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19 Oct 2020

HOW MANY SIGNATURES ARE ACTUALLY REQUIRED ON AN OTP WHEN A SELLER ACTS ON HIS OWN BEHALF AND ON BEHALF OF A CO-OWNER?

Mr and Mrs Smith co-own property. They get divorced and Mr Smith pays Mrs Smith R2 000 000 for her share in the property. In return, she agrees to transfer her share to Mr Smith. She also grants him power of attorney to sign all transfer documents her behalf, and/or a sale agreement, should he wish to rather sell the property someday, instead of taking transfer of her half share.

Mr Smith does not do anything to take transfer of her half share and some years later decides to sell the property. When he receives an offer, he adds his ex-wife’s name to the OTP as a co-seller (since her name still appears on the title deed as a half share owner), but he only signs once. He does not declare anywhere on the OTP that he signs “on my own behalf and on behalf of the co-owner by virtue of power of attorney”. In fact, he makes no mention on the OTP at all, of the fact that he is acting in a personal, AND in a representative capacity. He simply initials everywhere and then signs once on the last page.

The buyer defaults, is put to terms, and the sale is cancelled. The agency which assisted Mr Smith in selling, wants to now sue for commission. Do we have a valid sale agreement when the seller only signed once and failed to make any mention that he signs in a dual capacity?

The Alienation of Lands Act provides that “No alienation of land …. shall… be of any force or effect unless it is contained in a deed of alienation signed by the parties thereto or by their agents acting on their written authority”.

With thanks to our former senior partner Milton Koumbatis, who assisted us, we were referred to a court case – Glen Comeragh (Pty) Ltd v Colibri (Pty) Ltd, from 1979, where the court referred to a law book entitled “Phipson on Evidence” (11th ed at 714 para 1635) and where this author stated the following: “Where a party executes a document in several different capacities, it is not necessary that he should sign more than once…” This judgment has been relied upon by various judgments ever since but for different reasons, so this is not at all necessarily the conclusive position in our law. Phipson is also a British author. I could also not find any other judgments amongst the 33 000 plus judgments which are available on our “Jutastat On-Line Law Reports”, which repeats this quote from Phipson!

I have however also found an article on Google which indicates that in France (https://frenchlaw.blog/2018/05/29/how-many-signatures-for-a-person-intervening-in-an-act-in-a-dual-capacity/) a person signing a contract in a dual capacity needs to only sign once, which lends further support to this argument though.

The end result is this – we cannot say for certain what a High Court in SA would say to this question, if ever it had to be argued before a Judge! What we can however tell you is that we may soon be taking such a matter to court and if we are successful, you will be the first to know. Until then our advice to the reader is simple: if you are going to wear two hats, make it clear on the OTP and rather just point it out, or, sign twice and use “pp” which means “on behalf of”! Better to be safe than sorry.

Robert Krautkramer

Miltons Matsemela Inc.

14 Oct 2020

THE EXPROPRIATION BILL OF 2020 – NEW LAWS TO REGULATE EXPROPRIATION, INCLUDING EXPROPRIATION WITHOUT COMPENSATION

On 9 October 2020 and in Government Gazette number 43798 the latest draft of the Expropriation Bill was published. The first draft of this Bill was published in December 2018 (the 2018 Bill). These proposed Bills, if passed by Parliament, will bring our law of expropriation into line with our constitution.

The 2018 Bill was published after expropriation without compensation was again highlighted as a mechanism for land reform following statements made by the EFF, and the policy adopted by the ANC at their 2017 elective conference, where Cyril Ramaphosa was elected as President of the party. This initiative also resulted in extensive public hearings, and the formation of an ad hoc Parliamentary committee that was tasked to advise Parliament on the amendment of the Constitution to allow for expropriation without compensation. The work of this committee continues.

It was therefore surprising to see that government was persevering with their agenda to pass a new expropriation law without first finalising amendments to the constitution.

I have compared this new 2020 Bill against the 2018 Bill and there are very few changes of any serious consequence. If anything, the 2020 Bill is now more in line with the rights that are enshrined in our constitution. The 2020 Bill provides for a clearly regulated and transparent process for the government to follow should they wish to expropriate property, and provides protection for owners, and third parties, whose rights might be affected.

In section 12(3) of the 2018 Bill, examples of the circumstances in which land could be expropriated without compensation were set out. This section has now been rewritten. I think it is important to highlight the changes that have been made, as this gives us insight into the thinking behind the Bill.

In the 2018 bill, the first category of land where expropriation without compensation was contemplated was where the land was occupied or used by a labour tenant as defined in the Land Reform (Labour Tenants) Act. This category remains, albeit in a slightly different form, in section 12(4) of the 2020 Bill.

The second category of land where expropriation without compensation was contemplated was where the land is held for purely speculative purposes. This category was the most contentious because of the obvious problems inherent in determining what the owner’s purpose for holding the land was, and what would amount to “speculation”.

This category has now been restated as follows: “where land is not being used and the owner’s main purpose is not to develop the land or use it to generate income, but to benefit from appreciation of its market value”. While there is still some scope for debate on the interpretation of this category, the new definition does assist to clear up some of the confusion created by the previous draft.

The third category of land where expropriation without compensation was contemplated was where the land was owned by a state-owned corporation or other state-owned entity. This category has also been further defined. Land owned by an organ of state will only fall into this category if that organ of state is not using the land for its core functions, and is not likely to need the land for its future activities. In addition, for such land to be expropriated without compensation, the organ of state must not have paid for the property.

