is actually a defeat

Joe Debtor owes you a fortune but does everything he can to frustrate your debt collection attempts.  He strings you along with spurious queries and false promises, and when you issue summons he defends your action with every delaying tactic he can come up with.

Joe, you suspect, has one reason and one reason only for this delay – he needs time to get rid of all his assets so that when you finally get your judgment against him he has nothing left worth attaching, and you are left with a classic Pyrrhic victory and a large legal bill to pay.

The good news is that our law comes to your rescue in such cases with an “anti-dissipation interdict” (you might hear lawyers referring to it as a “Mareva Injunction” after a famous English case) which effectively freezes the debtor’s assets and preserves them until your litigation is finished.

The delaying debtor who sold all her properties

A recent High Court judgment paints a typical picture and nicely encapsulates our law on the matter –

  • The creditor in this case had lent money to a close corporation (CC), which was then liquidated
  • A surety had disclosed three immovable properties as being her only assets
  • The creditor sued the surety for almost R600,000 and in defending the claim she entered a “terse” plea (her answer to the claim) acknowledging the suretyship but baldly denying everything else and putting the creditor to the proof thereof.  She was then unwilling to attend a pre-trial conference, saying that the date set for it wasn’t suitable but then not responding when offered alternative dates
  • When the creditor found out that the debtor had sold her three properties, it asked her for an unconditional undertaking to hold back transfer until the litigation was finalised
  • Again, silence from the debtor, and when it became clear that transfer of the properties was imminent, the creditor asked the Court for an urgent anti-dissipation interdict
  • The debtor failed to file any intention to oppose, nor did she lodge any answering affidavit. Her legal team did however appear for her at the hearing, to argue that the interdict should not be granted.

What you must prove; and the outcome

Stopping someone from dealing freely with their own assets is of course a pretty drastic remedy but our courts will do so when necessary to prevent a dishonest debtor from perverting the course of justice and causing an injustice to a creditor.  What you must show, said the Court, is that –

  1. The debtor is wasting or getting rid of assets, or is likely to do so; and
  2. The debtor has “a particular state of mind”, i.e. the debtor is getting rid of assets, or is likely to do so, “with the intention of defeating the claims of creditors”.

In all the circumstances of this case the Court found that the debtor was delaying the inevitable in order to transfer all her properties to the creditor’s prejudice, and accordingly it ordered the transferring attorneys to hold in their trust account, pending finalisation of the litigation against the surety, both the R600k and an additional amount of R100k.

28 Feb 2017

Estate Agents – The Simple Mistake That Cost a 10% Commission

There’s many a slip ‘twixt the cup and the lip (very wise old proverb)

A recent Supreme Court of Appeal (SCA) case shows yet again how essential it is to double-check that your Fidelity Fund Certificate (FFC) is both current and valid.  Remember that you must hold FFCs not only for your trading entity (if you operate through one) but also for all directors/members/principals and agents.

The Estate Agency Affairs Act disentitles you to any remuneration if you don’t hold a valid FFC.  Don’t drop the ball on that one!

A fatal oversight

The facts in the SCA case were these –

  • An estate agency company converted to a close corporation but forgot to advise the Estate Agency Affairs Board of the conversion.
  • The agency had no valid FFC at all when it was supposedly granted a mandate (the existence of a mandate was in dispute) by three companies to sell their interests in a mining operation (comprising an immovable property, mining permits, and inter-company shareholdings).
  • By the time the agency fulfilled this supposed mandate by introducing a buyer, it had acquired FFCs – but they were in the names of the non-existent company and the ex-director. The CC and its member held no FFCs.
  • The seller refused to pay the claimed 10% commission and raised several defences, including an assertion that the close corporation had no FFC and was thus not entitled to any remuneration.

On appeal, the SCA overruled the High Court’s finding that the agency had “substantially complied” with the Act’s requirements in regard to the FFCs. “This is not”, said the SCA, “simply an issue of nomenclature, or a misdescription in the name of the certificate holder, but one of substance. The objectives of the Act are not fulfilled by the issue of invalid certificates by the Board as they play a central role in ensuring that estate agents comply with its provisions.”

The FFCs, held the Court, were accordingly invalid, and the estate agency was not entitled to any remuneration.

In this particular case the agency had in any case failed on the facts to prove its mandate, but the warning to all estate agents is clear – holding valid FFCs is a necessity, not a technicality.

02 Feb 2017

Barking Dogs Driving You Batty? Noisy Neighbours and the Interdict Option

“Nuisance usually involves repeated infringement of the Plaintiff’s property rights. An objective weighing up of the interests of the various parties, taking into account all the relevant circumstances is required in these matters” (from judgment below)

If the dog-next-door’s incessant barking is destroying your quality of life, read on.  A recent High Court case illustrates our law’s approach to protecting you from noisy neighbours generally.