The fourth ground upon which land could be subject to expropriation without compensation in terms of the 2018 Bill was where the land had been abandoned by its owner. This category remains in the 2020 Bill, with minor amendments to the wording.

The fifth category of land that was cited in the 2018 Bill as an example where expropriation without compensation might be applicable was land where the market value was less than the value of direct state investment and subsidy in the acquisition and improvement of the land. This category has been restated verbatim.

The new bill also adds an additional category of land that might be expropriated without compensation. This is where the nature or condition of the property poses a health, safety or physical risk to persons or other property.

While these categories are not exclusive, it remains clear that expropriation without compensation will only be applied in limited circumstances. Furthermore, the constitutional requirement that land may only be expropriated for a proper reason, and in terms of a law that applies equally to everyone in South Africa remains. In addition, property can only be expropriated for a public purpose or in the public interest and all relevant circumstances need to be taken into consideration in determining the issue of compensation. The amount of compensation to be paid also needs to balance the public interest and the interests of those who are affected by the expropriation.

Finally, it is important to emphasise that the courts will be the final arbiter in the event of disputes flowing from any expropriation. Such disputes might flow from the decision to expropriate, the procedures adopted, or the amount of compensation to be paid. The jurisdiction of the courts will not be able to be overridden by a government official with arbitrary powers.

The 2020 Bill therefore remains true to our constitution.

The publishing of the 2020 Bill is surprising in the light of the work that is being done by the Parliamentary ad hoc committee who are tasked to make proposals to Parliament for the amendment of the constitution to allow for expropriation without compensation. I say this because this 2020 Bill is in line with the constitution as it now stands. Are these two initiatives, the first, to pass this new law that fits in with the constitution; and the second, to amend the constitution, evidence of a dual agenda within the ANC, or will they be reconciled at some time in the future?

Whatever the case, if one looks at the proposed changes to the constitution that were published by the ad hoc Committee in December 2019, and if we read the latest draft of the Expropriation Bill, I anticipate no major deviations from the fundamental rights of property ownership that we enjoy in South Africa, as they are currently enshrined in our constitution.

Deon Welz

Miltons Matsemela Inc.
14 October 2020

07 Oct 2020

Directors, Trustees: Can You Hold Your AGMs and General Meetings on Zoom?

Regrettably the pandemic still shows no sign of going away any time soon, and the social distancing it has brought to our “new normal” leaves companies with a dilemma. How can you comply – safely and lawfully – with the Companies Act’s stringent requirements for the holding of Annual General Meetings and (where needed) interim General Meetings?

The good news is that our South African legislation has for many years allowed the holding of company meetings via electronic communication.

The savings in cost, efficiency and convenience have now – courtesy of the lockdown – been experienced first-hand by many a company and its stakeholders, and a Google search reveals a multitude of AGMs held recently via Zoom or similar platforms (there are also several proprietary platforms specializing in shareholder meetings).

The benefits of meeting virtually are such that even after Covid-19 is no more than a bad memory many of us will continue doing so in place of the traditional “face-to-face all in one place” gatherings.

Expect also an upsurge in hybrid physical/virtual meetings as things get safer.

The formal requirements

  1. Comply strictly with all the Companies Act’s requirements in regard to proper notice, conduct and minuting of meetings and decisions.
  2. Observe all the legal requirements set out in ECTA (the Electronic Communications and Transactions Act) in regard to identification of originator, accessibility, storage, retrieval etc.
  3. Shareholder meetings can be conducted entirely by electronic communication unless prohibited by your MOI (Memorandum of Incorporation) but if you want to avoid any uncertainty have your lawyer draw your MOI to clearly allow them.
  4. How you hold the virtual meeting is important, the requirement being that “The electronic communication employed ordinarily enables all persons participating in that meeting to communicate concurrently with each other without an intermediary, and to participate reasonably effectively in the meeting.”
  5. Notice of the meeting – over and above the normal requirements for notice, “the notice of that meeting must inform shareholders of the availability of that form of participation, and provide any necessary information to enable shareholders or their proxies to access the available medium or means of electronic communication”.
  6. It’s then over to shareholders (or their proxies) to arrange their own access at their own expense, although good practice might be to assist with technical and perhaps even financial support where necessary. Any suggestion of an infringement of shareholder rights could come back to haunt you.

Board decisions generally

Unless your MOI says otherwise, your board can make decisions electronically (without a virtual or physical meeting) if the decision is one “that could be voted on at a meeting of the board of that company”. Decisions can be “adopted by written consent of a majority of the directors” after “each director has received notice of the matter to be decided.”

Shareholder decisions generally

Shareholders can also vote electronically on resolutions relating to any business not required by the Companies Act or by the MOI to be conducted at an AGM

Public companies

Meetings of public company shareholders “must be reasonably accessible within the Republic for electronic participation by shareholders … irrespective of whether the meeting is held in the Republic or elsewhere”.

Bodies Corporate and Home Owners Associations

Community schemes should take advice on whether in their particular circumstances they can/should postpone their AGMs and/or hold them remotely. Bodies Corporate will need to comply with their Rules and Home Owners Associations with their founding documents (either a Constitution or an MOI).

This article was published recently by LawDotNews. We credit the original author.

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