The Chihuahua’s Tale

  • In a rustic township development boasting a wide variety of free-roaming wild animals (giraffe, kudu, warthog and the like), a management rule provided that no pets or farm animals were allowed in any public place, street or private property
  • However the owners’ committee granted special permission to a resident, who had been left temporarily homebound after a car accident, to keep a miniature chihuahua.  That permission came with a warning that it could be withdrawn if complaints were received
  • When the neighbours did indeed complain of continual barking from early in the morning, the committee duly revoked its permission to keep the dog.  It then applied to Court to interdict the dog’s owner (and his mother, a fellow occupant of the house) from keeping the dog
  • The Court was unable to decide a dispute around whether or not the occupants were bound by the management rule in question.  Nevertheless it granted the interdict on the general principles of nuisance, commenting that the neighbours “are entitled to the peaceful and undisturbed use of their property and the enjoyment of the nature thereof” and that the occupants “may not exercise their rights of enjoyment of their property including their ownership of a pet in such a manner or fashion that it encroaches on neighbours’ (in the broad sense) rights”
  • However, swayed no doubt by reports of the resident’s fragile mental state (including a possible suicide attempt) the Court made the interdict a conditional one – the dog can stay provided it is kept inside the house and is not left unattended, and provided the owner takes “active steps” to ensure that it doesn’t become a nuisance to other owners.

4 things to try before you rush off to court

  1. Taking the legal route without warning will probably be seen by the dog’s owner as a declaration of war, and there will be no winners there.  So start off with a friendly approach.  Aim for a win-win scenario with help from a step-by-step advice article like WikiHow’s “How to Deal With a Neighbor’s Barking Dog” here.
  2. If that proves fruitless, a “neighbours at war” nightmare is still avoidable if you can agree on mediation or arbitration – ask your lawyer to arrange it.  If you live or work in a “community scheme” like a sectional title or Home Owners Association development, apply for low-cost dispute adjudication by the new Community Schemes Ombud Services.
  3. Or you can ask your local municipality to help by enforcing whatever by-laws it has to regulate the keeping of animals, excessive barking, unreasonable noise etc.
  4. SAPS usually responds only to serious violations of our anti-noise laws but if you can arrange for a warning visit from a blue uniform that might solve your problem once and for all.

Going to court should be a last resort – here’s how the Judge in this case began his judgment: “It is to be deprecated that a High Court is burdened with such a dispute as the present one and it is equally deplorable that the parties cannot themselves resolve an issue of this nature”.  Getting on the wrong side of a tetchy Judge is never going to be a smart move.

Whatever you do, don’t suffer in silence – our law will help you!

02 Feb 2017

Creditors:  When Can You Use a Liquidation Application to Collect Debt?

“Creditors have better memories than debtors” (Benjamin Franklin)

When you are struggling to recover your money from a recalcitrant debtor company, applying for its liquidation can be a very powerful collection tool.  Suddenly the directors are faced with the imminent prospect of completely losing control of their company, its business and its assets to a liquidator.  If the directors are just fighting a rear-guard action to delay paying you, a liquidation (or “winding-up”) application should immediately focus their minds on finding a way to settle the debt.

But be warned – this only works with undisputed debt.  A recent SCA (Supreme Court of Appeal) case illustrates.

A R9m claim disputed

  • Company A (a provider of finance to the agricultural industry) made 3 loans to company B, totaling just under R9.2m
  • When B failed to repay the loans, A applied to the High Court for B’s liquidation
  • B defended the application, alleging that –
    • A’s representative knew that B’s representative (let’s call him “C”) had no authority from B to enter into the loan agreements
    • The loans were made solely for the benefit of C’s personal farming activities, not for company B’s benefit at all
    • The loan agreements were void and unenforceable as “simulated transactions” (B dropped an earlier allegation of fraudulent collusion between the company representatives).

Defending the claim – what a debtor must prove

The SCA confirmed that, in order to defend a liquidation application, an alleged debtor needn’t prove that its defence to the claim will succeed at trial.  On the contrary, all it has to prove is that it disputes the alleged indebtedness on grounds that are both –

  1. Reasonable and
  2. Bona fide   (genuine, in good faith, without intention to deceive).

The court will decide, on the basis of the documents filed with it, whether or not the alleged debtor has raised facts which, if proved at a trial, would constitute a good defence.  If the defence is “not unreasonable” and if “a lack of bona fides cannot readily be inferred from the papers”, the liquidation application is likely to be dismissed.

A clear lesson for creditors

“In essence”, held the Court, “the matter serves as a stark reminder that winding-up proceedings are not designed for the enforcement of a debt that the debtor company disputes on bona fide and reasonable grounds”.

So whilst a liquidation application can be a formidable weapon to use against a problem debtor, if you apply on the basis of a disputed debt you are probably just wasting your time and money, putting yourself in the wrong unnecessarily, and risking an adverse costs order (on a punitive scale if you are found to have “abused the court process”).

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